-----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, RviEhvhoIhPYVPd4QMR86TcMYDItSlSf4weHXcI9Jl12iltQ0K6OwQDY8/RYFk+G FbcHx3YYqj1JAftJC1uuuQ== 0000950131-99-002076.txt : 19990503 0000950131-99-002076.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950131-99-002076 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19990102 FILED AS OF DATE: 19990402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONTGOMERY WARD HOLDING CORP CENTRAL INDEX KEY: 0000836974 STANDARD INDUSTRIAL CLASSIFICATION: 5311 IRS NUMBER: 363571585 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-23403 FILM NUMBER: 99586475 BUSINESS ADDRESS: STREET 1: ONE MONTGOMERY WARD PLZ CITY: CHICAGO STATE: IL ZIP: 60671 BUSINESS PHONE: 3124672000 10-K405 1 FORM 10-K ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 _____________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the 52-Week Period Ended Commission file number January 2, 1999 No. 0-17540 _____________________ MONTGOMERY WARD HOLDING CORP. (Exact name of Registrant as specified in its charter) DELAWARE 36-3571585 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) MONTGOMERY WARD PLAZA, 60671-0042 CHICAGO, ILLINOIS (Zip code) (Address of principal executive offices) Registrant's telephone number, including area code: (312) 467-2000 _____________________ Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Not Applicable None Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, Series 1, $.01 Par Value (Title of class) Class A Common Stock, Series 2, $.01 Par Value (Title of class) Class B Common Stock, $.01 Par Value (Title of class) 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 ___. --- At April 2, 1999, there were 18,322,152 shares of Class A Common Stock and 25,000,000 shares of Class B Common Stock of the Registrant outstanding. ________________________________________________________________________________ ITEM 1. BUSINESS Forward-Looking Statements Information included in this Report on Form 10-K 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. General Montgomery Ward Holding Corp., a Delaware corporation ("the Company" or "MW Holding"), and its wholly-owned subsidiary, Montgomery Ward & Co., Incorporated ("Wards"), are engaged in retail merchandising in the United States. Signature Financial/Marketing, Inc. ("Signature"), a wholly-owned subsidiary of Wards, is engaged in direct marketing in the United States. On February 1, 1999, Wards announced its intention to sell Signature to General Electric Capital Corporation ("GE Capital") (see Business - Signature). Founded in 1872 and incorporated in Illinois in 1968, Wards is one of the nation's largest retail merchandising organizations. After the planned closing of 39 retail stores in early 1999, Wards will operate 252 retail stores in 32 states with approximately 20 million square feet of selling space. In addition, Wards operates six outlet and liquidation centers, 16 distribution facilities and 51 product service centers. Chapter 11 Filing 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 (the "Bankruptcy Court"). 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), pursuant to an order of the Bankruptcy Court. The following U.S. subsidiaries were not included in the bankruptcy filings: Signature and its direct and indirect subsidiaries; Marinco Insurance U.S.A., Inc. ("Marinco"); and Montgomery Ward Foundation. After a long period of negotiation, Wards was unable to reach an out-of- court settlement with its lenders. Accordingly, bankruptcy petitions were filed in order to obtain an opportunity to reorganize and begin implementing the Company's strategies while working to restructure its indebtedness. Pursuant to the Post-Petition Loan and Guaranty Agreement dated July 8, 1997, among Wards and Lechmere, Inc. ("Lechmere"), as borrowers; MW Holding and other debtor subsidiaries of MW Holding, as guarantors; GE Capital, as agent and lender; and various lenders, as amended (the "DIP Facility"), the lenders have agreed to provide up to $1 billion in post-petition financing to Wards. 1 ITEM 1. BUSINESS (CONTINUED) Chapter 11 Filing (continued) As a result of the Chapter 11 filings, absent approval of the Bankruptcy Court, the Company is prohibited from paying, and creditors are prohibited from attempting to collect, claims or debts arising prior to the Petition Date. On February 1, 1999, the Company announced its intention to emerge from Chapter 11 bankruptcy protection in mid-1999. The Company will file its plan of reorganization and disclosure statement with the Bankruptcy Court shortly. The plan of reorganization will set forth the means for satisfying claims and interests in the Company and its debtor subsidiaries, including the Liabilities subject to compromise. Under the reorganization plan, when filed, secured and non-tax priority claimholders will generally receive cash equal to the amount of their allowed claim. Claims held by unsecured creditors and certain allowed vendor claims held by GE Capital will be satisfied by cash distributions for a portion of the allowed claims. GE Capital will receive a significant equity interest in the Company in exchange for its remaining claims. The Company intends to fund its distributions under the plan of reorganization principally through funds placed in escrow by GE Capital and through the termination of its over- funded defined benefit pension plan. The Company expects to repay GE for the funds placed in escrow by GE with the proceeds from the sale of Signature (see Business - Signature). The consummation of a plan of reorganization for the Company and its debtor subsidiaries will require the requisite vote of impaired creditors and stockholders and confirmation by the Bankruptcy Court, which is expected to be completed by the Summer of 1999. Merchandising The major product offerings by the Company are apparel, furniture and home furnishings, appliances and electronics, fine jewelry, and automotive, including service. The apparel offering includes branded, value-oriented merchandise in women's, men's, children's and intimate apparel as well as footwear and accessories. The apparel brand and price point offering is targeted at the large middle market between department stores and discounters. An offering of prominent name brands has been built, including Lee, Playtex, Bugle Boy, Bestform, Converse, Gloria Vanderbilt, Hanes, New Balance, LEI, Zana-Di, Munsingwear, Starter, Tan-jay, Teddy, Wilson and others. In addition, the Company has developed licensed and proprietary brands for certain product categories, such as Ship 'N Shore in women's apparel and BIKE in men's and children's activewear. Furniture and home furnishings include broad selections emphasizing furniture, textiles and housewares. Furniture includes name brand offerings, such as Broyhill, Bassett and La-Z-Boy, displayed in accessorized room groupings to provide customers shopping and decorating convenience. Furniture also includes a wide selection of mattresses from prominent name brands such as Sealy, Serta, Simmons and Stearns and Foster. The Company offers combined consumer electronics and appliance product categories, including video, audio, telephones, electronic games and kitchen, laundry and other major appliances. The product offering includes significant national brands including, but not limited to, Sony and Panasonic in electronics and Maytag, Whirlpool and General Electric in appliances. 2 ITEM 1. BUSINESS (CONTINUED) Merchandising (continued) Fine jewelry offers all major merchandise categories: diamonds, gemstones, gold and watches. Wards has become one of the largest jewelry retailers in the country, and its major vendor relationships enable it to offer highly featured products at outstanding prices. Automotive focuses on the sale and installation of tires, batteries, brakes and shocks. Wards is one of the leading retailers of branded tires, including Goodyear, Firestone, Bridgestone and General. Wards' retail business is seasonal, with approximately one-third of sales occurring in the fourth quarter. The results of Wards' operations are also subject to changes in consumer demand associated with general economic conditions, which is especially true with respect to demand for durable goods and other "big ticket" merchandise. Wards' retail operations are supported by its corporate buying division which has its principal office in Chicago, and includes foreign purchasing offices in Hong Kong, Taiwan, Japan, and Korea. Performance Initiatives Facility Closings and Divestitures In 1997, management undertook a review of the retail operations of Wards, and determined that the number of different retail formats then in operation resulted in a lack of focus on Wards' core business. In August 1997, Wards announced its exit of its non-core specialty retail businesses - Lechmere, Home Image by Lechmere and Electric Avenue & More. Management also reviewed the performance of retail stores operating under the core retail format and closed 53 underperforming retail stores and four outlet and liquidation centers in 1997, and nine underperforming retail stores in 1998. In 1999, Wards will complete the closing of 39 underperforming retail stores. In addition, sales of automotive products and services were discontinued in 17 operating retail stores in January 1999. The financial performance of the remaining retail stores will be reviewed on a continuing basis and additional stores may be closed, if such closures are warranted. Other Divestitures In December 1997, the Bankruptcy Court approved the disposition of Wards' investment in the common stock and warrants to purchase common stock of ValueVision International, Inc. ("ValueVision"). In addition, the agreements relating to ValueVision's sales promotion rights with regard to the Wards credit cardholder file were restructured. Under the restructured agreements, Wards' obligation to purchase advertising from ValueVision was significantly reduced. Additionally, ValueVision and its affiliates agreed to cease direct mail solicitations to its customers using the Wards servicemarks after March 31, 1998. ValueVision may continue to use the servicemark in connection with televised home shopping through July 31, 2008. The transaction was consummated on January 15, 1998. New Merchandising Strategy Middle-income females aged 30 to 55 with family incomes of $25,000 to $50,000 have been targeted as Wards' core fashion customer. Wards' core hardlines customer is defined more broadly, representing both males and females with higher income levels and wider age distributions than the core fashion customer. Management believes that these core customers share lifestyle characteristics and shopping preferences typical of today's time-pressed, value-conscious families with traditional/conservative values and fashion tastes. 3 ITEM 1. BUSINESS (CONTINUED) Performance Initiatives (continued) New Merchandising Strategy (continued) Wards' strategic plan has been developed to focus its merchandise offering around categories of business that meet the needs of the targeted customer, as well as those categories that also offer opportunities to drive sales and gross margin rate improvements. Wards intends to leverage current areas of merchandising strength (major appliances, fine jewelry and furniture, for example) to drive near-term profit improvements and capture additional market share. Additionally, Wards has targeted certain categories, primarily family apparel, domestics, seasonal and home theater, as areas in which growth in terms of penetration and market position must be dramatically improved. Resources will be focused on developing "trend- right" assortments and substantially improving merchandising and marketing in these businesses. Finally, Wards will strive to improve the in-store execution of its important electronics, automotive and housewares businesses in order to maintain its market share, improve margins and achieve a service level comparable to its competitors. In September 1998, Wards introduced its new prototype store in Las Vegas, Nevada; Bloomingdale, Illinois; and Towson, Maryland. The prototype features a circular, racetrack design which creates a comfortable and aesthetically pleasing environment. It incorporates wide aisles, clear site lines and easy navigation providing customers with an efficient shopping experience while promoting cross-shopping and the total merchandising solutions offered by Wards. The prototype stores also incorporate bright lighting, warm colors, improved fixturing and display, expanded fitting rooms, increased customer service facilities, and clear, educational signage highlighting value, trend-right merchandise. These three stores have reflected sales increases over the prior year in excess of 40 percentage points above the combined performance of the entire chain from September 1998 through February 1999. Wards is remodeling an additional 40 stores in 1999 and anticipates remodeling a minimum of 40 stores in each of 2000 and 2001. Store Operations/Customer Service Strategy Wards continues to focus on improving the presentation of its retail stores and improving overall customer satisfaction. In addition to the remodeling of the three stores in 1998, Wards evaluated the appearance of all stores and cleaned, relamped and painted where necessary. In addition, new fixtures were added in several departments including apparel, shoes, fine jewelry, housewares and furniture. Store policies and procedures continued to be reviewed in order to redeploy time spent from non-service oriented tasks to customer-directed activities. A customer-service culture is being instilled in both corporate headquarters and store associates. As a first step, a Director of Customer Service was appointed in 1997. The primary focus of this position is to improve service and coordination at all levels of the organization. Also in 1997, the "Kick It Up A Notch" program was initiated to reward store associates who provide exceptional customer service. In 1998, Wards has been closely monitoring customer satisfaction through independent surveys. Overall, Wards has experienced improvements during the year in ratings on merchandise availability, the friendliness, knowledge and availability of associates, wait time and accuracy of check-out, store appearance, the value of merchandise for price paid, and the recommendation of Wards to others. 4 ITEM 1. BUSINESS (CONTINUED) Performance Initiatives (continued) Logistics Strategy Wards is continually reviewing its logistics network to better serve the retail stores at an optimal cost. Improved management of the flow of goods through the network is expected to result in improved product velocity and reduced inventory levels, while still maintaining an optimal in-stock level at the retail stores. A particular focus is improvement in the home delivery process, including the simplification of the current computer systems and implementation of an automated routing process. These changes are expected to allow a customer delivery to be scheduled for a more precise time window, thereby improving customer service while maximizing the productivity of routing staffs. In 1998, Wards closed distribution facilities in Grand Ledge, Michigan, and Pennsauken, New Jersey, and distribution facilities in Portland, Oregon and Phoenix, Arizona were converted to cross-dock facilities. In early 1999, Wards will close its distribution facility in Garden Grove, California and open a new distribution facility in Chino, California. Systems Strategy In February 1999, Wards entered into a post-petition contract with Axciom Corporation ("Axciom") to outsource most of its information processing services. Wards management believes that the benefits of the outsourcing agreement include gaining the knowledge and economics of scale of Axciom, who is engaged in data processing and related activities as its core business; maintaining and improving service levels to Wards; and obtaining fixed pricing, to the extent possible, for information technology services. The transition of information technology services is anticipated to be completed by the Summer of 1999. Computerized information systems are currently under development that will support the merchandising, customer service and logistics strategies previously discussed. The systems under development are primarily focused on supply chain efficiencies (through the implementation of state-of-the- art buying and warehouse management systems) and customer service improvements (through the implementation of a new point of sale system and the enhancement of customer delivery systems). Additionally, a major initiative is underway to assure the ability of all continuing systems to process dates that occur in the next century. The Company began addressing Year 2000 date conversion issues in the fall of 1996 and has developed a plan to assess and remediate both information technology ("IT") and non-IT systems. The Company's plan consists of two phases. The assessment phase includes the inventory of all systems (IT and non-IT) subject to the Year 2000 issue and developing a plan for addressing the problem as related to each system. The remediation phase includes the implementation of the identified changes required and testing of these changes before implementation. For IT systems, the Company has completed its assessment phase and the remediation phase is 90% complete. The remainder of the remediation phase is expected to be completed in the first half of 1999. For non-IT systems, the Company anticipates the assessment phase to be completed in early 1999 and the remediation phase to be completed by September 30, 1999. The Company is also in the process of assessing the Year 2000 readiness of its suppliers and service providers and is participating in a National Retail Federation survey of such providers. 5 ITEM 1. BUSINESS (CONTINUED) Performance Initiatives (continued) Systems Strategy (continued) In 1998, the Company expensed $22 million related to Year 2000 readiness. Prior to 1998, the Company expensed $12 million. The Company estimates an additional $3 million will be expensed as incurred to become Year 2000 ready. In addition, the Year 2000 issue has accelerated the timing of an estimated $26 million of capital expenditures of which $17 million has been capitalized as of January 2, 1999. No significant capital projects have been delayed as a result of addressing the Year 2000 issue. Based on the Company's plan, the remaining costs to be expended to become Year 2000 ready are not expected to materially impact future cash flows. The Company believes that its program will result in Year 2000 readiness. However, due to the complexity of the issue, there can be no assurances given that the Company's plan will be fully effective. The Company could experience interruptions of business at some of its operations, including those caused by, but not limited to, the inability of utility companies to provide telecommunications and electrical services, the failure of financial institutions to process transactions, and the inability of vendors to deliver products on a timely basis. The Company is in the process of developing contingency plans which are anticipated to be completed by September 30, 1999, with respect to the Company's facilities and merchandise supply and distribution networks. Signature On February 1, 1999, Wards announced its intention to sell Signature to GE Capital. The sale is expected to close in the second half of 1999 after the receipt of all required insurance regulatory approvals. Subsequent to the sale, Wards will continue to receive a marketing fee for allowing Signature to market its credit cardholder file. The Signature Group, headquartered in Schaumburg, Illinois, is a leading provider of fee-based membership services offered to consumers through direct response marketing. Signature provides consumers with a broad range of continuity club products including credit card registration, auto, dental and legal services as well as insurance products, including credit insurance and various supplemental life and health insurance policies. Signature's products typically are sold through affiliations with major bank, oil or retail credit cards, including the Wards proprietary credit card. Signature's clients include seven of the top 10 issuers of bank credit cards, nine of the top 10 issuers of oil company credit cards, all major airlines and a number of leading retailers and affinity groups such as Home Depot, Disney and AARP. Signature's teleservices unit also provides a variety of inbound and outbound telemarketing services as well as customer retention services to various financial, insurance and telecommunications clients. Established in 1966 as a wholly-owned subsidiary of Wards, Signature has over 30 years of expertise developing targeted marketing programs. Signature is the largest outbound telemarketer for the credit card industry in the country, with over 5,800 employees in 26 locations. It operates 26 call centers with 2,000 workstations and annually conducts over 66 million carefully scripted telemarketing presentations. Signature also mails over 232 million solicitations annually. The combination of leading-edge technology and marketing expertise allows Signature to offer a completely integrated marketing plan to its customers. Signature assigns a multi- functional account team to each client to manage every aspect of their marketing program, from the development and execution of marketing plans to the establishment of billing, fulfillment, customer service and post- marketing analysis. In addition to its proven experience marketing directly to consumers, Signature's auto, dental and legal services plans utilize networks of Signature-managed independent service providers and professionals to deliver value and quality customer service to the Company's customer. These networks have been developed over many years and are integral to the successful delivery of Signature's products. 6 ITEM 1. BUSINESS (CONTINUED) Signature (continued) Signature works in partnership with its clients and other organizations to offer consumers convenience and significant savings when purchasing a wide array of high-quality goods and services. Signature has a total of 12.2 million consumer members including 3.7 million Wards credit card customers and 8.5 million other credit card customers. Signature has exclusive marketing rights to the entire Wards credit card file. It also markets on behalf of approximately 130 other clients, including some of the nation's largest financial institutions, retailers, airlines, oil companies, associates, unions and employer groups. Signature's major third party clients include American Airlines, AARP, American Express, Amoco, BankOne, Brylane, Chase, Citigroup, Delta, Discover, Exxon, General Electric, MBNA, Merrill Lynch, Mobil, Shell, Texaco, TWA, United Airline, Wachovia and Wells Fargo. On March 18, 1999, Signature entered into a definitive agreement whereby Transmedia Network Inc. acquired the assets of Dining a la Card from Signature. As part of the Agreement, Signature will continue to acquire dining members from its airline frequent flyer partner programs as well as other client programs. Since 1994, Signature has aggressively sought to diversify its customer account base through the development of new third-party client (non-Wards) relationships and business acquisitions. As of December 31, 1998, 8.5 million, or 69% of the Company's total members were from third-party clients, up significantly from 3.1 million, or 33%, of total members at the end of 1994. Competition and Regulation The sale of merchandise by Wards is conducted under highly competitive conditions. Buying and selling are each done in open competitive markets. Wards' stores are in competition with specialty stores, department stores and other types of retail outlets in the areas in which they operate. The Company believes that merchandise assortments, brand names, competitive pricing and availability of services such as credit, delivery, installation and repair, are the principal factors which differentiate it from competitors. Certain of Signature's operations are highly regulated and conducted under highly competitive conditions. To date, Signature has been able to compete effectively with other companies which offer programs similar to those provided by Signature. Signature also competes with traditional methods of marketing by unaffiliated dentists and lawyers. Insurance companies operate pursuant to specific state statutes, rules and regulations and are required to file reports with such agencies at least quarterly. Telemarketing and direct mail solicitations are regulated at state and federal levels, and management believes that these activities will increasingly be subject to such regulation. Such regulation may limit Signature's ability to solicit new members or to offer more products and services to existing members and may materially adversely affect Signature's business and revenues. The requirements of environmental protection laws and regulations have not had a material effect upon Wards' operations. Compliance may, in certain cases, lengthen the lead-time of expansion plans and could increase construction and operating costs. Account Purchase Agreements Credit is extended to Wards' customers under an open-end revolving credit plan and is an important element in generating sales, especially in the big ticket businesses. Wards' private label credit card sales were 43.9% and 46.9% of total sales for 1998 and 1997, respectively. Bankcard sales were an additional 23.6% and 21.2% of total sales for 1998 and 1997, respectively. 7 ITEM 1. BUSINESS (CONTINUED) Account Purchase Agreements (continued) Wards entered into a Bank Credit Card Program Agreement ("Card Agreement") effective April 1, 1996 with Monogram Credit Card Bank of Georgia ("Monogram"), and an Account-Related Agreement ("Account Related Agreement") effective April 1, 1996 with Montgomery Ward Credit Corporation ("Montgomery Ward Credit") (collectively referred to as the "Agreements") pursuant to which Monogram and Montgomery Ward Credit (collectively referred to as the "Montgomery Ward Credit Companies" or "MWCC"), both of which are affiliates of GE Capital, make payments to Wards as to their receivables generated by sales to customers of Wards, its affiliates and licensees who utilize the Wards private label credit card, and provide services to Wards, all of which are guaranteed by GE Capital. Under the Agreements, Monogram has the exclusive right to operate the Wards private label credit card system and the obligation to pay to Wards the face amount of Monogram's receivables generated by the Wards private label credit card system, up to $7 billion outstanding at any time. If Wards desires to receive payment for receivables generated by the Wards private label credit card system at any time when Montgomery Ward Credit Companies own $7 billion or more of such receivables and do not desire to finance additional receivables, alternative arrangements, such as the sale of receivables to banks or other financial institutions, would be required unless Monogram agrees to fund the excess. As of January 2, 1999, there were $3.3 billion of Wards private label credit card receivables owned by Montgomery Ward Credit Companies, and the average outstanding amount of such receivables owned by Montgomery Ward Credit Companies during 1998 was $3.6 billion. Under the Card Agreement, Wards is required to pay Monogram the excess interest costs on a monthly basis if a blended interest rate applicable to funding costs with respect to the receivables exceeds 10% per annum. This blended interest rate has been less than 10% since 1988. Wards generally bears the risk of credit losses due to non-payment by cardholders to the extent of (i) the amount of credit losses that are between 3.9% and 5.0% of average outstanding receivables, plus (ii) 50% of credit losses that are between 5.0% and 8.0% of average outstanding receivables, subject to offsets described below relating to Wards' share of certain incremental increases in finance charges and late fees payable by cardholders. Wards is also responsible for losses on certain higher risk starter card accounts to the extent the loss percentage as to those accounts exceeds the loss percentage experience on the rest of the portfolio. Wards' net unpaid liability for credit losses for 1991 through 1998 is to be payable to Montgomery Ward Credit pursuant to a note (Continuation Note) due in early 2003, which provides that: (i) the outstanding balance of such note cannot exceed $300 million, (ii) scheduled monthly principal payments ranging from $.4 million to $2.8 million are required through 2002, and (iii) starter card losses are payable currently. Interest on Wards' unpaid liability for credit losses is payable at the monthly GE Capital commercial paper rate. Notes consisting of $285 million for losses incurred prior to July 8, 1997 were executed. A remaining note of $15 million, consisting of losses incurred after July 7, 1997 for the remaining portion of 1997, was executed which provides for monthly principal payments in the amount of 5% of the scheduled monthly principal payments for the Continuation Note. Payments of principal and interest on notes outstanding as of July 7, 1997, has been stayed by the Chapter 11 proceedings. In exchange for Wards' agreement to allow Montgomery Ward Credit to increase finance charge rates and late fees in selected states, Wards receives a share of incremental finance charges and late fees resulting from such increases. Such amount is available for offset against Wards' unpaid liability for its share of credit losses, and to the extent not currently paid or offset earns interest at the same rate as amounts owed by Wards to Montgomery Ward Credit. Effective April 1996, Monogram implemented additional finance charge and late fee increases in various states. The amount of these additional incremental finance charges and late fees are calculated each year pursuant to a formula specified in the Account Related Agreement, which makes certain of these amounts available to Wards. As the increased finance charge rate and late fees are added to the credit card balances, this will cause the amount of losses to increase. The higher finance charges and late fees also decrease the credit available by the credit card customer. 8 ITEM 1. BUSINESS (CONTINUED) Account Purchase Agreements (continued) In the event that, due to the increase in finance charge rates and late fees, refunds are required to be made, Wards and Montgomery Ward Credit have agreed in certain cases to share the financial risk. Legislation has from time-to-time been introduced in certain jurisdictions, which if enacted, may require rescinding all or a portion of such increases, in which case Wards' share of such increases may be substantially reduced. In connection with the foregoing arrangements, Wards owes $72 million for 1998 credit losses offset by incremental finance charges and late fee assessments. Wards has previously executed notes for certain of its unpaid share of credit losses through 1997, offset by incremental finance charges and late fee assessments due to Wards for a net obligation of $300 million. Monogram has the right of first refusal to implement certain new financing programs proposed by Wards. The Agreements are scheduled to expire on December 31, 2011, provided the terms shall continue thereafter from year to year unless either party gives ten years prior notice of its election to terminate. Except upon the occurrence of certain events of default, the Agreements may generally not be terminated by either party prior to December 31, 2011. 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 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 whether the Interim Amount Agreement is terminated or not, except in the termination circumstance where the Company would be liquidated or when certain defaults occur, 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 authorizing Wards to discontinue all of its retail operations or converts the case to Chapter 7, (e) upon certain defaults by the Company or Wards or default by Monogram or Montgomery Ward Credit, or (f) December 31, 1999. Associates At January 2, 1999, Wards and its subsidiaries employed the equivalent of 34,000 full-time associates. During certain seasons, temporary associates are added and peak employment is approximately 49,000 associates during the Christmas season. Approximately 1,500 Wards associates are covered by various collective bargaining agreements. Wards has experienced no major labor-related interruption or curtailment of operations during the last 15 years. 9 ITEM 2. PROPERTIES At January 2, 1999, excluding the retail stores announced to be closed in early 1999, the Company owned or leased 325 retail, distribution and other operating facilities. The Company's properties are located throughout the continental United States and cover approximately 44 million square feet. These properties are summarized as follows:
Number of Approximate Total Use Locations Square Feet - - --------------------------------- --------- ----------- Montgomery Ward Retail Stores: Full Line 248 33,916,000 Limited Line 4 344,000 Corporate Office Complex 1 2,975,000 Miscellaneous Operating Locations 72 6,913,000 --------- ----------- Total Locations 325 44,148,000 ========= ===========
Owned and leased retail stores include approximately 20 million square feet of selling space and 14 million square feet devoted to storage, office and related uses. Miscellaneous operating locations include warehouses, office buildings and distribution centers, but exclude vacant land parcels and properties held for disposition. See Note 11 to the Consolidated Financial Statements for information with respect to leased properties. The nationwide scope of Wards' operations helps minimize the impact of changes in the economies of specific regions on the overall performance of its retail stores and allows Wards to merchandise to a variety of demographic profiles. 10 ITEM 2. PROPERTIES (CONTINUED) The regional distribution of Ward's retail stores, as of January 2, 1999, excluding the retail stores announced to be closed in early 1999, is indicated in the following table: State Total ------------ ----- Arizona 9 Arkansas 1 California 49 Colorado 8 Florida 12 Georgia 2 Illinois 17 Indiana 4 Iowa 3 Kansas 5 Kentucky 1 Louisiana 5 Maryland 15 Michigan 12 Minnesota 2 Missouri 7 Nebraska 1 Nevada 3 New Mexico 3 New York 3 North Carolina 3 Ohio 4 Oklahoma 5 Oregon 7 Pennsylvania 11 South Carolina 2 Tennessee 1 Texas 37 Virginia 12 Washington 3 West Virginia 4 Wisconsin 1 ----- Total 252 ===== 11 ITEM 3. LEGAL PROCEEDINGS At the close of business on July 7, 1997, Montgomery Ward Holding Corp. 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 and its direct and indirect subsidiaries, Marinco, and Montgomery Ward Foundation. The filing of the petitions and the rejection of certain contracts created certain claims related to the filing. Among these cases is "Reliance Insurance Company v. Forum Insurance Company." This case alleges that Forum Insurance Company, an indirectly wholly-owned subsidiary of Signature, is liable under an indemnification agreement of which Wards is a signatory for the surety bonds issued to secure certain of Wards' obligations. The matter is now pending before the Bankruptcy Court. The potential liability related to the outcome of this claim cannot be estimated at this time. The Company and its subsidiaries are engaged in various litigation, including purported class actions, and have a number of unresolved claims. While the amounts claimed are substantial and the ultimate liability with respect to such litigation and claims cannot be determined at this time, management is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to have a material impact on the financial condition or the results of operations of the Company. In 1979, a suit entitled "United States v. Midwest Solvent Recovery, Inc., et.al." (Civil Action Number H-79-556) was initiated by the United States Department of Justice on behalf of the Environmental Protection Agency in the U.S. District Court for the Northern District of Indiana, and an Amended Complaint was filed in January 1984. This suit was against Standard T Chemical Company, Inc., a Delaware corporation and wholly-owned subsidiary of Wards ("Standard T"), which ceased operations in 1994 and is currently an inactive entity and is a debtor in the bankruptcy proceedings described above, and others involving two waste disposal sites and seeks reimbursement for the cost of surface clean-up, investigation studies concerning possible contamination of the soil and ground water and remedial action. In January 1990, the United States filed a second Amended Complaint seeking inter alia, treble damages and monetary sanctions. Standard T signed a consent decree, whereby it was obligated to provide a financial assurance. The financial assurance in the amount of $2.77 million has been drawn in order to remediate the site. The Company currently anticipates that its obligation will not exceed that amount. In 1985, the New York Environmental Protection Agency brought an action for remediation of a site in Staten Island, New York against the owner of the property. The owner asserted that Standard T, among others, generated wastes that were disposed of by a prior owner of the site. Standard T is in the process of completing the clean up of this site and has purchased the site from the owner for $1.45 million. The proposed remedy has a present value cost of $2.9 million. In February 1986, Standard T, along with approximately 330 other companies, was notified by the United States Environmental Protection Agency that the agency was mandating a remediation of the contamination of the American Chemical Services, Inc. ("A.C.S.") site located in Griffith, Indiana, under authority vested in it by the Comprehensive Environmental Response, Compensation and Liability Act of 1980. Standard T and a Wards paint factory were each identified as a Potentially Responsible Party ("PRP"), under the terms of the Act, because of their alleged status as generators of hazardous waste ultimately disposed of at the A.C.S. site. The Company will pay its proportionate share of the costs of the studies, and may ultimately pay a share of the costs of abating the contamination of the A.C.S. site. One estimate by the EPA of future costs of abating contamination at the A.C.S. site is $69 million, of which $24 million has been paid by deminimus settling parties. The proposed settlement of the proof of claim in the bankruptcy proceedings is $2.9 million. 12 ITEM 3. LEGAL PROCEEDINGS (CONTINUED) Standard T and Wards are also involved at various stages with several other sites where Standard T and Wards have been notified or sued as a PRP. The potential liability related to these sites cannot be estimated at this time. On April 29, 1997, MW Holding, Wards and Lechmere were served with a complaint, purporting to represent a nationwide class, filed by certain bankrupt credit card holders of Wards and Lechmere credit cards. The complaint alleged that MW Holding, Wards and Lechmere, benefited from the actions taken by Hurley, Lechmere's previous credit card provider, and MWCC and Monogram (both of which are affiliates of GE Capital), Wards' and Lechmere's current credit card providers, in that the recoveries received from the bankrupt credit card holders, allegedly were in violation of the bankruptcy laws dealing with reaffirmations, and ultimately reduced Wards' and Lechmere's loss sharing obligations. Hurley, MWCC and Monogram took all actions related to bankruptcy reaffirmations. A final settlement has been executed by Monogram and MWCC with the plaintiffs, which releases MW Holding, Wards and Lechmere of any liability. The plaintiffs have withdrawn their proofs of claim. In 1997, a suit entitled "Trent v. Montgomery Ward," was initiated by Karen Trent and four other plaintiffs alleging, on behalf of themselves and a class of other commissioned sales employees, fraud and breach of contract in the calculation of their sales commissions. This class action currently is being heard in the Federal District Court for the District of Wyoming. The suit claims that from 1992 to the present, Wards devised a commission sales plan that was designed to underpay commissions promised to employees and that Wards in fact paid employees less than the commissions they were supposed to have earned. Plaintiffs seek certification of the class and actual and punitive damages. Wards has denied the allegations and intends to aggressively defend this matter. The case currently is in the early stage of class discovery, and damage exposure cannot be determined at this time. A limited lifting of the bankruptcy automatic stay has been granted so that the class certification issue can be resolved. The court has determined that it does not have jurisdiction of the case and has remanded the case to the Wyoming State court. The plaintiffs have filed a motion for reconsideration. The plaintiffs have now filed a class claim in the Bankruptcy Court and it is expected that their claim will be resolved in the Bankruptcy Court. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. EXECUTIVE OFFICERS OF THE REGISTRANT Listed below are the names and ages of the executive officers of the Company as of March 26, 1999, and the positions each has held during the past five years: Roger V. Goddu, 48, has been a director of the Company and Chairman and Chief Executive Officer of Wards since January 6, 1997. Prior thereto, he was with Toys "R" Us, where from 1996 until 1997, he was President-U.S. Merchandising, and from 1989 to 1995, he was Executive Vice President/General Merchandise Manager. Prior to 1989, Mr. Goddu was a Senior Vice President and General Merchandise Manager of Target, a division of Dayton Hudson Corporation. Thomas J. Austin, 51, has been Executive Vice President - Men's and Children's Apparel and Shoes of Wards since May 19, 1997. Prior thereto, Mr. Austin was Senior Vice President - Divisional Merchandise Manager of Kohl's Corporation, where he spent 15 years in various merchandising positions of increasing responsibility. 13 EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED) Louis J. Caporale, 45, has been Executive Vice President - Women's Apparel and Fine Jewelry of Wards since May 27, 1997. Prior to joining Wards, Mr. Caporale was Senior Vice President - Divisional Merchandise Manager of Kohl's Corporation. From 1993 through 1997, he was Vice President - Divisional Merchandise Manager of Kohl's. Prior to joining Kohl's, Mr. Caporale held various merchandising positions with Federated Department Stores for 16 years. Don Civgin, 37, has been Vice President and Treasurer of the Company and Senior Vice President - Finance of Wards since May 8, 1997. Prior thereto, he was Vice President - Treasurer of Alliant Foodservice, Inc. from 1995 to 1997. From 1986 through 1995, Mr. Civgin held various financial management positions with Itel Corporation. Robert C. Claxton, 44, has been Senior Vice President - Advertising and Marketing of Wards since March 23, 1998. Prior thereto, he was Vice President of Advertising of Wards from June 1997 to March 1998. Prior thereto, he held positions at Wards as Vice President of Home Image from February 1996 to June 1997, Regional Managing Director from November 1995 to February 1996, and Field Director of Electric Avenue & More from September 1995 to November 1995. Prior to joining Wards, he was Divisional Vice President of Store Operations at Silo, Inc. since 1989. Alan E. DiGangi, 52, has been Executive Vice President - Appliances, Electronics and Automotive of Wards since November 1996. Prior thereto, he was Executive Vice President Marketing of Wards from March 1996 through November 1996. Mr. DiGangi was Executive Vice President, Electric Ave., Rooms & More/Soft Home of Wards from January 1996 through March 1996. Prior thereto, he was Senior Vice President, Electric Ave. & More from April 1995 to January 1996. From 1993 though 1995, Mr. DiGangi was Vice President of Wards, with responsibilities in Store Management, Field Operations, Marketing and Sales Promotion. Kevin Freeman, 48, has been Executive Vice President - Store Operations of Wards since May 1, 1997. Prior thereto, he was Executive Vice President of Store Operations for Caldor from 1994 until 1997. Mr. Freeman was Executive Vice President - Store Operations with Roses Stores from 1991 to 1994. Prior thereto, Mr. Freeman held various positions with Target, a division of Dayton Hudson Corporation, from 1978 to 1991, leaving as Senior Vice President of Store Operations. Thomas G. Grimes, 61, has been Executive Vice President - Home of Wards since November 7, 1997. Mr. Grimes joined the Company on February 24, 1997 as Chief Executive Officer of Lechmere, Inc. and President - Hardlines. Prior thereto, he was Managing Director of Trimingham Bros. Ltd. from January 1996 through February 1997. Prior to joining Trimingham Bros. Ltd., Mr. Grimes was Chairman and Chief Executive Officer of the John Breuner Company, a division of Batus Inc., from 1986. Spencer H. Heine, 56, has been an Executive Vice President, Secretary and General Counsel of the Company since September 30, 1991 and was a director from May 15, 1992 through January 6, 1997. Mr. Heine has been Executive Vice President, Secretary and General Counsel of Wards and President - Montgomery Ward Properties since April 12, 1994. Prior thereto, Mr. Heine served as Executive Vice President - Legal of Wards from September 30, 1991 through April 11, 1994. Mr. Heine was Chairman and Chief Executive Officer of Signature from March 8, 1993 through April 11, 1994. Robert A. Kasenter, 52, has been an Executive Vice President of the Company since February 21, 1992. Mr. Kasenter has served as Executive Vice President, Human Resources of Wards since January 27, 1992 and was Senior Vice President- Human Resources and Customer Satisfaction from June 23, 1988 to January 26, 1992. Mr. Kasenter announced his resignation from the Company in March 1999 and will be leaving in May 1999. 14 EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED) Thomas J. Paup, 50, has been an Executive Vice President and Chief Financial Officer of Wards since September 22, 1997. Prior to joining Wards, Mr. Paup was Senior Vice President, Finance and Distribution of Lord & Taylor, a division of The May Department Stores Company from 1990 to 1997. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no established public trading market for the Common Stock of the Company. All shares are subject to restrictions on transfers contained in the Stockholders' Agreement dated as of June 17, 1988, as amended ("Stockholders' Agreement"), or the Terms and Conditions ("Terms and Conditions") imposed under the Montgomery Ward & Co., Incorporated Stock Ownership Plan ("Stock Ownership Plan"). Management believes the stock has little or no value due to the bankruptcy filing. Transfers of shares of Class A Common Stock are restricted for a period of three years from certain applicable dates under the Stockholders' Agreement and the Terms and Conditions. Transfers of Class A shares purchased other than pursuant to the Stock Ownership Plan are restricted for a period of three years from the holder's first acquisition of any such shares, while transfers of shares received under the Stock Ownership Plan are restricted for a period of three years after the award of such shares, exercise of purchase rights for such shares or grant of options with respect to such shares, as applicable. After the applicable three-year periods, limited transfers of such shares which have become vested in accordance with the Stockholders' Agreement or the Terms and Conditions, as applicable, are permitted, subject to certain rights of first refusal. All of the Class B shares and virtually all of the outstanding Class A shares are eligible for transfer. The redemption provisions of the Company's outstanding preferred stock have been stayed by the Chapter 11 proceedings. No further dividends will be declared or paid on the preferred stock prior to the approval of a plan of reorganization. Future payments of dividends, if any, are dependent upon the approval of a plan of reorganization. As of March 26, 1999, there were 91 holders of record of Class A Common Stock, Series 1, 192 such holders of Class A, Common Stock, Series 2, and one such holder of Class B Common Stock. No shares of Class A Common Stock, Series 3, were outstanding as of that date. On June 21, 1998, the Voting Trust Agreement dated as of June 21, 1988, 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. 15 ITEM 6. SELECTED FINANCIAL DATA The following summary of certain financial information for each of the five fiscal years in the period ended January 2, 1999 has been derived from the Consolidated Financial Statements of MW Holding. Signature's results of operations have been classified as discontinued operations and prior periods have been restated. See Note 3 to the Consolidated Financial Statements on page 34 for a summary of financial data of discontinued operations. Such information for each fiscal year should be read in conjunction with the Consolidated Financial Statements and notes thereto and the report of independent public accountants beginning on page 22.
As of and for the --------------------------------------------------------------------------------------------- 52-Week 53-Week Period Period Ended Ended 52-Week Period Ended ------------- -------------- ----------------------------------------------------- (Dollars in millions, except Jan. 2, Jan. 3, Dec. 28, Dec. 30, Dec. 31, Per share amounts) 1999 1998 1996 1995 1994 ------------- -------------- ------------- ------------- -------------- Net Sales $ 3,634 $ 4,534 $ 5,879 $ 6,531 $ 6,564 Income (Loss) from Continuing Operations before Reorganization Costs and Income Taxes (418) (1,003) (446) (109) 89 Reorganization Costs 218 553 - - - Net Income (Loss) before Discontinued Operations (942) (1,170) (282) (63) 61 Net Income (Loss) Applicable to Common Shareholders (971) (1,160) (249) (13) 135 Net Income (Loss) per Class A Common Share before Discontinued Operations (25.46) (32.17) (7.48) (1.69) 1.37 Total Assets 3,492 4,080 4,187 4,442 4,132 Long-term Debt 46 108 77 389 220 Obligations Under Capital Leases (a) - - 90 102 122 Total Shareholders' Equity (Deficit) (1,688) (716) 433 700 707 Redeemable Preferred Stock 177 177 175 175 75 Cash Dividends per Common Share - - - - .50
(a) Excludes $64 and $77 million of Obligations under capital leases included in Liabilities subject to compromise as of January 2, 1999 and January 3, 1998, respectively. 16 ITEM 7. 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 1998 to 1997, as well as 1997 to 1996. Wards is on a 52- or 53-week fiscal year basis, with 1998 being a 52-week year, 1997 a 53- week year, and 1996 a 52-week year. All dollar amounts are in millions and all income and expense items and gains and losses are shown before income taxes, unless specifically stated otherwise. The Company's retail business is seasonal, with approximately one-third of sales occurring in the fourth quarter. Results of Operations: 1998 Compared with 1997 Net sales were $3,634, compared with $4,534 in 1997, a decrease of $900, or 20%. Sales on a comparable store basis decreased approximately 2% after adjusting for the closing of stores, the exit of certain product lines and the noncomparable impact of sales that occurred in the 53rd week of 1997. The decrease in net sales is attributable to the closing of nine retail stores in the third quarter of 1998 and 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. These closed stores reported net sales of $686 in 1997. The sales decrease was also caused by the Company's decision to exit certain product offerings which reported sales of $74 in 1997 and the noncomparable impact of sales that occurred in the 53rd week of 1997. Wards' management also believes that the decline in promotional offers to Wards' credit cardholders during 1998 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. Gross margin (net sales less cost of goods sold) dollars were $685, an increase of $105, or 18%, from 1997. This increase was due to an increase in the gross margin rate on sales of $246 and decreased occupancy and other margin-related expenses of $104 primarily related to the closed stores, offset by the gross margin impact of decreased sales of $245. The improvement of 6 percentage points in the gross margin rate in 1998, as compared to 1997, was due the effects of the increase in the margin rates in nearly every category of merchandise and the impact of closing Lechmere and Electric Avenue & More stores, which historically reported lower gross margin rates, as well as the negative impact of the aggressive markdown strategy employed in the first six months of 1997 to liquidate inventories. Operating, selling, general and administrative expenses decreased $428, or 29%, from the prior year. The decrease was primarily due to decreased payroll costs primarily related to the closed stores of $215, decreased advertising and other promotional costs of $103, decreased bad debt expense of $48, write-downs of investments and other unrealizable assets in the prior year of $42, increased pension income of $17, and a decrease in all other costs of $35, offset by decreased product service income of $32. Net interest expense decreased $52, or 48%, 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 1998, excluding pre-petition debt, decreased by approximately $700 as compared to 1997. Reorganization costs were $218 in 1998 as compared to $553 in 1997. These costs are related to the Company's exit of its non-core strategies, certain dispositions of assets and various other expenses. See Note 5 to the Consolidated Financial Statements for the components of these costs. Income tax expense of $306 was recorded for 1998 as compared to a benefit of $386 for 1997. See Note 9 to the Consolidated Financial Statements for a discussion of management's determination of the valuation allowance provided during 1998. 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Results of Operations: 1998 Compared with 1997 (continued) On February 1, 1999, Wards announced that GE Capital, a major shareholder and creditor, will acquire Signature, Wards' direct marketing response operations segment. Signature's results of operations have been classified as discontinued operations. The loss from discontinued operations was $29 million in 1998 as compared to income of $18 million in 1997. The current year's results of discontinued operations included the write-off of $33 million of capitalized fulfillment costs and $31 million associated with the estimated loss on Signature's sale of its dining operations. In addition, in 1998 no tax benefit was recorded and in 1997 tax expense of $11 million was recorded. Results of Operations: 1997 Compared with 1996 Due to Wards' inability to reach an out-of-court settlement with its lenders, petitions for reorganization under Chapter 11 of the Bankruptcy Code were filed at the close of business on July 7, 1997. The Company's performance reflected difficult competitive conditions and financial pressures, as well as the negative impact of the aggressive markdowns and promotional advertising to liquidate inventory in the first half of 1997. Net sales were $4,534, compared with $5,879 in 1996, a decrease of $1,345 or 23%. After adjusting for the noncomparable impact of sales that occurred in the 53rd week, sales on a comparable store basis, which reflect only the stores in operation for all of 1997 and 1996, decreased 16%. $534 of the sales decrease reflects the closings of 101 retail stores and liquidation and outlet centers, including the exit of the Lechmere and Electric Avenue & More formats. 1997 sales results also reflect the Company's decision to exit certain product offerings, including personal computers. 1996 third and fourth quarter sales for the affected product lines were $84. Additionally, the Company's management believes that merchandise shipment interruptions as a result of the bankruptcy filing and the decline in promotional offers to Wards' credit cardholders in the second half of 1997 (4 in 1997 versus 19 in 1996), contributed to the sales decline. Gross margin (net sales less cost of goods sold) dollars were $580, a decrease of $431, or 43%, from 1996. This decrease was due to the gross margin impact of the decreased sales of $298 and a decrease in the margin rate on sales of $167, offset by decreased occupancy costs of $34, primarily related to closed stores. The liquidation of slow moving and discontinued inventory, as well as the Chapter 11 filing, negatively impacted margin rates. As certain of the Company's vendors halted shipments for portions of the third quarter, a higher mix of third quarter sales represented sales of lower margin clearance merchandise. Gross margins showed substantial improvement in the fourth quarter of 1997. Despite a $579 decrease in 1997 fourth quarter sales, gross margin dollars increased by $4 and fourth quarter 1997 margin rates improved by 5 percentage points over fourth quarter 1996 rates. Operating, selling, general and administrative expenses increased $137, or 10%, from the prior year. The increase was due to increased bad debt expense of $29; write-downs of investments and other unrealizable assets of $57 and decreased product service income of $66, offset by all other decreased expenses of $15. Net interest expense decreased $11, or 9%, from the prior year. The net decrease reflects a $30 increase in interest expense for the first and second quarters of 1997 offset by a $41 decrease in interest expense for the third and fourth quarters of 1997. The first half increase reflects increased borrowings (including borrowings under vendor financing programs) and an increase in the weighted-average borrowing rate. The Company has stopped accruing interest on its short-term debt in connection with the Chapter 11 filing. Second-half 1997 borrowings under the DIP Facility were substantially below second-half 1996 borrowing levels. Reorganization costs of $553 were related to the Company's exit of its non- core strategies, certain dispositions of assets and various other expenses. See Note 5 to the Consolidated Financial Statements for the components of these costs. 18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Results of Operations: 1997 Compared with 1996 (continued) The income tax benefit was $386 as compared to a benefit of $164 for 1996. See Note 9 to the Consolidated Financial Statements for a discussion of management's determination of the benefit recorded and the related valuation allowance provided during 1997. The income from discontinued operations in 1997 was $18 million as compared to $45 million in 1996. The decrease in income from discontinued operations was due to an increase in amortization and other direct marketing related costs of $150 million offset by an increase in direct response marketing revenues of $111 million. Income tax expense was $11 million and $26 million in 1997 and 1996, respectively. Discussion of Financial Condition 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. On February 1, 1999, the Company announced its intention to emerge from Chapter 11 bankruptcy protection in mid-1999. The Company will file its plan of reorganization and disclosure statement with the Bankruptcy Court shortly. The plan of reorganization will set forth the means for satisfying claims and interests in the Company and its debtor subsidiaries, including the Liabilities subject to compromise. Under the reorganization plan, when filed, secured and non-tax priority claimholders will generally receive cash equal to the amount of their allowed claim. Claims held by unsecured creditors and certain allowed vendor claims held by GE Capital will be satisfied by cash distributions for a portion of the allowed claims. GE Capital will receive a significant equity interest in the Company in exchange for its remaining claims. The Company intends to fund its distributions under the plan of reorganization principally through funds placed in escrow by GE Capital and through the termination of its over- funded defined benefit pension plan. The Company expects to repay GE for the funds placed in escrow by GE with the proceeds from the sale of Signature. The consummation of a plan of reorganization for the Company and its debtor subsidiaries will require the requisite vote of impaired creditors and stockholders and confirmation by the Bankruptcy Court, which is expected to be completed by the Summer of 1999. Net cash used in the Company's operating activities for continuing operations totaled $167 for 1998 compared to $292 for 1997, a decrease of $125. The lower cash usage is summarized as follows: Cash impact of smaller operating loss $ 517 Decrease in cash received from facility closings (108) Higher payments of liabilities subject to compromise (32) Lower cash provided by accounts payable (213) All other cash from operations (37) ------ $ 125 ======
Cash received from facility closings, which represents proceeds from the disposition of inventory and properties, net of costs associated with the going out-of-business sales, declined to $47 million in 1998 from $155 in 1997. The 1997 net receipts included the proceeds from the exit of its non- core specialty retail businesses and a portion of the proceeds from the closing of the 53 Wards stores. The 1998 net receipts included the remaining proceeds from the 1997 store closing program and the closing of an additional nine Wards stores in 1998. 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Discussion of Financial Condition (continued) Higher payments of liabilities subject to compromise represents an increase in the settlement amount of reclamation claims, the offset of restricted cash against interest claims, and payments of advertising and real estate and personal property tax claims. The lower cash provided by accounts payable was due to the effects of the bankruptcy filing in the third quarter of 1997. Net cash used for investing activities of continuing operations totaled $93 for 1998, compared to $35 million for 1997. Capital expenditures were $93 for 1998 compared to $47 for 1997. The Company has capitalized $12 on the remodeling of three stores in 1998. These stores, unveiled in September 1998, will serve as the prototype for the remodeling of future stores. These three stores reflected sales increases over the prior year in excess of 30 percentage points above the combined performance of the entire chain from September 1998 through February 1999. The Company plans to spend $180 over the next three years related to the remodeling of approximately 120 stores. Net cash provided by financing activities of continuing operations totaled $225 for 1998, compared to $438 for 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 $254 in 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 $304 and letters of credit outstanding were $108 at January 2, 1999. The Company had $363 of borrowing availability under the DIP Facility at January 2, 1999. 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. On November 9, 1998, Wards obtained a Third Amendment to the DIP Facility ("Third Amendment Agreement") which was approved by the Bankruptcy Court on February 1, 1999. The Third Amendment Agreement amended certain provisions of the DIP Facility , including an increase in the interest rate margin and a reduction in the level of earnings required, as defined in the DIP Agreement. Prior to the bankruptcy filing, Wards entered into a long term credit agreement, as amended, ("Long Term Credit Agreement") and a short term credit agreement, as amended, ("Short Term Credit Agreement") both dated as of September 15, 1994; note purchase agreements, as amended, dated March 1, 1993 and July 11, 1995 ("Note Purchase Agreements"); and a credit agreement, as amended, ("Seasonal Credit Agreement") dated October 4, 1996. The Company is currently in default of the terms of these agreements and no future amounts may be drawn thereunder. The Seasonal Credit Agreement was terminated as a result of the Chapter 11 filings. There were no borrowings outstanding under this agreement. 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Discussion of Financial Condition (continued) On September 15, 1998, the Company received approval from the Bankruptcy Court to permit Lechmere to lend Signature the funds to repay its borrowings of $102 under a Credit Agreement between Signature and various lenders, plus interest and other fees associated with the extension and refinancing of such agreement. On September 30, 1998, Signature's loan under the Credit Agreement was repaid from the $105 of funds advanced by Lechmere to Signature. The Lechmere loan to Signature, which accrues interest at either the prime rate plus 1.75% or the LIBO rate plus 2.75%, is secured by a pledge of stock of certain Signature subsidiaries and is guaranteed by Wards. Such guarantee is subordinate to the DIP Facility. The loan shall become immediately due upon the earliest of (i) upon demand; (ii) the effective date of a plan of reorganization for the debtor subsidiary; (iii) the conversion of the bankruptcy case from a Chapter 11 case to a Chapter 7 case under the Bankruptcy Code; (iv) the sale of all or substantially all of Signature's assets, the merger or consolidation of Signature with or into another entity, or the sale of more than 50% of an interest in Signature to another entity; or (v) December 31, 1999. 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. The Company began addressing Year 2000 date conversion issues in the fall of 1996 and has developed a plan to assess and remediate both information technology ("IT") and non-IT systems. The Company's plan consists of two phases. The assessment phase includes the inventory of all systems (IT and non-IT) subject to the Year 2000 issue and developing a plan for addressing the problem as related to each system. The remediation phase includes the implementation of the identified changes required and testing of these changes before implementation. For IT systems, the Company has completed its assessment phase and the remediation phase is 90% complete. The remainder of the remediation phase is expected to be completed in the first half of 1999. For non-IT systems, the Company anticipates the assessment phase to be completed in early 1999 and the remediation phase to be completed by September 30, 1999. The Company is also in the process of assessing the Year 2000 readiness of its suppliers and service providers and is participating in a National Retail Federation survey of such providers. In 1998, the Company had expensed $22 related to Year 2000 readiness. Prior to 1998, the Company expensed $12. The Company estimates an additional $3 will be expensed as incurred to become Year 2000 ready. In addition, the Year 2000 issue has accelerated the timing of an estimated $26 of capital expenditures of which $17 has been capitalized as of January 2, 1999. No significant capital projects have been delayed as a result of addressing the Year 2000 issue. Based on the Company's plan, the remaining costs to be expended to become Year 2000 ready are not expected to materially impact future cash flows. 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Discussion of Financial Condition (continued) The Company believes that its program will result in Year 2000 readiness. However, due to the complexity of the issue, there can be no assurances given that the Company's plan will be fully effective. The Company could experience interruptions of business at some of its operations, including those caused by, but not limited to, the inability of utility companies to provide telecommunications and electrical services, the failure of financial institutions to process transactions, and the inability of vendors to deliver products on a timely basis. The Company is in the process of developing contingency plans which are anticipated to be completed by September 30, 1999, with respect to the Company's facilities and merchandise supply and distribution networks. As discussed in Note 2 to the Consolidated Financial Statements, the accompanying consolidated 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. Capital expenditures during 1998 of $93 were primarily related to systems development, remodeling of three stores, merchandise fixture and presentation programs, and retail facility improvements.
1998 1997 1996 -------- -------- -------- Total capital expenditures $ 93 $ 47 $ 79 Capital appropriations authorized during the year 89 57 90 Cancellations of prior year's appropriations (3) (66) (34) Unexpended capital appropriations at year-end 50 57 113
Wards is not contractually committed to spend all of the capital appropriations unexpended at January 2, 1999, but generally expects to do so. The DIP Agreement restricts the amount of capital expenditures Wards may make during the term of the Agreement. ITEM 8. FINANCIAL STATEMENTS
Page -------- Report of Independent Public Accountants 23 For the 52-Week Period Ended January 2, 1999, the 53-Week Period Ended January 3, 1998 and the 52-Week Period Ended December 28, 1996 Consolidated Statements of Income 24 Consolidated Statements of Shareholders' Equity (Deficit) 26 Consolidated Statements of Cash Flows 28 Consolidated Balance Sheets at January 2, 1999 and January 3, 1998 Notes to Consolidated Financial Statements 25
22 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ---------------------------------------- To the Board of Directors and Shareholders of Montgomery Ward Holding Corp.: We have audited the accompanying consolidated balance sheets of MONTGOMERY WARD HOLDING CORP. (a Delaware Corporation) AND SUBSIDIARIES (of which Montgomery Ward Holding Corp. and certain of its U.S. subsidiaries filed petitions for reorganization on July 7, 1997 under Chapter 11 of the United States Bankruptcy Code), as of January 2, 1999 and January 3, 1998, and the related consolidated statements of income, shareholders' equity (deficit) and cash flows for the fiscal years ended January 2, 1999, January 3, 1998 and December 28, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Montgomery Ward Holding Corp. and Subsidiaries as of January 2, 1999 and January 3, 1998 and the results of their operations and their cash flows for the fiscal years ended January 2, 1999, January 3, 1998 and December 28, 1996, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2, the Company expects to file a plan of reorganization with the Bankruptcy Court shortly. The Company anticipates emerging from bankruptcy in July 1999. On July 7, 1997, the Company filed a voluntary petition seeking to reorganize under Chapter 11 of the United States Bankruptcy Code. The Chapter 11 filing was the result of violation of certain debt covenants, recurring operating losses, deterioration of vendor support, and cash flow deficiencies. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Although the Company is currently operating as a Debtor-In-Possession under the jurisdiction of the Bankruptcy Court, the continuation of the business as a going concern is contingent upon, among other things, the approval and confirmation by the creditors and Bankruptcy Court of the aforementioned plan of reorganization, the success of future operations, and the ability to recover the carrying amount of assets and/or the amount and classification of liabilities. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. Arthur Andersen LLP Chicago, Illinois February 11, 1999 23 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF INCOME
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended --------------- --------------- --------------- Jan. 2, Jan. 3, Dec. 28, (In millions, except per share amounts) 1999 1998 1996 --------------- --------------- --------------- Net sales, including leased and licensed department sales $ 3,634 $ 4,534 $5,879 Costs and Expenses Cost of goods sold, including net occupancy and buying expense 2,949 3,954 4,868 Operating, selling, general and administrative expenses ( Notes 11 and 17) 1,047 1,475 1,338 Interest expense, net (Note 15) 56 108 119 --------------- --------------- --------------- Total Costs and Expenses 4,052 5,537 6,325 --------------- --------------- --------------- Loss from Continuing Operations before Reorganization Costs and Income Taxes (418) (1,003) (446) Reorganization Costs (Note 5) 218 553 - --------------- --------------- --------------- Loss before Income Taxes and Discontinued Operations (636) (1,556) (446) Income Tax Expense (Benefit) (Note 9) 306 (386) (164) --------------- --------------- --------------- Loss before Discontinued Operations (942) (1,170) (282) Income (Loss) from Discontinued Operations, net of Income Taxes (Note 3) (29) 18 45 --------------- --------------- --------------- Net Loss (971) (1,152) 237 Preferred Stock Dividend Requirements (Note 12) - (8) (12) --------------- --------------- --------------- Net Loss Applicable to Common Shareholders $ (971) $(1,160) $ (249) =============== =============== =============== Net Income (Loss) per Common Share (Note 13) Class A Before Discontinued Operations $(25.46) $(32.17) $(7.48) Discontinued Operations (.79) .50 1.15 --------------- --------------- --------------- $(26.25) $(31.67) $(6.33) =============== =============== =============== Class B Before Discontinued Operations $(18.99) $(23.54) $(6.17) Discontinued Operations (.59) .37 .65 --------------- --------------- --------------- $(19.58) $(23.17) $(5.22) =============== =============== ===============
See notes to consolidated financial statements. 24 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED BALANCE SHEETS
Jan. 2, Jan. 3, (In millions) 1999 1998 ------------------ ------------------- Assets Cash and cash equivalents (Note 1) $ 58 $ 164 Investments of insurance operations 3 3 ------------- ----------- Total Cash and Investments 61 167 Trade and other accounts receivable 187 153 Accounts and notes receivable from affiliates (Notes 6 and 10) 123 17 ------------- ----------- Total Receivables 310 170 Merchandise inventories 953 1,120 Prepaid pension cost (Note 7) 402 366 Properties, plants and equipment, net of accumulated depreciation and amortization (Note 8) 963 1,052 Net assets of discontinued operations (Note 3) 666 732 Other assets (Note 8) 137 174 Deferred income taxes (Note 9) - 299 ------------- ----------- Total Assets $ 3,492 $ 4,080 ============= =========== Liabilities Short-term debt (Note 10) $ 328 $ 14 Trade accounts payable 444 442 Accrued liabilities and other obligations (Note 6) 738 561 Long-term debt (Note 10) 46 108 Liabilities subject to compromise (Notes 4, 6, and 11) 3,447 3,494 ------------- ----------- Total Liabilities 5,003 4,619 Commitments and Contingent Liabilities (Notes 10 and 16 ) Redeemable Preferred Stock (Note 12) 177 177 Shareholders' Deficit Common stock (Note 13) 1 1 Capital in excess of par value 65 64 Accumulated deficit (1,622) (651) Accumulated other comprehensive income 7 9 Less: Treasury stock, at cost (139) (139) ------------- ----------- Total Shareholders' Deficit (1,688) (716) ------------- ----------- Total Liabilities and Shareholders' Deficit $ 3,492 $ 4,080 ============= ===========
See notes to consolidated financial statements. 25 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (Dollars in millions, except per share amounts)
Class A Class B Common Common Capital Stock Stock In Accum. Treasury Total $.01 $.01 Excess Other Stock Share- Par Par Common of Par Retained Comp. At Holders' Value Value Stock Value Earnings Income Cost Equity ------------ ---------- -------- -------- ----------- ---------- -------- ---------- (in thousands) Balance Dec. 30, 1995 19,210 25,000 $1 $45 $ 758 $10 $(114) $ 700 Net loss - - - - (237) - - (237) Unrealized losses on securities, net of reclassification adjustment - - - - - (1) - (1) ----------- Comprehensive loss (238) Cash dividends declared and paid - - - - (9) - - (9) Cash dividends declared - - - - (3) - - (3) Compensation expense on stock option exercises and other share exchanges - - - 5 - - - 5 Shares repur- chased as treasury stock (1,242) - - - - - (25) (25) Shares issued upon exercise of options 352 - - 3 - - - 3 Shares issued upon exercise of conversion rights 2 - - - - - - - ------- ------- ------ ----- ------- ------ ------- ------- Balance, Dec. 28, 1996 18,322 25,000 $1 $53 $ 509 $ 9 $(139) $ 433 ======= ======= ====== ===== ======= ====== ======= =======
See notes to consolidated financial statements. 26 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (Dollars in millions, except per share amounts)
Class A Class B Capital Common Common in Total Stock Stock Excess Accum. Treasury Share- $.01 $.01 of Retained Other Stock Holders' Par Par Common Par Earnings Comp. at Equity Value Value Stock Value (Deficit) Income Cost (Deficit) ---------- --------- -------- -------- ------------ --------- --------- --------- (In thousands) Balance Dec. 28, 1996 18,322 25,000 $1 $53 $ 509 $9 $(139) $ 433 Net loss - - - - (1,152) - - (1,152) Unrealized losses on securities, net of reclassification adjustment - - - - - - - - -------- Comprehensive loss (1,152) Cash dividends declared and paid - - - - (3) - - (3) Cash dividends declared - - - - (5) - - (5) Grants of restricted stock and stock Options by Majority Shareholder (Note 17) - - - 11 - - - 11 --------- -------- ------- -------- -------- -------- --------- ---------- Balance, Jan. 3, 1998 18,322 25,000 $ 1 $ 64 $(651) $ 9 $ (139) $ (716) --------- -------- ------- -------- -------- -------- --------- ---------- Net loss - - - - (971) - - (971) Unrealized losses on securities, net of reclassification Adjustment - - - - - (2) - (2) ---------- Comprehensive (973) loss Grants of restricted stock and stock Options by Majority Shareholder (Note 17) - - - 1 - - - 1 --------- -------- ------- -------- -------- -------- --------- ---------- Balance, Jan. 2, 1999 18,322 25,000 $ 1 $ 65 $ (1,622) $ 7 $ (139) $ (1,688) ========= ======== ======= ======== ======== ======== ========= ==========
See notes to consolidated financial statements. 27 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended ----------------- --------------- -------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 ----------------- --------------- -------------- Cash flows used for operating activities: Net loss $(971) $(1,152) $(237) Adjustments to reconcile net loss to net cash used for operating activities: (Income) loss from discontinued operations 29 (18) (45) Provision for disposition of assets of Lechmere, Inc. - 280 - Provision for closing of Wards and Electric Avenue & More stores 125 204 - Provision for other reorganization costs 36 38 - Net receipts of cash relating to disposition of assets of Lechmere, Inc. and closing of Wards and Electric Avenue & More stores 47 155 - Depreciation and goodwill amortization 95 119 128 Deferred income taxes 299 (375) (110) Changes in operating assets and liabilities: Trade and other accounts receivable 7 (28) (18) Accounts and notes receivable from affiliates (1) (9) (11) Merchandise inventories 163 191 225 Prepaid pension cost (36) (19) (13) Other assets 44 33 48 Trade accounts payable (4) 209 (219) Liabilities subject to compromise (44) (12) - Federal income taxes payable, net - (4) (2) Accrued liabilities and other obligations 44 96 (38) --------------- ------------- ------------ Net cash used for continuing operations (167) (292) (292) Net cash provided by (used for) discontinued operations 4 66 (22) --------------- ------------- ------------ Net cash used for operating activities $ (163) $ (226) $ (314) --------------- ------------- ------------
See notes to consolidated financial statements. 28 MONTGOMERY WARD HOLDING CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended --------------- --------------- -------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 --------------- --------------- -------------- Cash flows used in investing activities: Purchase of short-term investments $ - $ - $ (2) Capital expenditures (93) (47) (79) Disposition of properties, plants and equipment, net - 12 19 Other investments - - (9) --------------- --------------- -------------- Net cash used in investing activities of continuing operations (93) (35) (71) Net cash provided by (used in) investing activities of discontinued operations 27 (58) (95) --------------- --------------- -------------- Net cash used in investing activities (66) (93) (166) --------------- --------------- -------------- Cash flows provided by financing activities: Proceeds from issuance of short-term debt, net - 409 486 Borrowings under Post-Petition Loan and Guaranty Agreement 937 321 - Payments under Post-Petition Loan and Guaranty Agreement (683) (271) - Restricted cash applied as payments under Long Term Credit Agreement (14) - - Payments of long-term debt (2) (5) (56) Payments of obligations under capital leases (13) (13) (12) Cash dividends paid - (3) (9) Proceeds from issuance of common stock - - 3 Purchase of treasury stock, at cost - - (20) --------------- -------------- ------------- Net cash provided by financing activities of continuing operations 225 438 392 Net cash provided by (used for) financing activities of discontinued operations (102) - 102 Net cash provided by financing activities 123 438 494 --------------- --------------- -------------- Increase (decrease) in cash and cash equivalents (106) 119 14 Cash and cash equivalents at beginning of period 164 45 31 --------------- ------------- -------------- Cash and cash equivalents at end of period $ 58 $ 164 $ 45 =============== =============== ==============
See notes to consolidated financial statements. 29 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. MAJOR ACCOUNTING POLICIES Business Segments Montgomery Ward Holding Corp. ("the Company" or "MW Holding") and its wholly owned subsidiary, Montgomery Ward & Co., Incorporated ("Wards"), are engaged in retail merchandising. As of January 2, 1999, retail merchandising operations are conducted through Wards. The assets of Wards' wholly-owned subsidiary, Lechmere, Inc. ("Lechmere") were disposed of in fiscal 1997 (see Note 4) and Lechmere's retail merchandising operations closed. On February 1, 1999 Wards announced its intention to sell its wholly-owned subsidiary, Signature Financial/Marketing, Inc. ("Signature") which operates in the direct response marketing segment. See Note 3 for information regarding the discontinued direct response marketing operations. Principles of Consolidation; Use of Estimates The consolidated financial statements include the Company and all subsidiaries. Investments in 20 percent to 50 percent owned affiliates, where significant influence exists, are accounted for using the equity method. All significant intercompany accounts and transactions are eliminated in consolidation. Certain prior period amounts have been reclassified to be comparable with the current period presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fiscal Year The Company operates on a 52- or 53- week fiscal year basis. The Company's fiscal year ends on the Saturday closest to December 31. The fiscal years ended January 2, 1999 and December 28, 1996 included 52 weeks. The fiscal year ended January 3, 1998 included 53 weeks. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, time deposits and highly liquid debt instruments with an original maturity of three months or less. The carrying amount reported in the financial statements for cash and cash equivalents approximates the fair value of these assets. Cash and cash equivalents includes $8 million and $110 million at January 2, 1999 and January 3, 1998, respectively, of restricted cash generated from the disposition of the assets of Lechmere. The proceeds may be used to pay Lechmere's post-petition obligations, or may be used for other purposes only pursuant to order of the Bankruptcy Court. In September 1998, Lechmere loaned $105 million of its proceeds from the disposition of its assets to Signature. In addition, the Company has approximately $5 million and $29 million at January 2, 1999 and January 3, 1998, respectively, of cash held in segregated accounts by various banks who were lenders to the Company under the Long Term and Short Term Credit Agreements. This cash is being held subject to potential offset, pursuant to the order of the Bankruptcy Court. In June 1998, $24 million of pre-petition debt and interest under the Long Term Credit Agreement and Short Term Credit Agreement was offset against this cash. 30 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. MAJOR ACCOUNTING POLICIES (CONTINUED) Cash and Cash Equivalents (continued) Following is a summary of cash payments for interest and income taxes and non-cash financing and investing activities:
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended ---------------- ----------------- ---------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 ---------------- ----------------- ---------------- Cash paid (refunded) for: Income taxes $ 3 $ 1 $ (22) Interest 38 74 111 Non-cash financing activities: Notes issued for purchase of treasury stock - - 5 Non-cash investing activities: Grants of restricted stock and stock options by majority shareholder 1 11 - Increase in liquidation value of preferred stock - 2 - Changes in unrealized gain on marketable securities (2) - (1)
Investments of Insurance Operations The Company accounts for investments under Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments In Debt and Equity Securities". Under SFAS No. 115, all debt and equity securities are classified by management as "available-for-sale" and are stated at fair market value with all changes in unrealized gains or losses, net of applicable income taxes, included in Shareholders' Equity (Deficit). Merchandise Inventories Merchandise inventories consist primarily of merchandise held for resale and are valued at the lower of the cost or market using the retail, first- in, first-out ("FIFO") method. Properties, Plants and Equipment Depreciation is computed on a straight-line basis over the estimated useful life of the asset, with annual rates ranging between 2% and 3% for buildings and between 12% and 25% for fixtures and equipment. Leasehold improvements and assets under capital leases are amortized on a straight- line basis over no longer than the primary term of the lease. Depreciation expense includes amortization of assets under capital leases. 31 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. MAJOR ACCOUNTING POLICIES (CONTINUED) Properties, Plants and Equipment (continued) Interest relating to construction in progress is capitalized and amortized over the useful life of the property. In 1996, pre-opening costs, which were not capital in nature, were expensed upon store openings. No pre- opening costs were incurred in 1997 or 1998. Statement of Position ("SOP") 98-5 "Reporting of Costs of Start-up Activities" requires costs of start-up activities to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. The Company will expense all costs as incurred relating to future store openings. Normal maintenance and repairs are expensed as incurred. Major repairs that materially extend the lives of properties are capitalized. SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," provides guidance on accounting for the costs of computer software developed or obtained for internal use and requires certain costs incurred to be expensed or capitalized depending on the stage of its development and nature. This SOP is effective for fiscal years beginning after December 15, 1998. The Company's current accounting policy complies with this Statement. Results of operations and financial position of the Company will be unaffected by this new standard. Impairment of Long-lived Assets In the event facts and circumstances indicate the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the assets would be compared to the carrying amount of the assets to determine if a write-down to market value or discounted cash flow value is required. Interest Rate Exchange and Cap Agreements Amounts paid or received pursuant to interest rate exchange and cap agreements are deferred and amortized as interest expense or income over the remaining life of the applicable agreement. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences by applying enacted statutory tax rates to differences between the financial statement carrying amounts and tax bases of existing assets and liabilities. In addition, the amount of any future tax benefits is reduced by a valuation allowance to the extent such benefits are not expected to be realized on a more likely than not basis. Advertising Costs The Company expenses production costs of print, radio and television advertisements on the date the advertising first takes place. Advertising expenses included in operating, selling, general and administrative expenses were $229 million, $334 million and $373 million for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively. 32 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. MAJOR ACCOUNTING POLICIES (CONTINUED) Comprehensive Income In 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income. This statement establishes rules for 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 (deficit). The components of the unrealized gains (losses) on securities are as follows:
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended -------------- ------------- ------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 -------------- ------------- ------------- Unrealized holding gains arising during the period $ 6 $ 3 $ 2 Less: reclassification adjustment for gains included in net income (8) (4) (2) ---------- ---------- ----------- $ (2) $ (1) $ - ========== ========== ===========
The unrealized holding gains and the reclassification adjustment for gains included in net loss for the period ended January 2, 1999 are net of income taxes of $3 million and $5 million, respectively. The income taxes associated with the unrealized holding gains and reclassification adjustment for gains included in net income for the periods ended January 3, 1998 and December 28, 1996 are not significant. 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 and its direct and indirect subsidiaries; Marinco Insurance U.S.A., Inc. ("Marinco"); and Montgomery Ward Foundation. After a long period of negotiation, Wards was unable to reach an out-of- court settlement with its lenders. Accordingly, bankruptcy petitions were filed in order to obtain an opportunity to reorganize and begin implementing the Company's strategies while working to restructure its indebtedness. Pursuant to the Post-Petition Loan and Guaranty Agreement dated July 8, 1997, among Wards and Lechmere, as borrowers; MW Holding and other debtor subsidiaries of MW Holding, as guarantors; General Electric Capital Corporation ("GE Capital"), as agent and lender; and various lenders, as amended (the "DIP Facility"), the lenders have agreed to provide up to $1 billion in post-petition financing to Wards. 33 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. REORGANIZATION (CONTINUED) On February 1, 1999, the Company announced its intention to emerge from Chapter 11 bankruptcy protection in mid-1999. The Company will file its plan of reorganization and disclosure statement with the Bankruptcy Court shortly. The plan of reorganization will set forth the means for satisfying claims and interests in the Company and its debtor subsidiaries, including the Liabilities subject to compromise. Under the reorganization plan, when filed, secured and non-tax priority claimholders will generally receive cash equal to the amount of their allowed claim. Claims held by unsecured creditors and certain allowed vendor claims held by GE Capital will be satisfied by cash distributions for a portion of the allowed claims. GE Capital will receive a significant equity interest in the Company in exchange for its remaining claims. The Company intends to fund its distributions under the plan of reorganization principally through funds placed in escrow by GE Capital and through the termination of its over- funded defined benefit pension plan. The Company expects to repay GE for the funds placed in escrow by GE with the proceeds from the sale of Signature. The consummation of a plan of reorganization for the Company and its debtor subsidiaries will require the requisite vote of impaired creditors and stockholders and confirmation by the Bankruptcy Court, which is expected to be completed by the Summer of 1999. The accompanying consolidated 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 significant 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. DISCONTINUED OPERATIONS On February 1, 1999, Wards announced that GE Capital, a major shareholder and creditor, will acquire Signature, Wards' direct marketing response operations segment. Signature's results of operations have been classified as discontinued operations and prior periods have been restated. The net loss for the period ended January 2, 1999 includes the cumulative effect of $33 million associated with a change in the method of accounting for the printing and mailing of membership material costs. Historically, these costs were capitalized and amortized ratably over the membership period as revenue is recognized. Effective in fiscal year 1998, these costs were expensed upon the mailing of membership materials. The net loss for the period ended January 2, 1999 also includes a $31 million charge associated with the estimated loss on the sale of its dining operations. In March 1999, Signature signed a definitive agreement for the sale of its dining business to Transmedia Network Inc. Summarized financial data of discontinued operations are as follows: 34 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. DISCONTINUED OPERATIONS (CONTINUED)
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended -------------- ------------- ------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 -------------- ------------- ------------- Revenues $ 831 $ 852 $ 741 Income (loss) from operations before income taxes (29) 29 71 Income tax expense - (11) (26) Net income (loss) (29) 18 45
January 2, January 3, (In millions) 1999 1998 -------------- --------------- Net assets of discontinued operations Cash and investments $ 440 $ 408 Direct response and insurance acquisition costs 466 559 Other assets 293 302 Short-term debt (105) (102) Insurance policy claim reserves (234) (236) Accrued liabilities (194) (199) ------------ ------------- Net assets of discontinued operations $ 666 $ 732 ============ =============
The short-term debt balance at January 2, 1999 represents a loan from Lechmere (see Note 10). 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. 35 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. LIABILITIES SUBJECT TO COMPROMISE (CONTINUED)
January 2, January 3, (In millions) 1999 1998 -------------- -------------- Accounts payable $1,380 $1,376 Long Term Credit Agreement 603 603 Short Term Credit Agreement 442 456 Note Purchase Agreements 276 276 Other long-term debt 4 9 Obligations under capital leases 64 77 Lease and other contract rejection claims 118 104 Other liabilities 560 593 --------- ---------- $3,447 $3,494 ========= ==========
The Company has $56 million of liabilities due Marinco which have been eliminated in consolidation but are subject to compromise. In addition, obligations under capital leases include amounts due Signature of $22 million and $26 million at January 2, 1999 and January 3, 1998, respectively. 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. 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. Contractual interest expense not recorded on certain pre-petition debt totaled $122 million for the period ended January 2, 1999 and $61 million for the period from July 8, 1997 through January 2, 1999. Prior to the bankruptcy filing, the Company's debt consisted primarily of borrowings under the Long Term Credit Agreement, the Short Term Credit Agreement and Note Purchase Agreements. The Company was in default of the terms of each applicable loan agreement. Each of these agreements had a maturity date of August 29, 1997 and were to bear interest at varying rates. The Company was also in default of the terms of the Seasonal Credit Agreement, which was terminated as a result of the Chapter 11 filing. There were no borrowings outstanding under this agreement. The caption "Accounts payable," included in Liabilities subject to compromise, includes facilities Wards had available under vendor financing programs which totaled $725 million. At June 28, 1997, these facilities were principally drawn. These facilities are no longer available due to the Chapter 11 filing. The Company had entered into interest rate exchange and cap agreements with various banks to offset the market risk associated with an increase in interest rates under both the Long Term and Short Term Credit Agreements. The aggregate notional principal amounts under the interest rate exchange agreements was $175 million. The interest rate exchange agreements were terminated upon the Company's bankruptcy filing. Pursuant to the early termination, the Company incurred a pre-petition liability of $3 million which has been included in Liabilities subject to compromise. The cap agreements, which all expired during fiscal 1997, were not terminated early. 36 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. LIABILITIES SUBJECT TO COMPROMISE (CONTINUED) As part of the Chapter 11 reorganization process, the Company has attempted to notify all known or potential creditors of the Chapter 11 filing for the purpose of identifying all pre-petition claims against the Company. Generally, creditors whose claims arose prior to the Petition Date had until March 2, 1998 ("Bar Date") to file claims or be barred from asserting claims in the future. Claims arising from rejection of executory contracts and leases by the Company and claims related to certain other items were permitted to be filed by other dates set by the Bankruptcy Court. Differences between amounts shown by the debtors and claims filed by creditors are being investigated and will either be amicably resolved or adjudicated. The ultimate amount of and settlement terms for such liabilities are subject to the plan of the reorganization when confirmed, and accordingly are not presently determinable. 5. REORGANIZATION COSTS Reorganization costs recorded in fiscal 1998 and 1997 consisted of the following (in millions):
52-Week 53-Week Period Ended Period Ended -------------- -------------- Jan. 3, Jan. 2, 1999 1998 -------------- -------------- Store closings $ 125 $ 484 Interim Account Agreement Fees (Note 6) 30 3 Professional fees 17 10 Distribution center closings 15 - Other 39 58 Interest income (8) (2) -------------- -------------- $ 218 $ 553 ============== ==============
In 1997, Wards announced its exit of its non-core specialty retail businesses- Lechmere, Home Image by Lechmere and Electric Avenue & More and the closing of 53 underperforming retail stores and four outlet and liquidation centers. In 1998, Wards announced the closing of nine stores. 1998 store closing charges include 9 stores closed during 1998 and 39 store closings that will be completed in 1999. Sales of automotive products and services were discontinued in 17 operating retail stores in January 1999. The charges associated with these restructuring efforts included 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. Distribution center closings include 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, severance and other expenses. 37 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. ACCOUNTS AND NOTES RECEIVABLE FROM AFFILIATES Wards entered into a Bank Credit Card Program Agreement ("Card Agreement") effective April 1, 1996 with Monogram Credit Card Bank of Georgia ("Monogram"), and an Account-Related Agreement ("Account Related Agreement") effective April 1, 1996 with Montgomery Ward Credit Corporation ("Montgomery Ward Credit") (collectively referred to as the "Agreements") pursuant to which Monogram and Montgomery Ward Credit (collectively referred to as the "Montgomery Ward Credit Companies" or "MWCC"), both of which are affiliates of GE Capital provide services to Wards, and MWCC makes payments to Wards as to their receivables generated by sales to customers of Wards, its affiliates and licensees who utilize the Wards private label credit card. Under the Agreements, Monogram has the exclusive right to operate the Wards' private label credit card system and the obligation to pay to Wards the face amount of Monogram's receivables generated by the Wards private label credit card system, up to $7 billion outstanding at any time. Sales of receivables to Montgomery Ward Credit under the prior arrangements, and payments with respect to receivables under the current Agreements, were $2.1 billion, $2.6 billion and $3.6 billion for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively. At January 2, 1999 and January 3, 1998, there were $3.3 billion and $4.2 billion, respectively, of Wards credit card receivables owned by Montgomery Ward Credit Companies. Amounts receivable from Monogram in connection with such receivables are included in Accounts and notes receivable from affiliates. Under the Card Agreement, Wards is required to pay Monogram the excess interest costs on a monthly basis if a blended interest rate applicable to funding costs with respect to the receivables exceeds 10% per annum. This blended interest rate has been less than 10% since 1988. Should Montgomery Ward Credit Companies, or their guarantor GE Capital, fail to perform their obligations under the Agreements, Wards would suffer an accounting loss up to the amount of Wards' share of finance charges and late fees (as described below), net of applicable reserves carried by Montgomery Ward Credit. Wards estimates that any accounting loss would be immaterial at January 2, 1999. Montgomery Ward Credit Companies' obligations under the Agreements are not collateralized. Wards generally bears a portion of the risk of credit losses due to non- payment by cardholders up to a maximum of 2.6% of average outstanding receivables, subject to offsets relating to Wards' share of certain incremental increases in finance charges and late fees payable by cardholders. Wards is also responsible for losses on certain higher risk starter card accounts to the extent the loss percentage as to those accounts exceeds the loss percentage experience of the rest of the portfolio. Wards' net unpaid liability for credit losses for 1991 through 1998 are to be payable to Montgomery Ward Credit pursuant to a note ("Continuation Note") due in early 2003, provided that the outstanding balance of such note cannot exceed $300 million. A remaining note in the amount of $15 million, consisting of losses incurred after July 7, 1997 for the remaining portion of 1997, was executed which provides for monthly principal payments in the amount of 5% of the scheduled monthly principal payments for the Continuation Note. Starter card losses are payable currently. Interest on Wards' unpaid liability for credit losses is to be payable at the monthly GE commercial paper rate. Interest on notes outstanding as of July 7, 1997, has been stayed by the Chapter 11 proceeding. 38 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. ACCOUNTS AND NOTES RECEIVABLE FROM AFFILIATES (CONTINUED) In exchange for Wards' agreement to allow MWCC to increase finance charge rates and late fees in selected states, Wards receives a share of incremental finance charges and late fees resulting from such increases. Such amount is available for offset against Wards' unpaid liability for its share of credit losses, and to the extent not currently paid or offset earns interest at the same rate as amounts owned by Wards to Montgomery Ward Credit. In the event that, due to the increase in finance charge rates and late fees, refunds are required to be made, Wards and MWCC have agreed in certain cases to share the financial risk. In connection with the foregoing arrangements, Wards owes $72 million for 1998 credit losses offset by incremental finance charges and late fee assessments. Wards has previously executed notes for certain of its unpaid share of credit losses through 1997, offset by incremental finance charges and late fee assessments due to Wards for a net obligation of $300 million. At January 2, 1999 and January 3, 1998, $288 million of the net obligation is included in Liabilities subject to compromise and the remainder of the net obligation of $84 million and $40 million at January 2, 1999 and January 3, 1998, respectively, is included in Accrued liabilities and other obligations. As the $300 million threshold has been reached, it is expected that future payments may be required depending upon the level of credit card losses. The Agreements are scheduled to expire on December 31, 2011, provided the terms shall continue thereafter from year to year unless either party gives ten years prior notice of its election to terminate. Except upon the occurrence of certain events of default, the Agreements may generally not be terminated by either party prior to December 31, 2011. 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 whether the Interim Amount Agreement is terminated or not, except in the termination circumstance where the Company would be liquidated or when certain defaults occur, 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 authorizing Wards to discontinue all of its retail operations or converts the case to Chapter 7, (e) upon certain defaults by the Company or Wards or default by Monogram or Montgomery Ward Credit, or (f) December 31, 1999. 39 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. RETIREMENT PLANS Retirement plans cover a majority of full-time associates of Wards and its subsidiaries. Retirement benefits are provided through a defined benefit pension plan and a defined contribution plan. In addition, certain associates who retire after participation in the retirement plan for ten years and who were members of the health care plan for the year prior to retirement are eligible for certain post-retirement health care benefits, the cost of which is shared with the retirees. Certain associates who retired before January 1, 1996 are eligible for post-retirement life insurance benefits. The post-retirement healthcare benefits cease at age 65 for associates who retire on or after January 1, 1996 and who do not meet certain age and service requirements. In 1992, the Company established a limit on its future annual contributions on behalf of retirees at a maximum of 125% of the projected 1992 company contributions. The Company continues to evaluate ways in which it can better manage retiree benefits and control costs. Any changes in the plan or revisions to assumptions that affect the amount of expected future benefits may have a significant effect on the amount of the reported obligation and annual expense.
PENSION POST-RETIREMENT BENEFITS BENEFITS ------------------------------- -------------------------------- 1998 1997 1998 1997 ------------- ------------- -------------- ------------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 691 $ 677 $ 109 $ 119 Service cost 11 11 1 1 Interest cost 45 48 6 8 Benefit payments (70) (66) (8) (8) Actuarial (gains)/losses (8) 42 (12) (10) Plan amendments - (21) (2) (1) ------------- ------------- -------------- ------------- Benefits obligation at end of year $ 669 $ 691 $ 94 $ 109 ------------- ------------- -------------- ------------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning $ 967 $ 946 of year Actual return on plan assets 234 87 Benefits paid (70) (66) ------------- ------------- Fair value of plan assets at end of year $1,131 $ 967 ============= ============= Funded status $ 462 $ 277 $ (94) $(109) Unrecognized net actuarial (gain)/loss (49) 103 (25) (14) Unrecognized prior service cost (11) (14) (15) (15) ------------- ------------- -------------- ------------- Prepaid (accrued) benefit cost $ 402 $ 366 $(134) $(138) ============= ============= ============== ============= WEIGHTED-AVERAGE ASSUMPTIONS AS OF YEAR END Discount rate for obligation 6.75% 7.00% 6.75% 7.00% Expected return on plan assets 9.50% 9.50% - - Rate of compensation increase 3.00% 3.00% - -
40 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. RETIREMENT PLANS (CONTINUED) Components of net periodic benefit cost are as follows:
PENSION POST-RETIREMENT BENEFITS BENEFITS ------------------------------- ----------------------------------- 1998 1997 1998 1997 ------------- ------------- --------------- --------------- COMPONENTS OF NET PERIODIC BENEFIT (INCOME) EXPENSE Service cost $ 11 $ 11 $ 1 $ 1 Interest cost 45 48 6 8 Expected return on assets (90) (80) (2) (1) Amortization of prior service cost - (1) (1) (1) Amortization of actuarial loss/(gain) (2) 3 - - ------------- ------------- --------------- --------------- Net periodic benefit (income) expense $ (36) $ (19) $ 4 $ 7 ============= ============= =============== ===============
The Company provides a 401(k) defined contribution plan to eligible employees. Company matching contributions amounted to $2 million, $4 million and $6 million for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively. The assumed health care cost trend rate and the impact of a 1% change in the medical trend rate on the accumulated post-retirement benefit obligation, service cost and interest cost are not applicable due to caps established on current cost levels. A motion was approved by the Bankruptcy Court on February 19, 1999, which would allow the Company to spin-off and then terminate a portion of its over-funded defined benefit pension plan in order to partially fund its distributions under its plan of reorganization. Annuities will be purchased to fund the benefits of active, terminated and retired associates. A portion of the excess benefits will be contributed to a replacement plan for active associates. Subject to government approval, the remaining assets will revert to the Company, after payment of applicable taxes. In connection with the termination of the plan, the Company estimates it will incur a loss in excess of $100 million in 1999. 8. PROPERTIES, PLANTS AND EQUIPMENT The details of the properties, plants and equipment accounts at cost are shown below:
Jan. 2, Jan. 3, (In millions) 1999 1998 -------------------- ------------------- Land $ 154 $ 162 Buildings 712 768 Leasehold improvements 243 275 Fixtures and equipment 450 462 Deferred software costs 70 39 Assets under capital leases 123 143 Less accumulated depreciation and amortization (789) (797) -------------------- ------------------- Properties, plants and equipment, net $ 963 $1,052 ==================== ===================
41 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. PROPERTIES, PLANTS AND EQUIPMENT (CONTINUED) Depreciation expense for properties, plants and equipment was $94 million, $117 million and $124 million for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively. Assets held for disposition, representing primarily closed retail and warehouse facilities, of $82 million and $76 million at January 2, 1999 and January 3, 1998, respectively, are included in Other assets. Losses of $42 million and $16 million for the periods ended January 2, 1999 and January 3, 1998, respectively, which are included in Reorganization Costs, were recognized in connection with the write-down of these properties to their net realizable values. 9. INCOME TAXES As of January 2, 1999, the Company has a tax credit of $831 million attributable to net operating loss ("NOL") carryforwards available, which expire beginning in 2007; targeted jobs tax credit ("TJTC") carryforwards of $7 million, which expire beginning in 2009; alternative minimum tax ("AMT") credits of $3 million available to offset future federal income tax liabilities; and capital loss carryforward credits of $3 million expiring in 2002. At year-end 1997, management evaluated the realizability of the tax carryforwards and established a valuation reserve based upon its tax planning strategy of selling certain appreciated, non-operating assets, prior to emerging from Chapter 11, to avoid the carryforwards expiring without being used. During the third quarter of 1998, management determined that the tax benefits will more likely be realized through emergence from bankruptcy and the related expected restructuring of liabilities. As a result of the foregoing, the Company increased its valuation allowance by $299 million at January 2, 1999, since the consolidated financial statements do not give effect to adjustments that might result from a plan of reorganization. It is anticipated that the implementation of a plan of reorganization would significantly reduce or eliminate the amount of tax credits available. The approximate tax effects of temporary differences and carryforwards that give rise to the net deferred tax asset are as follows:
Jan. 2, Jan. 3, (In millions) 1999 1998 ------------------------ ------------------- Accrued liabilities $ 262 $ 114 Postretirement benefits 47 48 Insurance reserves 54 57 Other deferred tax assets 7 13 ------------------------ ------------------- Total deferred tax assets 370 232 Prepaid pension contribution (146) (131) Net deferred liabilities of discontinued operations (148) (185) Properties, plants and equipment (148) (117) Other deferred tax liabilities (19) (39) ------------------------ ------------------- Total deferred tax liabilities (461) (472) NOL, TJTC, AMT and capital loss credit carryforwards 831 744 Valuation allowance (740) (205) ------------------------ ------------------- Net deferred tax asset $ - $ 299 ======================== ===================
42 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. INCOME TAXES (CONTINUED) Income tax expense (benefit) consists of:
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended -------------------- ------------------ ---------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 -------------------- ------------------ ---------------- Federal Current $ 2 $ 2 $ 2 Deferred 299 (372) (160) State, local and foreign 5 (16) (6) -------------------- ------------------ ---------------- Income tax expense (benefit) before discontinued operations 306 (386) (164) Income tax expense related to discontinued operations - 11 26 -------------------- ------------------ ---------------- Total income tax expense (benefit) $ 306 $ (375) $ (138) ==================== ================== ================
A reconciliation of the statutory to effective federal income tax rate is as follows:
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended --------------- ---------------- ----------------- Jan. 2, Jan. 3, Dec. 28, 1999 1998 1996 --------------- ---------------- ----------------- Federal income tax rate (35)% (35)% (35)% State taxes, net of reduction of federal tax and NOL benefit 1 (1) (1) Tax credits - - (2) Permanent differences 1 - 1 Change in valuation allowance 81 11 - --------------- ---------------- ----------------- Effective income tax rate 48% (25)% (37)% =============== ================ =================
43 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. SHORT-TERM AND LONG-TERM DEBT The long-term debt of Wards and its subsidiaries is as follows:
Jan. 2, Jan. 3, (In millions) 1999 1998 ---------------------- --------------------- Wards Post-Petition Loan and Guaranty Agreement $ - $ 50 Wards' Real Estate Subsidiaries 11.50% Secured Note, due serially to September 1, 2001 11 11 7.50% Secured Note, due serially to November 30, 2002 5 5 9.45% Secured Notes, due serially to November 30, 2003 14 14 7.75% Secured Notes, due serially to August 31, 2004 15 16 7.875% Secured Notes, due serially to December 15, 2005 7 7 9.00% Secured Notes, due serially to January 1, 2006 11 11 Other 7 8 ---------------------- --------------------- Total long-term debt 70 122 Less: current portion 24 14 ---------------------- --------------------- $ 46 $ 108 ====================== =====================
Maturities of long-term debt for the five years succeeding January 2, 1999 are as follows: 1999--$24 million, 2000--$11 million, 2001--$10 million, 2002--$9 million, 2003--$8 million, and thereafter --$8 million. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the carrying value of long-term debt approximates fair value. Wards entered into the Post-Petition Loan and Guaranty Agreement ("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 billion. Wards had borrowed $304 million under the DIP facility at January 2, 1999 which has been classified as short-term debt due to the facility expiring on July 7, 1999. Total letters of credit outstanding were $108 million at January 2, 1999. The Company had $363 million of borrowing availability under the DIP Facility at January 2, 1999. Under the DIP Facility, Wards may select among several interest rate options, all of which are based on market rates plus a margin, as amended. 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. 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 also 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. 44 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. SHORT-TERM AND LONG-TERM DEBT (CONTINUED) 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. Effective November 9, 1998, Wards obtained a Third Amendment to the DIP Facility ("Third Amendment Agreement") which was approved by the Bankruptcy Court on February 1, 1999. The Third Amendment Agreement amended certain provisions of the DIP Facility , including an increase in the interest rate margin and a reduction in the level of earnings required, as defined in the DIP Agreement. On September 15, 1998, the Company received approval from the Bankruptcy Court to permit Lechmere to lend Signature the funds to repay its borrowings of $102 under a Credit Agreement between Signature and various lenders, plus interest and other fees associated with the extension and refinancing of such agreement. On September 30, 1998, Signature's loan under the Credit Agreement was repaid from the $105 of funds advanced by Lechmere to Signature. The Lechmere loan to Signature, which accrues interest at either the prime rate plus 1.75% or the LIBO rate plus 2.75%, is secured by a pledge of stock of certain Signature subsidiaries and is guaranteed by Wards. Such guarantee is subordinate to the DIP Facility. The loan shall become immediately due upon the earliest of (i) upon demand; (ii) the effective date of a plan of reorganization for the debtor subsidiary; (iii) the conversion of the bankruptcy case from a Chapter 11 case to a Chapter 7 case under the Bankruptcy Code; (iv) the sale of all or substantially all of Signature's assets, the merger or consolidation of Signature with or into another entity, or the sale of more than 50% of an interest in Signature to another entity; or (v) December 31, 1999. The Secured Notes of the real estate subsidiaries are secured by mortgage liens and/or assignments of rental agreements whereby the real estate subsidiaries have assigned to trustees certain monies payable under leases with Wards. As the Secured Notes of the real estate subsidiaries are adequately collateralized by the respective properties, these obligations are not considered subject to compromise. 11. LEASES The Company leases real and personal property principally through noncancelable capital and operating leases, which generally provide for the payment of minimum rentals and, in certain instances, executory costs and additional rentals based upon a percentage of sales. The terms of the real estate leases typically contain renewal +options for additional periods. 45 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. LEASES (CONTINUED) At January 2, 1999, the minimum lease payments under all noncancelable operating leases with an initial term of more than one year, not including $16 million of future sublease rentals, and under capital leases are as follows:
Capital Operating (In millions) Leases Leases ----------------------- ----------------------- 1999 $ 17 $ 70 2000 15 61 2001 14 51 2002 14 45 2003 12 41 Thereafter 18 286 ======================= ----------------------- Total Minimum Lease Payments $ 90 $ 554 ======================= Less: Executory costs, principally real estate taxes to be paid by the lessor (2) Less: Imputed interest (24) ----------------------- Present value of net minimum capital lease payments including portion due within one year of $6 $ 64 =======================
The obligations under capital leases have been included in Liabilities subject to compromise at January 2, 1999 and January 3, 1998. Net rent expense charged to earnings was $91 million, $128 million and $124 million for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively, after deducting rentals from subleases of $7 million, $9 million and $10 million for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively. Rent expense includes contingent lease rentals for capital and operating leases of $4 million, $7 million, and $10 million for the periods ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively. These contingent lease rentals are generally based on sales revenues. Some rental agreements contain escalation provisions that may require higher future rent payments. Rent expense incurred under rental agreements which contain escalation clauses is recognized on a straight-line basis over the life of the lease. 46 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. REDEEMABLE PREFERRED STOCK On December 29, 1995, Wards issued 1,750 shares of senior preferred stock ("MW Senior Preferred Stock"), par value of $1.00 per share, to GE Capital in exchange for $175 million in cash. Subsequent to year end 1995, Wards used a portion of the proceeds to finance the purchase of the Amoco Motor Club by its wholly-owned subsidiary, Signature. The subscription agreement for the MW Senior Preferred Stock contained an exchange option which gave GE Capital the option to exchange the MW Senior Preferred Stock for senior preferred stock of the Company with substantially the same terms. On January 31, 1996, GE Capital exercised this exchange option. On March 29, 1996, the Company issued 1,750 shares of senior preferred stock ("Senior Preferred Stock") to GE Capital in exchange for the 1,750 shares of MW Senior Preferred Stock held by GE Capital. Dividends on the Senior Preferred Stock are payable quarterly at an annual rate of $7,010 per share. The Company is required to redeem the Senior Preferred Stock on June 30, 2002, with the option of redeeming all or any portion prior to June 30, 2002. On March 4, 1997, GE Capital, Wards and Lechmere amended the Program Agreement under which GE Capital provided funds to Wards and Lechmere to pay manufacturers and distributors of goods purchased by Wards and Lechmere. In exchange for a $150 million increase in the maximum amount of funds GE Capital agreed to provide, MW Holding agreed to issue shares of a new series of preferred stock having a liquidation value of $21 million. On April 1, 1997, GE Capital further increased its funding under the Program Agreement by $100 million and the Board of Directors of MW Holding agreed to issue additional shares of the new series of preferred stock. At its Annual Meeting held on May 29, 1997, the stockholders of MW Holding approved an amendment to its Certificate of Incorporation authorizing the issuance of up to 25,000 shares of preferred stock. The amendment allows future issuances of preferred stock by action of the Board of Directors without the need for further action by the stockholders. The Board of Directors designated 1,000 shares of the newly authorized preferred stock to be Series C Preferred Stock and MW Holding issued 352 shares of the Series C Preferred Stock to GE Capital in full payment of the obligations described above. All of the Series C Preferred Stock is required to be redeemed on September 30, 2002 at a redemption price of $100,000 per share (the "Liquidation Value") plus unpaid accrued dividends. Dividends are payable quarterly at a rate per annum equal to 15%, with the first payment based on the number of days from and including March 4, 1997. If for any reason the full dividend on any payment date is not paid in cash on such date, the unpaid amount thereof will automatically, without further action, be deemed added to the Liquidation Value. MW Holding did not pay the dividend due June 30, 1997 of $2 million and such amount has been added to the liquidation value of the Series C Preferred Stock. MW Holding also did not pay dividends due on June 30, 1997 on its Senior Preferred Stock. The redemption provisions of the Series C and Senior Preferred Stock have been stayed by the Chapter 11 proceedings. No further dividends will be declared or paid on the Series C or Senior Preferred Stock prior to the approval of a plan of reorganization. 47 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. COMMON STOCK As of January 2, 1999, the Company has the following authorized classes of common stock: Class A Common Stock, Series 1; $.01 par value; 25,000,000 shares authorized; 18,222,706 shares issued and outstanding, net of 6,777,294 shares held in treasury. Class A Common Stock, Series 2; $.01 par value; 5,412,000 shares authorized; 99,446 shares issued and outstanding, net of 2,118,185 shares held in treasury. Class A Common Stock, Series 3; $.01 par value; 12,400,000 shares authorized; no shares issued or outstanding. Class B Common Stock; $.01 par value; 25,000,000 shares authorized, issued and outstanding; all owned by GE Capital. The Company has repurchased 5,982,897 shares held by certain former officers of the Company, Wards and Signature and their permitted transferees by making cash payments and issuing installment notes in the aggregate of approximately $54 million. As of January 2, 1999, the outstanding balance of these notes was $7 million. These installment notes bear interest at varying rates, are payable over multi-year periods (generally three to five years) and are secured by shares of common stock. These notes are classified as Liabilities subject to compromise. The Company does not have the capacity under its borrowing agreements to satisfy the payments for these notes. A noteholder may foreclose on the pledge of shares repurchased if note payments are not made within one year of becoming due; provided, however that the foreclosure remedy has been stayed by the Chapter 11 filing. The escrow accounts holding the shares of common stock have been closed and the stock is now being held by the noteholders. Each share of Class B Common Stock entitles the holder thereof to one vote. All shares of Class A Common Stock entitle the holders to a total of 25,000,000 votes, or one vote per share if the total number of Class A shares issued and outstanding is less than 25,000,000. In 1997, the Company adopted Statement of Financial Accounting Standards Number 128, "Earnings per Share" ("FAS 128"). FAS 128 requires the presentation of "basic" earnings per share (income applicable to common shareholders divided by the weighted-average number of common shares outstanding during the period) and "diluted" earnings per share (which gives effect to all dilutive potential common shares that were outstanding during the period). All prior-period earnings per share data have been restated to conform to FAS 128. Basic and diluted earnings per share are the same for the periods ended January 2, 1999, January 3, 1998 48 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. COMMON STOCK (CONTINUED) and December 28, 1996, as all common stock equivalents are antidilutive, due to the net loss incurred during these periods.
For the 52-Week For the 53-Week For the 52-Week (In millions, Period Ended Period Ended Period Ended except share January 2, 1999 January 3, 1998 December 28, 1996 -------------------------------- ---------------------------- --------------------------- and per share amounts) Class A Class B Class A Class B Class A Class B ---------------- ------------- ---------------------------- --------------------------- Net loss applicable to common shareholders $ 481 $ 490 $ 580 $ 580 $ 118 $ 131 Weighted average number of common shares outstanding 18,322,173 25,000,000 18,322,247 25,000,000 18,710,601 25,000,000 Net loss per common share, Before discontinued operations $ (25.46) $ (18.99) $ (32.17) $ (23.54) $ (7.48) $ (6.17) Discontinued operations (.79) (.59) .50 .37 1.15 .95 ---------------- ------------ ------------ ------------ ------------ ----------- $ (26.25) $ (19.58) $ (31.67) $ (23.17) $ (6.33) $ (5.22) ================ ============ ============ ============ ============ ===========
14. STOCK OWNERSHIP PLAN The Montgomery Ward & Co., Incorporated Stock Ownership Plan was adopted effective July 19, 1988. A total of 1,000,000 Class A Common Stock, Series 1, 5,412,000 shares of Class A Common Stock, Series 2, and 12,400,000 shares of Class A Common Stock, Series 3, have been reserved for issuance under the plan. Key associates of Wards and its subsidiaries are eligible to participate and may receive awards, purchase rights and options. Awards are grants of shares for no consideration. The Stock Ownership Plan expired on July 19, 1998 and, therefore, no additional stock options may be granted thereunder. During 1991, the Board of Directors approved the Directors Plan. The Directors Plan was established to, among other things, allow outside directors to receive all or any portion of the fees for their services as directors of the Company and Wards via conversion rights in Series 1 or Series 2 shares. In 1998, no shares were issued from treasury stock as payment for directors fees. In 1997 and 1996, 706 and 2,421 Series 1 shares were issued from treasury stock as payment for directors fees, respectively. 49 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. STOCK OWNERSHIP PLAN (CONTINUED) Following is a summary of activity under the plans:
January 2, January 3, December 28, 1999 1998 1996 -------------------------------- ------------------------------- --------------------------- Wtd. Wtd. Wtd. Shares Avg. Shares Avg. Shares Avg. (000) Ex. Price (000) Ex. Price (000) Ex. Price ------------- ------------- ------------ ------------- -------------- ---------- Outstanding, beg. of year 6,761 $11.64 4,338 $17.87 5,165 $17.61 Granted - - 4,721 7.32 340 23.95 Exercised - - - - (352) 9.52 Forfeited (315) 18.51 (970) 18.61 (458) 21.14 Canceled (204) 10.05 (1,328) 11.54 (357) 23.86 ------------- ------------- ------------ ------------- -------------- -------- Outstanding, end of year 6,242 $11.67 6,761 $11.64 4,338 $17.8 ============= ============= ============ ============= ============== ======== Exercisable, end of year 4,253 $13.71 3,688 $15.23 3,981 $16.3 ============= ============= ============ ============= ============== ========
4.9 million of the 6.2 million options outstanding at January 2, 1999 have exercise prices between $2.91 and $18.75, with a weighted-average exercise price of $8.60 and a weighted-average remaining contractual life of 6.9 years. 2.9 million of these options are exercisable. The remaining 1.3 million options have exercise prices between $22.50 and $26.50, with a weighted-average exercise price of $23.27 and a weighted-average remaining contractual life of 4.9 years. All of these options are exercisable. In 1996, the Company adopted the disclosure only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," requiring pro-forma net loss and net loss per common share be determined as though stock-based compensation expense had been recognized using an option pricing model. However, due to the Company's bankruptcy filing and the significant losses incurred in fiscal 1998 and 1997, the Company does not believe the pro- forma net loss and net loss per common share would be materially different from the reported amounts. 50 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. INTEREST EXPENSE, NET OF INVESTMENT INCOME Net interest expense is as follows:
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended ------------------- --------------------------------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 ------------------- ----------------- ----------------- Interest on short-term borrowings $ 22 $ 54 $ 53 Interest on long-term debt and obligations under capital leases 25 18 36 Miscellaneous interest, net 10 36 32 Investment income (1) - (2) ------------------- ----------------- ----------------- Total interest expense, net of investment income $ 56 $ 108 $ 119 =================== ================= =================
16. LITIGATION AND OTHER PROCEEDINGS MW Holding, Wards and its subsidiaries are engaged in various litigation and have a number of unresolved claims. While the amounts claimed are substantial and the ultimate liability with respect to such litigation and claims cannot be determined at this time, management is of the opinion that such liability, to the extent not provided for through insurance or otherwise, is not likely to have a material impact on the financial condition and the results of operations of the Company. 17. RELATED PARTY TRANSACTIONS Bernard F. Brennan In conjunction with a Relationship Agreement entered into between Mr. Brennan and the Company in December 1996, the Company provided a loan to Mr. Brennan of $12.5 million. Class A common stock of the Company owned by Mr. Brennan and his permitted transferees is pledged as collateral for this loan. The loan does not bear interest. In addition, Mr. Brennan is to be paid $1.5 million annually (for a five-year period) for consulting services he provides to the Company. The Company ceased payment for such consulting services upon the bankruptcy filing. GE Capital Corporation Certain key executives in 1997 and 1998 were granted restricted stock and stock options of General Electric Company ("GE"). Roger Goddu, Chairman and Chief Executive Officer, was granted 120,000 shares of GE restricted stock which had a fair market value of $6.1 million at the date of grant. The shares vest equally over a five-year period on each December 31, beginning on December 31, 1997, subject to continuing employment. 51 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. RELATED PARTY TRANSACTIONS (CONTINUED) Mr. Goddu and six other key executives were granted GE stock options with a fair market value of $5.6 million at the grant date. The shares vest over periods ranging from four to six years, subject to continuing employment. The exercise price equaled in each case the fair market value of the common stock at the grant date. As a result of the above transactions, the Company recorded the grants of GE restricted stock and stock options of $11.7 million as a capital contribution and established an asset, unearned compensation expense. Total expense recorded related to the amortization of the unearned compensation was $3.0 million for the fiscal years ended January 2, 1999 and January 3, 1998, respectively. The Company engages in various other transactions with GE Capital as described in Notes 2, 6, 12 and 13. ValueVision International, Inc. On December 30, 1997, the Bankruptcy Court approved a restructuring of the operating agreement between Wards and ValueVision. ValueVision agreed to cede exclusive use of the Wards' name for catalog and mail order catalog "syndicates" back to Wards in exchange for Wards' return to ValueVision of warrants covering the purchase of approximately 3.8 million shares of ValueVision common stock. In addition, ValueVision agreed to repurchase 1.28 million shares of its stock owned by Wards, at a price of $3.80 per share. Under the new operating agreement, Wards' commitment to support ValueVision's television spot advertising purchases will be $2 million annually, for a period of three years. The transaction was consummated on January 15, 1998. In connection with this transaction, Wards recorded a loss on the sale of its investment in ValueVision of approximately $25 million, which is included in Reorganization Costs. Merchant Partners In July 1994, Wards became a limited partner in Merchant Partners. Wards made capital contributions to the partnership of $17 million in 1996, $4 million in 1995 and $1 million in 1994. In December 1995, Merchant Partners made a partnership distribution of $22 million to Wards, resulting in a gain of $16 million. On December 31, 1996, Wards entered into an agreement under which Wards assigned, transferred and set over unto, the general partner of Merchant Partners Wards' entire right, title and interest in and to its limited partnership interest. The general partner assumed the performance of all of the covenants and obligations associated with the interest under the Limited Partnership Agreement. The agreement eliminated Wards' future obligations with respect to its interest in Merchant Partners. Wards recognized a charge to earnings of $7.8 million and $10.0 million for the periods ended January 3, 1998 and December 28, 1996, respectively, which is included in Operating, selling, general and administrative expense. 52 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. PARENT COMPANY FINANCIAL INFORMATION Following are the MW Holding balance sheets as of January 2, 1999 and January 3, 1998 and the statements of income and cash flows for the 52-week period ended January 2, 1999, the 53-week period ended January 3, 1998 and the 52-week period ended December 28, 1996. BALANCE SHEETS
Jan. 2, Jan. 3, (In millions) 1999 1998 ------------------- ----------------- Assets Deferred income taxes $ - $ 2 Investment in Wards (1,596) (623) Redeemable preferred stock of Wards 175 175 Other assets 6 9 ------------------------ ---------------- Total Assets $ (1,415) $ (437) ======================== ================ Liabilities Accounts payable to Wards $ 85 $ 91 Liabilities subject to compromise 11 11 ------------------------ ---------------- Total Liabilities 96 102 Redeemable Preferred Stock 177 177 Shareholders' Deficit Common stock 1 1 Capital in excess of par value 65 64 Accumulated deficit (1,622) (651) Accumulated other comprehensive income 7 9 Less: Treasury stock, at cost (139) (139) ------------------------ ---------------- Total Shareholders' Deficit (1,511) (716) ------------------------ ---------------- Total Liabilities and Shareholders' Deficit $ (1,415) $ (437) ======================== ================
53 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED) STATEMENTS OF INCOME
Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 --------------------- ------------------- ---------------- Miscellaneous expenses $ - $ (1) $ (2) --------------------- ------------------- ---------------- Total costs and expenses - (1) (2) --------------------- ------------------- ---------------- Net loss before earnings of Wards - (1) (2) Equity in net loss of Wards (971) (1,151) (235) --------------------- ------------------- ---------------- Net loss (971) (1,152) (237) Preferred stock dividend requirements - (8) (12) --------------------- ------------------- ---------------- Net loss available for common shareholders $ (971) $ (1,160) $ (249) ===================== =================== ================
STATEMENTS OF CASH FLOWS
52-Week 53-Week 52-Week Period Period Period Ended Ended Ended --------------------- -------------------- --------------- Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 --------------------- -------------------- -------------- Net loss $ (971) $ (1,152) $ (237) Adjustments to reconcile net loss to net cash Provided by operations: Change in undistributed earnings of subsidiary 971 1,157 235 Compensation expense on stock option grants/ repurchases - - 5 Change in operating assets and liabilities: Accounts payable to Wards - (2) 36 Accrued liabilities and liabilities subject to compromise - - (13) --------------------- -------------------- -------------- Net cash provided by operating activities $ - $ 3 $ 26 --------------------- -------------------- --------------
54 MONTGOMERY WARD HOLDING CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED) STATEMENTS OF CASH FLOWS
Jan. 2, Jan. 3, Dec. 28, (In millions) 1999 1998 1996 ----------------- ----------------- ------------------ Cash flows from financing activities: Proceeds from issuance of common stock $ - $ - $ 3 Proceeds from issuance of preferred stock - - 175 Purchase of Wards preferred stock - - (175) Cash dividends paid - (3) (9) Purchase of treasury stock, at cost - - (20) ----------------- ----------------- ------------------ Net cash used for financing activities - (3) (26) ----------------- ----------------- ------------------ Cash at end of period $ - $ - $ - ================= ================= ================== Non-cash investing activities: Grants of restricted stock and stock options by majority shareholder $ 1 $ 11 $ - Increase in liquidation value of preferred stock - 2 - Change in unrealized gain on marketable securities (2) - (1) Non-cash financing activities: Notes issued for purchase of treasury stock $ - $ - $ 5
55 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 56 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Board of Directors The following persons currently serve as directors of the Company: Roger V. Goddu, Bernard F. Brennan, Tommy T. Cato, Silas S. Cathcart, James A. Parke, Denis J. Nayden, Dennis D. Dammerman and Edward D. Stewart. Under that certain Stockholders' Agreement dated as of June 17, 1988, as amended to date (the "Stockholders' Agreement"), the By-laws of the Company shall provide (and the By-laws of the Company do so provide), and the parties to the Stockholders' Agreement agree to vote, for the election of a Board of Directors consisting of ten members, three to be designated by Mr. Brennan (which three shall include Mr. Brennan), five to be designated by GE Capital and two to be designated by the Chief Executive Officer of Wards (which two shall include such Chief Executive Officer). Of the nominees listed below, Mr. Brennan has designated himself and Mr. Cato, GE Capital has designated Messrs. Cathcart, Parke, Nayden, Dammerman and Stewart, and Mr. Goddu, who is the Chief Executive Officer of Wards, has designated himself as a director of the Company. A directorship to be designated by Mr. Brennan and a directorship to be desginated by Mr. Goddu are each vacant. Pursuant to the Stockholders' Agreement, if GE Capital and its affiliates cease to own more than 50% of the number of shares of Common Stock purchased by them in June 1988, the number of directors which Mr. Brennan is permitted to designate will be increased by one, and the number of directors which GE Capital may designate shall be reduced by one. If GE Capital and its affiliates cease to own 20% or more of such shares of Common Stock, except as described below, GE Capital shall have no right to designate any directors, and the number of directors shall be reduced to nine, seven to be elected by the holders of Class A Common Stock, voting as a class, and two to be elected by the holders of Class B Common Stock, voting as a class, provided that, so long as the Account Purchase Agreement between Wards and Montgomery Ward Credit relating to the purchase by Montgomery Ward Credit of customer receivables of Wards remains in effect, and GE Capital or any of its affiliates owns any Common Stock, GE Capital will have the right to elect one of the two directors to be elected by the holders of Class B Common Stock. Also pursuant to the Stockholders' Agreement, if Mr. Brennan and his permitted transferees cease to own more than 50% of the number of shares of Common Stock held by them on December 1, 1996, the number of directors which GE Capital is permitted to designate will be increased by two and the number of directors which Mr. Brennan may designate shall be reduced by two. If Mr. Brennan and his permitted transferees cease to own 20% or more of such shares of Common Stock, Mr. Brennan shall no longer have the right to designate any directors and the directors that Mr. Brennan would have been entitled to designate (after taking into account the application of the preceding sentence) shall be designated by the Chief Executive Officer of Wards. The holder of the Senior Preferred Stock (currently GE Capital) has the right to elect one director to be an additional member of the Board of Directors (a) during the period following a default in the payment of accrued dividends on the Senior Preferred Stock for four consecutive quarters until such accrued dividends shall have been paid in full and (b) during the period following any failure to make a mandatory redemption of Senior Preferred Stock until such failure shall have been cured. Information with respect to ages of the directors is as of March 26, 1999 and information as to their ownership of shares of the Company as of that date is provided under Item 12 below. 57 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED) Board of Directors (continued) Roger V. Goddu, 48, has been a director of the Company and Chairman and Chief Executive Officer of Wards since January 6, 1997. Prior thereto, he was with Toys "R" Us, where from 1996 until 1997, he was President-U.S. Merchandising, and from 1989 to 1995, he was Executive Vice President/General Merchandise Manager. Prior to 1989, Mr. Goddu was a Senior Vice President and General Merchandise Manager of Target, a division of Dayton Hudson Corporation. Bernard F. Brennan, age 60, has been a director of the Company since February 9, 1988, has been Chairman of the Company since June 17, 1988, and was Chief Executive Officer of the Company from February 9, 1988 through December 10, 1996. Mr. Brennan served as Chief Executive Officer of Wards from May 13, 1985 through December 10, 1996. Mr. Brennan has been a director of Itel Corporation since 1988. Tommy T. Cato, age 57, has been a director of the Company since August 20, 1997. Mr. Cato served as Executive Vice President of the Company from May 15, 1992, until February 4, 1994. Mr. Cato was Executive Vice President -Logistics and Product Service of Montgomery Ward from November 8, 1990 through February 3, 1994. Silas S. Cathcart, age 72, has been a director of the Company since June 25, 1988. Mr. Cathcart is retired Chairman of Illinois Tool Works, Inc. and Kidder, Peabody Group, Inc. He is a director of Allegiance Corporation and General Electric Company. Dennis D. Dammerman, age 53, has been a director of the Company since January 26, 1999. Mr. Dammerman was named Vice Chairman of the Board and Executive Officer of General Electric Company and Chairman and Chief Executive Officer of GE Capital Services, Inc. in 1998. Prior thereto, he was Senior Vice President, Finance since 1984. Denis J. Nayden, age 44, has been a director of the Company since June 25, 1988. Mr. Nayden has been President and Chief Operating Officer of GE Capital since January 1, 1995. Mr. Nayden served as President and Chief Operating Officer of Kidder, Peabody Group, Inc. from June 1994 through December 1994. Prior thereto, Mr. Nayden was an Executive Vice President of GE Capital from February 1989 to June 1994. Mr. Nayden is a director of General Electric Capital Services, Inc. and GE Capital. James A. Parke, age 53, has been a director of the Company since March 31, 1997 and previously was a director from April 27, 1990 through December 17, 1996. He has been Senior Vice President - Finance of General Electric Financial Services since November 1989. Mr. Parke is a director of GE Capital, FGIC Corporation, Polaris Holding Co., and Financial Guaranty Insurance Co. Edward D. Stewart, age 56, has been a director of the Company since December 10, 1996. Mr. Stewart has been an Executive Vice President of GE Capital since January 1, 1992. Mr. Stewart serves on the board of directors of GE Capital. Executive Officers Information with respect to the executive officers of the Company is included in Part I of this Form 10-K. 58 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED) Section 16(a) Reporting Section 16(a) of the Securities Exchange Act of 1934, and the rules promulgated thereunder, requires the Company's executive officers, directors and holders of 10% or more of the Common Stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. On June 21, 1998, the Voting Trust Agreement dated as of June 21, 1988 expired pursuant to its terms. All holders of voting trust certificates received shares of Class A Common Stock in respect of such voting trust certificates on that date. None of those directors and executive officers who received shares of such common stock timely reported such transaction under Section 16(a). During 1998, Mr. Robert Claxton became an executive officer of the Company and Mr. Dammerman became a director of the Company. Neither Mr. Claxton nor Mr. Dammerman filed a Form 3 in connection with such appointment. ITEM 11. EXECUTIVE COMPENSATION The Company (Montgomery Ward Holding Corp.) had no employees and paid no compensation in 1998. The following information details compensation accrued by Wards and its subsidiaries to executive officers of the Company. 59 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Summary Compensation Table The following table sets forth summary compensation information for (i) Mr. Goddu, who was the only person to serve as Chief Executive Officer during the Company's 1998 fiscal year, and (ii) the four most highly compensated other executive officers who were serving as executive officers at the end of the Company's 1998 fiscal year. Due to the bankruptcy filing, management believes that the securities underlying options have little or no value.
Annual Compensation Long-Term Compensation --------------------------------------------------- --------------------------------------- Other Securities All Annual Underlying LTIP Other Name and Salary Bonus Compensation Options Payout Compensation Principal Position Year ($) ($) ($) /1/ (#) ($) ($) /2/ -------------------- ------- ---------- --------- -------------- ------------- --------- ------------- Roger V. Goddu 1998 1,000,000 350,000 5,984 2,596,219 - 120,112 Chairman and Chief 1997 985,215 350,000 10,296 2,596,219 - 2,849,330 Executive Officer /3/ Thomas J. Paup 1998 400,000 150,000 1,708 - - 10,461 Executive Vice 1997 110,000 150,000 40 - - 87,999 President and Chief Financial Officer /3/ Kevin Freeman 1998 450,000 75,000 3,224 200,000 - 259 Executive Vice 1997 306,250 150,000 20 200,000 - 62,079 President -Store Operations /3/ Spencer H. Heine 1998 400,000 125,000 1,244 225,000 - 2,490 Executive Vice 1997 400,000 125,000 2,934 225,000 - 403,075 President, Secretary 1996 400,000 - 4,869 - - 352,952 and General Counsel Thomas G. Grimes 1998 450,000 50,000 19,880 500,000 - 863 Executive Vice 1997 417,262 200,000 6,181 500,000 - 84,396 President - Home /3/
/1/ No named executive officer received perquisites exceeding $50,000 or 10% of salary and bonus. /2/ Represents company matching contributions to the Savings and Profit Sharing Plan and company payments of premiums on group term life insurance policies. In 1998 and 1997, Mr. Goddu was paid $115,200 and $93,600, respectively, representing an amount equivalent to dividends on non-vested GE restricted stock shares. Relocation costs for Mr. Goddu were $4,653 and $533,782 in 1998 and 1997, respectively. In 1997, Mr. Goddu was paid $2,221,948 as compensation for benefits accrued with Mr. Goddu's prior employer which were lost by Mr. Goddu in connection with the termination of his employment with such former employer. Relocation costs for Mr. Paup were $10,461 and $37,854 in 1998 and 1997, respectively. Mr. Paup received a hiring bonus of $50,000 in 1997. Mr. Freeman was paid $12,079 and $50,000 in 1997 for relocation costs and a hiring bonus, respectively. For 1997, amounts paid to Mr. Heine include $400,000 in exchange for his waiver of the diminution of his position upon removal from the Board of Directors in January 1997. For 1996, amounts paid to Mr. Heine include $200,000 under a retention plan and $150,000 under a security plan due to the triggering of a change of control event. Mr. Grimes was paid $34,396 and $50,000 in 1997 for relocation costs and a hiring bonus, respectively. /3/ Messrs. Goddu and Grimes joined Wards in January 1997. Mr. Messrs. Paup and Freeman joined Wards in September 1997 and May 1997, respectively. 60 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Option Grants and Exercises The following table sets forth the value of unexercised options held by Messrs. Goddu, Freeman, Heine and Grimes as of January 2, 1999. No stock options or stock appreciation rights were granted to or exercised by any of the Named Executive Officers in 1998. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
Number of Securities Underlying Value of Unexercised Unexercised Options at FY-End (#) In-the-Money Options at FY-End /1/ --------------------------------------- ---------------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ------------------------- -------------------- ----------------- ---------------- ------------------ Roger V. Goddu 1,298,110 1,298,109 $ - $ - Kevin Freeman 80,000 120,000 - - Spencer H. Heine 75,000 150,000 - - Thomas G. Grimes 200,000 300,000 - -
1 The stock was deemed to have value below the exercise price as the Company has filed for reorganization under Chapter 11 of the Bankruptcy Code. Long-Term Incentive Plan Awards Prior to the bankruptcy filing, senior executives of Wards, generally Senior Vice Presidents and above, were eligible to participate in the Executive Long- Term Incentive Plan. The Executive Long-Term Incentive Plan generally consisted of three-year cycles that could be initiated annually. If specific objectives for the pre-tax earnings and return on equity for the Company and its subsidiaries established by the Incentive Compensation Committee were achieved for any designated cycle, cash was awarded based upon a target Executive Long-Term Incentive Plan payout, which was a percentage (determined by the Incentive Compensation Committee) of the base salary of each participant, but in no event would the target Executive Long-Term Incentive Plan payout for any participant exceed $2,000,000 for any cycle. The plan has not been operational subsequent to the bankruptcy filing and no future benefits for outstanding cycles will be paid. Executive Emergence Bonus Plan Certain senior executives of Wards participate in the Montgomery Ward Special Emergence Bonus Plan ("Emergence Bonus Plan"). The Emergence Bonus Plan (subject to amendment or modification in the plan of reorganization) provides for a lump sum bonus payment within 30 days of court approval of a plan of reorganization. To be eligible for the full bonus, the executive must be actively employed on the date of the court approval of the plan of reorganization or the executive must have separated from employment after a Change of Control (as defined in the Severance Plan described below) but within six months of approval of the plan of reorganization. If the plan of reorganization is approved as of April 1, 1999, the bonus amount for Messrs. Goddu, Paup, Freeman, Heine and Grimes would be $1,250,000, $500,000, $562,500, $500,000 and $625,000, respectively. If the plan of reorganization is approved after April 1, 1999, but prior to or as of October 1, 1999, the bonus amount for Messrs. Goddu, Paup, Freeman, Heine and Grimes would be $1,000,000, $400,000, $450,000, $400,000 and $500,000, respectively. If the plan of reorganization is approved after October 1, 1999, the bonus amount for Messrs. Goddu, Paup, Freeman, Heine and Grimes would be $500,000, $200,000, $225,000, $200,000 and $250,000, respectively. 61 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Pension Plan In 1998, executive officers of Wards, in addition to many other associates, participated in a pension plan (the "Pension Plan"), which provides benefits defined by formulae based primarily on a participant's compensation, offset, with respect to periods prior to July 1, 1997, as provided by benefits provided by the participant's accounts in the Savings Plan ("Savings Plan"), in which executive officers of Wards, in addition to many other associates, participate. From 1989 through 1993, no more than $200,000, as adjusted annually under Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code"), of any participant's compensation was considered for any purpose, including for purposes of the formulae, under the Pension Plan. Beginning in 1994, no more than $150,000, as adjusted, ($160,000 in 1998) of any participant's compensation is considered for any purpose, including for purposes of the formulae, under the Pension Plan. The monthly pension benefit to which current associates are entitled under the Pension Plan at the normal retirement age of 65 is generally based on different benefit formulae that are applicable to different years of service. The formula for service on and after July 1, 1997 is a credit of $.70 to $1.35 (depending on age) for each $1 contributed as a basic contribution (3% of compensation) to the Savings Plan. Such Pension Plan accounts will be credited with interest at a rate based on the 30-year rate earned by government securities. The formula for service after 1988 and before July 1, 1997 applies to credited service, as defined in the Pension Plan, earned during such period while making contributions to the Savings Plan and is based on "career earnings". A participant's annual benefit under such 1988 - 1997 formula is 1.5% of the participant's eligible pay for each year of credited service after 1988 and before July 1, 1997. A participant's benefit determined under the Pension Plan based on the formulae through June 30, 1997 is reduced by an amount equivalent to an annuity which could be purchased with the participant's Basic Contribution and Transferred Contribution accounts in the Savings Plan as of June 30, 1997. The Pension Plan formulae benefit is determined by adding the benefit under the formula in effect commencing July 1, 1997 to the participant's accrued benefit under the Pension Plan as of June 30, 1997, as determined under the formulae in effect prior to July 1, 1997. The following table sets forth the estimated annual benefits (calculated on a straight life annuity basis) upon retirement at age 65 (for executives who have not retired or resigned) under the Pension Plan, which is the only defined benefit plan under which associates of Wards can currently accrue benefits, to the Named Executive Officers (calculated on the basis of estimated years of service at retirement age; levels of compensation paid in calendar year 1998 assuming 6% annual increases for executives who have not retired or resigned and the Named Executive Officers make basic contributions (3% of compensation) to the Savings Plan; but with regard to Code limitations on compensation and benefits and without regard to any reduction for benefits under the Savings Plan): Estimated Annual Pension at Name of Participant Retirement ---------------------------------------- ----------------- Roger V. Goddu $25,883 Thomas J. Paup 22,518 Kevin Freeman 25,892 Spencer H. Heine 71,526 Thomas G. Grimes 4,628 62 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Certain Arrangements In the course of recruiting new executives, promoting existing associates to executive positions, increasing the responsibilities of existing executives and retaining executives, Wards frequently enters into employment agreements which set forth the general terms of the compensation arrangements for such executive. Such agreements have, in the past, typically set forth, among other things, a recipient's base salary, the target annual bonus under the Senior Executive Performance Management Program ("PMP"), the maximum percentage of the target bonus under the PMP that can be earned, bonus guarantees, if any, relocation payments and the number of stock options, if any, that are expected to be initially granted to the executive in his or her new position. Of the executive officers named in the Summary Compensation Table, Messrs. Paup, Freeman, Heine and Grimes have agreements of this type, each of which were entered into in connection with the commencement of the executive's employment with Wards (other than the agreement with Mr. Heine, which was entered into connection with his retention as an executive officer of Wards). The agreements with Messrs. Paup, Freeman, Heine and Grimes provide for, respectively, (i) annual base salary of $400,000, $450,000, $400,000 and $450,000; and (ii) PMP target bonuses of $150,000, $150,000, $125,000 and $200,000 in each case guaranteed at 100% for 1997 (the target bonuses for Messrs. Paup and Freeman were also guaranteed at 100% and 50%, respectively, for 1998) and in each case with opportunities to earn up to 150% of such target bonuses. The agreements with Messrs. Freeman, Heine and Grimes also provide for the grant of options to purchase common stock of the Company. Due to the bankruptcy filing, management believes that the options and the securities underlying the options are of little or no value. The agreements with Messrs. Paup, Freeman and Grimes provided for hiring bonuses of $50,000 each, which were paid in 1997. The Company agreed to reimburse Messrs. Paup, Freeman and Grimes for certain relocation costs in connection with their moves. In the case of a separation of employment initiated by the Company for a reason other than "Cause," the agreements provide that Messrs. Paup, Freeman, Heine and Grimes will receive their base salaries through September 22, 2000 in the case of Mr. Paup, and through October 1, 2000 in the case of Messrs. Freeman, Heine and Grimes (however, not less than twenty-four months). In addition, if the agreements of Messrs. Paup, Freeman, Heine and Grimes are not renewed at the end of the respective agreement, a lump sum payment equal to twenty-four months base salary will be owed. In the event of a change of control, in which a sale of substantially all of the business occurs, and for a period of three years after such date, if Messrs. Paup, Freeman, Heine and Grimes are separated from the Company for a reason other than "Cause", the lump sum severance payment will be three years base salary plus three times their target bonus amount. In September 1997, GE granted options to Mr. Paup to purchase 20,000 shares of GE common stock with an exercise price of $66.25, which options vest 50% on September 12, 2000 and 50% on September 12, 2002. In June 1997, GE granted options to Mr. Freeman to purchase 40,000 shares, of GE common stock with an exercise price of $65.3125, which options vest 50% on September 27, 1999 and 50% on September 27, 2001. In February 1997, GE granted options to Mr. Grimes to purchase 40,000 shares, of GE common stock, with an exercise price of $52.50, which options vest 50% on September 7, 1999 and 50% on September 7, 2001. GE Capital has agreed to pay Messrs. Paup, Freeman and Grimes their base salary for the first three years of their 1997 employment agreements described above and the guaranteed bonus under such agreements if Wards fails to pay such amounts for any reason other than the executives' termination of employment either voluntarily by the executives or for cause by Wards. 63 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Certain Arrangements (continued) Mr. Goddu joined the Company as Chief Executive Officer and as Chairman and Chief Executive Officer of Wards effective January 6, 1997. In connection with his employment with Wards, Mr. Goddu, the Company and Wards entered into an employment agreement dated as of December 20, 1996 (the "Goddu Agreement"). The Goddu Agreement expires on December 31, 2001. During the term of the Goddu Agreement (unless his employment is earlier terminated), Mr. Goddu is to serve as Chairman of the Board and Chief Executive Officer of Wards and as Chief Executive Officer of the Company. Pursuant to the Goddu Agreement, Mr. Goddu is to receive a base salary of $1,000,000 per annum, increasing at a rate of $50,000 per year or such larger increase as the Board of Directors may determine. Mr. Goddu waived his annual increase for 1998 and has elected not to accept contractual annual increases until the Company successfully emerges from Chapter 11. In addition, the Goddu Agreement provides that Mr. Goddu is eligible to receive an annual cash bonus of up to 50% of his base salary, based on performance targets to be established from time to time by the Board of Directors or a committee thereof. For each of 1997, 1998 and 1999, Mr. Goddu's bonus is guaranteed to be at least $350,000 without regard to such targets. The bonus may be increased by up to an additional 50% of base salary based on the achievement of exceptional performance against the targets. The Goddu Agreement also provides that Mr. Goddu will be provided with a supplemental pension benefit on the same terms as his arrangement with his prior employer with an actuarial present value at age 60 of $3.9 million. The Company also agreed to pay Mr. Goddu $2,221,948 as compensation for benefits accrued with Mr. Goddu's prior employer which were lost by Mr. Goddu in connection with the termination of his employment with such former employer. Mr. Goddu's agreement also provides for the grant of options to purchase common stock of the Company. Due to the bankruptcy filing, management believes that the options and the securities underlying the options are of little or no value. The Goddu Agreement also provides that Wards would provide Mr. Goddu a loan in the principal amount of $2,000,000, payable in five years, and bearing interest at LIBOR plus 25 basis points payable in arrears on each January 8 during the loan term. The Company provided such loan to Mr. Goddu on January 8, 1997, and Mr. Goddu executed a Promissory Note (the "Goddu Note") with respect thereto on that date. As of March 6, 1999, the outstanding balance of the loan including interest accrued thereon was $2,017,118. The Goddu Agreement provides that in the event his employment is terminated due to his death or disability, he (or his estate, as applicable) would be entitled to unpaid base salary through the month in which his death or disability occurs, an amount equal to 50% of his base salary in effect on the date of his death or disability (in lieu of any bonus), and a restatement of the Goddu Note to provide a maturity date of the third anniversary of Mr. Goddu's death or disability. In the event his employment is terminated by Wards for cause (as defined in the Goddu Agreement), he would be entitled to unpaid base salary through the month in which the termination of his employment occurs, and amounts outstanding under the Goddu Note will become immediately due and payable 90 days after such termination. In the event that his employment is terminated without cause or through a constructive termination, as provided in the Goddu Agreement, he would be entitled to a prorated bonus through the date of termination of employment, continuation of his then-current base salary for a period of 24 months and, in lieu of further bonus, an amount equal to $700,000 (which salary continuation and amount may be paid in a lump sum) and cancellation of Mr. Goddu's obligations under the Goddu Note. 64 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Certain Arrangements (continued) In the event his employment is terminated by the expiration of the Goddu Agreement, Mr. Goddu would be entitled to continuation of his then-current base salary for a period of 24 months and, in lieu of further bonus, an amount equal to $700,000 (which salary continuation and amount may be paid in a lump sum). The Goddu Agreement is not guaranteed by GE Capital if Wards fails to pay such amounts. Also in connection with Mr. Goddu's employment with Wards, Mr. Goddu and GE Capital entered into a letter agreement dated as of December 20, 1996 (the "Goddu Letter Agreement"). The Goddu Letter Agreement provides that on or before January 6, 1997, General Electric Company ("GE"), the indirect parent of GE Capital, would grant to Mr. Goddu 60,000 shares of common stock of GE, with restrictions lapsing on 12,000 of such shares on each December 31, beginning on December 31, 1997, and would grant to Mr. Goddu options to purchase 60,000 shares of common stock of GE with an exercise price equal to the NYSE closing price of such shares on the date of grant (which was $102.25 per share), which options will vest in cumulative annual installments of 20,000 underlying shares on January 6, 1999, January 6, 2001 and January 6, 2003. Such shares and options were granted to Mr. Goddu on December 20, 1996. The Goddu Letter Agreement also provides that on an annual basis beginning in 1997, GE will grant to Mr. Goddu, at such time as similar grants are made to its employees, options to purchase up to 25,000 shares of common stock of GE, up to an aggregate of 125,000 such shares, with exercise prices equal to the NYSE closing price of such shares on the applicable date of grant, and which options will vest 50% three years from the date of grant and 50% five years from the date of grant. In accordance with the terms of his letter agreement, options were granted to Mr. Goddu on September 12,1997 and September 11, 1998. Such options will vest 50% three years from the date of issuance and 50% five years from the date of issuance. On April 28, 1997, after the date of the Goddu Letter Agreement, the shares of GE Common Stock split 2-for-1. The Wards Executive Committee Severance Plan ("Severance Plan") provides that if the employment of certain senior executives is terminated other than for Cause (as defined in the Severance Plan), the executive will receive a lump sum payment equal to the greater of the executive's base salary for the remainder of the executive's employment agreement or the executive's base salary for 24 months. In addition, the executive will receive executive outplacement services and continue to participate in executive benefit plans. If such termination occurs within three years of a Change of Control (as defined in the Severance Plan), the lump sum payment is increased to three years base salary plus three times the executives' target bonus. Amounts otherwise payable under the Severance Plan are reduced dollar for dollar for any additional amounts representing base salary or bonus payable under the executive's employment contract or other severance plan. Director Compensation Arrangements The Directors Plan (the "Directors Fee Plan") permits directors (as designated by the Directors Fee Plan Committee, as defined below) to receive Series 1 and Series 2 Shares. The plan provides for the establishment of a committee (the "Directors Fee Plan Committee") to (i) administer the Directors Fee Plan, (ii) estimate director fees payable to directors for the fiscal year and (iii) permit directors to elect to receive Class A Shares with a value determined by the Directors Fee Plan Committee not to exceed the estimated fees. 65 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Director Compensation Arrangements (continued) Under the Directors Fee Plan, participating directors are automatically granted rights ("Conversion Rights") after the end of each fiscal quarter of the Company in a number determined by dividing the director fees for the fiscal quarter by the fair market value per share of the Company's Common Stock. The number of Class A Shares acquired pursuant to accelerated Conversion Rights (as described below) reduces the number of automatically granted Conversion Rights. The acquisition of Class A Shares by directors pursuant to Conversion Rights does not require any direct payment by a director, but the director fees which otherwise would be payable to the director are reduced by such fair market value of the Class A Shares acquired. If directors acquire Class A Shares pursuant to Conversion Rights, the Company will pay the directors an amount sufficient to pay all applicable federal and state taxes payable by the directors with respect to the Class A Shares acquired pursuant to Conversion Rights and the amount attributable to this payment. The Directors Fee Plan Committee decides based on the past service of the director whether there should be an acceleration of the grant of Conversion Rights based on an estimate of director fees for the fiscal year. If the grant of Conversion Rights is accelerated by the Directors Fee Plan Committee, the Directors Fee Plan Committee determines the number of Class A Shares to which the Conversion Rights relate, the value of the Class A Shares, the duration of the Conversion Rights and the limitations on the Class A Shares acquired pursuant to the Conversion Rights. It is currently anticipated that any Class A Shares acquired pursuant to accelerated Conversion Rights would be forfeited to the extent a director does not earn the anticipated director fees for the fiscal year. Directors of the Company or Wards other than members of the Directors Fee Plan Committee are eligible to participate in the Directors Fee Plan if designated by the Directors Fee Plan Committee. The Directors Fee Plan Committee is comprised of not fewer than two directors who are appointed by the Board of Directors and who serve at the pleasure of the Board of Directors. The current members of the Directors Fee Plan Committee are Messrs. Brennan and Stewart. Of the seven eligible directors, the Directors Fee Plan Committee has designated only Mr. Cathcart as a participant in the Directors Fee Plan. Pursuant to an irrevocable election made in 1992, Mr. Cathcart elected to receive all of the fees earned for service as a director of the Company and of Wards in Series 1 Shares. Through the date of the bankruptcy filing, Mr. Cathcart had acquired 8,987 Series 1 Shares and Mr. Myron Lieberman, a former director, had acquired 10,235 Series 1 Shares, pursuant to Conversion Rights under the Directors Fee Plan. No shares have been distributed under the Directors Fee Plan since the bankruptcy filing. The Board of Directors may amend or terminate the Directors Fee Plan, except that no such action by the Board of Directors may change the terms and conditions of any Conversion Rights previously granted in a manner adverse to the holder of the Conversion Right without the consent of such holder. The Directors Fee Plan Committee has the right to make adjustments with respect to Conversion Rights if Wards or the Company dissolves or is liquidated or upon the occurrence of a public offering of shares of the Company. 66 ITEM 11. EXECUTIVE COMPENSATION (CONTINUED) Director Compensation Arrangements (continued) In connection with the termination of the employment of Bernard F. Brennan as Chief Executive Officer of the Company and as Chairman and Chief Executive Officer of Wards, Mr. Brennan, the Company, Montgomery Ward and GE Capital entered into a Relationship Agreement dated as of December 10, 1996 (the "Relationship Agreement"). The Relationship Agreement provided the terms of Mr. Brennan's separation from the Company and Wards, including with respect to his continued participation as Chairman of the Company and a director of each of the Company and Wards. Pursuant to the Relationship Agreement, the Company loaned to Mr. Brennan $12.5 million in cash, without interest, for which the Company's sole recourse is the shares of Common Stock owned by Mr. Brennan and his permitted transferees. In the Relationship Agreement, Mr. Brennan agreed that within five business days after he or any permitted transferee sells any such shares or receives any proceeds with respect to any such shares (other than as a result of certain charity loans), such proceeds would be applied toward any outstanding balance of such loan, provided that if proceeds are received pursuant to the "put" provisions of the Stockholders' Agreement, only 75% of such proceeds need be so applied. The Relationship Agreement also provides that amounts outstanding under the loan, if not paid sooner, shall be due and payable on the last to occur of the deaths of Mr. Brennan, his wife and his children. The Relationship Agreement provides that Mr. Brennan is engaged as a consultant to the Company and Wards for the lesser of five years or until the date on which he and his permitted transferees no longer own any shares of Common Stock. The Company and Wards agreed to make annual cash consulting payments totaling $1.5 million to Mr. Brennan in installments not less frequently than semi-monthly throughout the consulting period. Wards ceased payment of the consulting fees as of the Bankruptcy date. Also in connection with his resignation, Mr. Brennan, the Company and GE Capital entered into an Amendment Agreement dated as of December 10, 1996 with respect to certain amendments to the Stockholders' Agreement and the Company's By-laws (the "Amendment Agreement"). Pursuant to the Amendment Agreement, Mr. Brennan's right to require the Company to purchase his shares of Common Stock will become effective on January 1, 1999. The Amendment Agreement also amended the Stockholders' Agreement to provide the director designation rights described herein and the supermajority requirements described herein. See Item 10. Finally, the Amendment Agreement provides Mr. Brennan and his affiliates with certain rights to participate in transfers of shares of Common Stock by GE Capital, provides for Mr. Brennan's and his affiliates' participation in certain sales of the stock or assets of the Company, and provides GE Capital, Mr. Brennan and their respective affiliates with a right of first refusal on new securities issued by the Company. Compensation Committee Interlocks And Insider Participation Mr. Brennan, Chairman of the Company and a former executive officer of the Company, serves as a member of the Compensation Committee of Wards' Board of Directors. Robert A. Kasenter, Executive Vice President of the Company and Executive Vice President, Human Resources of Wards, serves as Secretary of the Compensation Committee of Wards' Board of Directors, although Mr. Kasenter is not a director of the Company or of Wards. 67 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the beneficial ownership, as of March 26, 1999, of Class A Shares (i) by each person who is a director of the Company (none of whom except the individuals identified beneficially owns any shares of the Company's equity securities), (ii) by each of the Named Executive Officers (none of whom except the individuals identified beneficially owns any shares of the Company's equity securities), (iii) by each person who is known to be a holder of more than 5% of Class A Shares and (iv) by all directors and executive officers of the Company as a group. Individual or Group Shares % ---------------------------- -------------------- -------------- Bernard F. Brennan (a) 13,025,750 71.1% Edwin G. Pohlmann (b) 2,892,500 15.8% Tommy T. Cato 227,875 1.2% Silas S. Cathcart 18,987 0.1% Roger V. Goddu (c) 1,298,110 6.6% Kevin Freeman (d) 140,000 0.8% Spencer H. Heine (e) 401,250 2.2% Thomas G. Grimes (f) 350,000 1.9% Tamara Brennan (g) 2,200,000 12.0% All directors and executive officers as a group (19 persons) (h) 15,736,772 77.6% (a) Represents 13,025,750 Class A Shares (71.1% of the Class A Shares and 30.1% of the Company's common stock ("Common Stock") outstanding as of March 26, 1999) owned of record by Mr. Brennan and with respect to which Mr. Brennan has sole investment and voting power. Does not include 2,200,000 Class A Shares (12.0% of the Class A Shares and 5.1% of the Common Stock outstanding as of March 26, 1999) which are owned by Edwin G. Pohlmann, as trustee of a trust (the "Family Trust") for the benefit of members of Mr. Brennan's family with respect to which Mr. Brennan has no voting or investment power, but with respect to which Tamara Brennan, Mr. Brennan's wife, may acquire shared voting and dispositive power. See Note (g) below. Mr. Brennan disclaims beneficial ownership of such 2,200,000 Class A Shares. Mr. Brennan's business address is 5000 Sawgrass Village Circle, Suite Five, Ponte Vedra, FL 32082. (b) Does not include 200,000 Class A Shares held by trusts for the benefit of members of Mr. Pohlmann's family, with respect to which Mr. Pohlmann has no voting or investment power. Includes 2,200,000 Class A Shares with respect to which Mr. Pohlmann has sole voting and investment power as trustee of the Family Trust. Mr. Pohlmann's business address is 9300 Sante Fe Springs Road, Sante Fe Springs, CA 90670. (c) Includes 1,298,110 Class A Shares which may be acquired by Mr. Goddu pursuant to options exercisable on March 26, 1999. Does not include 1,298,110 Class B Shares which may be acquired by Mr. Goddu from GE Capital pursuant to options exercisable on December 31, 1998 and December 31, 1997, as described herein. See Item 11 above. Mr. Goddu's business address is Montgomery Ward Plaza, Chicago, IL 60671. (d) Represents 140,000 Class A Shares which may be acquired by Mr. Freeman pursuant to options currently exercisable. (e) Includes 150,000 Class A Shares which may be acquired by Mr. Heine pursuant to exercisable options. 68 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (CONTINUED) (f) Includes 350,000 Class A Shares which may be acquired by Mr. Grimes pursuant to exercisable options. (g) Represents Class A Shares with respect to which Mrs. Brennan, if she were to elect to become an advisor to the trustee of the Family Trust, may acquire shared power to vote or direct the vote of, and shared power to dispose or direct the disposition of, such shares. See Notes (a) and (b) above. (h) Represents all Class A Shares with respect to which executive officers and directors have investment power, which is in each case sole investment power. Includes 2,170,410 Class A Shares which may be acquired by executive officers or directors at purchase prices ranging from $2.91 to $24.50 per share pursuant to options exercisable on March 26, 1999 or on April 1, 1999 (date within 60 days after March 26, 1999). GE Capital owns 100% of the 25,000,000 Class B Shares currently outstanding. Such shares represented 57.7% of the outstanding Common Stock as of March 26, 1999. GE Capital has granted to Mr. Goddu an option, 50% of which is exercisable as of March 26, 1999, to purchase from GE Capital that number of shares of Common Stock which equals 5% of the issued and outstanding shares of Common Stock of the Company on a fully-diluted basis. For purposes of this calculation, the number of shares of Common Stock underlying such options is to be adjusted upwards from time to time until the last day of the Company's 1998 fiscal year to give effect to the grant of stock options after December 20, 1996 to management employees of Wards covering up to 10% of the outstanding shares of Common Stock on a fully-diluted basis. As of March 26, 1999, pursuant to the foregoing, such option is exercisable with respect to 1,298,110 Class B Shares (4.9% of the outstanding Class B Shares and 2.9% of the outstanding Common Stock). GE Capital's address is 260 Long Ridge Road, Stamford, Connecticut 06927. GE Capital owns 100% of the 1,750 shares of Senior Preferred Stock of the Company, having a liquidation value of $100,000 per share (the "Senior Preferred Stock") outstanding as of the date hereof, and 100.0% of the 352 shares of Series C Preferred Stock of the Company, having a liquidation value of $100,000 per share (the "Series C Preferred Stock") outstanding as of the date hereof. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Wards entered into a Bank Credit Card Program Agreement ("Card Agreement") effective April 1, 1996 with Monogram Credit Card Bank of Georgia ("Monogram"), and an Account-Related Agreement ("Account Related Agreement") effective April 1, 1996 with Montgomery Ward Credit Corporation ("Montgomery Ward Credit") (collectively referred to as the "Agreements") pursuant to which Monogram and Montgomery Ward Credit (collectively referred to as the "Montgomery Ward Credit Companies"), both of which are affiliates of GE Capital, make payments to Wards as to their receivables generated by sales to customers of Wards, its affiliates and licensees who utilize the Wards' private label credit card, and provide services to Wards, all of which are guaranteed by GE Capital. Set forth below is a description of various transactions entered into in connection with the Agreements. Unless otherwise specified, information given is for aggregate transactions under both the Card Agreement and the Account Related Agreement. As of January 2, 1999, there were $3.3 billion of Wards' private label credit card receivables owned by the Montgomery Ward Credit Companies. During the 1998, 1997 and 1996 fiscal years, the Credit Companies paid to Wards, pursuant to the Agreements and predecessor agreements, approximately $2.1 billion, $2.6 billion and $3.6 billion, respectively, in respect of such receivables. As of February 27, 1999, the Credit Companies have paid approximately $209 million to Wards in respect of such receivables during the current fiscal year. Wards generally bears the risk of credit losses due to non-payment by cardholders to the extent of (i) the amount of credit losses that are between 3.9% and 5.0% of average outstanding receivables, plus (ii) 50% of credit losses that are between 5.0% and 8.0% of average outstanding receivables, subject to offsets described below relating to Wards' share of certain incremental increases in finance charges and late fees payable by cardholders. 69 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED) Wards' net unpaid liability for credit losses for 1991 through 1998 are to be payable to Montgomery Ward Credit pursuant to a note ("Continuation Note") due in early 2003, provided that the outstanding balance of such note cannot exceed $300 million. A remaining note in the amount of $15 million, consisting of losses incurred after July 7, 1997 for the remaining portion of 1997, was executed which provides for monthly principal payments in the amount of 5% of the scheduled monthly principal payments for the Continuation Note. Starter card losses are payable currently. Interest on Wards' unpaid liability for credit losses is to be payable at the monthly GE commercial paper rate. Interest on notes outstanding as of July 7, 1997, has been stayed by the Chapter 11 proceeding. In connection with the foregoing arrangements, Wards owes $72 million for 1998 credit losses offset by incremental finance charges and late fee assessments. Wards has previously executed notes for certain of its unpaid share of credit losses through 1997, offset by incremental finance charges and late fee assessments due to Wards for a net obligation of $300 million. At January 2, 1999 and January 3, 1998, $288 million of the net obligation is included in Liabilities subject to compromise and the remainder of the net obligation of $84 million and $40 million at January 2, 1999 and January 3, 1998, respectively, is included in Accrued liabilities and other obligations. As the $300 million threshold has been reached, it is expected that future payments may be required depending upon the level of credit card losses. In exchange for Wards' agreement to allow the Montgomery Ward Credit Companies to increase finance charge rates and late fees in selected states, Wards receives a share of incremental finance charges and late fees resulting from such increases. Such amount is available for offset against Wards' unpaid liability for its share of credit losses. To the extent not currently paid or offset, such amounts earn interest at the same rate as amounts owned by Wards to Montgomery Ward Credit. The Montgomery Ward Credit Companies also provide administrative services in connection with Signature products. Lechmere, Inc., a wholly-owned subsidiary of Wards ("Lechmere"), entered into an Interim Consumer Credit Card Program Agreement (the "Lechmere Agreement") effective as of March 13, 1996 with Monogram pursuant to which Monogram (among other things) made payments to Lechmere in respect of Monogram's receivables generated by sales to customers of Lechmere who utilized the Lechmere private label credit card issued by Monogram pursuant to the Lechmere Agreement. Such payments were equal to the face amount of such receivables. The Lechmere Agreement, as executed, was scheduled to expire on the earlier of August 31, 1996 or the execution by the parties thereto of a long-term agreement. The long-term agreement never was executed and the Lechmere Agreement was extended by numerous letter agreements between the parties. Pursuant to an order of the Bankruptcy Court overseeing Lechmere's bankruptcy (which, like the bankruptcy filing, was filed on July 7, 1997), Lechmere and Monogram continued to perform under the Lechmere Agreement as though such Agreement had been assumed by Lechmere. On or around August 1, 1997 (before any assumption or rejection of the Lechmere Agreement), Lechmere announced that its assets would be sold and liquidated. Shortly thereafter, Monogram, Lechmere and Wards entered into a stipulation and order for adequate protection defining the parties' respective rights during the wind-down of the Lechmere credit card program and the liquidation of receivables that arose in connection therewith. Pursuant to that stipulation and order, purchases made using Lechmere cards ceased on or around August 8, 1997. Lechmere, to date, has neither assumed or rejected the Lechmere Agreement. Wards and Lechmere also entered into an agreement on April 3, 1996 for the sale of certain commercial customer receivables to Montgomery Ward Credit. During 1998, Montgomery Ward Credit paid $2.5 million to Wards and Lechmere pursuant to this agreement and, as of February 27, 1999, Montgomery Ward Credit has paid $379,000 to Wards in respect of such receivables during the current fiscal year. 70 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED) Wards and Lechmere have entered into a Program Agreement dated October 12, 1989, as amended on March 6, 1997, with GE Capital, under which GE Capital pays certain manufacturers and distributors a discounted invoice price of products acquired by Wards and Lechmere and whereby Wards and Lechmere reimburse GE Capital for such payments according to an agreed-upon schedule. The aggregate amount of outstanding payments and other amounts payable under the Program Agreement is not to exceed $650 million at any one time. At June 28, 1997, this facility was principally drawn. This facility is no longer available due to the bankruptcy. Wards entered into the Post-Petition Loan and Guaranty Agreement ("DIP Facility"), as amended, with GE Capital as agent and lender; and various other lenders, on July 8, 1997, 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 billion. Total letters of credit outstanding were $108 million at January 2, 1999. The Company had $363 million of borrowing availability under the DIP Facility at January 2, 1999. 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. GE Capital's portion of the commitment under the DIP Facility is $300 million. On February 1, 1999, Wards announced its intention to sell Signature to GE Capital. The sale is expected to close in the second half of 1999 after the receipt of all required insurance regulatory approvals. GE, the indirect parent of GE Capital, is, in the ordinary course of its business, a major supplier of consumer goods to Wards for sale at Wards' stores in the ordinary course of its business. As more fully described above, Mr. Goddu is indebted to the Company under the Goddu Note in the initial principal amount of $2,000,000 and Mr. Brennan is indebted to the Company in connection with the loan provided him pursuant to the Relationship Agreement in the initial principal amount of $12,500,000. See Item 11 above. 71 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements
Page --------------- Report of Independent Public Accountants 23 For the 52-Week Period Ended January 2, 1999, the 53-Week Period Ended January 3, 1998 and the 52-Week Period Ended December 28, 1996 Consolidated Statements of Income 24 Consolidated Statements of Shareholders' Equity (Deficit) 26 Consolidated Statements of Cash Flows 28 Consolidated Balance Sheets at January 2, 1999 and January 3, 1998 25 Notes to Consolidated Financial Statements 30
2. Financial Statement Schedules Schedules have been omitted because they are not applicable, not required, not material, or the required information is given in the financial statements or notes thereto or combined with the information presented in other schedules or exhibits. 72 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits 3.1 Third Restated Certificate of Incorporation of the Company, filed June 28, 1994, incorporated by reference to Exhibit 3.2 (ii) of the Company's Registration Statement on Form S- 1 (Registration No. 33-33252). 3.1 (i) Certificate of Amendment to Certificate of Incorporation of Montgomery Ward Holding Corp. dated October 25, 1994, incorporated by reference to Exhibit 3.2 (iv) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended October 1, 1994. 3.1 (ii) Certificate of Amendment to Certificate of Incorporation of Montgomery Ward Holding Corp. dated March 29, 1996, incorporated by reference to Exhibit 3.1 (ii) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 3.1 (iii) Certificate of Amendment to Certificate of Incorporation of Montgomery Ward Holding Corp. dated May 29, 1997, incorporated by reference to Exhibit 3.1 (iii) of the Company's Quarterly Report on Form 10-Q for the fiscal quarter quarterly period ended June 28, 1997. 3.1 (iv) Certificated of Stock Designation of Montgomery Ward Holding Corp. dated May 29, 1997, incorporated by reference to Exhibit 3.1 (iv) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 3.3 Amended and Restated By-laws of the Company, dated as of December 29, 1994, incorporated by reference to Exhibit 3.3 of the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 3.3 (i) Amendment to By-laws of Montgomery Ward Holding Corp., dated as of December 10, 1996, incorporated by reference to Exhibit 3.3 (i) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 9. (i) Voting Trust Agreement dated as of October 21, 1994, incorporated by reference to Exhibit 9. (i) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended October 1, 1994. 10. (i) (A) (1) Stockholders' Agreement dated as of June 17, 1988, as amended and restated as of December 29, 1994, incorporated by reference to Exhibit 4. (e) to the Company's Registration Statement on Form S-8 (Registration No. 33- 57075). 10. (i) (A) (2) Amendment Agreement dated as of December 10, 1996, incorporated by reference to Exhibit 1 of the Company's Current Report on Form 8-K for an event occurring January 6, 1997. 10. (i) (A) (3) Montgomery Ward & Co., Incorporated Stock Ownership Plan Terms and Conditions, as amended and restated, as of December 29, 1994, incorporated by reference to Exhibit 4. (f) of the Company's Registration Statement on Form S-1 (Registration No. 33-57075). 73 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (i) (A) (4) Amendment No. 17 to Stockholders' Agreement, dated as of March 31, 1997, incorporated by reference to Exhibit 10. (i) (A) (3) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 19, 1997. 10. (i) (B) Stock Purchase Agreement dated March 6, 1988 between Mobil Corporation, Marcor Inc. and BFB Acquisition Corp. incorporated by reference to Exhibit 10. (i) (B) of the Company's Registration Statement on Form S-1 (Registration No. 33-23403). 10. (i) (C) Subscription Agreement dated as of December 29, 1995 between General Electric Capital Corporation, Montgomery Ward & Co., Montgomery Ward Holding Corp., and Bernard F. Brennan, incorporated by reference to Exhibit 10. (i) (C) of the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. 10. (i) (F) Note Purchase Agreements dated March 1, 1993 between Montgomery Ward & Co., Incorporated and various lenders, incorporated by reference to Exhibit 10. (i) (F) of the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. 10. (i) (F) (1) Amendment dated June 30, 1995 to Note Purchase Agreements dated March 1, 1993 between Montgomery Ward & Co., Incorporated and various lenders, incorporated by reference to Exhibit 10. (i) (F) (1) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended July 1, 1995. 10. (i) (F) (2) Limited waiver and First Amendment to Note Purchase Agreements dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various lenders, incorporated by reference to Exhibit 10. (i) (F) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 10. (i) (G) U.S. $1,000,000,000 Post-Petition Loan and Guaranty Agreement dated as of July 8, 1997, among Montgomery Ward & Co., Incorporated and Lechmere, Inc. as borrowers and various guarantors and General Electric Capital Corporation as agent and lender and various lenders, incorporated by reference to Exhibit 10. (i) (G) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 10. (i) (G) (1) Waiver and First Amendment to Post-Petition Loan and Guaranty Agreement dated as of July 30, 1997, incorporated by reference to Exhibit and 10. (i) (G) (1) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 10. (i) (G) (2) Waiver to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of August 12, 1997, incorporated by reference to Exhibit 10. (i) (G) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 27, 1997. 74 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (i) (G) (3) Waiver to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of September 24, 1997, incorporated by reference to Exhibit 10. (i) (G) (3) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 27, 1997. 10. (i) (G) (4) Waiver to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of November 7, 1997, incorporated by reference to Exhibit 10. (i) (G) (4) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (i) (G) (5) Waiver and Second Amendment to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., Incorporated, as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of February 20, 1998, incorporated by reference to Exhibit 10. (i) (G) (5) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended April 4, 1998. 10. (i) (G) (6) Waiver to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & co., Incorporated, as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders as of June 26, 1998, incorporated by reference to Exhibit 10. (i) (G) (6) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended October 3, 1998. 10. (i) (G) (7) Waiver to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., Incorporated, as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of September 2, 1998, incorporated by reference to Exhibit 10. (i) (G) (7) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended October 3, 1998. 10. (i) (G) (8) Amendment to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., Incorporated, as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of November 9, 1998. 10. (i) (H) Long Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (H) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended October 1, 1994. 75 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (i) (H) (1) Amended Schedule 1 to the Long Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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 incorporated by reference to Exhibit 10. (i) (H) (1) of the Company's Quarterly Report on Form 10-Q, for the fiscal quarterly period ended September 30, 1995. 10. (i) (H) (2) Amendment dated March 19, 1996 to the Long Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (H) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 30, 1996. 10. (i) (H) (3) Amendment to Long Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, which became effective September 6, 1996, incorporated by reference to Exhibit 10. (i) (H) (3) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 28, 1996. 10. (i) (H) (4) Amendment to Long Term Credit Agreement dated as of December 23, 1996 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (H) (5) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (i) (H) (5) Waiver and Fourth Amendment to Long Term Credit Agreement dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various banks, incorporated by reference to Exhibit 10. (i) (H) (5) of the Company's Annual Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 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 American National Trust and Savings Association, as Advisory Agent, incorporated by reference to Exhibit 10. (i) (H) (6) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended July 4, 1998. 76 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (continued) 3. Exhibits (continued) 10. (i) (I) Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (H) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended October 1, 1994. 10. (i) (I) (1) Amended Schedule 1 to the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (I) (1) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 30, 1995. 10. (i) (I) (2) Amendment dated March 19, 1996 to the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (I) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 30, 1996. 10. (i) (I) (3) Amendment dated September 6, 1996 to the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (I) (3) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 28, 1996. 10. (i) (I) (4) Confirmation of New Bank executed by The Industrial Bank of Japan, Limited, Chicago Branch and The Bank of Nova Scotia, as Administrative Agent, pursuant to Section 2.6(c) of the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, as amended and extended, and (b) a letter dated October 24, 1996 from The Bank of Nova Scotia, as Administrative Agent, to the Banks and other Agents who are parties to said Short Term Credit Agreement transmitting an attached revised Schedule 1 to such Agreement, incorporated by reference to Exhibit 10. (i) (I) (4) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 28, 1996. 77 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (i) (I) (5) Amendment dated December 23, 1996 to the Short Term Credit Agreement dated as of September 15, 1994 among Montgomery Ward & 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, incorporated by reference to Exhibit 10. (i) (I)(5) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (i) (I) (6) Waiver and Fourth Amendment to Short Term Credit Agreement dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various banks, incorporated by reference to Exhibit 10. (I) (I) (6) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 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 American National Trust and Savings Association, as Advisory Agent, incorporated by reference to Exhibit 10. (i) (I) (7) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended July 4, 1998. 10. (i) (J) Note Purchase Agreement dated July 11, 1995 between Montgomery Ward & Co., Incorporated and various lenders, incorporated by reference to Exhibit 10. (i) (J) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended July 1, 1995. 10. (i) (J) (1) Limited waiver and First Amendment to Note Purchase Agreements dated as of March 29, 1997 among Montgomery Ward & Co., Incorporated and various lenders, incorporated by reference to Exhibit 10. (i) (F) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 10. (i) (L) Credit Agreement dated as of September 27, 1996 as amended and restated as of October 21, 1996, among Signature Financial/Marketing, Inc., various lenders, The Bank of New York, as Documentation Agent and The Bank of Nova Scotia, as Administrative Agent, incorporated by reference to Exhibit 10. (i) (L) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (i) (L) (1) Amendment to Credit Agreement dated as of December 23, 1996 among Signature Financial/Marketing, Inc., various lenders, The Bank of New York, as Documentation Agent and The Bank of Nova Scotia, as Administrative Agent, incorporated by reference to Exhibit 10. (i) (L) (1) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (i) (L) (2) Waiver Letter dated as of March 27, 1997 addressed to Signature Financial/Marketing, Inc. from the Bank of New York and The Bank of Nova Scotia, incorporated by reference to Exhibit 10. (i) (L) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 78 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (i) (L) (3) Correction Letter Agreement dated as of March 27, 1997 among Signature Financial/Marketing, Inc., The Bank of New York and The Bank of Nova Scotia, incorporated by reference to Exhibit 10. (i) (L) (3) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 10. (i) (L) (4) Waivers and Recision of Acceleration dated July 15, 1997, among The Bank of New York, The Bank of Nova Scotia and Signature Financial/Marketing, Inc., incorporated by reference to Exhibit 10. (i) (L) (4) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 10. (i) (L) (5) Waiver, Amendment and Extension Agreement dated as of August 29, 1997, among Signature Financial Marketing, Inc., various lenders, The Bank of New York, as Documentation Agent and The Bank of Nova Scotia, as Administrative Agent, incorporated by reference to Exhibit 10. (i) (L) (5) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 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, incorporated by reference to Exhibit 10. (i) (L) (6) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended July 4, 1998. 10. (i) (L) (7) Waiver, Amendment and Extension Agreement dated as of July 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, incorporated by reference to Exhibit 10. (i) (L) (7) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended October 3, 1998. 10. (i) (M) Credit Agreement dated October 4, 1996 among Montgomery Ward & Co., Incorporated, various lenders, The Bank of Nova Scotia, as Administrative Agent, and The Bank of New York, as Documentation Agent, incorporated by reference to Exhibit 10. (i) (M) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 28, 1996. 10. (i) (M) (1) Amendment to Credit Agreement dated as of December 23, 1996 among Montgomery Ward & Co., Incorporated, various lenders, The Bank of Nova Scotia, as Administrative Agent, and The Bank of New York, as Documentation Agent, incorporated by reference to Exhibit 10. (i) (M) (1) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (i) (M) (2) Second Amendment to Credit Agreement dated as of December 23, 1996 among Montgomery Ward & Co., Incorporated, various lenders, The Bank of Nova Scotia, as Administrative Agent, and The Bank of New York, as Documentation Agent, incorporated by reference to Exhibit 10. (i) (M) (2) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 79 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (i)(M)(3) Waiver and Third Amendment to Credit Agreement dated as of March 29, 1997 among Montgomery Ward & CO., Incorporated and various lenders, incorporated by reference to Exhibit 10. (i) (M) (3) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997. 10. (i)(N) Asset Purchase, License & Agency Agreement for the Purchase of Certain Assets of Lechmere, Inc. and Montgomery Ward & Co., Incorporated, by Schottenstein Bernstein Capital Group LLC dated August 14, 1997, incorporated by reference to Exhibit 10. (i) (N) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 27, 1997. 10. (i)(O) Agency Agreement between Schottenstein Bernstein Capital Group LLC and Montgomery Ward & Co., Incorporated, as of August 14, 1997, incorporated by reference to Exhibit 10. (i) (O) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended September 27, 1997. 10. (i)(P) Agency Agreement dated as of October 31, 1997 between the joint venture composed of Gordon Brothers Partners, Inc., Hilco Trading, Inc./Garcel, Inc. D/B/A Great American Asset Management and Alco Capital Group, Inc., as agent and Montgomery Ward & Co., Incorporated, incorporated by reference to Exhibit 10. (i) (P) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (i)(Q) Promissory Note among Lechmere, Inc. and Signature Financial/Marketing, Inc. dated September 30, 1998, incorporated by reference to Exhibit 10. (i) (Q) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended October 3, 1998. 10. (i)(R) Master Service Agreement for Information Technology Services and Service Agreements No. 1 through 7 between Montgomery Ward & Co., Incorporated and Axciom Corporation dated November 6, 1998. 10. (ii)(A)* Interim Consumer Credit Card Program dated as of April 1, 1996, as amended, restated and renamed the Bank Credit Card Program Agreement dated as of April 1, 1996 by and between Monogram Credit Card Bank of Georgia and Montgomery Ward & Co., Incorporated, incorporated by reference to Exhibit 10. (ii) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(B)* Account Purchase Agreement dated as of June 24, 1988, as amended, restated and renamed the Account-Related Agreement and dated as of April 1, 1996 by and between Montgomery Ward Credit Corporation and Montgomery Ward & Co., Incorporated, incorporated by reference to Exhibit 10. (ii) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(B)(1) Letter Agreement dated March 27, 1998 by and between Montgomery Ward & Co., Incorporated and Monogram Credit Card Bank of Georgia amending the Bank Program Agreement dated as of April 1, 1996, incorporated by reference to Exhibit 10. (ii) (B) (1) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended April 4, 1998. * Confidential treatment has been requested from the Secretary of the Commission, with respect to portions of this document. 80 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (ii)(B)(2) Letter Agreement dated March 20, 1998 by and between Montgomery Ward & Co., Incorporated and Montgomery Ward Credit Corporation amending the Account-Related Agreement dated as of April 1, 1996, incorporated by reference to Exhibit 10. (ii) (B) (2) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended April 4, 1998. 10. (ii)(B)(3) Interim Amendment Agreement Relating to Bank Program and Account-Related Agreements dated as of April 1, 1998 by and between Monogram Credit Card Bank of Georgia, Montgomery Ward Credit Corporation and Montgomery Ward & Co., Incorporated, incorporated by reference to Exhibit 10. (ii) (B) (3) of the Company's quarterly report on Form 10-Q for the fiscal quarterly period ended April 4, 1998. 10. (ii)(C)(1) Letter Agreement dated as of April 1, 1996 between Signature Financial/Marketing, Inc., Monogram Credit Card Bank of Georgia, Montgomery Ward Credit Corporation, and Montgomery Ward & Co., Incorporated, incorporated by reference to Exhibit 10. (ii) (C) (1) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(C)(2) Letter Agreement dated as of April 1, 1996 between Signature Financial/Marketing, Inc. and Montgomery Ward Credit Corporation, incorporated by reference to Exhibit 10. (ii) (C) (2) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(C)(3) Letter Agreement dated September 17, 1996 between Montgomery Ward & Co., Incorporated, Monogram Credit Card Bank of Georgia and Montgomery Ward Credit Corporation, incorporated by reference to Exhibit 10. (ii) (C) (3) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(C)(4)* Letter Agreement dated as of August 2, 1995 between Monogram Retailer Credit Services, Inc. and Montgomery Ward & Co., Incorporated, incorporated by reference to Exhibit 10. (ii) (C) (4) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(D)* Interim Consumer Credit Card Program Agreement dated as of March 13, 1996 between Monogram Credit Card Bank of Georgia and Lechmere, Inc., incorporated by reference to Exhibit 10. (ii) (D) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(D)(1)* Letter Agreement dated January 23, 1996 between Montgomery Ward & Co., Incorporated, Montgomery Ward Credit and General Electric Capital Corporation, incorporated by reference to Exhibit 10. (ii) (D) (1) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. * Confidential treatment has been requested from the Secretary of the Commission, with respect to portions of this document. 81 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (ii)(D)(2) Letter Agreement dated March 13, 1996 between Montgomery Ward & Co., Incorporated, Lechmere, Inc., General Electric Capital Corporation and Montgomery Ward Credit Corporation, incorporated by reference to Exhibit 10. (ii) (D) (2) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(E)* MWCC Program Agreement dated as of April 3, 1996 between Montgomery Ward Credit Corporation, Montgomery Ward & Co., Incorporated and Lechmere, Inc., incorporated by reference to Exhibit 10. (ii) (E) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ii)(F) Letter Agreement dated July 7, 1997, among Montgomery Ward & Co., Incorporated, Monogram Credit Card Bank of Georgia, Montgomery Ward Credit Corporation and Lechmere, Inc., incorporated by reference to Exhibit 10. (ii) (F) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 10. (iii)(A) Program Agreement dated October 12, 1989 between Montgomery Ward & Co., Incorporated and General Electric Capital Corporation, incorporated by reference to Exhibit 10. (iii) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (iii)(B) Amendment to Program Agreement dated March 4, 1997 between General Electric Corporation, Montgomery Ward & Co., Incorporated and Lechmere, Inc., incorporated by reference to Exhibit 10. (iii) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (iii)(C) Waiver letter of General Electric Capital Corporation dated March 27, 1997, incorporated by reference to Exhibit 10. (iii) ( C) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 27, 1997. 10. (iii)(D) Letter Agreement dated June 25, 1997 among General Electric Capital Corporation, Montgomery Ward Holding Corp., Montgomery Ward & Co., Incorporated and Lechmere, Inc., incorporated by reference to Exhibit 10. (iii) (D) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 10. (iv)(A) Montgomery Ward & Co., Incorporated Stock Ownership Plan, amended and restated as of May 20, 1994, incorporated by reference to Exhibit 10. (iv) (A) (ii) (A) of the Company's Registration Statement on Form S-1 (No. 33- 33252). 10. (iv)(A)(1) Amendment No. 1 to the Amended and Restated Montgomery Ward & Co. Stock Ownership Plan dated October 20, 1994, incorporated by reference to Exhibit 10. (iv) (A) (iii) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended October 1, 1994. * Confidential treatment has been requested from the Secretary of the Commission, with respect to portions of this document. 82 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (iv)(A)(2) Amendment No. 2 to the Amended and Restated Montgomery Ward & Co., Incorporated Stock Ownership Plan, dated as of May 29, 1997, incorporated by reference to Exhibit 10. (iv) (A) (2) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 28, 1997. 10. (iv)(B) Montgomery Ward & Co., Incorporated Long-Term Incentive Plan, incorporated by reference to Exhibit 10. (iv) (B) of the Company's Registration Statement on Form S-1 (Registration No. 33-23403). 10. (iv)(B)(i) Montgomery Ward & Co., Incorporated Executive Long-Term Incentive Plan, incorporated by reference to Exhibit 10. (iv) (B) (1) of the Company's Registration Statement on Form S-1 (No. 33-33252). 10. (iv)(C) Montgomery Ward & Co., Incorporated Performance Management Program, incorporated by reference to Exhibit 10. (iv) (C) of the Company's Registration Statement on Form S-1 (Registration No. 33-23403). 10. (iv)(C)(i) Montgomery Ward & Co., Incorporated Senior Executive Performance Management Program, incorporated by reference to Exhibit 10. (iv) (C) (i) of the Company's Registration Statement on Form S-1 (No. 33-33252). 10. (iv)(D)(6) Montgomery Ward & Co., Incorporated Retirement Security Plan (as amended and restated effective as of January 1, 1998). 10. (iv)(D)(7) First Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective November 25, 1998. 10. (iv)(D)(8) Second Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective January 2, 1999. 10. (iv)(D)(9) Third Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective January 1, 1999. 10. (iv)(D)(10) Fourth Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective January 29, 1999. 10. (iv)(D)(11) Fifth Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective March 6, 1999. 10. (iv)(E) Montgomery Ward & Co., Incorporated Supplemental Retirement Plan, incorporated by reference to Exhibit 10. (iv) (E) of the Company's Registration Statement on Form S-1 (Registration No. 33-23403). 10. (iv)(F) Montgomery Ward Holding Corp. Directors Fee and Stock Ownership Plan, incorporated by reference to Exhibit 10. (iv) (F) of the Company's Registration Statement on Form S-1 (Registration No. 33-41161). 83 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (iv)(G) Montgomery Ward Holding Corp. Senior Officer Severance Plan, incorporated by reference to Exhibit 10. (iv) (G) of the Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1993. 10. (iv)(G)(1) Montgomery Ward & Co., Incorporated Executive Committee Severance Plan incorporated by reference to Exhibit 10. (iv) (G) (1) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (iv)(H)(3) Montgomery Ward & Co., Incorporated Savings Plan (as amended and restated effective as of January 1, 1998). 10. (iv)(I) Montgomery Ward & Co., Incorporated Success Plan, incorporated by reference to Exhibit 10. (iv) (I) of the Company's Registration Statement on Form S-1 (No.33- 33252). 10. (iv)(J) Form of Montgomery Ward Special Retention Plan document entered into with the following persons: Alan E. DiGangi, Spencer H. Heine, Carol J. Harms, Robert A. Kasenter, Frederick E. Meiser, Edwin G. Pohlmann, Robert J. Stevenish and John Workman, incorporated by reference to Exhibit 10. (iv) (J) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 30, 1996. 10. (iv)(L) Form of Montgomery Ward Change of Control Security Plan document entered into with the following persons: Alan E. DiGangi, Spencer H. Heine, Carol J. Harms, Robert A. Kasenter, Frederick E. Meiser, Edwin G. Pohlmann, Robert J. Stevenish and John Workman, incorporated by reference to Exhibit 10. (iv) (L) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 30, 1996. 10. (v) Relationship Agreement effective December 10, 1996 between Bernard F. Brennan, Montgomery Ward Holding Corp., Montgomery Ward & Co., Incorporated and General Electric Capital Corporation, incorporated by reference to Exhibit 10. (v) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (vi)(A) Employment Agreement effective December 20, 1996 between Montgomery Ward & Co., Incorporated, Montgomery Ward Holding Corp., and Roger V. Goddu, incorporated by reference to Exhibit 10. (vi) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (vi)(B) Letter Agreement dated December 20, 1996 between General Electric Capital Corporation and Roger V. Goddu, incorporated by reference to Exhibit 10. (vi) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (vi)(C) Letter Agreement dated November 3, 1997 between Montgomery Ward & Co., Incorporated and Roger V. Goddu, regarding Court Approval of Executive Compensation Plan for Executive Committee Members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan, incorporated by reference to Exhibit 10. (vi) (C) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 84 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (vii)(A) Employment Agreement effective January 31, 1997 between Montgomery Ward & Co., Incorporated, Montgomery Ward Holding Corp., and Burnett Donoho, incorporated by reference to Exhibit 10. (vii) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (vii)(B) General Release and Agreement Not to Sue dated January 23, 1998 between Montgomery Ward & Co., Incorporated and Burnett Donoho, incorporated by reference to Exhibit 10. (vii) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (viii) Line of Credit Agreement effective December 19, 1996 between Montgomery Ward & Co., Incorporated and The Northern Trust Company, incorporated by reference to Exhibit 10. (viii) of the Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. 10. (ix)(A) Employment Agreement effective November 3, 1997, between Montgomery Ward & Co., Incorporated and Alan E. DiGangi, incorporated by reference to Exhibit 10. (ix) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (ix)(B) Letter agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Alan E. DiGangi, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan, incorporated by reference to Exhibit 10. (ix) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (x)(A) Employment Agreement effective February 3, 1997, between Montgomery Ward & Co., Incorporated and Thomas Grimes, incorporated by reference to Exhibit 10. (x) (A) of the Company's Annual Report of Form 10-K for the fiscal year ended December 28, 1996. 10. (x)(B) Letter Agreement dated February 18, 1997 between General Electric Capital Corporation and Thomas Grimes, incorporated by reference to Exhibit 10. (x) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (x)(C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Thomas Grimes, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan, incorporated by reference to Exhibit 10. (x) (C) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (x)(D) Supplemental Employment Agreement effective November 6, 1997, between Montgomery Ward & Co., Incorporated and Thomas Grimes. 10. (xi)(A) Employment Agreement effective April 15, 1997, between Montgomery Ward & Co., Incorporated and Thomas J. Austin, incorporated by reference to Exhibit 10. (xi) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 85 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (xi)(B) Letter Agreement dated April 30, 1997 between General Electric Capital Corporation and Thomas J. Austin, incorporated by reference to Exhibit 10. (xi) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xi)(C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Thomas J. Austin, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan, incorporated by reference to Exhibit 10. (xi) (C) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xii)(A) Employment Agreement effective April 15, 1997, between Montgomery Ward & Co., Incorporated and Louis J. Caporale, incorporated by reference to Exhibit 10. (xii) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xii)(B) Letter Agreement dated April 30, 1997 between General Electric Capital Corporation and Louis. J. Caporale, incorporated by reference to Exhibit 10. (xii) (B) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xii)(C) Letter agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Louis J. Caporale, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan, incorporated by reference to Exhibit 10. (xii) (C) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xiv)(A) Employment Agreement effective April 13, 1997 between Montgomery Ward & Co., Incorporated and Spencer H. Heine, incorporated by reference to Exhibit 10. (xiv) of the Company's Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 29, 1997, incorporated by reference to Exhibit 10. (xiv) (A) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xiv)(B) Amendment to Employment Agreement effective November 3, 1997, between Montgomery Ward & Co., Incorporated and Spencer H. Heine. 10. (xiv)(C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Spencer H. Heine, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan. 10. (xv) Employment Agreement dated March 6, 1998 between Montgomery Ward & Co., Incorporated and Worthington W. Linen, incorporated by reference to Exhibit 10. (xv) of the Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998. 10. (xvi)(A) Employment Agreement dated September 2, 1997 between Montgomery Ward & Co., Incorporated and Thomas J. Paup. 10. (xvi)(B) Letter Agreement dated September 4, 1997 between General Electric Capital Corporation and Thomas J. Paup. 86 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (CONTINUED) 3. Exhibits (continued) 10. (xvi)(C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Thomas J. Paup, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan. 10. (xvii)(A) Employment Agreement effective March 19, 1997 between Montgomery Ward & Co., Incorporated and Kevin Freeman. 10. (xvii)(B) Letter Agreement dated April 30, 1997 between General Electric Capital Corporation and Kevin Freeman. 10. (xvii)(C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Kevin Freeman, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan. 10. (xvii)(D) Supplemental Employment Agreement effective November 6, 1997, between Montgomery Ward & Co., Incorporated and Kevin Freeman. 11. Not applicable. 12. Not applicable. 13. Not applicable. 16. Not applicable. 18. Not applicable. 19. Not applicable. 21. Subsidiaries of the Registrant, incorporated by reference to Exhibit 21 of the Company's Registration Statement on Form S-1 (Registration No. 33-33252). 22. Not applicable. 23. Consent of independent public accountants. 24. Power of attorney. 27. Financial data schedule. 28. Not applicable. (b) Reports on Form 8-K. None. 87 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant, Montgomery Ward Holding Corp., 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, Chief Financial Officer DATE April 2, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. BY /s/ Thomas J. Paup ---------------------------------------------------------- NAME AND TITLE Roger V. Goddu*, Director and Chief Executive Officer DATE April 2, 1999 BY /s/ Thomas J. Paup ---------------------------------------------------------- NAME AND TITLE Thomas J. Paup, Executive Vice President, Chief Financial Officer DATE April 2, 1999 BY /s/ Thomas J. Paup ---------------------------------------------------------- NAME AND TITLE Bernard F. Brennan*, Director DATE April 2, 1999 BY /s/ Thomas J. Paup ---------------------------------------------------------- NAME AND TITLE Silas S. Cathcart*, Director DATE April 2, 1999 BY /s/ Thomas J. Paup ---------------------------------------------------------- NAME AND TITLE Tommy T. Cato*, Director DATE April 2, 1999 BY /s/ Thomas J. Paup ---------------------------------------------------------- NAME AND TITLE Dennis D. Dammerman*, Director DATE April 2, 1999 * By power of attorney. 88 SIGNATURES (CONTINUED) BY /s/ Thomas J. Paup -------------------------------------------------------- NAME AND TITLE Denis J. Nayden*, Director DATE April 2, 1999 BY /s/ Thomas J. Paup -------------------------------------------------------- NAME AND TITLE James A. Parke*, Director DATE April 2, 1999 BY /s/ Thomas J. Paup -------------------------------------------------------- NAME AND TITLE Edward D. Stewart*, Director DATE April 2, 1999 * By power of attorney. 89 EXHIBIT INDEX -------------------------------------------------- 10. (i) (G) (8) Amendment to Post-Petition Loan and Guaranty Agreement among Montgomery Ward & Co., Incorporated, as borrower; Montgomery Ward Holding Corp. and other debtor subsidiaries of Montgomery Ward Holding Corp., as guarantors; General Electric Capital Corporation, as agent and lender; and various lenders dated as of November 9, 1998. 10. (i) (R) Master Service Agreement for Information Technology Services and Service Agreements No. 1 through 7 between Montgomery Ward & Co., Incorporated and Axciom Corporation dated November 6, 1998. 10. (iv) (D) (6) Montgomery Ward & Co., Incorporated Retirement Security Plan (as amended and restated effective as of January 1, 1998). 10. (iv) (D) (7) First Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective November 25, 1998. 10. (iv) (D) (8) Second Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective January 2, 1999. 10. (iv) (D) (9) Third Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective January 1, 1999. 10. (iv) (D) (10) Fourth Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective January 29, 1999. 10. (iv) (D) (11) Fifth Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan effective March 6, 1999. 10. (iv) (H) (3) Montgomery Ward & Co., Incorporated Savings Plan (as amended and restated effective as of January 1, 1998). 10. (x) (D) Supplemental Employment Agreement effective November 6, 1997, between Montgomery Ward & Co., Incorporated and Thomas Grimes. 10. (xiv) (B) Amendment to Employment Agreement effective November 3, 1997, between Montgomery Ward & Co., Incorporated and Spencer H. Heine. 10. (xiv) (C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Spencer H. Heine, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan. 10. (xvi) (A) Employment Agreement dated September 2, 1997 between Montgomery Ward & Co., Incorporated and Thomas J. Paup. 10. (xvi) (B) Letter Agreement dated September 4, 1997 between General Electric Capital Corporation and Thomas J. Paup. 10. (xvi) (C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Thomas J. Paup, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan. 10. (xvii) (A) Employment Agreement effective March 19, 1997 between Montgomery Ward & Co., Incorporated and Kevin Freeman 10. (xvii) (B) Letter Agreement dated April 30, 1997 between General Electric Capital Corporation and Kevin Freeman. 10. (xvii) (C) Letter Agreement dated November 3, 1997, between Montgomery Ward & Co., Incorporated and Kevin Freeman, regarding court approval of Executive Compensation Plan for Executive Committee members and Montgomery Ward & Co., Incorporated Special Emergence Bonus Plan. 10. (xvii) (D) Supplemental Employment Agreement effective November 6, 1997, between Montgomery Ward & Co., Incorporated and Kevin Freeman. 23. Consent of Independent Public Accountants. 24. Power of Attorney. 27. Financial Data Schedule. EX-10.(I)(G)(8) 2 AMENDMENT TO POST-PETITION LOAN & GUARANTY AGMT. 10.(i)(G)(8) THIRD AMENDMENT TO POST-PETITION LOAN AND GUARANTY AGREEMENT THIRD AMENDMENT TO POST-PETITION LOAN AND GUARANTY AGREEMENT, dated as of November 9, 1998 (this "Amendment"), among MONTGOMERY WARD & CO., --------- INCORPORATED, an Illinois corporation and a debtor and debtor in possession ("Borrower Representative"), MONTGOMERY WARD HOLDING CORP., a Delaware - - ------------------------- corporation and a debtor and debtor in possession ("Parent" or "Guarantor"), as ------ --------- Guarantor, the other Guarantors signatory hereto (together with Parent and the Borrower Representative, the "Credit Parties"), GENERAL ELECTRIC CAPITAL -------------- CORPORATION, a New York corporation (in its individual capacity, "GE Capital"), ---------- for itself, as Lender, and as Agent (the "Agent") for Lenders, and the other ----- Lenders signatory hereto. RECITALS -------- WHEREAS, the Borrower Representative, the Guarantors, the Lenders and the Agent are parties to that certain Post-Petition Loan and Guaranty Agreement, dated as of July 8, 1997 (as amended by the Waiver and First Amendment to Post- Petition Loan and Guaranty Agreement, dated as of July 30, 1997; by the Waiver and Second Amendment to Post-Petition Loan and Guaranty Agreement, dated as of February 20, 1998; and as further amended, supplemented or modified, the "Loan ---- Agreement"). The Borrower Representative and the Guarantors have requested that - - --------- the Lenders agree to amend certain provisions of the Loan Agreement. The Borrower Representative, the Guarantors, the Lenders and the Agent have agreed, upon the terms and conditions specified herein, to amend certain provisions of the Loan Agreement, all as hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties hereto agree as follows: SECTION 1. Defined Terms and Interpretation. -------------------------------- (a) The capitalized terms used herein which are defined in the Loan Agreement shall have the respective meanings assigned to them in the Loan Agreement except as otherwise provided herein or unless the context otherwise requires. In addition, as used in this Amendment, the following term shall have the following meaning: "Third Amendment Effective Date" shall have the meaning specified in ------------------------------ Section 4 hereof. (b) Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. (c) No provision in this Amendment shall be interpreted or construed against any Person because that Person or its legal representative drafted such provision. SECTION 2. Amendments to the Loan Agreement. The Loan Agreement is, -------------------------------- effective as of the Third Amendment Effective Date, amended as follows: (a) The second paragraph of Section 1.5(a) of the Loan Agreement is hereby amended and restated to read as follows: "The Applicable Revolver Index Margin, the Applicable Revolver LIBOR Margin, the Applicable Standby L/C Margin and the Applicable Trade L/C Margin will be 1.25%, 2.50%, 2.00% and 1.75% per annum, respectively, as of the Closing Date." (b) Section 5.11 of the Loan Agreement is hereby amended and restated to read as follows: "5.11 Appraisals of Eligible Real Property. ------------------------------------ (a) The Agent (or the Requisite Lenders acting through the Agent) may require Borrowers, at any time, to retain a Qualified Appraiser (as such term is defined in this Section 5.11) to conduct a Conforming ------------ Appraisal (as such term is defined in this Section 5.11) of the real ------------ property, buildings and improvements (whether held in fee or by leasehold) that are stores, warehouses or other business facilities operated by any Credit Party in the ordinary course of its business. In addition, for purposes of establishing the Fair Market Value of any Eligible Real Property, from time to time, Borrowers shall be entitled to submit to Agent a Conforming Appraisal of such Eligible Real Property. Borrowers shall be obligated to pay for the first Conforming Appraisal of any parcel of real property, building or improvement requested by Agent or the Requisite Lenders, as applicable; provided, that so long as a Default or Event of Default -------- has not occurred and is continuing, the Borrowers shall only be obligated to pay for additional Conforming Appraisals requested by Agent or the Requisite Lenders of such parcel of real property, building or improvement once in any twelve (12)-month period. Borrowers shall be obligated to pay for any Conforming Appraisals that are not requested by either Agent or the Requisite Lenders. (b) `Conforming Appraisal', as used in this Agreement, shall -------------------- mean, as to any parcel of real property, buildings or improvements, an 2 appraisal rendered by a Qualified Appraiser that establishes the cash price that would be paid for such real property, buildings or improvements in an arm's-length sale transaction between an informed and willing purchaser (other than a purchaser currently in possession) under no compulsion to purchase and an informed and willing seller under no compulsion to sell. `Qualified Appraiser', as used in this ------------------- Agreement, shall mean an independent third-party appraiser with at least ten (10) years continuous experience in the appraisal of property of the generally same kind and character as the property to be appraised and the identity of whom is acceptable to (i) Agent, if a Conforming Appraisal has been requested by Agent or if it has been provided by Borrowers on their own initiative or (ii) the Requisite Lenders, if they have requested a Conforming Appraisal, in each case, in the exercise of its or their reasonable discretion, as the case may be." (c) The following proviso is hereby inserted at the end of the definition of "Borrowing Base" in Annex A of the Loan Agreement: -------------- "provided, however, that, from and after November 1, 1998, if any Credit -------- ------- Party sells, transfers or otherwise disposes of any of its interest in any Real Estate, then, at such time as the aggregate amount of the Net Sale Proceeds from all such sales, transfers or other dispositions exceed $25,000,000 (the "Cut-Off Date"), the amount in clause (b)(B) shall be ------------ reduced, on a dollar for dollar basis, by an amount that is equal to 75% of all of the Net Sale Proceeds received by any Credit Party relating to or arising out of any sale, disposition or other transfer by any Credit Party of any Real Estate after the Cut-Off Date; provided, further, if any Real -------- ------- Estate that is sold, disposed of or otherwise transferred after the Cut-Off Date is also Eligible Real Property that is listed on Schedule X attached ---------- hereto, then, to the extent the aggregate Net Sale Proceeds received by any of the Credit Parties after the Cut-Off Date in respect of all of the sales, transfers or other dispositions of Eligible Real Property after the Cut-Off Date are less than the aggregate Fair Market Value of such sold, transferred or otherwise disposed of Eligible Real Property, then the amount in clause (b)(B) hereof shall be reduced by 100% of the aggregate Net Sale Proceeds received by any Credit Party from the sale, transfer or other disposition of all such Eligible Real Property. (d) The definition of "Fair Market Value" in Annex A of the Loan ----------------- Agreement is hereby amended and restated to read as follows: "'Fair Market Value' shall mean (for the purpose of calculating ----------------- the Borrowing Base, as of the Closing Date and continuing, for each parcel of Eligible Real Property until an updated appraisal of such parcel has been rendered to Agent that conforms to the requirements of Section 5.11) an amount equal to the excess of (a) the amount ascribed ------------ to such parcel of Eligible Real Property under the column titled `Borrowing Base Value' on Schedule X attached hereto over (b) the --------------------- ---------- amount ascribed to such parcel of Eligible Real Property under the column titled `8/1/98 Existing Mortgage' ------------------------ 3 on Schedule X attached hereto less any reductions to such Indebtedness ---------- since August 1, 1998. Upon the delivery to Agent of an updated Conforming Appraisal on any parcel of Eligible Real Property pursuant to Section 5.11, the Fair Market Value of such parcel of Eligible Real ------------ Property shall be the amount ascribed to such parcel of Eligible Real Property in such Conforming Appraisal." (e) The following definition is added, in the proper alphabetical order, to Annex A of the Loan Agreement: "'Net Sale Proceeds' shall mean, with respect to any sale, ----------------- transfer or other disposition of any Real Estate, the aggregate proceeds received by any Credit Party relating to or arising out of any sale, transfer or other disposition of Real Estate minus any ----- reasonable and customary fees, title expenses, Taxes or Indebtedness (if in the case of any Eligible Real Property, such Indebtedness is secured by a Permitted Encumbrance), in each case, that are required to be paid by a Credit Party in connection with such sale, transfer or other disposition minus any escrowed amounts, holdbacks or other funds ----- given by a Credit Party as security or collateral for its performance or other obligations to the purchaser of such Real Estate; provided, -------- however, that at such time as any such escrowed amounts, holdbacks or ------- other funds are returned or refunded to any Credit Party, the amount of such returned or refunded escrowed amounts, holdbacks or other funds shall be deemed to be added to the Net Sale Proceeds relating to such Real Estate." (f) Subsection (b) of Annex G of the Loan Agreement is hereby amended and restated to read as follows: "Minimum EBITDA. At the end of each Fiscal Quarter set forth -------------- below, EBITDA, for the respective periods set forth below, shall be an amount not less than the following: (i) $(235,000,000) for the twelve Fiscal Months ending the fourth Fiscal Quarter of 1998; (ii) $(225,000,000) for the twelve Fiscal Months ending the first Fiscal Quarter of 1999; and (iii) $(200,000,000) for the twelve Fiscal Months ending the second Fiscal Quarter of 1999." SECTION 3. Representations and Warranties True; No Default or Event -------------------------------------------------------- of Default. The Credit Parties represent and warrant to the Agent and the - - ---------- Lenders that on the date of and after giving effect to the execution and delivery of this Amendment (i) the representations and warranties set forth in the Loan Agreement are true and correct in all material respects on the date hereof as though made on and as of such date (unless any 4 such representation or warranty expressly relates to an earlier date) and (ii) neither any Default nor any Event of Default has occurred and is continuing as of the date hereof. SECTION 4. Conditions of Effectiveness. As used in this Amendment, --------------------------- "Third Amendment Effective Date" shall mean the date when, and only when: (i) - - ------------------------------- Agent has received executed counterparts of this Amendment from the requisite number of Lenders that comprise the Requisite Lenders; (ii) the Bankruptcy Court has entered a final order that is not subject to appeal, in form and substance satisfactory to the Agent, in its sole and absolute discretion, authorizing the payment of a fee to Agent from the Borrowers, for the account of the Lenders who execute this Amendment, in an amount equal to .20% of the Lenders' Revolving Loan Commitments (the "Fee") and (iii) Agent has received the Fee. --- SECTION 5. Reference to this Amendment and Effect on Loan Documents. -------------------------------------------------------- (a) From and after the Third Amendment Effective Date, each reference in the Loan Agreement (including in any Exhibit thereto) to "this Agreement", "hereunder", "herein" or words of like import shall mean and be a reference to the Loan Agreement, as affected and amended hereby. (b) From and after the Third Amendment Effective Date, each reference in the Loan Documents (i) to "the Loan Agreement" shall mean and be reference to the Loan Agreement, as affected and amended hereby and (ii) to the terms whose definitions are amended pursuant to this Amendment shall mean and be a reference to such term as affected and amended hereby. (c) The Loan Agreement, the Notes and the other Loan Documents, as affected and amended hereby, shall remain in full force and effect and the Loan Documents are hereby ratified and confirmed in all respects. SECTION 6. Governing Law; Binding Effect. In all respects, including ----------------------------- all matters of construction, validity and performance, this Amendment shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York (without regard to conflict of law provisions) and any applicable laws of the United States of America, and shall be binding upon the parties hereto and their respective successors and permitted assigns. SECTION 7. Execution in Counterparts. This Amendment may be executed ------------------------- in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 8. Consent of Guarantors. By their execution and delivery of --------------------- this Amendment, each Guarantor hereby consents to all of the terms and provisions of this Amendment and ratifies and confirms that each of the other Loan Documents to which it is a party remains in full force and effect and enforceable in accordance with their respective terms. 5 IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above. BORROWER: MONTGOMERY WARD & CO., INCORPORATED By: s/ Thomas J. Paup ----------------- Name: Thomas J. Paup Title: Executive Vice President GUARANTORS: LECHMERE, INC. By: s/ Thomas G. Grimes ------------------- Name: Thomas G. Grimes Title: President AMERICAN DELIVERY SERVICE COMPANY By: s/ Philip D. Delk ----------------- Name: Philip D. Delk Title: Vice President CONTINENTAL TRANSPORTATION, INC. By: s/ Philip D. Delk ----------------- Name: Philip D. Delk Title: Vice President and Assistant Secretary S-1 JRI DISTRIBUTING, INC. STANDARD T CHEMICAL COMPANY, INC. WFL REALTY, INC. By: s/ Philip D. Delk --------------------------------------- Name: Philip D. Delk Title: Vice President and Secretary M-W PRESTRESS, INC. MW DIRECT GENERAL, INC. MW DIRECT LIMITED, INC. By: s/ Philip D. Delk --------------------------------------- Name: Philip D. Delk Title: Vice President and Secretary MONTGOMERY WARD INTERNATIONAL, INC. MPI, INC. By: s/ Philip D. Delk --------------------------------------- Name: Philip D. Delk Title: Assistant Secretary S-2 BARRETWARD PROPERTIES CO., INC. BRANDYWINE DC, INC. BRANDYWINE PROPERTIES, INC. BRETTWARD PROPERTIES CO., INC. FIRST MONT CORPORATION FOURTH WYCOMBE PROPERTIES, INC. GABEWARD PROPERTIES CORPORATION GARDEN GROVE DEVELOPMENT CORPORATION HUGA REALTY INC. JOSHWARD PROPERTIES CORPORATION LECHMERE DEVELOPMENT CORPORATION M-W FAIRFAX PROPERTIES, INC. M-W PROPERTIES CORPORATION M-W RESTAURANTS REALTY CORPORATION MARCOR HOUSING SYSTEMS, INC. MARYWARD PROPERTIES CORPORATION MF NEVADA INVESTMENTS, INC. MICHAELWARD PROPERTIES CO., INC. MONTGOMERY WARD DEVELOPMENT CORPORATION MONTGOMERY WARD LAND CORPORATION MONTGOMERY WARD PROPERTIES CORPORATION MONTGOMERY WARD REALTY CORPORATION MW LAND CORPORATION NATIONAL HOMEFINDING SERVICE, INC. 998 MONROE CORPORATION PAULWARD PROPERTIES CO., INC. ROBERTWARD PROPERTIES CORPORATION SACWARD PROPERTIES, INC. SECOND MONT CORPORATION 7TH & CARROLL CORPORATION SEVENTH MONT CORPORATION 618 CORPORATION 619 CORPORATION THE 535 CORPORATION THIRD WYCOMBE PROPERTIES, INC. 2825 DEVELOPMENT CORPORATION 2825 REALTY CORPORATION UNIVERSITY AVENUE MARKETPLACE, INC. WFL DEVELOPMENT CORPORATION WYCOMBE PROPERTIES, INC. By: s/ G. Tad Morgan --------------------------------------- Name: G. Tad Morgan Title: Vice President and Secretary S-3 GOODE FURNITURE COMPANIES, INC. MONTGOMERY WARD SECURITIES, INC. R M P DEVELOPMENT CORPORATION By: s/ G. Tad Morgan --------------------------------------- Name: G. Tad Morgan Title: Secretary MONTGOMERY WARD HOLDING CORP. By: s/ G. Tad Morgan --------------------------------------- Name: G. Tad Morgan Title: Assistant Secretary JEFFERSON STORES, INC. By: s/ G. Tad Morgan --------------------------------------- Name: G. Tad Morgan Title: Vice President and Treasurer S-4 AGENT AND AS LENDER GENERAL ELECTRIC CAPITAL CORPORATION By: s/ Paul M. Feehan ---------------------------------- Its Authorized Signatory LENDERS: THE CHASE MANHATTAN BANK By: s/ William P. Rindfuss ---------------------------------- Title: Vice President BANK OF SCOTLAND By: s/ Annie Chin Tat ---------------------------------- Title: Senior Vice President BANKAMERICA BUSINESS CREDIT, INC. By: s/ Thomas G. Sullivan ---------------------------------- Title: Vice President BANKBOSTON RETAIL FINANCE INC. (f/k/a GBFC, INC.) By: s/ Mary E. Abott ---------------------------------- Title: Assistant Vice President S-5 PARIBAS By: s/ John J. McCormick ---------------------------------- Title: Vice President By: s/ David Canavan ----------------------------------- Title: Director CREDIT AGRICOLE INDOSUEZ By: s/ David Bouhl ---------------------------------- Title: F.V.P. By: s/ Dean Balice ---------------------------------- Title: Senior Vice President THE CIT GROUP/BUSINESS CREDIT, INC. By: s/ Nicole Cangelos ----------------------------------- Title: Assistant Secretary CITICORP USA, INC. By: s/ Claudia Slacik ---------------------------------- Title: Vice President FLEET CAPITAL CORPORATION By: s/ Thomas E. Joyce ---------------------------------- Title: Senior Vice President FLEET NATIONAL BANK By: s/ Kevin Chamberlain ---------------------------------- Title: Vice President S-6 GOLDMAN SACHS CREDIT PARTNERS L.P. By: s/ Ed Forst ---------------------------------- Title: Authorized Signatory GREEN TREE FINANCIAL SERVICING CORPORATION By: s/ Gary Wetherholt ---------------------------------- Title: Vice President HELLER FINANCIAL, INC. By: s/ Albert J. Forzano ---------------------------------- Title: Vice President IBJ SCHRODER BUSINESS CREDIT CORP. By : s/ Alfred J. Scoyni ---------------------------------- Title: Vice President JACKSON NATIONAL LIFE INSURANCE COMPANY By: PPM FINANCE, INC. Its Attorney-in-fact By: s/ Jeffrey J. Powdika ---------------------------------- Title: Vice President LEHMAN COMMERCIAL PAPER, INC. By: s/ Michele Swanson ---------------------------------- Title: Authorized Signatory S-7 NATIONAL CITY COMMERCIAL FINANCE, INC. By:___________________________________ Title: STAR BANK, N.A. By: s/ Mike Ehlert ----------------------------------- Title: Vice President S-8 EX-10.(I)(R) 3 MASTER SERVICE AGREEMENT 10.(i)(R) MASTER SERVICE AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION NOVEMBER 6, 1998 TABLE OF CONTENTS -----------------
PAGE ---- BACKGROUND AND OBJECTIVES...................................................................................... 1 ARTICLE 1...................................................................................................... 2 DEFINITIONS................................................................................................. 2 Section 1.1 Certain Definitions.......................................................................... 2 Section 1.2 Other Definitions............................................................................ 7 ARTICLE 2...................................................................................................... 7 MASTER AGREEMENT............................................................................................ 7 Section 2.1 Master Agreement............................................................................. 7 Section 2.2 Master Schedules............................................................................. 7 Section 2.3 Interpretation and Precedence................................................................ 7 Section 2.4 No Implied Agreement......................................................................... 8 ARTICLE 3...................................................................................................... 8 TERM........................................................................................................ 8 Section 3.1 Term......................................................................................... 8 Section 3.2 Renewal Term................................................................................. 8 ARTICLE 4...................................................................................................... 9 SERVICES.................................................................................................... 9 Section 4.1 General; Service Agreements.................................................................. 9 Section 4.2 Migration Services........................................................................... 9 Section 4.3 Specialized Services or Products............................................................. 11 Section 4.4 Third Party Services......................................................................... 11 Section 4.5 Resources.................................................................................... 12 Section 4.6 Cooperation.................................................................................. 12 Section 4.7 Affiliates................................................................................... 12 Section 4.8 Changes in Law and Regulations............................................................... 13 Section 4.9 Licenses and Permits......................................................................... 13 Section 4.10 Dedicated/Partitioned Environment.......................................................... 13 Section 4.11 Services non-exclusive..................................................................... 14 Section 4.12 Correction of Errors....................................................................... 14 ARTICLE 5...................................................................................................... 15 SERVICE LEVELS.............................................................................................. 15 Section 5.1 Service Level Agreements..................................................................... 15 Section 5.2 Review of Service Levels..................................................................... 15 Section 5.3 Measurement and Monitoring Tools............................................................. 15 Section 5.4 Failure to Meet Service Levels............................................................... 15 Section 5.5 Performance Standards........................................................................ 16 Section 5.6 Baseline Wards Satisfaction Survey........................................................... 17 Section 5.7 Value Initiatives and Periodic IT Review..................................................... 17
i ARTICLE 6.................................................................................................. 18 TRANSFERS OF EQUIPMENT, FACILITIES AND THIRD PARTY CONTRACTS............................................ 18 Section 6.1 Assumption of Equipment Leases........................................................... 18 Section 6.2 Use of Wards Facilities.................................................................. 18 Section 6.3 Third Party Contracts.................................................................... 19 ARTICLE 7.................................................................................................. 20 PERSONNEL............................................................................................... 20 Section 7.1 Offers and Terms of Employment........................................................... 20 Section 7.2 Key Supplier Positions................................................................... 20 Section 7.3 Supplier Employees Assigned to Wards Account............................................. 21 Section 7.4 Employment Offers........................................................................ 21 ARTICLE 8.................................................................................................. 21 INTELLECTUAL PROPERTY RIGHTS AND OBLIGATIONS............................................................ 21 Section 8.1 Wards Software........................................................................... 21 Section 8.2 Supplier Software........................................................................ 22 Section 8.3 Third Party Software..................................................................... 22 Section 8.4 Work Product............................................................................. 23 Section 8.5 Use of Concepts, Know-how and Methods.................................................... 23 Section 8.6 Non-Infringement......................................................................... 23 Section 8.7 Viruses.................................................................................. 24 Section 8.8 Disabling Code........................................................................... 24 ARTICLE 9.................................................................................................. 24 CONFIDENTIALITY......................................................................................... 24 Section 9.1 Definitions.............................................................................. 24 Section 9.2 Rights, Restrictions and Obligations of the Receiving Party.............................. 25 Section 9.3 Rights and Remedies of the Disclosing Party.............................................. 27 Section 9.4 Nondisclosure Agreements................................................................. 28 Section 9.5 Ownership of Wards Data.................................................................. 28 Section 9.6 Return of Data........................................................................... 28 Section 9.7 Security................................................................................. 28 Section 9.8 Destroyed or Lost Data................................................................... 29 ARTICLE 10................................................................................................. 29 MANAGEMENT AND SUBCONTRACTING........................................................................... 29 Section 10.1 Project Executives..................................................................... 29 Section 10.2 Joint Operating Committee and Executive Committee...................................... 30 Section 10.3 Wards Office Space at Supplier Facilities.............................................. 30 Section 10.4 Meetings............................................................................... 30 Section 10.5 Reports................................................................................ 30 Section 10.6 Procedures Manual...................................................................... 30 Section 10.7 Technical Change Control............................................................... 31 Section 10.8 Contract Change Control................................................................ 32 Section 10.9 System Change Benchmarking............................................................. 33 Section 10.10 Subcontracting......................................................................... 33 ARTICLE 11................................................................................................. 34
ii AUDITS................................................................................................. 34 Section 11.1 Audit Rights.......................................................................... 34 Section 11.2 Payments.............................................................................. 35 Section 11.3 Supplier Audits....................................................................... 35 Section 11.4 Survival.............................................................................. 35 ARTICLE 12................................................................................................ 36 INSURANCE; RISK OF LOSS................................................................................ 36 Section 12.1 Required Insurance Coverages.......................................................... 36 Section 12.2 General Insurance Requirements........................................................ 37 Section 12.3 Risk of Loss.......................................................................... 37 ARTICLE 13................................................................................................ 37 CHARGES................................................................................................ 37 Section 13.1 Charges............................................................................... 37 Section 13.2 Pass-Through Expenses................................................................. 38 Section 13.3 Taxes................................................................................. 38 Section 13.4 Charges Pursuant to Change Control Procedures......................................... 40 Section 13.5 Recordkeeping......................................................................... 40 Section 13.6 Most Favored Customer................................................................. 40 ARTICLE 14................................................................................................ 40 INVOICING AND PAYMENT.................................................................................. 40 Section 14.1 Invoices.............................................................................. 41 Section 14.2 Payment............................................................................... 42 Section 14.3 Proration............................................................................. 42 Section 14.4 Refunds............................................................................... 42 Section 14.5 Setoff and Withholding................................................................ 43 ARTICLE 15................................................................................................ 43 CERTAIN REPRESENTATIONS AND WARRANTIES................................................................. 43 Section 15.1 Mutual Representations and Warranties................................................. 43 Section 15.2 Supplier Representations and Warranties............................................... 43 Section 15.3 RFP and Due Diligence Assistance...................................................... 44 ARTICLE 16................................................................................................ 45 INDEMNIFICATION........................................................................................ 45 Section 16.1 Indemnification by Supplier........................................................... 45 Section 16.2 Indemnification by Wards.............................................................. 45 Section 16.3 Mutual Indemnification................................................................ 46 Section 16.4 Intellectual Property Indemnification................................................. 46 Section 16.5 Indemnification Procedures............................................................ 47 Section 16.6 Subrogation........................................................................... 48 ARTICLE 17................................................................................................ 48 LIMITATIONS ON LIABILITY............................................................................... 48 Section 17.1 General Intent........................................................................ 48 Section 17.2 Limit on Types of Damages Recoverable................................................. 48 Section 17.3 Limit on Amount of Direct Damages Recoverable......................................... 49 Section 17.4 Force Majeure......................................................................... 50 Section 17.5 Actions of Other Party................................................................ 51 ARTICLE 18................................................................................................ 51 TERMINATION............................................................................................ 51
iii Section 18.1 Termination for Cause................................................................ 51 Section 18.2 Termination for Convenience.......................................................... 53 Section 18.3 Termination for Insolvency........................................................... 54 Section 18.4 Termination Upon Force Majeure Event................................................. 54 Section 18.5 Extension of Expiration or Termination Effective Date................................ 54 Section 18.6 Effect of Termination................................................................ 54 Section 18.7 Termination/Expiration Assistance.................................................... 55 Section 18.8 Purchase of Equipment................................................................ 55 Section 18.9 Supplier Software License............................................................ 55 Section 18.10 Third Party Contracts................................................................ 56 Section 18.11 Offers to Supplier Employees......................................................... 56 ARTICLE 19............................................................................................... 57 DISPUTE RESOLUTION.................................................................................... 57 Section 19.1 General.............................................................................. 57 Section 19.2 Informal Dispute Resolution.......................................................... 57 Section 19.3 Arbitration.......................................................................... 57 Section 19.4 Continued Performance................................................................ 58 Section 19.5 Applicable Law....................................................................... 58 Section 19.6 Jurisdiction and Venue............................................................... 58 Section 19.7 Equitable Remedies................................................................... 59 ARTICLE 20............................................................................................... 59 MISCELLANEOUS......................................................................................... 59 Section 20.1 Interpretation....................................................................... 59 Section 20.2 Binding Nature and Assignment........................................................ 60 Section 20.3 Expenses............................................................................. 60 Section 20.4 Amendment and Waiver................................................................. 60 Section 20.5 Further Assurances; Consents and Approvals........................................... 60 Section 20.6 Publicity............................................................................ 61 Section 20.7 Severability......................................................................... 61 Section 20.8 Entire Agreement..................................................................... 61 Section 20.9 Notices.............................................................................. 61 Section 20.10 Survival............................................................................. 62 Section 20.11 Independent Contractors.............................................................. 62 Section 20.12 Third Party Beneficiaries............................................................ 62 Section 20.13 Counterparts......................................................................... 62 Section 20.14 Bankruptcy Court Approval............................................................ 63
SCHEDULES Schedule A........Form of Service Agreement Schedule B........Form of Service Level Agreement Schedule C........Corporate Service Level Credits and Termination Events Schedule D........Account Management and Governance Overview Schedule E........Supplier Rates iv MASTER AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES ---------------------------------------------------- THIS MASTER AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES (the "Master Agreement") is made and entered into this 6th day of November, 1998 (the "Effective Date"), between Montgomery Ward & Co., Incorporated, an Illinois corporation ("Wards"), and Acxiom Corporation, a Delaware corporation ("Supplier"). BACKGROUND AND OBJECTIVES This Master Agreement is entered into in connection with Wards' decision to contract with Supplier for Supplier's provision of information technology services related to Wards' business operations. This Master Agreement sets forth the general terms and conditions governing the contractual relationship between Wards and Supplier. It is the intent of Wards and Supplier that they will, upon entering into this Master Agreement, enter into one or more Service Agreements pursuant to this Master Agreement and may, from time to time in the future, enter into one or more Value Initiative Agreements or additional Service Agreements setting forth the specific terms and conditions applicable to specific Value Initiatives or Services to be contracted for by Wards and Supplier. Supplier is an established provider of a broad range of information technology services. By entering into this Master Agreement and each Service Agreement, Supplier represents that it has, and will have, the skills, qualifications, expertise and experience necessary to perform and manage the services described in each such Service Agreement in an efficient, cost-effective manner with a high degree of quality and responsiveness and has performed and continues to perform similar services for other customers in such manner. Wards' objectives in entering into this Master Agreement include obtaining (i) high quality information technology services and systems in the areas described in this Master Agreement and related Service Agreements provided in a cost-effective manner; (ii) a flexible relationship with Supplier under which Supplier will be highly responsive to the requests of Wards and to changes in technology and methods for providing information technology services, including accommodation of significant changes in volumes of operations, new generations of technology and improved methods of monitoring, measuring and achieving increased levels of service; (iii) continuous improvement in services and reduction of Wards' associated costs in each area of Services performed by Supplier; and (iv) consistent and effective management of the relationship between Supplier and Wards. Supplier will thoroughly review and analyze Wards' needs and requirements for each information technology area described in each Service Agreement. Supplier fully understands Wards' objectives in entering into this Master Agreement and, with respect to the Services, each Service Agreement. Based on such review and understanding, Supplier represents and 1 warrants to Wards that Supplier currently has and will maintain the capability to achieve those objectives. On the basis of and in reliance upon the inducements described above, and in any proposal provided by Supplier relating to a Service Agreement, and the representations and warranties made by Supplier therein, in this Master Agreement, and in any Service Agreement (including Supplier's representation and warranty that the statements in the above paragraphs are true and correct in all respects and will continue to be true and correct at any time a Service Agreement is entered into), Wards desires to engage Supplier to perform the services described in each Service Agreement entered into pursuant to this Master Agreement. The foregoing provisions set forth the background and inducements under which Wards is entering into this Master Agreement and are intended to be a general introduction to this Master Agreement. They are not intended to expand the scope of the parties' express obligations under this Master Agreement or to alter the plain meaning of the terms and conditions of this Master Agreement. However, to the extent the terms and conditions of this Master Agreement do not address a particular circumstance or are otherwise unclear or ambiguous, such terms and conditions are to be interpreted and construed consistent with the foregoing provisions. ARTICLE 1 DEFINITIONS SECTION 1.1 CERTAIN DEFINITIONS In this Master Agreement, the following terms shall have the indicated meanings: "AFFILIATE" means, with respect to any specified person or entity, any other person or entity that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with, the specified person or entity; provided, however, that General Electric Company and its Affiliates, other than Wards and Wards Affiliates and Montgomery Ward Holding Corporation, shall not be deemed to be Affiliates of Wards. "BANKRUPTCY CASE" has the meaning given in Section 20.14. "BUSINESS DAY" means any day during which Wards is generally conducting business. "CHANGE CONTROL DOCUMENT" has the meaning given in Section 10.8(c). "CHANGE CONTROL PROCEDURES" has the meaning given in Section 10.8(a). "CHARGES" has the meaning given in Section 13.1. "COMMERCIALLY REASONABLE EFFORTS" means, with respect to any objective, a level of effort to achieve such objective equal to or exceeding the higher of (i) the level of effort to 2 achieve the same or similar objectives used by Wards or any third party providing such services for Wards immediately before the applicable Service Agreement Effective Date, or (ii) the level of effort to achieve the same or similar objectives used by other sophisticated outsourcing companies providing services similar to the Services, and in any event a prompt and diligent effort, made in a professional and workmanlike manner, using qualified individuals. "CONFIDENTIAL INFORMATION" has the meaning given in Section 9.1. "CONFIDENTIAL MATERIALS" has the meaning given in Section 9.1. "CONTRACT YEAR" with respect to a Service Agreement, means each annual period beginning on the Service Agreement Effective Date unless defined otherwise within a Service Agreement. "CONTROL" and its derivatives means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting securities, by contract, or otherwise. "CORPORATE SERVICE LEVEL CREDITS" has the meaning given in Section 5.4(a). "CRITICAL MIGRATION MILESTONES" has the meaning given in Section 4.2(a). "DISCLOSING PARTY" has the meaning given in Section 9.1(a). "EFFECTIVE DATE" means the date of this Master Agreement. "EQUIPMENT" means the computer, communications and other equipment owned or leased by Supplier and used by Supplier to provide the Services. Equipment includes, without limitation, all associated accessories and peripheral devices used in the provision of Services. "EXECUTIVE COMMITTEE" has the meaning given in Section 10.2(b). "FORCE MAJEURE EVENTS" has the meaning given in Section 17.4(a). "KEY SUPPLIER POSITIONS" has the meaning given in Section 7.3(a). "LOSSES" means all losses, liabilities, damages and claims, and all related costs and expenses (including any and all reasonable legal fees and reasonable costs of investigation, litigation, settlement, judgment, appeal, interest and penalties) incurred by an indemnified party hereunder in connection with an indemnified claim. "MASTER AGREEMENT" means this Master Agreement For Information Technology Services, all Master Schedules, and, when the meaning so requires, all Service Agreements. "MASTER SCHEDULE(S)" has the meaning given in Section 2.2. 3 "MATERIAL SUBCONTRACT" has the meaning given in Section 10.9(a). "MIGRATION COMPLETION DATE" means the date a migration is completed in accordance with a Migration Plan. "MIGRATION MILESTONES" has the meaning given in Section 4.2(a). "MIGRATION PLAN" has the meaning given in Section 4.2(b). "MIGRATION SERVICES" has the meaning given in Section 4.2(b). "NOTICE OF ASSUMPTION OF DEFENSE" has the meaning given in Section 16.5. "OPERATING COMMITTEE" has the meaning given in Section 10.2(a). "PARTIES" means Wards and Supplier, and "PARTY" means either one of them. "PASS-THROUGH EXPENSES" means the actual invoiced amounts (excluding any Supplier profit, administrative fee or overhead charges) charged to Supplier by third parties that Wards has agreed to pay directly or for which Wards has agreed to reimburse Supplier. "PERFORMANCE STANDARDS" has the meaning given in Section 5.5. "PRELIMINARY MIGRATION PLAN" is a preliminary plan for migration of Services to be included as part of a Service Agreement, as described in Section 4.2(a). "PROCEDURES MANUAL" has the meaning given in Section 10.6(a). "PROJECT EXECUTIVE" has the meaning given in Section 10.1. "RECEIVING PARTY" has the meaning given in Section 9.1(a). "REPORTS" means, collectively, single or periodic reports relating to the Services that are provided by Supplier to Wards under any Service Agreement, as defined in Section 10.5. "RULES" has the meaning given in Section 19.3. "SCHEDULES" means any schedule, exhibit, agreement or other document either (i) attached to this Master Agreement, (ii) attached to Service Agreements; or (iii) executed by the Parties at any time hereafter, if such document states that it is a schedule to this Master Agreement or any Service Agreement. "SERVICE AGREEMENT" has the meaning given in Section 2.1. 4 "SERVICE AGREEMENT COMMENCEMENT DATE" is the date Supplier shall begin providing Services under a Service Agreement as defined in each Service Agreement. "SERVICE AGREEMENT EFFECTIVE DATE" is the date indicated as such in a Service Agreement, and with respect to Service Agreements No. 1 through No. 7, means the date of this Master Agreement. "SERVICE AGREEMENT TERM" means the term of the applicable Service Agreement, as defined in each Service Agreement. "SERVICE LEVEL" has the meaning given in Section 5.1. "SERVICE LEVEL AGREEMENT" has the meaning given in Section 5.1. "SERVICE CREDITS" means, collectively, Service Level Credits and Corporate Service Level Credits. "SERVICE LEVEL CREDITS" has the meaning given in Section 5.4(a). "SERVICES" has the meaning given in Section 4.1. "SOFTWARE" means any computer software that relates to Services provided under a Service Agreement, and includes any Wards Software, Supplier Software and Third Party Software. "SPECIAL CHARGES" means Charges provided for in Service Agreements No. 1 and No. 3 (or as designated in other Service Agreements by the Parties subsequent to the Effective Date) that are based on amortized costs incurred by Supplier for equipment, software and other one-time costs. "SUPPLIER ENVIRONMENT" has the meaning given in Section 15.2(f). "SUPPLIER FACILITIES" means the facilities owned or leased by Supplier and from which the Supplier will provide any Services as specifically identified in a Services Agreement. "SUPPLIER PERSONNEL" means employees of Supplier and its subcontractors assigned to performing Services. "SUPPLIER SOFTWARE" means any Software owned by Supplier and used in conjunction with any of the Services. "TERM" has the meaning given in Sections 3.1 and 3.2. When used herein in the context of a Service Agreement, "Term" refers to the applicable Service Agreement Term. "TERMINATION/EXPIRATION ASSISTANCE" has the meaning given in Section 18.7(a). 5 "THIRD PARTY CONSENTS" has the meaning given in Sections 6.3(c). "THIRD PARTY CONTRACTS" means any contract that is a Third Party Software License or Third Party Service Contract. "THIRD PARTY SERVICE CONTRACTS" means, collectively, (i) the agreements between Wards and a third party pursuant to which the third party is providing to Wards immediately before a Service Agreement Effective Date any services included within the Services, and (ii) the agreements between Supplier and a third party pursuant to which the third party is providing to Wards or Supplier at any time during the applicable Service Agreement Term any services included within the Services. "THIRD PARTY SOFTWARE" means any Software that is owned by a person other than Supplier or Wards and used to provide the Services. "THIRD PARTY SOFTWARE LICENSE" means a license agreement that authorizes Wards or Supplier to use Third Party Software. "TRANSFERRED EMPLOYEE" has the meaning given in Section 7.1(b). "TRANSFERRED EQUIPMENT" has the meaning given in Section 6.1. "UNIDENTIFIED THIRD PARTY CONTRACT" has the meaning given in Section 6.3(d). "VALUE INITIATIVE AGREEMENT" has the meaning given in Section 5.8. "VIRUS" shall mean files, programs or program code designed to affix themselves to, bury themselves within or send instructions to, other files, programs or program code in order to cause malfunctions, errors or destruction or corruption of data when affixed or at a later time. "WARDS" means Montgomery Ward & Co., Incorporated and each of its Affiliates, subsidiaries, divisions, partnerships and joint ventures. "WARDS DATA" means all information entered in Software or Equipment by or on behalf of Wards and information derived from such information, including all file layouts and records associated therewith. "WARDS EQUIPMENT" has the meaning given in Section 6.2. "WARDS FACILITIES" has the meaning given in Section 6.2. "WARDS SOFTWARE" means any Software owned or developed by Wards and used in conjunction with any of the Services, including any exits to Third Party Software. 6 "YEAR 2000 COMPLIANT" means that the Supplier Software and Supplier Environment, as the case may be, will (i) operate and produce data on and after January 1, 2000 (including taking into effect that such year is a leap year), accurately and without delay, interruption or error, and (ii) accept, calculate, process, maintain, write and output, accurately and without delay, interruption or error, all times or dates, or both, whether before, on or after January 1, 2000 (including taking into effect that such year is a leap year), and any time periods determined or to be determined based on any such times or dates, or both. SECTION 1.2 OTHER DEFINITIONS Other terms used in this Master Agreement, the Master Schedules and the Service Agreements are defined where they first appear and have the respective meanings there indicated. ARTICLE 2 MASTER AGREEMENT SECTION 2.1 MASTER AGREEMENT (a) This Master Agreement is a Master Agreement that contains general contractual terms for Services to be provided to Wards by Supplier. Services will be provided by Supplier pursuant to Service Agreements entered into by Wards and Supplier. Separate Service Agreements may be entered into for discrete Services. Each Service Agreement shall describe the Services covered by the Service Agreement, the provisions for payment, the term for performance, applicable Service Levels, and other provisions that are specific to the Service Agreement. A form of Service Agreement is attached hereto as Master Schedule A. ----------------- (b) Except as otherwise expressly set forth in this Master Agreement, the obligations of the Parties under this Master Agreement during the Term shall be suspended during any period in which no Service Agreement is in effect. (c) This Master Agreement and the Service Agreements are effective as of the Effective Date; however, except to the extent expressly provided in Service Agreement No. 1 (Transition Management and Migration Services), neither Party shall be required or permitted to begin performance of any obligations under this Master Agreement or the Service Agreements until the same have been approved by the Court in the Bankruptcy Case. SECTION 2.2 MASTER SCHEDULES Attached to this Master Agreement are schedules (the "Master Schedules") that contain specific provisions that apply to the Services generally or provide a form to be used in preparation of Service Agreements. The Master Schedules shall apply to all Service Agreements unless the Parties expressly agree otherwise. SECTION 2.3 INTERPRETATION AND PRECEDENCE 7 This Master Agreement, the Master Schedules, the Service Agreements, and the Service Level Agreements and other Schedules that may be added to the Service Agreements are to be interpreted so that all of the provisions are given as full effect as possible. In the event of a conflict between this Master Agreement or a Master Schedule and any Service Agreement, the order of precedence shall be first, the Service Agreement, second, any exhibit or Schedule to the Service Agreement; third, this Master Agreement; and fourth, any Master Schedule. All of the terms of this Master Agreement shall apply to each Service Agreement except to the extent negated or contradicted by the express terms of a Service Agreement or any Schedule to a Service Agreement. SECTION 2.4 NO IMPLIED AGREEMENT Except as expressly required in a Service Agreement, nothing in this Master Agreement requires Wards to purchase products or services from Supplier. Wards may request information, proposals, or competitive bids from third parties on the same or different terms than as provided in this Master Agreement. ARTICLE 3 TERM SECTION 3.1 TERM The term of this Master Agreement (the "Term") shall begin as of the Effective Date and shall continue for a period of ten (10) years thereafter or, if later, the expiration of the Service Agreement Term for any Service Agreement in effect as of the date of expiration of such ten-year period, unless earlier terminated or renewed in accordance with the provisions of this Master Agreement. Each Service Agreement shall set forth the applicable Service Agreement Term. SECTION 3.2 RENEWAL TERM Wards shall have the option to renew each Service Agreement for a three (3) year term by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final applicable Contract Year under each Service Agreement. All of the terms of this Master Agreement and the applicable Service Agreement shall continue to apply without change during any renewal period. "Service Agreement Term" shall refer to both the original term of the applicable Service Agreement and any renewal thereof. 8 ARTICLE 4 SERVICES SECTION 4.1 GENERAL; SERVICE AGREEMENTS During the Term of this Master Agreement, regardless of whether one or more Service Agreements are in effect, Supplier shall cooperate with Wards in providing proposals for information technology services reasonably requested by Wards from time to time. Throughout each Service Agreement Term, Supplier shall provide the services described in the Service Agreements, as such Service Agreements may be amended and supplemented from time to time by written amendments thereto or pursuant to the Change Control Procedures (collectively, the "Services"). Supplier shall provide the Services in accordance with all of the terms of this Master Agreement, the Master Schedules, and the applicable Service Agreement. The specific Services to be supplied by Supplier to Wards, the compensation to be paid and other related matters shall be expressed in each Service Agreement prepared from time to time by Supplier in response to a request by Wards for such Services. Each Service Agreement shall incorporate by reference, and shall be subject to, the terms and conditions of this Master Agreement. No Services shall be provided by Supplier unless and until the appropriate Service Agreement has been duly signed and delivered by an authorized officer of Wards. Each Service Agreement shall generally be in the form, and shall contain the information and terms, described in Master Schedule A attached hereto. As of the Effective Date of this Master Agreement, Wards and Supplier are entering into the following Service Agreements: Agreement Services --------- -------- Service Agreement No. 1 Migration and Transition Services Service Agreement No. 2 Data Center Services Service Agreement No. 3 Midrange Processing Services Service Agreement No. 4 Network Services Service Agreement No. 5 Desktop/LAN Services Service Agreement No. 6 Satellite Services Service Agreement No. 7 Tandem Services Wards shall not resell Supplier's Service to third parties, except in support of Wards' and its Affiliates' businesses. SECTION 4.2 MIGRATION SERVICES If any migration of Services is to occur under a Service Agreement, Supplier shall be responsible for preparing a Preliminary Migration Plan and a Migration Plan, both subject to Wards' approval in order to assure an orderly transition of the Services (and, if necessary, the Equipment and Software). After any Migration Completion Date, Supplier shall obtain Wards' written consent prior to any subsequent migration of the Services. Any such 9 subsequent migration of Services shall be conducted by Supplier at its sole expense pursuant to a Migration Plan prepared by Supplier and approved by Wards. (a) Supplier shall prepare and submit to Wards as part of a Service Agreement a Preliminary Migration Plan that generally describes the Migration Services to be provided, and that specifies the milestones for completion of the applicable Migration Services (the "Migration Milestones") including certain critical Migration milestones ("Critical Migration Milestones") and the dates and time schedule for the applicable migration. Supplier acknowledges that, if requested by Wards in advance, a Migration Plan must recognize as a Migration Milestone any date identified by Wards that relates to the closing or sale of any Wards Facilities. (b) Within thirty (30) days following a Service Agreement Effective Date, Supplier shall submit for Wards' approval a final plan (the "Migration Plan") for the migration of the Services. The Migration Plan shall state in detail the specific steps for the timing and migration methodology that will be used by Supplier. The Migration Plan must be approved by Wards prior to implementation of any part of such Plan. As part of the Services, Supplier shall perform all functions and services, including the functions and services described in the Migration Plan necessary to accomplish the migration to the Supplier as identified in the Migration Plan (the "Migration Services"). Supplier shall perform the Migration Services without causing a disruption to Wards' business. (c) As part of the Services and as directed by Wards, Supplier shall support and assist in the closing of any Wards Facilities if required in connection with a migration and to the extent related to Services or computer or network equipment related to the Services. In connection with such closures and as part of the Services, Supplier shall, upon Wards' request, identify and solicit, upon terms and prices as favorable to Wards as Supplier would obtain for its own account, purchasers of Wards' data processing assets at the applicable Wards Facilities. Any sale of assets shall be approved in advance by Wards and may in certain cases be subject to bankruptcy court approval. (d) Each Migration Plan shall include a migration acceptance test for each Service that is migrated that will ensure a complete and satisfactory migration of Services. (e) As part of the Migration Services, and if requested by Wards, Supplier shall provide (i) parallel operation/testing environments and (ii) a training environment for the Supplier Environment using test data prepared by Supplier. Subject to Wards approval and where testing with data representative of the production environment is necessary, Supplier may use a copy of such Wards production data; provided, however, that such test data shall not contain actual client names or addresses to the extent that the same is prohibited by statutory or regulatory requirements. (f) Supplier acknowledges that in the event any Critical Migration Milestone is not achieved in the manner specified in a Migration Plan, Wards will suffer damages the amount of which are difficult to specify at this time. Accordingly, subject to Section 17.5 of this Master Agreement, in addition to any obligations under this Section 4.2, Supplier shall pay to 10 Wards, upon Wards' election, the following amounts as liquidated damages and not as a penalty if Supplier fails by more than the number of days specified in this Section 4.2(f) to achieve a Critical Migration Milestone: (i) In the event a Critical Migration Milestone is not met within ten (10) days of the Critical Migration Milestone date set forth in the applicable Service Agreement or Migration Plan, Wards may elect, and upon such election Supplier shall pay to Wards the liquidated damages specified in the applicable Service Agreement or Migration Plan for each Critical Migration Milestone that is not achieved. (ii) If the damages resulting from the failure to meet a Critical Migration Milestone exceed the amount of liquidated damages specified in the applicable Service Agreement or Migration Plan, Wards may terminate the applicable Service Agreement, upon notice to Supplier within thirty (30) days after such failure. (g) A breach of any Preliminary Migration Plan or Migration Plan shall constitute a breach of the applicable Service Agreement. Unless otherwise expressly provided in a Service Agreement, Preliminary Migration Plan or Migration Plan, all of Supplier's obligations contained in this Master Agreement and the applicable Service Agreement shall continue to apply during the applicable migration of Services. SECTION 4.3 SPECIALIZED SERVICES OR PRODUCTS From time to time Wards may request that Supplier use Commercially Reasonable Efforts to obtain products or specialized services reasonably related to the Services that may be available from a third party supplier and that Supplier make such products or specialized services available to Wards at prices more favorable than would otherwise be available to Wards directly. Supplier shall notify Wards from time to time of relationships Supplier may have with such third party suppliers that may be of benefit to Wards in this respect. Supplier will not add an administrative fee or other markup to such products or services unless the charges to be paid by Wards through Supplier are less than the charges Wards would pay directly. SECTION 4.4 THIRD PARTY SERVICES Notwithstanding any request made to Supplier or the submission of any proposal by Supplier pursuant to Section 4.1 (General; Service Agreements) or 5.7 (Value Initiative Agreements), Wards shall have the right to contract with a third party to perform any services which are in addition to, or outside the scope of, the Services. If Wards contracts with a third party to perform any such service, Supplier shall cooperate with Wards and such third party to the extent reasonably required by Wards, including provision of (i) written requirements, standards, and procedures for Wards systems operations maintained by Supplier so that the enhancements or developments of such third party may be operated by Supplier, (ii) assistance and support services to such third party at the rates specified in Master Schedule E to this Master Agreement or the ----------------- applicable Service Agreement, and (iii) access to the technical environment managed or operated by Supplier or any Services as necessary for such third 11 parties to perform their work. Wards shall require such third parties to comply with Supplier's reasonable requirements regarding confidentiality, operations, standards, and security. Supplier shall be obligated to support and maintain such service provider's work product at Wards' request, provided the service provider complies with any written requirements, standards, and policies for system operations provided to Wards by Supplier. The cost of any Supplier facilities necessary to accommodate such work product shall be borne by the third party service provider, except that Supplier shall bear such costs for facilities directly related to the Services. Nothing herein shall be construed to relieve Supplier of its obligation to maintain or cause to be maintained any Third Party Software that is embedded in or operates with any operating systems software in the Supplier Environment. Wards may request that Supplier provide modifications to Third Party Software used in the Supplier Environment and that any such modifications be maintained by a third party service provider. SECTION 4.5 RESOURCES Except as otherwise expressly provided in a Service Agreement and in Section 6.2, Supplier shall provide, at its expense, all of the facilities, personnel, Equipment, Software, services and other resources necessary to provide the Services. Except as contemplated by Service Agreement No. 1, Supplier shall not implement any action or decision regarding such resources that would have an adverse effect on the Services (including, without limitation, changes in Equipment, Software and systems configurations), Service Levels, the amounts payable to Supplier under any Service Agreement or other Wards costs and expenses without Wards' prior written consent, which consent may be withheld in Wards' sole discretion. No consent on behalf of Wards shall be binding on Wards unless granted in writing by Wards' Project Executive (or authorized designee) or an officer of Wards. SECTION 4.6 COOPERATION As part of the Services, and generally to the extent the Transferred Employees provided such cooperation and assistance prior to the applicable Service Agreement Commencement Date, Supplier agrees to use Commercially Reasonable Efforts to comply with Wards requests for cooperation and assistance for Wards and its third party service providers in connection with special projects that are not within the scope of the Services. In particular, Supplier agrees to provide assistance and cooperation relating to Wards' efforts to assess, implement and test Year 2000 conversion and readiness projects to the extent within the scope of efforts provided by the Transferred Employees prior to the applicable Service Agreement Commencement Date. SECTION 4.7 AFFILIATES Throughout the Term, Supplier shall provide the Services to Wards and to those present and future Affiliates of Wards as Wards may designate from time to time, all in accordance with the terms and conditions of this Master Agreement and the designated Service Agreement(s). Wards and Supplier shall each have all of the same rights and obligations with 12 respect to Services provided to Wards Affiliates as they do with respect to Services provided to Wards; provided, however, that each Party reserves the right to separately negotiate the terms on which Services would be provided to an Affiliate of Wards not using the Services as of any Service Agreement Effective Date if Wards requests that Supplier incur new financial obligations for Wards or Affiliate personnel, assets or liabilities (e.g., equipment, software transfer or upgrade fees, license or lease obligations) in connection with providing such Services. If at any time during the Term of any Service Agreement Wards sells or otherwise transfers ownership of an Affiliate to a third party, Supplier shall continue to provide the Services to such Affiliate if requested by Wards, and for the time period requested by Wards on the terms and conditions set forth in this Master Agreement and the applicable Service Agreement. Supplier shall cooperate with Wards, such Affiliate and any new service provider to ensure an uninterrupted transition to the new service provider. SECTION 4.8 CHANGES IN LAW AND REGULATIONS As part of the Services, Supplier shall identify the impact, if any, of changes in applicable legislative enactments and regulations on the Services. Supplier shall notify Wards of such changes and shall work with Wards to identify the impact of such changes on how Wards uses the Services. Wards shall notify Supplier of such changes in applicable legislative enactments and regulations that Wards becomes aware of in the ordinary course of its business. Supplier shall promptly make any resulting modifications to the Services as reasonably necessary as a result of such changes through the Change Control Procedures. Supplier shall be responsible for, and shall pay for, the cost of any such changes relating to Supplier's business. Wards shall be responsible for the cost of any such changes relating to Wards' business to the extent such changes require computer resources in excess of the personnel or computer resources otherwise provided by Supplier as part of the Services. Supplier shall be responsible for any fines and penalties imposed on Wards or Supplier arising from any noncompliance by Supplier, its subcontractors or agents with the laws and regulations in respect of the Services. Wards shall be responsible for any fines and penalties imposed on Wards or Supplier relating to Supplier's provision of the Services which arise from Wards' failure to comply with laws and regulations to the extent advised of the necessity of such compliance by Supplier pursuant to this Section 4.8. SECTION 4.9 LICENSES AND PERMITS As part of the Services, except as otherwise expressly set forth herein or in an applicable Service Agreement, Supplier shall be responsible for obtaining all applicable licenses, authorizations, and permits required in connection with the performance of Services and to otherwise carry out its obligations under each Service Agreement and shall have financial responsibility for, and shall pay, all fees and taxes associated with such licenses, authorizations, and permits. SECTION 4.10 DEDICATED/PARTITIONED ENVIRONMENT 13 During any time Services are performed at the Wards Facilities, Supplier shall provide the Services using hardware, software and related resources dedicated solely to supporting Wards. Unless otherwise expressly provided in a Service Agreement, all Services provided from the Supplier's Facilities shall be provided using partitioned or dedicated Equipment. Supplier shall not provide any Services from a shared partition or shared processing environment unless specifically approved in writing by Wards. SECTION 4.11 SERVICES NON-EXCLUSIVE (a) Except as shall be expressly set forth in a Service Agreement, Wards may obtain the Services during the Term from Supplier or, at Wards' option exercised from time to time during the Term, Wards may obtain any or all of the Services from a third party or provide them internally. Wards shall have no obligation to obtain from Supplier any services that are not included within the definition of Services. Any Services that are limited to specific locations under a Service Agreement apply only to such locations. (b) If Wards elects to obtain any categories of Services from a third party, or elects to provide any categories of Services internally in accordance with Section 4.11(a), Wards shall so notify Supplier at least forty-five (45) days in advance of the date such third party or Wards will begin to provide such Services. Supplier shall cooperate with Wards and Wards' contractors to allow the proper performance of any services (whether or not included within the definition of Services) being provided internally by Wards or by such third party contractors. Such cooperation shall include, without limitation, provision of (i) written requirements, standards and procedures for Wards systems operations maintained by Supplier so that the enhancements or developments of such third party may be operated by Supplier, (ii) assistance and support services to such third party at commercially reasonable rates, and (iii) access to the technology environment used by Supplier to provide the Services (subject to reasonable confidentiality and security restrictions) or any Services as necessary for such third parties to perform their work. SECTION 4.12 CORRECTION OF ERRORS Supplier shall promptly correct any errors or inaccuracies in Wards Data or Reports. Such corrections shall be provided at no charge to Wards unless the error or inaccuracy was caused by Wards. Corrections and reruns shall be reported in daily, weekly and monthly reports defined by Wards and produced by Supplier. 14 ARTICLE 5 SERVICE LEVELS SECTION 5.1 SERVICE LEVEL AGREEMENTS Concurrently with entering into each Service Agreement, Wards and Supplier will enter into an agreement (a "Service Level Agreement") that specifically relates to such Service Agreement and contains quantitative levels of performance ("Service Levels") for certain specified Services. Each Service Level Agreement will be in a form similar to the form attached hereto as Master ------ Schedule B. With respect to each Service which has an associated Service Level, - - ---------- Supplier shall provide such Service throughout the Term in a manner that meets or exceeds the associated Service Level. SECTION 5.2 REVIEW OF SERVICE LEVELS Within six (6) months after the initiation of Services under a Service Agreement and every six months thereafter, the parties shall jointly review the Service Levels and adjust them to reflect any improved performance capabilities associated with advances in the technology and methods used to perform the Services. The Parties acknowledge that they expect the Service Levels identified in the Service Level Agreements to generally improve continuously throughout the Term. Throughout the Term, Supplier shall identify and notify Wards of Commercially Reasonable methods of improving the Service Levels. SECTION 5.3 MEASUREMENT AND MONITORING TOOLS As part of the Services throughout the Term, and at no additional cost to Wards, Supplier shall implement any measurement and monitoring tools and procedures necessary to measure its performance of the Services and compare such performance to that required by the Service Level Agreements. Upon Wards' request, Supplier shall provide Wards or its auditors with any information and access to the measurement and monitoring tools necessary to verify compliance by Supplier with the Service Level Agreements. SECTION 5.4 FAILURE TO MEET SERVICE LEVELS (a) Supplier acknowledges that its failure to meet one or more Service Levels may have a material adverse effect on the business and operations of Wards and that the actual amount of damage sustained by Wards because of such failure would be impracticable or extremely difficult to determine. Accordingly, if Supplier fails to meet a Service Level for reasons other than those specified in Section 5.4(c) below, Wards shall have the option, but not the obligation, to recover the applicable amount specified in each Service Level Agreement ("Service Level Credits") as liquidated damages. If Supplier fails to meet Service Levels under certain circumstances described in Master Schedule C, Wards ----------------- shall have the option, but not the obligation, to recover the applicable amounts specified in Master Schedule C (the "Corporate Service Level Credits"). Supplier ----------------- acknowledges that the Service Credits are reasonable under the circumstances existing as of the date of this Master Agreement and any 15 Service Agreement Effective Date. Supplier shall remit Service Credits to Wards within thirty (30) days after the end of the month in which such failure occurred, or, at Wards' option, Supplier shall deduct the Service Credits from the next succeeding invoice or other amounts due to Supplier. Regardless of whether Wards exercises its option to recover Service Credits with respect to any failure, Wards shall also have any remedies available to Wards under this Master Agreement or any Service Agreement, at law or in equity, including the right, depending on the circumstances, to terminate this Master Agreement or any Service Agreement for cause. (b) Each time Supplier fails to meet a Service Level, Supplier shall: (i) promptly investigate the root cause(s) of the failure and deliver to Wards a written report identifying such root cause(s) in the form requested by Wards or as specified in a Service Agreement; (ii) use all Commercially Reasonable Efforts to correct the problem and to begin meeting such Service Level as soon as practicable; and (iii) at Wards' request, advise Wards of the status of such corrective efforts. All Service Levels and applicable Service Credits remain in effect notwithstanding Supplier's use of Commercially Reasonable Efforts to correct any performance problem. (c) If any failure to meet a Service Level is directly and solely attributable to (i) a Force Majeure Event, (ii) a breach by Wards of this Master Agreement or a Service Agreement, (iii) Wards Software, or (iv) as otherwise provided in a Service Level Agreement, Wards shall not be entitled to a Service Credit. SECTION 5.5 PERFORMANCE STANDARDS (a) With respect to any Service or obligation which does not have an associated Service Level, Supplier shall perform such Service or obligation with a level of accuracy, quality, completeness, timeliness, responsiveness and cost efficiency that meets or exceeds the higher of (i) the level of performance by Wards or any third party providing such services for Wards immediately before the applicable Service Agreement Effective Date, or (ii) the standards of other sophisticated outsourcing companies providing services similar to the Services, and in any event using prompt and diligent efforts in a professional and workmanlike manner and using qualified individuals ("Performance Standards"). Each time Supplier fails to meet any Performance Standards, Supplier shall: (i) promptly investigate the root cause(s); (ii) use all Commercially Reasonable Efforts to correct the problem and to begin performing such obligation in the required manner as soon as practicable, but in any event within thirty (30) days of such failure; and (iii) at Wards' request, advise Wards of the status of such corrective efforts. All Performance Standards remain in effect notwithstanding Supplier's use of Commercially Reasonable Efforts to correct any performance problem. (b) Regardless of whether there exists an associated Service Level, Supplier shall (i) perform all Services and obligations promptly, diligently and in a workmanlike and professional manner, using qualified individuals, and (ii) use all Commercially Reasonable Efforts to perform the Services and obligations in the manner which reduces charges payable by Wards hereunder to the minimum amount reasonably practicable while still meeting required levels of quality and performance. 16 SECTION 5.6 BASELINE WARDS SATISFACTION SURVEY Upon the request of Wards and as part of the Services, Supplier (or if Wards elects, a third party mutually agreed upon by Wards and Supplier) shall, if requested by Wards, conduct a baseline Wards satisfaction survey as approved by Wards for affected end-users of the Services as designated by Wards. This survey shall be of the content and scope reasonably determined by Wards, administered in accordance with the procedures agreed upon by Wards and Supplier. If a third party is selected, Wards and Supplier shall share the third party costs equally. SECTION 5.7 VALUE INITIATIVES AND PERIODIC IT REVIEW During the Term of this Master Agreement it is the intention of Supplier and Wards to cooperate in good faith to identify opportunities for Supplier to propose Supplier Services to Wards for the purpose of creating technology-enabled business value for the benefit of Wards ("Value Initiatives"). Periodically, but at least annually, Supplier and Wards executives shall meet for a review of Wards' information technology requirements as well as reporting and recommendations of Supplier as to the quality of Services performance by Supplier and continuous improvement in such performance. Wards may periodically cause an independent, nationally recognized organization to conduct an information technology review of Wards' operations to assist Wards and Supplier in their assessment and review, including a review of available benchmarking and best practices information. Such organization shall be reasonably acceptable to Supplier, it being acknowledged by the Parties that a competitor of Supplier in the provision of information technology outsourcing services shall not be the selected organization. The cost of such review will be shared equally by Wards and Supplier, provided that Supplier's share of such cost shall not exceed $50,000 per year. If Wards agrees with Supplier to contract for implementation of a Value Initiative, Supplier and Wards will negotiate in good faith to determine the pecuniary value of Supplier's contribution to achievement of the applicable business objectives, the method of measuring and tracking such value and the period over which it will be measured and tracked, and the basis for compensating Supplier for the applicable Supplier Services. The principles on which these negotiations will be based will include, among others, the degree to which the applicable Supplier Services contribute to achievement of the business objectives and the value of the at-risk investment of resources Supplier is willing to make to achieve such business objectives. Generally, it is the intent of Supplier and Wards that Supplier' compensation for such Supplier Services will be contingent upon successful achievement of the business objectives and will be equivalent to Supplier's proportionate value contribution over a specific period (generally up to one (1) year). The terms and conditions agreed to by Supplier and Wards with respect to each Value Initiative will be set forth by the Parties in an agreement (a "Value Initiative Agreement"). 17 ARTICLE 6 TRANSFERS OF EQUIPMENT, FACILITIES AND THIRD PARTY CONTRACTS SECTION 6.1 ASSUMPTION OF EQUIPMENT LEASES If specified in a Service Agreement, Wards shall assign, and Supplier shall assume, Wards' obligations under the applicable leases for certain equipment that is used to provide the Services as described in the Services Agreement or Wards may sell equipment owned by it to Supplier (the "Transferred Equipment"). Unless Wards obtains an order from the Bankruptcy Court authorizing the assumption and assignment of such leases to Supplier, Supplier. with Wards' assistance, shall seek to obtain consents to such assignments and releases of Wards' liability under such leases as promptly as practicable. The Service Agreement shall state the other terms and conditions applicable to the Transferred Equipment. Wards represents that all Transferred Equipment is subject to valid regular maintenance agreements with vendors or time and materials maintenance agreements with third parties. Otherwise, any assignment of Wards' interests in the Transferred Equipment is made "AS IS, WHERE IS," WITHOUT WARRANTIES OF ANY KIND (EXCEPT AS EXPRESSLY STATED IN SUCH SERVICE AGREEMENT), AND SPECIFICALLY WITHOUT ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. SECTION 6.2 USE OF WARDS FACILITIES AND EQUIPMENT (a) During the Term of a Service Agreement, Wards shall make available to Supplier furnished space in Wards' facilities as reasonably determined by Wards to be suitable for Supplier to carry out administrative functions associated with the Services (the "Wards Facilities") and certain Equipment identified in each Service Agreement that will continue to be owned by Wards (the "Wards Equipment"). (b) Supplier shall: (i) use the space in the Wards Facilities for the sole purpose of providing the Services; (ii) comply with the leases and other agreements applicable to the Wards Facilities; (iii) comply with all policies and procedures governing access to and use of Wards Facilities; and (iv) return such space to Wards in the same condition it was in on the Service Agreement Effective Date, ordinary wear and tear excepted. Except to the extent included in the Services and charges described in the applicable Service Agreement (e.g., supplies and consumables used in providing the Services), Wards shall provide the Wards Facilities and access to normal office resources (e.g., fax, telephone and copier support) at no charge to Supplier; provided, however, that Supplier shall be responsible for costs associated with any Wards Facilities leased by Wards (for Service Agreements No. 1 through No. 7 not to exceed $1,500 per month for approximately 18 to 20 employees). Supplier shall remain responsible for any required personal computers and peripherals, long distance charges and all other expenses incurred by Supplier's on-site account management team. (c) Supplier shall: (i) use the Wards Equipment for the sole purpose of providing the Services; (ii) comply with any directions from Wards concerning the location of the Wards Equipment; (iii) provide, or arrange for third parties to provide, maintenance of the Wards Equipment; and (iv) return such equipment to Wards, upon termination of the applicable 18 Service Agreement, in the same condition it was in on the Service Agreement Effective Date, ordinary wear and tear excepted. SECTION 6.3 THIRD PARTY CONTRACTS (a) Each Service Agreement shall provide for the treatment of all Third Party Contracts, as follows: (i) all or certain of the Third Party Contracts may be assigned by Wards to Supplier, (ii) all or certain of the Third Party Contracts may be retained by Wards and, as necessary, any required Third Party Consents shall be obtained by Wards, Supplier or both, as specified in the Service Agreement, and (iii) the respective financial, operational and other obligations of the Parties with respect to the Third Party Contracts shall be set forth in the Service Agreement. Regardless of whether a Third Party Consent is obtained with respect to any Third Party Service Contract assigned or to be assigned to Supplier, on and after each Service Agreement Effective Date Supplier shall fulfill all of the payment and other obligations formerly imposed on Wards under such Third Party Contracts. If any such Third Party Consent cannot be obtained, Supplier shall identify and adopt, at its expense, subject to Wards' prior approval, such alternative approaches as are necessary to provide the Services without such Third Party Consent; provided that if the third party has refused to grant its consent primarily based on Wards' involvement, Wards will share 50% of any incremental cost attributable to the selected alternative. (b) Subject to obtaining any required Third Party Consents, as of the applicable Service Agreement Effective Date Wards shall grant to Supplier, for the sole purpose of providing the Services, the same rights of access to, and use of, the Third Party Contracts used by Wards immediately before the applicable Service Agreement Effective Date. (c) On or before the applicable Service Agreement Commencement Date, in the event the Service Agreement requires Supplier to assume any Third Party Contract, and unless Wards obtains an order from the Bankruptcy Court authorizing the assumption and assignment of such Third Party Contracts to Supplier, Supplier, with Wards' assistance, shall seek to obtain from each third party to a Third Party Contract existing on the applicable Service Agreement Effective Date any required consents by such third party to (i) the assignment to and assumption by Supplier of Third Party Contracts, and (ii) to the extent agreed to by the third party, a complete release of Wards with respect to all obligations arising under such Third Party Contracts on and after the applicable Service Agreement Effective Date (collectively, the "Third Party Consents"). Supplier shall pay all transfer, upgrade and other fees necessary to obtain any Third Party Consents with respect to Third Party Contracts, and Wards' liability for any such payments is only to Supplier as expressly set forth in the applicable Service Agreement. Unless otherwise specified in a Service Agreement, the Parties shall attempt to include in any assigned Third Party Contract the right of Wards to re-acquire the rights under the Third Party Contract upon any termination or expiration of a Service Agreement. 19 (d) With respect to any Third Party Contract which both (i) is not identified in a Service Agreement and (ii) was not made known to Supplier during the due diligence and negotiations preceding the execution of a Service Agreement (an "Unidentified Third Party Contract"), the following shall apply: (A) the Unidentified Third Party Contract shall be added to the appropriate Service Agreement as soon as it has been identified; (B) Supplier shall obtain any required Third Party Consents with respect to any Unidentified Third Party Contract that is a Third Party Service Contract as soon as possible after it has been identified; and (C) Wards shall pay all transfers, upgrade and other fees necessary to obtain such Third Party Consent with respect to the Unidentified Third Party Contracts. During the Term, Wards shall either retain financial responsibility for license, maintenance or other financial obligations with respect to such Unidentified Third Party Contracts or Supplier shall charge such amounts to Wards on a Pass-Through Expense basis. ARTICLE 7 PERSONNEL SECTION 7.1 OFFERS AND TERMS OF EMPLOYMENT (a) Each Service Agreement will specify the Wards employees to whom Supplier shall offer employment, if any. With respect to Service Agreements No. 1 through No. 7, such employees are listed in Service Agreement No. 1. (b) Supplier shall give each such employee who accepts such offer (a "Transferred Employee") full credit under all Supplier seniority-based benefits plans (including, without limitation, vacation, 401(k) and employee stock purchase plans) for years of service at Wards or elsewhere to the same extent that Wards had given credit for that employee's years of service. Any pre- existing condition limitations and waiting periods under Supplier benefit plans shall be waived for all Transferred Employees to the extent permitted or required by applicable law. Supplier shall grant each Transferred Employee the same rights and opportunities for advancement as comparable employees currently employed by Supplier. SECTION 7.2 KEY SUPPLIER POSITIONS (a) A Service Agreement may designate certain Supplier personnel positions (the "Key Supplier Positions") which are critical to providing the Services throughout the Term. Wards may change or update the Key Supplier Positions from time to time during the Term, provided that, unless otherwise agreed by the parties, the number of Key Supplier Positions shall not exceed the number listed in the applicable Service Agreement. Supplier shall cause the personnel filling the Key Supplier Positions to devote substantially full time and effort to the provision of the Services. (b) The individuals who will fill the Key Supplier Positions on the Service Agreement Commencement Date shall be listed in the applicable Service Agreement. From the date an individual first fills a Key Supplier Position until completion of the period set forth next to such Key Supplier Position in such Service Agreement, Supplier shall notify Wards reasonably in advance of any decision by Supplier to (i) terminate the employment of any 20 individual originally or subsequently filling such Key Supplier Position except for cause, (ii) transfer such individual from such Key Supplier Position, or (iii) transfer of an individual from a Key Supplier Position to the account of a competitor of Wards. In any such case, Supplier shall reasonably consider any concerns expressed by Wards with respect to such proposed action. (c) Before assigning an individual to fill a Key Supplier Position, Supplier shall notify Wards of the proposed assignment, shall introduce the individual to appropriate Wards representatives as designated by Wards' Project Executive and Relationship Executive, and shall provide Wards with a resume and such other information as Wards may reasonably request. If Wards objects in good faith to the proposed assignment within fifteen (15) days after being notified thereof, Supplier shall discuss such objections with Wards and attempt to resolve them on a mutually agreeable basis. If Wards continues to object to the proposed assignment, Supplier shall not assign the individual to that position and shall propose another individual to fill the Key Supplier Position. SECTION 7.3 SUPPLIER EMPLOYEES ASSIGNED TO WARDS ACCOUNT Under any Service Agreement, Wards shall have the right to notify Supplier if Wards determines that the continued assignment to the Wards account of any Supplier employee is not in the best interests of Wards. Upon receipt of such notice, Supplier shall have a reasonable time period, not to exceed five (5) days, to investigate the matters stated therein, discuss its findings with Wards and attempt to resolve such matters in a manner acceptable to Wards. SECTION 7.4 EMPLOYMENT OFFERS Except as set forth in Section 18.11 (Offers to Supplier Employees) or except with Supplier's prior approval, during the Term Wards shall not solicit the employment of any Supplier employees. During the Term and while Supplier is providing any Termination/Expiration Assistance, Supplier, and any Subcontractor providing Services under Section 10.10, shall not extend offers of employment to, or directly or indirectly solicit the employment of, any Wards employees without Wards' prior approval. ARTICLE 8 INTELLECTUAL PROPERTY RIGHTS AND OBLIGATIONS SECTION 8.1 WARDS SOFTWARE Each Service Agreement shall identify the Wards Software, if any, that Supplier is authorized to use to perform the Services and specify the rights of Supplier to use the Wards Software. 21 SECTION 8.2 SUPPLIER SOFTWARE Each Service Agreement will identify any Supplier Software that will be used to provide the Services. Supplier shall install, operate and maintain at its expense any Supplier Software needed to provide the Services. Without Wards' written consent, Supplier shall not use in performing the Services any Supplier Software that is not commercially available to Wards. As of the applicable Service Agreement Effective Date, Supplier grants to Wards and its contractors and subcontractors, to the extent necessary or desirable for Wards or such contractors and subcontractors to perform any Services permitted by this Master Agreement or any Service Agreement, a worldwide, royalty free, nonexclusive license during the Term to use Supplier Software for the sole benefit of Wards. Except for the foregoing license, Supplier retains all right, title and interest in and to the Supplier Software. SECTION 8.3 THIRD PARTY SOFTWARE Each Service Agreement shall identify any Third Party Software, and, unless otherwise stated in such Service Agreement, Supplier shall, to the extent necessary or appropriate to provide the Services: (i) maintain licenses for Third Party Software Licenses used by Wards on the Service Agreement Effective Date; (ii) upgrade, enhance, and implement new versions of Third Party Software used by Wards on the Service Agreement Effective Date; (iii) obtain licensed authorization for use and disclosure of Third Party Software by and to Supplier's employees or agents; (iv) install fixes, modifications, releases or versions of Third Party Software which are identified by the licensor of Third Party Software as required to make the Third Party Software Year 2000 Compliant; and (v) if directed by Wards, replace or add to Third Party Software used by Wards on the Service Agreement Effective Date. Supplier shall not use in performing the Services any Third Party Software unless such Third Party Software was commercially available to Wards when selected. If required by any vendor of Third Party Software, Wards will enter into three-way confidentiality agreements with Supplier and such vendors upon terms and conditions reasonably acceptable to Wards. 22 SECTION 8.4 WORK PRODUCT Supplier shall be the sole and exclusive owner of all work product owned by it as of each applicable Service Agreement Effective Date. Wards shall be the sole and exclusive owner of any reports, manuals (including any Procedures Manual) and other work product prepared by Supplier pursuant to a Service Agreement and of any enhancements to and modifications of Wards Software implemented pursuant to a Service Agreement. In addition, as between Wards and Supplier, Wards shall be the sole and exclusive owner of any enhancements to and modifications of Third Party Software implemented pursuant to a Service Agreement. All work product described in the preceding two (2) sentences shall be considered works for hire owned by Wards. If any such work product is not considered a work made for hire under applicable law, Supplier hereby irrevocably assigns to Wards, without further consideration, all of Supplier's right, title and interest in and to such work product. Supplier shall execute any documents and take any other actions reasonably requested by Wards to accomplish the purposes of this Section. If for any reason Wards fails to obtain ownership of the work product and such ownership is vested in Supplier or its employees or agents, Supplier grants to Wards, or will obtain the right to grant to Wards, a perpetual, exclusive, royalty-free and world-wide license to use the work product for any purpose, and to assign and sublicense its license rights. The Parties' rights, if any, in software developed outside the scope of the Services shall be determined pursuant to the Contract Change Control Procedures. Notwithstanding the foregoing, prior to proceeding with development of any work product or enhancements, Supplier may propose to Wards that Supplier will fund such development without charge to Wards. If Wards agrees to proceed on that basis, Supplier shall retain ownership of the work product or enhancements and shall grant Wards a royalty-free, transferable, perpetual and non-exclusive license to such work product or enhancements. SECTION 8.5 USE OF CONCEPTS, KNOW-HOW AND METHODS Nothing in this Master Agreement or any Service Agreement shall restrict a Party from the use of any ideas, concepts, know-how, methods or techniques relating to information technology services that such Party, individually or jointly, develops or discloses under this Master Agreement or any Service Agreement or obtains from third parties, except to the extent that such use infringes the other Party's patent rights, copyrights or other intellectual property rights or involves a disclosure or use of the other Party's Confidential Information. SECTION 8.6 NON-INFRINGEMENT Supplier shall perform its obligations under this Master Agreement and all Service Agreements in a manner that does not infringe, or constitute an infringement or misappropriation of, any patent, copyright, trademark, trade secret or other proprietary rights of any third party. Supplier represents that, to its knowledge, the Supplier Software and Third Party Software and the Services performed by Supplier do not, and will not, infringe any patent, copyright, trade secret or any other intellectual property interest owned or controlled by any other person. 23 SECTION 8.7 VIRUSES Supplier shall use all Commercially Reasonable Efforts to ensure that no Viruses are coded or introduced into the systems used to provide the Services. If a Virus is introduced into the systems used to provide the Services, Supplier shall eliminate the Virus and mitigate any losses of operational efficiency or data caused by the Virus. SECTION 8.8 DISABLING CODE Supplier shall not insert into any Software any code that would have the effect of disabling any Software, Equipment or Services. With respect to any disabling code that may be part of the Software, Supplier shall not invoke such disabling code at any time (whether during or after the Term) for any reason. If at any time the licensor of any Third Party Software shall invoke or threaten to invoke any disabling code in Third Party Software licensed to Supplier which could adversely affect the Services, Supplier shall use its Best Efforts to preclude such action on the part of such licensor. ARTICLE 9 CONFIDENTIALITY SECTION 9.1 DEFINITIONS (a) "Disclosing Party" means the Party furnishing Confidential Information and "Receiving Party" means the Party receiving the Confidential Information disclosed by the Disclosing Party. (b) "Confidential Information" means information designated as confidential or which ought to be considered as confidential from its nature or from the circumstances surrounding its disclosure. Confidential Information includes, without limiting the generality of the foregoing, Supplier Software, Wards Data, Wards Software, the terms of this Master Agreement, and information: (i) relating to the Disclosing Party's software or hardware products or services, or to its research and development projects or plans; (ii) relating to the Disclosing Party's business, policies, strategies, operations, finances, plans or opportunities, including the identity of, or particulars about, the Disclosing Party's clients or suppliers; and (iii) marked or otherwise identified as confidential, restricted, secret or proprietary, including, without limiting the generality of the foregoing, information acquired by inspection or oral disclosure provided such information was identified as confidential at the time of disclosure or inspection and is confirmed in writing with ten (10) Business Days after the disclosure or inspection. 24 Notwithstanding the foregoing, Confidential Information does not include information that the Receiving Party can establish: (A) has become generally available to the public or commonly known in either Party's business other than as a result of a breach by the Receiving Party of any obligation to the Disclosing Party; (B) was known to the Receiving Party prior to disclosure to the Receiving Party by the Disclosing Party by reason other than having been previously disclosed in confidence to the Receiving Party; (C) was disclosed to the Receiving Party on a non- confidential basis by a third party who did not owe an obligation of confidence to the Disclosing Party with respect to the disclosed information; (D) was independently developed by the Receiving Party without any recourse to any part of the Confidential Information; or (E) in the case of Wards, any information related to the Services which Wards determines in good faith to be necessary or appropriate in connection with any requests by Wards for information or proposals from other service providers, including, without limitation, information of an operational, technical or financial nature related to Wards which Wards desires to make available to such service providers (excluding, however, Supplier's pricing for the Services). (c) "Confidential Materials" means the part of any tangible media upon or within which any part of the Confidential Information is recorded or reproduced in any form, excluding any storage device which forms a part of computer hardware. SECTION 9.2 RIGHTS, RESTRICTIONS AND OBLIGATIONS OF THE RECEIVING PARTY (a) During the Term, the Receiving Party may: (i) disclose Confidential Information received from the Disclosing Party only to its subcontractors, agents, representatives, advisors, employees, officers and directors and Affiliates who have a need to know such information exclusively for the purpose of executing its obligations or exercising its rights under this Master Agreement or any Service Agreement; provided that the Disclosing Party may, on a case by case basis, require that the Receiving Party obtain its written consent prior to disclosure of certain categories of Confidential Information to such parties; (ii) reproduce the Confidential Information received from the Disclosing Party only as required to execute its obligations or exercise its rights under this Master Agreement or any Service Agreement; 25 (iii) disclose Confidential Information as required by law, provided the Receiving Party gives the Disclosing Party prompt notice prior to such disclosure to allow the Disclosing Party to make a reasonable effort to obtain a protective order or otherwise protect the confidentiality of such information; and (iv) disclose Confidential Information which pertains to the terms of this Master Agreement, any Service Agreement or Wards' information technology operations which may be necessary in order for potential bidders to respond to any future Wards request for proposal for all or part of the Services. (b) Except as otherwise specifically provided in this Master Agreement or any Service Agreement, the Receiving Party shall not during the Term and after expiration or earlier termination hereof: (i) disclose, in whole or in part, any Confidential Information received directly or indirectly from the Disclosing Party; or (ii) sell, rent, lease, transfer, encumber, pledge, reproduce, publish, transmit, translate, modify, reverse engineer, compile, disassemble or otherwise use the Confidential Information in whole or in part. (c) The Receiving Party shall exercise the same care in preventing unauthorized disclosure or use of the Confidential Information that it takes to protect its own information of a similar nature, but in no event less than reasonable care. Reasonable care includes, without limiting the generality of the foregoing: (i) informing its subcontractors, agents, representatives, advisors, directors, officers, employees and Affiliates and, where applicable, their directors, officers and employees, of the confidential nature of the Confidential Information and the terms of this Master Agreement, directing them to comply with these terms, and obtaining their written acknowledgment that they have been so informed and directed, and their written undertaking to abide by these terms; and (ii) notifying the Disclosing Party immediately upon discovery of any loss, unauthorized disclosure or use of Confidential Information, or any other breach of this Article by the Receiving Party, and assisting the Disclosing Party in every reasonable way to help the Disclosing Party regain possession of the Confidential Information and to prevent further unauthorized disclosure or use. (d) The Receiving Party acknowledges that: (i) the Disclosing Party possesses and will continue to possess Confidential Information that has been created, discovered or developed by or on behalf of the Disclosing Party, or otherwise provided to the Disclosing Party by third parties, which information has commercial value and is not in the public domain; 26 (ii) unauthorized use or disclosure of Confidential Information is likely to cause injury not readily measurable in monetary damages, and therefore irreparable; (iii) in the event of an unauthorized use or disclosure of Confidential Information, the Disclosing Party shall be entitled, without waiving any other rights or remedies, to such injunctive or equitable relief as may be deemed proper by a court of competent jurisdiction; (iv) subject to the rights expressly granted to the Receiving Party in this Master Agreement or in any Service Agreement, the Disclosing Party and its licensors retain all right, title and interest in and to the Confidential Information, including without limiting the generality of the foregoing, title to all Confidential Materials regardless of whether provided by or on behalf of the Disclosing Party or created by the Receiving party; and (v) any disclosure by the subcontractors, agents, representatives, advisors, directors, officers and employees and Affiliates of the Receiving Party and, where applicable, their directors, officers and employees shall be deemed to be disclosure by the Receiving Party and the Receiving Party shall be liable for any such disclosure as if the Receiving Party had disclosed the Confidential Information. SECTION 9.3 RIGHTS AND REMEDIES OF THE DISCLOSING PARTY (a) Immediately upon the Disclosing Party's request, and at the expiration or earlier termination of this Master Agreement or any applicable Service Agreement, the Receiving Party shall: (i) return all Confidential Materials, including, without limitation, all originals, copies, reproductions and summaries of Confidential Information; and (ii) destroy all copies of Confidential Information in its possession, power or control, which are present on magnetic media, optical disk, volatile memory or other storage device, in a manner that assures the Confidential Information is rendered unrecoverable. Upon completion of those tasks an officer of the Receiving Party shall provide written confirmation to the Disclosing Party that the requirements of this Section have been complied with. (b) The Disclosing Party may visit the Receiving Party's premises, upon reasonable prior notice and during normal business hours, to review the Receiving Party's compliance with the terms of this Section. 27 SECTION 9.4 NONDISCLOSURE AGREEMENTS Supplier shall, at Wards' request made from time to time during the Term, cause Supplier Personnel designated by Wards to sign nondisclosure agreements reasonably proposed by Wards. SECTION 9.5 OWNERSHIP OF WARDS DATA All Wards Data shall remain the property of Wards. The Wards Data shall not be (i) used by Supplier other than in connection with providing the Services, (ii) disclosed, sold, assigned, leased or otherwise provided to third parties by Supplier, or (iii) commercially exploited by or on behalf of Supplier, its employees or agents. SECTION 9.6 RETURN OF DATA At no cost to Wards, Supplier shall upon (i) request by Wards at any time, and (ii) the cessation of all Termination/Expiration Assistance, promptly return to Wards, in the format and on the media in use as of the date of request, all or any requested portion of the Wards Data. Archival tapes containing any Wards Data shall be used by Supplier solely for back-up purposes. SECTION 9.7 SECURITY (a) Supplier will comply with the written security procedures that are in effect during the Term of this Master Agreement and any Service Agreement for the security of Wards' facilities and Wards Data, as such procedures are created or modified by Wards from time to time. The applicable policy or policies may be included in each applicable Service Agreement. (b) (i) Since Supplier personnel may, by nature of the Services, have the ability to defeat systems security provisions on devices specified in each applicable Service Agreement containing both attorney-client privileged material or attorney work product, but such personnel have no need to actually access such data in order to perform Services, Supplier covenants that, in addition to the other provisions of this Article 9, Supplier shall inform Wards whenever access is sought by Supplier, its employees, agents, or contractors to the data files on such devices. Supplier shall not, and Supplier's employees and contractors shall not, access such Wards Data, and Supplier waives any claim that, as to Supplier, Wards, by any act contemplated or permitted under this Master Agreement or any Service Agreement, has waived any privileges to which it is otherwise entitled by virtue of the access required for performing the Services. (ii) Since Supplier personnel may, by nature of the Services, have the ability to defeat systems security provisions on devices specified in each applicable Service Agreement containing Wards' financial data that, if utilized or disclosed could lead to violations of the applicable securities laws, Supplier covenants that, in addition to the other provisions of this Article 9, (1) neither Supplier nor its employees or contractors shall access or disclose any Wards financial data, and (2) Supplier employees and contractors who have the ability to obtain access to the data files on such devices containing Wards Data which includes such financial data will not 28 trade in any Wards security for the period of time from the close of any fiscal quarter or Wards fiscal year until at least one day after the release by Wards of its quarterly or annual financial reports to the public (or such other period which Wards imposes upon the Wards employees who have permitted access to such Wards Data). (c) Supplier shall indemnify Wards and hold Wards harmless from any loss resulting from a breach by Supplier, or its employees, agents, or contractors under this Section 9.7. SECTION 9.8 DESTROYED OR LOST DATA Supplier will not delete or destroy any Wards Data or media on which Wards Data resides without prior authorization from Wards. Wards hereby authorizes Supplier to delete or destroy Wards Data in accordance with any Wards document retention program, including Wards' approved tape management retention rules. Supplier will maintain and provide to Wards one or more Reports that identify the Wards Data or media that have been destroyed. In the event any Wards Data is lost or destroyed due to any act or omission of Supplier, including any breach of the security procedures described in this Article 9 and any Service Agreement, Supplier shall be responsible for the prompt regeneration or replacement of such Wards Data. Supplier shall prioritize this effort so that the loss of Wards Data will not have an adverse effect upon Wards' business or the Services. Wards agrees to cooperate with Supplier to provide any available information, files or raw data needed for the regeneration of the Wards Data. If Supplier fails to regenerate the lost or destroyed Wards Data within the time reasonably set by Wards, then Wards may obtain data reconstruction services from a third party, and Supplier shall cooperate with such third party as requested by Wards. In addition to any other damages incurred by Wards, Supplier will be responsible for the actual costs incurred by Wards for the reconstruction of Wards Data by a third party. In the event it is determined that Wards Data has been lost or destroyed as a result of the willful conduct of Supplier or its employees, contractors or agents, Wards may terminate the applicable Service Agreement or this Master Agreement for cause pursuant to Section 18.1. ARTICLE 10 MANAGEMENT AND SUBCONTRACTING SECTION 10.1 PROJECT EXECUTIVES On or before the Effective Date, and from time to time thereafter during the Term, Wards and (subject to Section 7.3 (Key Supplier Positions)) Supplier shall each designate an individual as its relationship executive (the "Relationship Executive"). A Party's Relationship Executive shall be authorized to act as the primary contact for such Party with respect to all matters relating to this Agreement. In addition, each Party shall designate individuals who will be directly responsible for its performance under each Service Agreement (each a "Project Executive"). Supplier shall ensure that Supplier's Relationship Executive and Project Executive has the authority necessary to allow such Project Executive to make prompt decisions with respect to this Agreement. 29 SECTION 10.2 JOINT OPERATING COMMITTEE AND EXECUTIVE COMMITTEE (a) Within thirty (30) days after the Effective Date, the Parties shall form a joint committee (the "Joint Operating Committee"). The Joint Operating Committee shall take the actions and assume oversight of those matters described in the Account Management and Governance Overview attached hereto as Schedule D. (b) Within thirty (30) days after the Effective Date, the Parties shall form a joint committee (the "Executive Committee") as described in the Account Management and Governance Overview attached hereto as Schedule D. The Joint Operating Committee shall report to the Executive Committee and the Executive Committee shall take the actions and assume oversight of these matters described in Schedule D. SECTION 10.3 WARDS OFFICE SPACE AT SUPPLIER FACILITIES Supplier shall provide to Wards without charge furnished office space at any Supplier Facilities used to provide Services for the occasional use of the Wards Relationship Executive, Project Executive or their designees when visiting such Supplier Facilities. The Wards Relationship Executive, Project Executive, or their designees shall comply with all policies and procedures governing access to and use of such Supplier Facilities and shall leave such space in the same condition it was in immediately before they used the space, ordinary wear and tear excepted. SECTION 10.4 MEETINGS Throughout the Term, the Parties shall hold those meetings and review the items described in Schedule D and in any Service Agreement. SECTION 10.5 REPORTS Supplier shall prepare and deliver to Wards the reports described in each Service Agreement ("Reports") by the respective deadlines specified in each Service Agreement. At no charge to Wards, Supplier shall modify the Reports or provide additional Reports as reasonably requested by Wards from time to time. SECTION 10.6 PROCEDURES MANUAL (a) Within ninety (90) days after the commencement of Services under any Service Agreement, Supplier shall deliver to Wards for review and comment a draft of a manual (the "Procedures Manual") describing in detail how Supplier shall perform the Services, the Equipment and Software used to provide the Services, and the documentation (such as, for example, operations manuals, user guides, forms of Service Level reports, call lists, escalation procedures, emergency procedures, and requests for approvals or information) which provides further information regarding the Services. The Procedures Manual shall describe the activities Supplier proposes to undertake in order to provide the Services, including, where appropriate, those direction, supervision, monitoring, quality assurance, staffing, reporting, 30 planning and overseeing activities normally undertaken at facilities that provide services of the type Supplier shall provide under this Agreement, and further including acceptance testing and quality assurance procedures approved by Wards. The Procedures Manual shall be based on the Wards procedures manual in use immediately before the commencement of Services under such Service Agreement Supplier shall incorporate any reasonable comments and suggestions made by Wards and shall deliver a revised Procedures Manual within fifteen (15) days after receipt of Wards' comments. The final Procedures Manual shall be subject to Wards' approval. (b) Supplier shall update the Procedures Manual throughout the Term to reflect changes in the Services and the procedures and resources used to provide the Services. Updates to the Procedures Manual shall also be provided to Wards for review, comment and approval. Supplier shall update and deliver to Wards for approval portions of the Procedures Manual relating to any material operational change in the Services within fifteen (15) days of such change. (c) Supplier shall perform the Services in accordance with the then-current version of the Procedures Manual. The Procedures Manual shall be for operational purposes only, and shall not constitute a contractual document. Accordingly, in the event of a conflict between the provisions of this Agreement and a Procedures Manual, the provisions of this Agreement shall control, and Wards' acceptance of the Procedures Manual shall not be deemed a waiver of any rights of Wards. SECTION 10.7 TECHNICAL CHANGE CONTROL Supplier shall implement any changes in the technical environment and systems used to provide the Services in accordance the Service Agreement and any applicable Procedures Manual. Until such Procedures Manual is finalized, Supplier shall follow Wards' existing procedures or instructions for the implementation of technical changes. Notwithstanding anything to the contrary in the Service Agreement, the Procedures Manual, or Wards' existing procedures: (a) Supplier shall not make any change that adversely affects the functions or performance of, or decreases the operational efficiency of, the Services, including without limitation the implementation of technological changes, without first obtaining Wards' approval, which may be withheld in its sole discretion. Notwithstanding the foregoing, Supplier may make temporary changes required by an emergency but shall, if reasonably practicable, contact appropriate Wards personnel to obtain prior approval. Supplier shall promptly document and report such emergency changes to Wards. (b) Supplier shall move programs from development and test environments to production environments in a controlled and documented manner, and shall not permit any changes to be introduced into such programs during such move without first obtaining Wards' approval. 31 SECTION 10.8 CONTRACT CHANGE CONTROL (a) From time to time during the Term Wards or Supplier may propose changes in or additions to the Services or other aspects of this Agreement or a Service Agreement. Subject to clause (e) below, all such changes shall be implemented pursuant to the procedures set forth in this Section (the "Change Control Procedures"). (b) Any change to this Master Agreement must be approved by the Relationship Executive of each Party and memorialized in a written amendment that specifically identifies this Master Agreement, the section of this Agreement that is the subject of the amendment, and the new provision. (c) If Wards desires to propose a change in or addition to the Services under a Service Agreement, it shall deliver a written notice to the Supplier Project Executive describing the proposal. Supplier shall respond to such proposal as promptly as reasonably possible by preparing at Supplier's expense and delivering to the Wards Project Executive a written document ("Change Control Document"), indicating: (i) the effect of the proposal, if any, on the amounts payable by Wards hereunder (which effect shall be determined in the manner set forth in Section 13.4 (Charges Pursuant to Change Control Procedures) and the manner in which such effect was calculated; (ii) the effect of the proposal, if any, on Service Levels with a full explanation acceptable to Wards; (iii) the anticipated time schedule for implementing the proposal; and (iv) any other information requested in the proposal or reasonably necessary for Wards to make an informed decision regarding the proposal. If Supplier desires to propose a change in or addition to the Services or other aspects of this Agreement, it may do so by preparing at its expense and delivering a Change Control Document to the Wards Project Executive. A Change Control Document, once submitted to Wards, shall constitute an offer by Supplier to implement the proposal described therein on the terms set forth therein, and shall be irrevocable for a minimum of thirty (30) days. (d) No change in or addition to the Services or any other aspect of this Agreement shall become effective without the written approval of the Wards Project Executive (or, if necessary, a Wards officer with the appropriate level of signature authority). If Wards elects to accept the offer set forth in the Change Control Document, as evidenced by the written approval of the Wards Project Executive, any changes in or additions to the Services described in the Change Control Document shall thereafter be deemed "Services," any other changes described in the Change Control Document shall be deemed to have amended this Agreement, and the Parties shall agree on any further modifications to the Agreement required to reflect the Change Control Document. (e) Routine changes made in the ordinary course of Supplier's provision of the Services that are performed within the then-existing resources used to provide the Services and that do not affect Service Levels (such as changes to operating procedures, schedules and Equipment configurations) shall be made at no additional cost to Wards and shall be made and documented in accordance with the Procedures Manual. 32 SECTION 10.9 SYSTEM CHANGE BENCHMARKING Each time, if any, that Supplier initiates a material change in the operating environment in which Supplier is operating Software (a "System Change"), Supplier shall perform a comparison, at a reasonable and mutually agreed level of detail, between the amount of resources required by the Software to perform a representative sample of the data processing then being performed for Wards immediately prior to the System Change and immediately after the System Change. Wards shall not be required to pay for increased resource usage due to a System Change. If, following a System Change, Supplier contends that increased resource usage has resulted from increased Wards usage and not from the System Change, Wards shall only pay for increased usage as to the extent Supplier is able to demonstrate to Wards that increased usage is not due to the System Change and is due to Wards usage. Any such demonstration shall utilize the same representative sample as used in the comparison above. The parties acknowledge that upgrades to existing operating systems Software operated by Supplier shall not be deemed a System Change provided Supplier uses all Commercially Reasonable Efforts to minimize any increased processing utilization; however, for example, new or replacement operating systems Software implementation would be deemed a System Change unless such implementation is directed by Wards. SECTION 10.10 SUBCONTRACTING (a) Supplier shall not delegate or subcontract any of its material obligations under this Master Agreement or any Service Agreement without Wards' prior written consent, which may be withheld in Wards' sole discretion. Notwithstanding the preceding sentence, but subject to clause (c) below, Supplier may use, in the ordinary course of business, third party service providers or products pursuant to subcontracts which, when combined with any related subcontracts, involve the payment of no more than $100,000 in any twelve month period. A subcontract involving the payment of more than $100,000 in any twelve-month period shall be a Material Subcontract. Notwithstanding any other provision in this Section 10.10, all subcontractors shall be required to execute documents binding the subcontractor to confidentiality and non-disclosure agreements that are at least as protective as this Agreement with respect to confidentiality of Wards Confidential Information under Article 9. (b) If Supplier desires to enter into a Material Subcontract, it shall submit to Wards in writing a proposal specifying (i) the specific tasks Supplier proposes to subcontract, (ii) the reason for having a subcontractor perform such tasks instead of Supplier, (iii) the identity and qualifications of the proposed subcontractor and (iv) any other information reasonably requested by Wards or relevant to Wards' approval of the subcontractor. If Wards approves of the use of such subcontractor, Supplier shall include in such subcontract provisions (A) naming Wards as an intended third-party beneficiary, (B) substantially similar to Article 11 (Audits), Section 5.5 (Performance Standards) and Article 9 (Confidentiality), and (C) any other provisions necessary for Supplier to fulfill its obligations under this Master Agreement or any Service Agreement (including without limitation, clause (c) below), and provide Wards with a copy of each Material Subcontract. Such subcontract provisions shall also include the option 33 of Wards to assume each Material Subcontract in the event Wards terminates this Master Agreement or a Service Agreement. In addition, Supplier shall not disclose any Wards Confidential Information to such subcontractor until such subcontractor has agreed in writing to assume the obligations described in Article 9 (Confidentiality). (c) Wards may revoke approval of a subcontractor previously approved, or object to Supplier's use of a subcontractor for which Wards' approval was not required pursuant to the clause (a) above, if a subcontractor is acquired or otherwise becomes affiliated with a competitor of Wards, the subcontractor's performance has been materially deficient, good faith doubt exists concerning the subcontractor's ability to render future performance, or there have been material misrepresentations by or concerning the subcontractor. Upon such revocation or objection, Supplier shall remove such subcontractor from performing the Services. (d) Supplier shall remain liable for obligations performed by subcontractors to the same extent as if a Supplier employee had performed such obligations, and for purposes of this Master Agreement such work shall be deemed work performed by Supplier. If a subcontractor breaches a Material Subcontract, or is alleged to have breached a Material Subcontract, Supplier shall notify Wards and provide Wards with such information relating to the alleged breach as Wards may reasonably request. (e) At no time shall Supplier retain individual independent contractors for provision of the Services in excess of twenty-five percent (25%) of the number of personnel involved in providing the Services under each Services Agreement, without the prior approval of Wards. ARTICLE 11 AUDITS SECTION 11.1 AUDIT RIGHTS Supplier shall maintain records and supporting documentation of all financial and non-financial transactions under this Master Agreement and all Service Agreements sufficient to permit a complete audit thereof in accordance with this Section 11.1. Supplier shall, at no additional cost to Wards, provide to Wards, Wards' internal and external auditors, inspectors, regulators and such other representatives as Wards may designate from time to time access at reasonable times and after reasonable notice (unless circumstances reasonably preclude such notice) to (i) the parts of any facility at which Supplier is providing the Services, (ii) Supplier Personnel providing the Services, and (iii) all data and records relating to the Services, for the purpose of performing audits and inspections of Wards and its business, to verify the integrity of Wards Data, to examine the systems that process, store, support and transmit that data, and to examine Supplier's charges and performance of the Services under this Master Agreement and any Service Agreement. The foregoing audit rights shall include, without limitation, and when applicable, audits (A) of practices and procedures, (B) of systems, (C) of general controls and security practices and procedures, (D) of disaster recovery and backup procedures, (E) of costs (to the extent Services may be being provided by Supplier on a Pass-Through Expense basis) and procurement practices of Supplier in performing the Services (e.g., pursuant to Section 13.2 hereof), (F) of Charges under any Service Agreement, (G) 34 necessary to enable Wards to meet applicable regulatory requirements, and (H) for any other reasonable purpose as determined by Wards. Supplier shall provide full cooperation to such auditors, inspectors, regulators and representatives, including the installation and operation of audit software. Notwithstanding the foregoing, if Wards has reason to suspect any malfeasance or dishonest acts on the part of Supplier, or other significant or non-routine problems, Wards shall be entitled to undertake such audit of Supplier as Wards reasonably deems appropriate without the foregoing notice or other restrictions. If in any audit Wards determines that material operational problems or financial issues exist, Supplier shall reimburse Wards for any costs directly incurred in such audit and Wards may conduct a follow-up audit when reasonably deemed appropriate by Wards. Supplier shall respond promptly to any conclusions and recommendations reported as part of an audit and the applicable Operating Committee will establish and monitor Supplier's schedule for implementation of such recommendations. SECTION 11.2 PAYMENTS If an audit reveals that Supplier has overcharged Wards for Services during the audited period in an amount equal to or in excess of three percent (3%) of the payments made to Supplier during the last twelve-month period, Supplier shall reimburse Wards for the cost of the audit in addition to the amount of any overcharges that are due Wards. If the audit reveals that Supplier has overcharged Wards in an amount equal to or in excess of ten percent (10%) of the payments made to Supplier during the last twelve-month period, Supplier shall pay an additional amount equal to one hundred percent (100%) of the overcharged amount. The calculation of overcharges shall be calculated based upon each Service Agreement, and not on a cumulative basis. Supplier shall pay such amount to Wards within thirty (30) days following Wards' written request. SECTION 11.3 SUPPLIER AUDITS Supplier shall make available promptly to Wards, at no additional charge, the results of any internal or external review or audit conducted by Supplier, its Affiliates, or their respective contractors, agents or representatives, relating to Supplier's operating practices and procedures to the extent relevant to the Services. SECTION 11.4 SURVIVAL This Article shall survive the expiration or earlier termination of the Term and shall continue to the fifth (5th) anniversary of the last day Supplier provides any Termination/Expiration Assistance. 35 ARTICLE 12 INSURANCE; RISK OF LOSS SECTION 12.1 REQUIRED INSURANCE COVERAGES Throughout the Term Supplier shall maintain in force, at minimum, the insurance coverages described below. All subcontractors must comply with required insurance requirements as set forth in Section 12.1. Any exceptions must be approved by Wards. Additional insurance coverage(s) may be required under a Service Agreement. (a) Commercial General Liability Insurance, including Products/Complete Operations and Advertising Injury coverage, with a minimum combined single limit of $3 million per occurrence and minimum general aggregate limit of $5 million; (b) Umbrella Liability Insurance, including Products/Complete Operations and Advertising Injury coverage, with a minimum limit of $50 million per occurrence and minimum aggregate amount of $50 million; (c) Worker's Compensation Insurance or any alternative plan or coverage as permitted or required by applicable law and employers liability insurance with a minimum occurrence limit of $500,000; (d) Comprehensive Computer Processor/Computer Consultant Professional Liability Insurance covering the liability for financial loss due to error, omission or negligence of Supplier as described in this Master Agreement and any Service Agreement with a minimum amount of $50 million; (e) Automotive Liability Insurance covering use of all owned, non- owned and hired automobiles with a minimum combined single limit of $3 million per occurrence for bodily injury and property damage liability; (f) "All Risk" Property Insurance in an amount equal to the replacement value of the Equipment; (g) Employee Dishonesty and Computer Fraud Insurance for loss arising out of or in connection with fraudulent or dishonest acts committed by the employees of Supplier, acting alone or in collusion with others, in a minimum amount of $10 million per loss; and (h) Employment Practices Liability Insurance covering all of Supplier's employment practices and covering Wards for Vicarious Liability as the result of Supplier's actions on behalf of Wards in an amount of at least $10 million per occurrence. Supplier shall maintain in full force and effect, during each Service Agreement Term and for a period of one (1) year thereafter, the Comprehensive Computer Processor/Computer Consultant Professional Liability Insurance in satisfaction of its obligation pursuant to Section 12.1(d). If for any reason such policy insurer cancels or fails to renew such policy, Supplier 36 shall immediately purchase a replacement policy containing substantially the same terms as such policy and including a Prior Acts Coverage Endorsement effective from the Master Agreement Effective Date. SECTION 12.2 GENERAL INSURANCE REQUIREMENTS All insurance policies Supplier is required to carry pursuant to this Article shall: (i) be primary as to Supplier's negligence and non-contributing with respect to any other insurance or self-insurance Wards may maintain; (ii) name Wards, its Affiliates, subsidiaries and their respective officers, directors and employees as additional insureds, as such parties' interests may appear with respect to this Master Agreement (except as to the insurance described in Section 12.1(c), (d), (g) and (h)); (iii) be provided by reputable and financially responsible insurance carriers with a Best's minimum rating of "A-" (or any future equivalent) and minimum Best's financial performance rating of "6" (or any other future equivalent); (iv) require the insurer to notify Wards in writing at least forty-five (45) days in advance of cancellation or modification; and (v) include a waiver of all rights of subrogation against Wards and its Affiliates. Supplier shall cause its insurers to issue to Wards on or before the Effective Date and each policy renewal date certificates of insurance evidencing that the coverages and policy endorsements required by this Article are in effect. SECTION 12.3 RISK OF LOSS As of the Effective Date, each Party shall be responsible for risk of loss of, and damage to, any Equipment, Software or other materials in its possession or under its control. ARTICLE 13 CHARGES SECTION 13.1 CHARGES Subject to the other provisions of this Master Agreement, Wards shall pay to Supplier the amounts set forth in each Service Agreement as payment in full for the Services under such Service Agreement performed by Supplier during the Term (the "Charges"). Except as otherwise expressly set forth in this Master Agreement, Wards shall not be obligated to pay any amounts to Supplier for its performance of the Services and its other obligations under this Master Agreement other than the amounts set forth in the Service Agreements. Without limiting the foregoing, Wards shall not be required to reimburse Supplier for any expenses Supplier incurs in performing the Services and such obligations, including, without limitation, travel and lodging, document reproduction and shipping. If a Service Agreement Term is renewed pursuant to the applicable terms of such Service Agreement, the Charges set forth in such Service Agreement for the last applicable Contract Year shall continue to apply during the renewal period(s). Wards may from time to time advise Supplier that Wards desires to acquire equipment or software related to Services and Supplier shall acquire such equipment or software on 37 Wards' behalf. In such event the monthly processing charges provided for in the applicable Service Agreement shall be increased by the net present value of the total cost of such equipment or software, including taxes, installation, certification and shipping, amortized at 8% interest per annum over the remaining term of the applicable Service Agreement (or such shorter period as the parties may agree). Upon any Termination For Convenience by Wards pursuant to Section 18.2 of this Master Agreement or Termination for Cause by Supplier pursuant to Section 18.1(e) of this Master Agreement, Wards' shall pay Supplier the remaining unamortized amount related to such purchase reduced by the remaining lease or license obligations for the equipment or software assumed by Wards and title to the subject equipment or the license to the software shall be transferred to Wards. This provision does not relieve Supplier of its obligations to acquire, at Supplier's expense, equipment or software necessary to provide the Services contemplated by a Service Agreement. SECTION 13.2 PASS-THROUGH EXPENSES (a) Any categories of Pass-Through Expenses shall be described in the applicable Service Agreement. Supplier shall review for accuracy each third party invoice for any Pass-Through Expenses and shall pay when due to such third party all valid amounts set forth on such invoice. Supplier shall include the amount of such payment on its next invoice to Wards and shall include with such invoice a copy of the third party invoice. Supplier shall not charge Wards any mark-up or administrative fee with respect to such Pass-Through Expenses unless expressly agreed to in a Service Agreement. Pass-Through Expenses must be approved in advance by Wards' Project Executive. (b) Supplier shall use all Commercially Reasonable Efforts to minimize the amount of Pass-Through Expenses. With respect to materials or services paid for on a Pass-Through Expenses basis, Wards shall have the right to: (i) obtain such materials or services directly from a third party; (ii) designate the third party source for such materials or services; (iii) designate the particular materials or services Supplier shall obtain; (iv) require Supplier to identify and consider multiple sources for such materials or services; (v) review and approve the Pass-Through Expense for such materials or services before Supplier enters into a subcontract for such materials or services; and (vi) if mutually agreed by the Parties with respect to any commitments made after a Service Agreement Effective Date for Pass-Through Expenses reject or require discontinuance of any third party providing pass-through materials or services pertaining to the Services. SECTION 13.3 TAXES (a) Each Party shall pay any real property taxes or personal property taxes on property it either owns or leases from a third party or any other taxes, fees or costs related to equipment or the lease of equipment, including any property taxes attributable to Wards Facilities used by Supplier to provide the Services, which shall be paid by Wards. Taxes payable on any Transferred Equipment shall be prorated as of the Service Agreement Effective Date of the applicable Service Agreement based on the number of days in the applicable tax period, with Wards paying the taxes allocable to the period before the Service Agreement Effective Date and Supplier paying the taxes allocable to the period on and after the Service 38 Agreement Effective Date. If Supplier owes money to Wards pursuant to such proration, Supplier shall pay such amount to Wards by corporate check on the Service Agreement Effective Date. If Wards owes money to Supplier pursuant to such proration, Wards shall pay such amount to Supplier by corporate check on or before the date Supplier must pay the next installment of the applicable tax. If Wards purchases any Equipment from Supplier on the expiration or earlier termination of a Service Agreement pursuant to Section 18.8 (Purchase of Equipment), personal property taxes on such Equipment shall be prorated and paid in a similar manner, with Supplier paying the taxes allocable to the period before the date Wards purchases the Equipment and Wards paying the taxes allocable to the period on and after such date. A Service Agreement may provide, with respect to certain equipment leases, that applicable taxes will be paid on a regularly scheduled basis. (b) Supplier shall pay any sales, use, excise, value-added, services, consumption, and other taxes and duties imposed on any goods and services acquired, used or consumed by Supplier in connection with the Services (including any taxes applicable to the acquisition of the Transferred Equipment, but excluding any taxes applicable to Pass-Through Expenses). Wards shall pay any sales, use, excise, value-added, services, consumption and other taxes and duties imposed on its acquisition of Equipment from Supplier on the expiration or earlier termination of a Service Agreement pursuant to Section 18.8 (Purchase of Equipment). (c) Wards shall pay when due any sales, use, excise, value-added, services, consumption, or other tax imposed by any taxing jurisdiction as of the Service Agreement Effective Date on the provision of the Services or any component thereof, as the rate of such tax may change from time to time during the applicable Service Agreement Term. At Wards' option, unless not legally permissible, Wards shall either pay such taxes directly to the appropriate taxing authority or Wards shall pay such taxes to Supplier as invoiced and Supplier shall remit such payments to the appropriate taxing authority. Supplier shall be responsible for properly calculating and invoicing applicable taxes on the Services (other than City of Chicago taxes, if applicable, for which Wards shall be responsible for calculating). If any taxing jurisdiction imposes after the Service Agreement Effective Date a new sales, use, excise, value-added, services, consumption, or other tax on the provision of the Services or any component thereof, the Parties shall cooperate in attempting to reduce the amount of such tax to the maximum extent feasible. Wards shall be liable for any such new tax which is imposed on the Charges for the provision of the Services, or any component thereof, as well as such new tax on Pass-Through Expenses. Supplier shall be liable for any such new tax which is imposed on any Charges (other than Pass-Through Expenses) incurred in order to provide the Services. If any taxes applicable to the Services are imposed on Wards during a Service Agreement Term as a result of Supplier's migration of Services to a location other than the initial location of Supplier's Facility under the applicable Service Agreement, Supplier shall have full responsibility for payment of all such taxes to the extent the net taxes owed increases over the amount of taxes then being paid by Wards. (d) The Parties shall cooperate with each other to enable the Parties to determine accurately their respective tax liabilities and to reduce such liabilities to the extent permitted by 39 law. Supplier invoices to Wards shall separately state the amount of any taxes Supplier is collecting from Wards. Each Party shall provide to the other any resale certificates, exemption certificates, information regarding out-of-state or out-of-country sales or use of Equipment and services, and such other similar information as the other Party may reasonably request. SECTION 13.4 CHARGES PURSUANT TO CHANGE CONTROL PROCEDURES (a) If either Wards or Supplier proposes a change in or addition to the Services pursuant to the Change Control Procedures, the charge for such change or addition shall be determined in the manner set forth in this Section. (b) To the extent the proposed change or addition can be accommodated within the existing level of resources then being used by Supplier to provide the Services and without degradation to existing Service Levels (unless otherwise agreed by Wards in writing), the Charges payable by Wards under the applicable Service Agreement shall not be increased. To the extent the proposed change or addition will lower Supplier's cost to provide the Services thereafter, the applicable charges payable by Wards shall be equitably adjusted to reflect such projected cost savings. (c) To the extent the proposed change or addition will require the addition or subtraction of resources for which a pricing metric exists under this Master Agreement, the resulting change to the Charges payable by Wards hereunder shall be calculated in accordance with that pricing metric. SECTION 13.5 RECORDKEEPING Supplier shall maintain complete and accurate records of, and supporting documentation for, the amounts billed to and payments made by Wards under this Master Agreement and all Service Agreements, as specified in the monthly invoice, of such amounts and payments. Such records shall include data and documentation of third party charges invoiced to and paid by Supplier. Supplier shall retain such records throughout the Term (including any records received by Supplier maintained by Wards or Wards' previous Supplier prior to the applicable Service Agreement Effective Date). Supplier shall provide Wards, at Wards' request, with paper and electronic copies of documents and information reasonably necessary to verify Supplier's compliance with this Master Agreement. Wards and its authorized agents and representatives shall have access to such records for audit purposes during normal business hours during the Term and thereafter for the period during which Supplier is required to maintain such records. Upon termination or expiration of this Master Agreement, Wards and Supplier shall mutually agree as to any records or documentation of which Supplier may retain one archived copy. SECTION 13.6 MOST FAVORED CUSTOMER Charges payable from time to time by Wards under each Service Agreement shall not exceed those then paid by other Supplier customers under contracts signed before or after the 40 Effective Date of the applicable Service Agreement to whom Supplier provides services similar in type and scope to the Services described in such Service Agreement. The comparison of charges payable by Wards and such other Supplier customers shall take into account non-standard costs such as purchases of assets by Supplier at above fair market value, the term of such other customer agreements, and the extent of any customer guarantees of revenues to Supplier under such agreements. If the prices charged to another Supplier customer are, considering the foregoing, lower than the charges to Wards under any Service Agreement, then the charges to Wards shall be equitably adjusted to provide Wards the benefit of such lower charges for such Service Agreement, retroactive to the first date on which such lower charges to the other Supplier customer first became effective. Within thirty (30) days after the beginning of each Contract Year, a Supplier officer with executive responsibility for systems outsourcing and operations services shall certify in writing to Wards that Supplier's charges to Wards comply with this Section, and shall provide to Wards' auditors the information reasonably necessary for Wards to verify such compliance. The auditors shall inform Wards and Supplier whether Supplier's charges comply with this Section, but shall keep in strict confidence all information necessary to provide such verification. ARTICLE 14 INVOICING AND PAYMENT SECTION 14.1 INVOICES Supplier shall issue to Wards, on a monthly basis in arrears, one (1) consolidated invoice for all amounts due under each Service Agreement with respect to Services rendered in the previous month. Each invoice shall separately state Charges for each category of Service, Pass-Through Expenses and taxes payable, and shall otherwise be in such detail as Wards may require for its internal accounting needs (including, without limitation, any chargeback requirements), as specified by Wards from time to time. Each Service Agreement invoice shall include any calculations used to establish the Charges. Invoices shall be in the form and provide such detail as specified in the sample invoice form as required by the applicable Service Agreement. Supplier shall deliver each invoice (one paper copy and one electronic version) to the appropriate Wards Project Executive. If out-of-scope Services are provided under a Service Agreement, Supplier will invoice the applicable charges in a separate invoice. If data required for invoicing is for any reason destroyed, corrupted or otherwise not available, the Charges to be invoiced for that month shall be calculated by using the lowest actual reported volumes or levels of Services for the corresponding period during such month. For example, if such data is not available for a period of hours on a Thursday, then the volumes during the same period on each other Thursday during the month shall be compared and the actual volumes for the lowest volume period shall be used for the unavailable data. 41 SECTION 14.2 PAYMENT (a) Subject to Section 14.5 (Setoff and Withholding), each invoice delivered pursuant to Section 14.1 shall be due and payable within forty-five (45) days after the date such invoice is received by the applicable Wards Project Executive. Any amount due under or any Service Agreement for which a payment date is not otherwise specified shall be due and payable within forty-five (45) days after receipt of the invoice for such amount. (b) To the extent Wards is entitled to a credit pursuant to this Master Agreement or any Service Agreement, Supplier shall provide Wards with such credit on the first invoice delivered after such credit is earned. If the amount of any credit on an invoice exceeds the amount owing to Supplier reflected on such invoice, Supplier shall pay the balance of the credit to Wards within forty-five (45) days after the invoice date. If no further amounts are payable to Supplier under this Master Agreement, Supplier shall pay the amount of the credit to Wards within forty-five (45) days after the credit is earned. SECTION 14.3 PRORATION All periodic charges under this Master Agreement (excluding charges based upon actual usage or consumption of Services) shall be computed on a calendar month basis and shall be prorated for any partial month. SECTION 14.4 REFUNDS If either Party should receive a refund, credit or other rebate for goods or services paid for by the other Party, the recipient of such refund, credit or rebate shall promptly notify the other Party and shall pay such amount, with interest at the prime rate of Citibank of New York, to the other Party (or, if applicable, provide a credit on the next delivered invoice) within thirty (30) days after receipt thereof. Interest shall be calculated from the date thirty (30) days after such refund, credit or rebate was received. SECTION 14.5 SETOFF AND WITHHOLDING (a) Notwithstanding any other provision of this Master Agreement, a Party who is owed any amount by the other Party may, at its option, set off that amount as a credit against any amounts it otherwise owes to the other Party. (b) If Wards disputes in good faith any portion of an invoice, Wards shall pay the undisputed dollar amount of such invoice when due and may, at its option, withhold the disputed portion pending resolution of the dispute by mutual agreement or pursuant to Article 19 (Dispute Resolution). If Wards withholds any payment pursuant to this Section 14.5(b), Wards shall notify Supplier of the basis for such withholding in accordance with Section 20.9 (Notices). Upon resolution of the dispute, Wards shall pay to Supplier such portion, if any, of the disputed amount determined to be owing to Supplier. 42 ARTICLE 15 CERTAIN REPRESENTATIONS AND WARRANTIES SECTION 15.1 MUTUAL REPRESENTATIONS AND WARRANTIES Each Party represents and warrants that, as of the Effective Date and each Service Agreement Effective Date: (a) It is a corporation duly incorporated, validly existing and is in good standing under the laws of the state in which it is incorporated, and is good standing in each other jurisdiction where the failure to be in good standing would have a material adverse effect on its business or its ability to perform its obligations under this Master Agreement or any Service Agreement. (b) It has all necessary corporate power and authority to own, lease and operate its assets and to carry on its business as presently conducted and as it will be conducted pursuant to this Master Agreement and any Service Agreement. (c) It has all necessary corporate power and authority to enter into this Master Agreement and each Service Agreement and to perform its obligations thereunder, and the execution and delivery of this Master Agreement and each Service Agreement and the consummation of this transactions contemplated thereby have been duly authorized by all necessary corporate actions on its part. (d) This Master Agreement and each Service Agreement constitutes a legal, valid and binding obligation of such Party, enforceable against it in connection with its terms. SECTION 15.2 SUPPLIER REPRESENTATIONS AND WARRANTIES As of the Effective Date and continuing throughout the Term and each Service Agreement Term, Supplier represents and warrants to Wards that: (a) It has not violated and it will not violate any applicable laws or regulation or any Wards policies regarding the offering of unlawful inducement in connection with this Master Agreement or any Service Agreement. (b) Except as previously disclosed to Wards and Wards' outside legal counsel, it has and shall have the right and authority to use the Supplier Software and Third Party Software to provide Services during each Service Agreement Term and to grant to Wards the licenses to the Supplier Software described in each Service Agreement. (c) It is not a party to, and is not bound or affected by or subject to, any instrument, agreement, charter or by-law provision, law, rule, regulation, judgment or order which would be contravened or breached as a result of the execution of this Master Agreement, consummation of the transactions contemplated by this Master Agreement, or execution of any Service Agreement. 43 (d) Except as previously disclosed to Wards and Wards' outside legal counsel, it is not the subject of any pending or threatened litigation (including claims subject to arbitration) with any vendor of software, equipment or other resources or arising from an outsourcing relationship similar to the relationship contemplated by this Master Agreement or any Service Agreement and will notify Wards immediately in the event Supplier becomes the subject of any such litigation. (e) Supplier shall perform the Services in a professional and workmanlike manner. (f) All Supplier Software is and shall remain Year 2000 Compliant and, no later than June 30, 1999, the computing environment provided or serviced by Supplier (including all hardware, peripherals, Supplier Software and Third Party Software but not including any Wards' Software) (the "Supplier Environment") shall be and shall remain throughout the Term Year 2000 Compliant. Upon Wards' request prior to June 30, 1999 Supplier shall provide to Wards such internal and external information and analyses as are available to fully advise Wards of the status and compliance efforts of Supplier with respect to Supplier's Year 2000 compliance program. Beginning July 1, 1999 and, as requested by Wards, an executive officer of Supplier shall certify that the foregoing warranty continues to be true and correct. In no event shall Wards incur additional costs or increased Charges as a result of Supplier's Year 2000 Compliance efforts with respect to the Supplier Environment. For example, provided that Wards has satisfactorily performed Year 2000 testing of its application software prior to the Migration Completion Date under Service Agreement No. 1, if Supplier upgrades operating system software and as a result of such upgrade any Wards' or Third Party application software requires modification, Supplier shall be responsible for the cost of such modification. SECTION 15.3 RFP AND DUE DILIGENCE ASSISTANCE If at any time during the Term Wards elects to issue a request for proposals to one or more services providers for the provision of all or any part of the Services, Supplier shall cooperate with Wards by (i) providing to Wards and such third party providers reasonable access to personnel and information relevant to such request for proposals, and (ii) participating in a reasonable due diligence process for the benefit of Wards and such third party providers in connection with the request for proposals. Supplier's obligations pursuant to this Section 15.3 are subject to (i) the agreement of Wards and such third party providers to reasonable security and confidentiality restrictions, generally in accordance with Article 9 (Confidentiality) of this Master Agreement, and (ii) the condition that such activities shall not disrupt or adversely affect Supplier's normal business. 44 ARTICLE 16 INDEMNIFICATION SECTION 16.1 INDEMNIFICATION BY SUPPLIER Supplier shall indemnify, defend and hold harmless Wards, its Affiliates, and Wards' private label credit card provider, if any, and their respective officers, directors, employees, agents, successors and assigns, from and against all Losses arising from, in connection with or relating to, third party allegations of any of the following: (a) Supplier's failure to perform any obligations required to be performed by it under any of the Third Party Contracts or Transferred Equipment leases on or after the applicable Service Agreement Commencement Date; (b) acts or omissions of Supplier Personnel located in any Wards Facility; (c) any claims arising out of or related to occurrences Supplier is required to insure against pursuant to Article 12 (Insurance; Risk of Loss); (d) Supplier's breach of its obligations with respect to Wards' Confidential Information; (e) any claims relating in any way to selection of the Transferred Employees or Supplier's offers of employment, and any claims by or on behalf of Transferred Employees that arise from or relate in any way to their employment with Supplier or to the termination of their employment with Supplier, including any claims by Transferred Employees against Wards based on a theory of joint employer liability or similar theory; (f) any claims of Supplier's subcontractors; and (g) any theft or other misappropriation of Wards' property or funds by Supplier or any of Supplier's employees. SECTION 16.2 INDEMNIFICATION BY WARDS Wards shall indemnify, defend and hold harmless Supplier, its Affiliates and their respective officers, directors, employees, agents, successors and assigns, from and against all Losses arising from, in connection with or relating to, third party allegations of any of the following: (a) Wards' failure to perform any obligations required to be performed by it under any of the Third Party Contracts or Transferred Equipment leases before the Service Agreement Commencement Date; (b) Wards' breach of its obligations with respect to Supplier's Confidential Information; and 45 (c) any claims by or on behalf of Transferred Employees that arise from or relate in any way to their employment with Wards prior to the date such Transferred Employees are hired by Supplier, including any termination of such employment by Wards; provided, however, that during any period in which Supplier is managing Wards' employees pursuant to a Service Agreement, the foregoing indemnification is contingent on Supplier having given Wards prompt notice at the time Supplier knew or reasonably should have known of any acts or omissions of Wards' employees that could be the basis for any claim against Wards or Supplier. SECTION 16.3 MUTUAL INDEMNIFICATION Each Party shall indemnify, defend and hold harmless the other Party, the other Party's Affiliates, and Wards' private label credit card provider, if any, and their respective officers, directors, employees, agents, successors and assigns, from and against all Losses arising from: (i) death of or injury to any agent, employee, invitee, visitor or other person to the extent caused by the conduct of the indemnitor, its Affiliates, or their respective agents, employees or contractors; (ii) damage to, or loss or destruction or, any real or tangible personal property to the extent caused by conduct of the indemnitor, its Affiliates, or their respective agents, employees or contractors; (iii) any violation of law by the indemnitor, whether before, on or after the Effective Date; or (iv) any breach of a Party's representations and warranties pursuant to this Master Agreement. SECTION 16.4 INTELLECTUAL PROPERTY INDEMNIFICATION Wards and Supplier each agree to defend the other against any action to the extent that such action is based on a claim that the Wards Software, in the case of Wards, and the Supplier Software or the Services in the case of Supplier, or the Confidential Information provided by the indemnitor, or any party thereof, (a) infringes a copyright perfected under applicable law, (b) infringes a patent granted under applicable law or (c) constitutes an unlawful disclosure, use or misappropriation of another party's trade secret. The indemnitor will bear the expense of such defense and pay any damages and attorneys' fees that are attributable to such claim finally awarded by a court of competent jurisdiction. If any Software or Confidential Information becomes the subject of a claim under this Section, or in the indemnitor's opinion is likely to become the subject of such a claim, then the indemnitor may, at its option, (a) modify the Software or Confidential Information to make it noninfringing or cure any claimed misuse of another's trade secret, provided such modification does not adversely affect the functionality of the Software, or (b) procure for the indemnitee the right to continue using the Software or Confidential Information pursuant to the applicable Service Agreement, or (c) replace the Software with substantially equivalent Software that is noninfringing or that is free of claimed misuse of another's trade secret. Any costs associated with implementing any of the above alternatives shall be borne by the indemnitor. With respect to any Software provided or developed by a Party pursuant to a Service Agreement, such Party shall have no liability to the other Party under such Service Agreement (a) to the extent that any claim of infringement is based upon the use of the Software in 46 connection or in combination with equipment, devices or Software not supplied by that Party or used in a manner for which the Software was not designed, (b) for infringements that arise solely as a result of the implementation by that Party of functionality requirements presented by the other Party where there is no non-infringing alternative to such implementation, and the other Party has been so advised by that Party prior to implementation, and (c) for maintenance, modifications, updates, enhancements and improvements to the Software made by any party other than that Party. SECTION 16.5 INDEMNIFICATION PROCEDURES (a) Promptly after receipt by an indemnitee of any written claim or notice of any action giving rise to a claim for indemnification by the indemnitee, the indemnitee shall so notify the indemnitor and shall provide copies of such claim or any documents relating to the action. No failure to so notify an indemnitor shall relieve the indemnitor of its obligations under this Master Agreement except to the extent that the failure or delay is prejudicial. Within thirty (30) days following receipt of such written notice, but in any event no later than ten (10) days before the deadline for any responsive pleading, the indemnitor shall notify the indemnitee in writing (a "Notice of Assumption of Defense") if the indemnitor elects to assume control of the defense and settlement of such claim or action. (b) If the indemnitor delivers a Notice of Assumption of Defense with respect to a claim within the required period, the indemnitor shall have sole control over the defense and settlement of such claim; provided, however, that (i) the indemnitee shall be entitled to participate in the defense of such claim and to employ counsel at its own expense to assist in the handling of such claim and (ii) the indemnitor shall obtain the prior written approval of the indemnitee before entering into any settlement of such claim or ceasing to defend against such claim. After the indemnitor has delivered a timely Notice of Assumption of Defense relating to any claim, the indemnitor shall not be liable to the indemnitee for any legal expenses incurred by such indemnitee in connection with the defense of such claim; provided, that the indemnitor shall pay for separate counsel for the indemnitee to the extent that conflicts or potential conflicts of interest between the Parties so require. In addition, the indemnitor shall not be required to indemnify the indemnitee for any amount paid by such indemnitee in the settlement of any claim for which the indemnitor has delivered a timely Notice of Assumption of Defense if such amount was agreed to without prior written consent of the indemnitor, which shall not be unreasonably withheld or delayed in the case of monetary claims. An indemnitor may withhold consent to settlement of claims of infringement affecting its proprietary rights in its sole discretion. (c) If the indemnitor does not deliver a Notice of Assumption of Defense relating to a claim within the required notice period, the indemnitee shall have the right to defend the claim in such a manner as it may deem appropriate, at the cost and expense of the indemnitor. The indemnitor shall promptly reimburse the indemnitee for all such costs and expenses upon written request therefor. 47 SECTION 16.6 SUBROGATION In the event an indemnitor indemnifies an indemnitee pursuant to this Article, the indemnitor shall, upon payment in full of such indemnity, be subrogated to all of the rights of the indemnitee with respect to the claim to which such indemnity relates. ARTICLE 17 LIMITATIONS ON LIABILITY SECTION 17.1 GENERAL INTENT Subject only to the limitations set forth in this Article, a Party who breaches any of its obligations under this Master Agreement or any Service Agreement shall be liable to the other for any damages actually incurred by the other as a result of such breach. SECTION 17.2 LIMIT ON TYPES OF DAMAGES RECOVERABLE (a) EXCEPT AS SET FORTH IN CLAUSE (B) BELOW, NEITHER PARTY SHALL BE LIABLE FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR OTHERWISE, AND EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (b) The exclusion set forth in clause (a) shall not apply to (i) Losses otherwise recoverable by an indemnitee pursuant to Article 16 (Indemnification) (except that such exclusion shall apply to Losses recoverable pursuant to Section 16.3(iv)), (ii) breach by a Party of its obligations for intentional acts with respect to Confidential Information, (iii) damages caused by a Party's intentional or willful acts or willful misconduct, or (iv) any intentional breach of this Master Agreement or any Service Agreement. 48 SECTION 17.3 LIMIT ON AMOUNT OF DIRECT DAMAGES RECOVERABLE (a) Supplier's aggregate liability for any breach or series of related breaches of this Master Agreement or any Service Agreement shall not exceed an amount equal to the total Charges payable to Supplier under all Service Agreements (excluding any Pass-Through Expenses and Special Charges) for the twelve (12) complete calendar months immediately preceding the month in which the event giving rise to the liability occurred (or, if the event giving rise to the liability occurs during the first twelve (12) months after the Effective Date, the total Charges (excluding any Pass-Through Expenses and Special Charges) estimated to be payable to Supplier pursuant to all Service Agreements for such first twelve (12) months). This limitation shall not apply to losses or damages attributable to (i) claims by an indemnitee pursuant to Article 16 (Indemnification) (except that such limitation shall apply to Losses recoverable pursuant to Section 16.3(iv)), (ii) breach by Supplier of its obligations for intentional acts with respect to Confidential Information, (iii) claims arising out of Supplier's intentional or willful acts or willful misconduct, or (iv) any intentional breach of this Master Agreement or any Service Agreement. Notwithstanding the foregoing, if any claim against Supplier for breach of this Master Agreement or any Service Agreement is a claim covered by any insurance policy maintained by Supplier in accordance with Article 12, any recovery of proceeds under such policy shall be paid to Wards to the extent Wards' damages exceed the foregoing limitation of liability. Supplier shall vigorously pursue any applicable policy claim as requested by Wards. (b) Wards' liability for any breach of this Master Agreement or any Service Agreement shall not exceed an amount equal to the total Charges payable to Supplier under all Service Agreements (excluding any Pass-Through Expenses and Special Charges) for the twelve (12) complete calendar months immediately preceding the month in which the event giving rise to the liability occurred (or, if the event giving rise to the liability occurs during the first twelve (12) months after the Effective Date, the total Charges (excluding any Pass-Through Expenses and Special Charges) estimated to be payable to Supplier pursuant to all Service Agreements for such first twelve (12) months). This limitation shall not apply to losses or damages attributable to (i) claims by an indemnitee pursuant to Article 16 (Indemnification) (except that such limitation shall apply to Losses recoverable pursuant to Section 16.3(iv)), (ii) breach by Wards of its obligations for intentional acts with respect to Confidential Information, (iii) claims arising out of Wards' intentional or willful acts or willful misconduct, or (iv) claims for breach of Wards' payment obligations under any Service Agreement. (c) The following shall be considered direct damages and neither party shall assert that they are consequential damages to the extent they result from a Party's failure to fulfill its obligations in accordance with any Service Agreement: (i) costs of recreating or reloading any of Wards' lost or damaged information; (ii) costs of implementing a workaround in respect of a failure to provide the Services; 49 (iii) costs of replacing lost or damaged Equipment and Software or other materials; (iv) costs and expenses incurred to correct errors in software maintenance and enhancements provided as part of the Services; (v) costs and expenses incurred to procure the Services from an alternate source; and (vi) straight time, overtime, or related expenses incurred by Wards, including overhead allocations of Wards for Wards' employees, wages and salaries of additional employees, travel expenses, overtime expenses, telecommunication charges, and similar charges, due to the failure of Supplier to provide the Services or incurred in connection with (i) through (v) above. (d) Each Party shall have a duty to mitigate damages for which the other Party is liable. SECTION 17.4 FORCE MAJEURE (a) Subject to clause (d) below, neither Party shall be liable for any failure or delay in the performance of its obligations under this Master Agreement or any Service Agreement, if any, to the extent such failure or delay both: (i) is caused, directly or indirectly, without fault by such Party, by: fire, flood, earthquake, elements of nature or acts of God; labor disruptions or strikes; acts of war, terrorism, riots, civil disorders, rebellions or revolutions; quarantines, embargoes and other similar governmental action; or any other similar cause beyond the reasonable control of such party; and (ii) could not have been prevented by reasonable precautions and cannot reasonably be circumvented by the non-performing Party through the use of alternate sources, work-around plans or other means (including, in the case of Supplier, compliance with Supplier's obligations with respect to the provision of any disaster recovery services as set forth in any Service Agreement). Events meeting both of the criteria set forth in clauses (i) and (ii) above are referred to collectively as "Force Majeure Events." The Parties expressly acknowledge that, except as otherwise expressly provided in a Service Agreement, Force Majeure Events do not include third party non-performance or the failure of an individual component or group of components (including but not limited to, hardware and software) used in delivery of the Services. The Parties further agree that Force Majeure Events do not include those events, circumstances or constraints that prevent a contracted product or service from qualifying as Year 2000 Compliant. 50 (b) Subject to clause (d) below, upon the occurrence of a Force Majeure Event, the non-performing Party shall be excused from any further performance or observance of the affected obligation(s) for as long as such circumstances prevail and such Party continues to attempt to recommence performance or observance whenever and to whatever extent possible without delay. Any Party so delayed in its performance will immediately notify the other by telephone or by the most timely means otherwise available (to be confirmed in writing within two (2) Business Days of the inception of such delay) and describe in reasonable detail the circumstances causing such delay. (c) If a Force Majeure Event causes a material failure or delay in the performance of any Services for more than two (2) consecutive days, Wards may, at its option, and in addition to any rights Wards may have pursuant to Section 18.4 (Termination Upon Force Majeure Event), procure such Services from an alternate source until Supplier is again able to provided such Services, and Supplier shall be liable for all payments made and costs incurred by Wards required to obtain the Services from such alternate source during such period. Wards shall continue to pay Supplier the charges established hereunder during such period, but Supplier shall not be entitled to any additional payments as a result of the Force Majeure Event. (d) Notwithstanding any other provision of this Section, a Force Majeure Event shall not relieve Supplier of its obligation to implement successfully all of the Services relating to disaster recovery services that are included in any Service Agreement within the time period described in such Service Agreement. SECTION 17.5 ACTIONS OF OTHER PARTY Neither Party shall be liable for any failure or delay in the performance of its obligations under this Master Agreement or any Service Agreement if and to the extent such failure or delay is caused by the actions or omissions of the other Party or breaches of this Master Agreement or a Service Agreement by the other Party provided that the Party which is unable to perform has provided the other Party with reasonable notice of such non-performance and has used Commercially Reasonable Efforts to perform notwithstanding the actions, omissions or breaches of the other Party. ARTICLE 18 TERMINATION SECTION 18.1 TERMINATION FOR CAUSE (a) Wards shall have the option, but not the obligation, to terminate any Service Agreement, or one or more categories of Services under a Service Agreement, for cause: (i) for a material breach of such Service Agreement by Supplier that is not cured by Supplier within thirty (30) days of the date on which Wards provides written notice of such breach, in accordance with Section 20.9; 51 (ii) for a material breach of such Service Agreement by Supplier that is not reasonably subject to cure within thirty (30) days after its occurrence.; (iii) for any Service Level Termination Event defined in any Service Level Agreement or any Corporate Service Level Termination Event defined in Master Schedule C; (iv) immediately upon failure by Supplier to provide any Services pertaining to disaster recovery services under any Service Agreement; (v) upon Supplier's failure to satisfactorily complete a migration under a Service Agreement by the scheduled Migration Completion Date; (vi) upon termination of this Master Agreement for any reason; or (vii) upon any change in control of Supplier or any sale of substantially all the assets of Supplier. (b) Wards shall have the option, but not the obligation, to terminate this Master Agreement for cause: (i) for a material breach of the terms of this Master Agreement by Supplier that is not cured by Supplier within thirty (30) days of the date on which Wards provides written notice of such breach, in accordance with Section 20.9; (ii) for a material breach of this Master Agreement by Supplier that is not reasonably subject to cure within thirty (30) days after its occurrence; (iii) for any Corporate Service Level Termination Event defined in Master Schedule C; (iv) at any time if Wards has terminated one or more Service Agreement for cause; or (v) upon any change in control of Supplier or any sale of substantially all the assets of Supplier. (c) Wards shall have the option, but not the obligation, to terminate this Master Agreement without cause at any time if no Services are being provided by Supplier under a Service Agreement. (d) Wards shall exercise its termination option by delivering to Supplier written notice of such termination identifying the scope of the termination and the termination date. (e) Supplier shall have the option, but not the obligation, to terminate a Service Agreement only if Wards fails to pay when due undisputed amounts (including, without limitation, amounts determined pursuant to Article 19 (Dispute Resolution) to be owing to 52 Supplier) Wards owes to Supplier under such Service Agreement and Wards fails to cure such failure within ten (10) days after receipt from Supplier of written notice specifically stating that Supplier is exercising its rights under this Section 18.1(d). Supplier hereby waives any rights it may have under this Master Agreement or any Service Agreement, at law or in equity, to terminate this Master Agreement or any Service Agreement for any reason other than that set forth in the immediately preceding sentence. Supplier shall exercise its termination option by delivering to Wards written notice of such termination identifying the termination date, which shall be at least thirty (30) days from the date such termination notice is delivered to Wards. SECTION 18.2 TERMINATION FOR CONVENIENCE (a) Wards shall have the option, but not the obligation, to terminate for convenience this Master Agreement or, from time to time, one or more Service Agreements or one or more categories of Services under a Service Agreement. Wards shall exercise its termination option by delivering to Supplier written notice of such termination identifying the scope of the termination and the termination date (which shall be at least ninety (90) days after the date of such notice). In connection with any such termination, (i) Wards shall have no liability to Supplier for amounts in excess of the normal charges through the date of termination except for payment of the termination fee, if any, described in the applicable Service Agreement, and (ii) Supplier shall use Commercially Reasonable Efforts to reduce any costs associated with any such termination. Any termination fee included within a Service Agreement shall be equivalent to agreed unamortized investments made by Supplier in connection with a Service Agreement and shall not include any reimbursements for lost profits. (b) If a purported termination for cause by Wards under Section 18.1 (Termination for Cause) is determined pursuant to Article 19 (Dispute Resolution) not to be a proper termination for cause, such termination shall be deemed a termination for convenience subject to this Section. (c) Either Party may terminate this Master Agreement and all Service Agreements for convenience upon written notice to the other Party upon occurrence of either (i) Wards' decision not to file a motion for approval of this Master Agreement and the Service Agreements on or before November 30, 1998, or (ii) any such motion filed by Wards is not approved by the court in the Bankruptcy Case on or before December 31, 1998. In the event of any termination pursuant to this Section 18.2(c) Wards shall not be required to make any payments to Supplier except as provided in Service Agreement No. 1 and as provided in that certain letter agreement between the Parties dated October 28, 1998. 53 SECTION 18.3 TERMINATION FOR INSOLVENCY Wards shall have the option, but not the obligation, to terminate this Master Agreement in its entirety (including all Service Agreements) without payment of any termination fees if Supplier (i) becomes insolvent or is unable to meet its debts as they mature, (ii) files a voluntary petition in bankruptcy or seeks reorganization or to effect a plan or other arrangement with creditors, (iii) files an answer or other pleading admitting, or fails to deny or contest, the material allegations of an involuntary petition filed against it pursuant to any applicable statute relating to bankruptcy, arrangement or reorganization, (iv) shall be adjudicated a bankrupt or shall make an assignment for the benefit of its creditors generally, (v) shall apply for, consent to or acquiesce in the appointment of any receiver or trustee for all or a substantial part of its property, or (vi) any such receiver or trustee shall be appointed and shall not be discharged within thirty (30) days after the date of such appointment. SECTION 18.4 TERMINATION UPON FORCE MAJEURE EVENT Wards shall have the option, but not the obligation, to terminate this Master Agreement or, from time to time, one or more affected Service Agreements or categories of Services, if Supplier fails to perform any Services in any material respect because of the occurrence of a Force Majeure Event and: (a) subject to clause (b) below, Supplier does not cure such failure within five (5) days after the occurrence of the Force Majeure Event; or (b) such failure is not reasonably subject to cure within five (5) days after such occurrence. Wards shall exercise its termination option by delivering to Supplier written notice of such termination identifying the termination date. SECTION 18.5 EXTENSION OF EXPIRATION OR TERMINATION EFFECTIVE DATE Wards may, at its option, upon thirty (30) days advance notice, extend any expiration date or the termination date it has specified pursuant to this Article one or more times, provided that the total of all such extensions shall not exceed one (1) year and each extension shall be for a minimum of ninety (90) days. In such event, the Services shall be provided pursuant to and on the terms and conditions set forth in this Master Agreement and each applicable Service Agreement. SECTION 18.6 EFFECT OF TERMINATION Termination of this Master Agreement or any Service Agreement or categories of Services for any reason under this Article shall not affect (i) any liabilities or obligations of either Party arising before such termination or out of the events causing such termination, or (ii) any damages or other remedies to which a Party may be entitled under this Master 54 Agreement or any Service Agreement, at law or in equity, arising from any breaches of such liabilities or obligations. SECTION 18.7 TERMINATION/EXPIRATION ASSISTANCE (a) Upon Wards delivery to Supplier of any written notice of breach or termination of this Master Agreement or any Service Agreement, Supplier shall provide to Wards or Wards' designee the assistance reasonably requested by Wards to enable the Services to continue without interruption and to facilitate the orderly transfer of the Services to Wards or its designee, including, without limitation, the assistance described in the applicable Service Agreement(s) ("Termination/Expiration Assistance"). Wards may also request that Supplier begin providing Termination/Expiration Assistance at any time within the six- month period prior to expiration of any Service Agreement Term. (b) At Wards' request, Supplier shall provide Termination/Expiration Assistance of an incidental nature to Wards for up to eighteen (18) months after the expiration date of a Service Agreement or, if applicable, the effective date of termination. The Termination/Expiration Assistance described in each Service Agreement shall be provided to Wards at no additional cost (except as may set forth in each Service Agreement) and except for reasonable travel and out-of- pocket expenses approved by Wards in connection with any expiration or termination of this Master Agreement or any Service Agreement. (c) Supplier acknowledges that, if it were to breach, or threaten to breach, its obligation to provide Wards with Termination/Expiration Assistance, Wards would be irreparably harmed. In such circumstances, Wards shall be entitled to proceed directly to a court of competent jurisdiction and obtain such injunctive, declaratory or other injunctive relief as may be reasonably necessary to prevent such breach, without the requirement of posting any bond. SECTION 18.8 PURCHASE OF EQUIPMENT Upon expiration or termination of any Service Agreement, Wards shall have the option, but not the obligation, to purchase any Equipment owned by Supplier and used by Supplier primarily to provide the Services provided under such Service Agreement. The purchase price for any Equipment purchased by Wards shall be its net book value. Wards shall pay the purchase price to Supplier concurrently with Supplier's delivery to Wards of the Equipment and a bill of sale acceptable to Wards. In addition, Wards shall have the option, but not the obligation, to assume any lease of Equipment leased by Supplier and used by Supplier primarily to provide the Services. SECTION 18.9 SUPPLIER SOFTWARE LICENSE Upon expiration or earlier termination of any Service Agreement, Supplier shall grant to Wards a worldwide, royalty-free, nonexclusive license to Wards or its designee to use, copy, maintain, modify, enhance and create derivative works of Supplier Software used to provide the applicable Services at the end of the Services Agreement, and Supplier shall offer 55 to maintain such Supplier Software on terms at least as favorable as those offered to other Supplier customers. The scope of any such license grant will be for the sole purpose of supporting Wards' technology requirements covered by the Service Agreement that has been terminated and any such Supplier Software or derivative works thereof may be used only by Wards or by a third party on Wards' behalf for such purpose. If for any reason any Supplier Software is not available to Wards or such designee or cannot be licensed to Wards or such designee at the expiration or earlier termination of the Term, Supplier shall procure at its expense a license for substitute Software with substantially equivalent functionality and shall pay for all reasonable conversion costs. All references in this section to Wards shall include Wards' designee. SECTION 18.10 THIRD PARTY CONTRACTS Upon expiration or earlier termination of any Service Agreement, Supplier shall, at Wards' request, and to the extent permitted by the applicable Third Party Contract and any applicable Third Party Consent, assign to Wards or its designee any Third Party Software Licenses and any Third Party Service Contracts used to provide Services to Wards on a dedicated basis at the end of the Term. Concurrently with such assignment, Wards shall deliver to Supplier a corporate check payable to Supplier equal to the amount, if any, of pre-payments made by Supplier pursuant to such Third Party Software Licenses and Third Party Service Contracts attributable to the period after such assignment. All references in this section to Wards shall include Wards' designee. SECTION 18.11 OFFERS TO SUPPLIER EMPLOYEES Beginning upon delivery by Wards to Supplier of a written notice of breach or termination of this Master Agreement or a Service Agreement, or during the six-month period prior to expiration of any Service Agreement Term, Wards shall be entitled to seek to hire any Transferred Employee or any Supplier Personnel who has spent a majority of his or her working hours in the preceding twelve (12) months performing Services with respect to the applicable Service Agreement or any individual who is involved in more than one set of Services but has significant responsibilities under the applicable Service Agreement. Supplier shall not interfere with Wards' efforts, shall not enforce any restrictions imposed on such employees by agreement or policy which would interfere with Wards' efforts, and shall provide Wards access to such employees for the purposes of interviews, evaluations and recruitment. Any such employment by Wards would not be effective until termination or expiration of this Master Agreement or the applicable Service Agreement Supplier shall give. 56 ARTICLE 19 DISPUTE RESOLUTION SECTION 19.1 GENERAL Any dispute or controversy between the parties with respect to the interpretation or application of any provision of this Master Agreement or the performance by Supplier or Wards of their respective obligations hereunder shall be resolved as provided in this Article. SECTION 19.2 INFORMAL DISPUTE RESOLUTION The Parties may, by mutual agreement, attempt to resolve their dispute informally in the following manner: (a) Either Party may submit the dispute to the applicable Operating Committee, which shall meet as often as the Parties reasonably deem necessary to gather and analyze any information relevant to the resolution of the dispute. The applicable Operating Committee shall negotiate in good faith in an effort to resolve the dispute. (b) If the applicable Operating Committee determines in good faith that resolution through continued discussions by such Operating Committee does not appear likely, the matter shall be referred to the Executive Committee to negotiate a resolution of the dispute. (c) During the course of negotiations, all reasonable requests made by one Party to the other for non-privileged information, reasonably related to the dispute, shall be honored in order that each of the Parties may be fully advised of the other's position. (d) The specific format for the discussions shall be determined at the discretion of the applicable Operating Committee or the Executive Committee, but may include the preparation of agreed upon statements of fact or written statements of position. (e) Proposals and information exchanged during the informal proceedings described in this Article between the Parties shall be privileged, confidential and without prejudice to a Party's legal position in any formal proceedings. All such proposals and information, as well as any conduct during such proceedings, shall be considered settlement discussions and proposals, and shall be inadmissible in any subsequent proceedings. (f) Notwithstanding this Section, either Party may commence formal dispute resolution proceedings pursuant to Section 19.3 (Arbitration) without first observing the procedures set forth in this Section. SECTION 19.3 ARBITRATION (a) Except as set forth in clause (b) below, any controversy or claim arising out of or relating to this Master Agreement or any Service Agreement, or any alleged breach hereof, including any controversy regarding the arbitrability of any dispute, shall be settled at the 57 request of either Party by binding arbitration in Chicago, Illinois before and in accordance with the then existing Commercial Arbitration Rules of the American Arbitration Association (the "Rules"). In any dispute in which the amount in controversy is less than Two Hundred Fifty Thousand Dollars ($250,000), there shall be one (1) arbitrator agreed to by the Parties or, if the Parties are unable to agree within thirty (30) days after demand for arbitration is made, selected in accordance with the Rules. In all other cases there shall be three (3) arbitrators, one (1) of whom shall be selected by Wards within thirty (30) days after demand for arbitration is made, one (1) of whom shall be selected by Supplier within thirty (30) days after demand for arbitration is made, and one (1) of whom shall be selected by the two Party- appointed arbitrators within thirty (30) days after their selection. If one or more arbitrator(s) is not selected within the time period stated in the preceding sentence, such arbitrator(s) shall be selected pursuant to Rule 13 of the Rules. Any arbitrator(s) proposed by the American Arbitration Association shall have at least ten (10) years of experience in complex, commercial technology engagements in the area that is generally the same as the technology issue that is the subject of the dispute. Each Party shall pay its own attorneys' fees and one-half (1/2) of the other arbitration costs, subject to final apportionment by the arbitrators. The arbitrators shall apply the law set forth herein to govern this Master Agreement and any Service Agreement and shall have the power to award any remedy available at law or in equity; provided, however, that the arbitrators shall have no power to amend this Master Agreement or any Service Agreement. Any award rendered pursuant to such arbitration shall be final and binding on the Parties, and judgment on such award may be entered in any court having jurisdiction thereof. A party may recover its attorneys' fees incurred in any such enforcement action. (b) Notwithstanding clause (a) above, either Party may request a court of competent jurisdiction to grant provisional injunctive relief to such Party until an arbitrator can render an award on the matter in question and such award can be confirmed by a court having jurisdiction thereof. SECTION 19.4 CONTINUED PERFORMANCE Both parties shall continue performing their respective obligations and responsibilities under this Master Agreement and any Service Agreement while any dispute is being resolved in accordance with this Article, unless and until such obligations are terminated or expire in accordance with the provisions of this Master Agreement or the applicable Service Agreement. SECTION 19.5 APPLICABLE LAW All questions concerning the validity, interpretation and performance of this Master Agreement and any Service Agreement shall be governed by and decided in accordance with the laws of the State of Illinois, as such laws are applied to contracts between Illinois residents that are entered into and performed entirely with the State of Illinois. SECTION 19.6 JURISDICTION AND VENUE 58 The Parties hereby submit and consent to the exclusive jurisdiction of any state or federal court located within Cook County of the State of Illinois and irrevocably agree that all actions or proceedings relating to this Master Agreement and any Service Agreement, other than any action or proceeding required by this Article to be submitted to arbitration, shall be litigated in such courts, and each of the Parties waives any objection which it may have based on improper venue or forum non conveniens to the conduct of any such action or proceeding in such court. Nothing in this Section shall affect the obligation of the Parties with respect to the arbitration of disputes pursuant to Section 19.3. SECTION 19.7 EQUITABLE REMEDIES The Parties agree that in the event of any breach or threatened breach of any provision of this Master Agreement or any Service Agreement concerning (i) Confidential Information, (ii) intellectual property rights or (iii) other matters for which equitable rights may be granted, money damages would be an inadequate remedy. Accordingly, such provisions may be enforced by the preliminary or permanent, mandatory or prohibitory injunction or other order of a court of competent jurisdiction. ARTICLE 20 MISCELLANEOUS SECTION 20.1 INTERPRETATION (a) In this Master Agreement and in any Service Agreement, words importing the singular number include the plural and vice versa and words importing gender include all genders. The word "person" includes, subject to the context in which it appears, an individual, partnership, association, corporation, trustee, executor, administrator or legal representative. (b) The division of this Master Agreement, any Master Schedules and any Service Agreement into Articles, Sections, subsections and Schedules and the insertion of any captions or headings are for convenience of reference only and shall not affect its construction or interpretation. (c) In this Master Agreement and in any Service Agreement, unless otherwise specifically provided: (i) In the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." (ii) References to a specified Article, Section, subsection, Schedule or other subdivision shall be construed as references to that specified Article, Section, subsection, Schedule or other subdivision of this Master Agreement or the applicable Service Agreement, unless the context otherwise requires. 59 (iii) The word "dollar" and the symbol "$" refer to United States dollars. (iv) References to "days" means calendar days unless "business days" are specified. (v) The term "including" means "including, without limitation," or "including, but not limited to." (d) The Parties are sophisticated and have been represented by counsel during the negotiation of this Master Agreement and each Service Agreement. As a result, the Parties believe the presumption of any laws or rules relating to the interpretation of contracts against the drafter thereof should not apply, and hereby waive any such presumption. SECTION 20.2 BINDING NATURE AND ASSIGNMENT Neither Party may assign, voluntarily or by operation of law, any of its rights or obligations under this Master Agreement without the prior written consent of the other Party; provided, that Wards may assign its rights and obligations under this Master Agreement or any Service Agreement to an Affiliate, or to an entity which effects a merger transaction involving Wards or otherwise acquires all or substantially all of the capital stock or assets of Wards and any such Affiliate or successor in interest shall assume in writing all obligations of Wards. Subject to the foregoing, this Master Agreement and each Service Agreement shall be binding on the Parties and their respective successors and assigns. SECTION 20.3 EXPENSES In this Master Agreement and each Service Agreement, unless otherwise specifically provided, all costs and expenses (including the fees and disbursements of legal counsel) incurred in connection with this Master Agreement or the applicable Service Agreement, and the completion of the transactions contemplated by this Master Agreement or the applicable Service Agreement shall be paid by the Party incurring such expenses. SECTION 20.4 AMENDMENT AND WAIVER No supplement, modification, amendment or waiver of this Master Agreement or any Service Agreement shall be binding unless executed in writing by the Party against whom enforcement of such supplement, modification, amendment or waiver is sought. No waiver of any of the provisions of this Master Agreement or any Service Agreement shall constitute a waiver of any other provision (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. SECTION 20.5 FURTHER ASSURANCES; CONSENTS AND APPROVALS Each party shall provide such further documents or instruments required by the other Party as may be reasonably necessary or desirable to give effect to this Agreement and to carry 60 out its provisions. Whenever this Master Agreement or any Service Agreement requires or contemplates any action, consent or approval, such Party shall act reasonably and in good faith and (unless the Agreement expressly allows exercise of a Party's sole discretion) shall not unreasonably withhold or delay such action, consent or approval. SECTION 20.6 PUBLICITY All media releases, public announcements and other disclosures by either Party relating to this Master Agreement or any Service Agreement or the subject matter hereof, including promotional or marketing materials, but excluding announcements intended solely for internal distribution or to meet legal or regulatory requirements, shall be coordinated with and approved by the other Party prior to release. No license or right, either directly or by implication, is granted to Supplier to use Wards' name or any of Wards' trade names, trademarks, service marks, slogans, logos or designs for any advertising, promotional or other purpose which is not material to Supplier's performance under this Master Agreement without the prior, written permission of Wards. SECTION 20.7 SEVERABILITY Any provision in this Master Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 20.8 ENTIRE AGREEMENT This Master Agreement and each of the Service Agreements thereto, including the Schedules thereto, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof. SECTION 20.9 NOTICES Any notice, demand or other communication required or permitted to be given under this Master Agreement or any Service Agreement shall be in writing and shall be deemed delivered to a Party (i) when delivered by hand or courier, (ii) when sent by confirmed facsimile with a copy sent by another means specified in this Section, or (iii) six (6) days after the date of mailing if mailed by United States certified mail, return receipt requested, postage prepaid, in each case to the address of such Party set forth below (or at such other address as the Party may from time to specify by notice delivered in the foregoing manner): If to Supplier, to: Acxiom Corporation 1501 Opus Place Downers Grove, IL 60515 Attention: Outsourcing Group, Business Leader 61 With a Copy to: Acxiom Corporation 1501 Opus Place Downers Grove, IL 60515 Attention: Outsourcing Group, Corporate Counsel If to Wards, to: Montgomery Ward & Co., Incorporated 535 W. Chicago Avenue Chicago, Illinois 60671-0042 Attention: Chief Information Officer With a Copy to: Montgomery Ward & Co., Incorporated 535 W. Chicago Avenue Chicago, Illinois 60671-0042 Attention: Legal/Secretary SECTION 20.10 SURVIVAL Any provision of this Master Agreement or of any Service Agreement which contemplates performance or observance subsequent to any termination or expiration of this Master Agreement or of any Service Agreement, including, without limitation, Section 7.5 (Employment Offers), Section 8.4 (Work Product), Section 8.5 (Use of Concepts, Know-how and Methods), Article 9 (Confidentiality), Article 11 (Audits), Section 13.3 (Taxes), Section 13.6 (Recordkeeping), Article 16 (Indemnification), Article 17 (Limitations on Liability), Sections 18.7 through 18.11, inclusive (Termination) and Article 19 (Dispute Resolution) shall survive expiration or termination of this Master Agreement or any Service Agreement. SECTION 20.11 INDEPENDENT CONTRACTORS Supplier shall perform its obligations under this Master Agreement and all Service Agreements as an independent contractor of Wards. Nothing herein shall be deemed to constitute Supplier and Wards as partners, joint venturers, or principal and agent. Supplier has no authority to represent Wards as to any matters, except as expressly authorized in this Master Agreement or in a Service Agreement. SECTION 20.12 THIRD PARTY BENEFICIARIES Except as set forth in Article 16 (Indemnification) of this Master Agreement, nothing in this Master Agreement or in any Service Agreement, express or implied, is intended to confer on rights, benefits, remedies, obligations or liabilities on any person (including, without limitation, any employees of the Parties) other than the Parties or their respective successors or permitted assigns. SECTION 20.13 COUNTERPARTS 62 This Master Agreement and each Service Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same instrument. SECTION 20.14 BANKRUPTCY COURT APPROVAL Wards is a debtor in a case pending before the United States Bankruptcy Court for the District of Delaware, Case No. 97-1409 (PJW) (Jointly Administered) (the "Bankruptcy Case"). Wards will undertake reasonable efforts to have this Master Agreement and the applicable Service Agreements approved by a final order entered in the Bankruptcy Case. IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day and year first above written. MONTGOMERY WARD & CO., ACXIOM CORPORATION INCORPORATED By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ---------------------------- ------------------------------- Name: Don Bernheisel Name: Joseph C. Grossestreuer -------------------------- ----------------------------- Its: SVP, CIO Its: SVP-Outsourcing Services --------------------------- ------------------------------ 63 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 1: TRANSITION MANAGEMENT AND --------------------------------------------------- MIGRATION SERVICES ------------------ THIS SERVICE AGREEMENT NO. 1: TRANSITION MANAGEMENT AND MIGRATION SERVICES (the "Service Agreement") is made and entered into this 6th day of November, 1998, between Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), andAcxiom Corporation, a Delaware corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in this Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into this Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITIONS All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: "ASSOCIATE HIRE DATE" has the meaning given in Section 5.2. "ASSOCIATE TRANSITION PERIOD" has the meaning given in Section 5.1. "SERVICE AGREEMENT COMMENCEMENT DATE" means the date immediately following the date of Bankruptcy Court approval of the Master Agreement and all Service Agreements.. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "TRANSITION MANAGEMENT SERVICES" has the meaning given in Section 4.1. ARTICLE 2. TERM 2.1 TERM. The Service Agreement Term shall begin as of the Service Agreement Commencement Date and shall continue until the Migration Services and the Transition Management Services have been completed, unless further extended or earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. ARTICLE 3. MIGRATION SERVICES 3.1 MIGRATION SERVICES; PRELIMINARY MIGRATION PLAN. Throughout the Service Agreement Term, Supplier shall provide Migration Services, in accordance with Section 4.2 of the Master Agreement, for all of the Services described in Service Agreements 2, 3, 4, 5, 6 and 7 under the Master Agreement. The Preliminary Migration Plan is attached to this Service Agreement as Exhibit A, --------- and a final Migration Plan will be furnished to Wards for approval under Section 4.2(b) of the Master Agreement. The Preliminary Migration Plan specifies the Migration Milestones and Migration Completion Date required to effectively migrate all of such Services to Supplier. Except for any specific responsibilities assigned to Wards in Exhibit C to this Service Agreement, the --------- Migration Services shall include all functions, responsibilities and tasks not specifically described in the Preliminary Migration Plan or the Migration Plan but which are required for the proper migration of the Services described above and are an inherent part of, or a necessary sub-part included within, the Migration Services. The Supplier Project Executive identified in Section 4.2 of this Service Agreement shall act as a single point of contact for all of the Migration Services performed by Supplier. 3.2 LIQUIDATED DAMAGES. Exhibit B to this Service Agreement sets forth --------- the Migration Milestones and conditions for payment of liquidated damages in accordance with Section 4.2(f) of the Master Agreement. ARTICLE 4. TRANSITION MANAGEMENT 4.1 TRANSITION MANAGEMENT SERVICES. Throughout the Service Agreement Term, Supplier shall assume operation and control of the Wards computing environments that are generally described in Service Agreements 2, 3, 4, 5, 6 and 7 under the Master Agreement (the "Transition Management Services"). Transition Management Services includes the supervision and other duties related to personnel as described in Article 5. 4.2 APPOINTMENT OF PROJECT EXECUTIVES. The Parties appoint the following individuals as Project Executives under this Service Agreement: Wards: Irving Hammer 2 Supplier: Joseph Grossestreuer 4.3 RESPONSIBILITIES OF WARDS. Exhibit C to this Service Agreement --------- identifies the responsibilities of Wards during the Service Agreement Term, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. ARTICLE 5. PERSONNEL MATTERS 5.1 PERSONNEL TRANSITION. During the period from the Service Agreement Commencement Date to no later than February 15, 1999 (the "Associate Transition Period"), Supplier shall manage the Transferred Associates in performing the Transition Management Services. During the Associate Transition Period, the Transferred Associates will continue to be employees of Wards, and will be managed by Supplier in the same day-to-day responsibilities as they performed prior to the Service Agreement Effective Date. Wards shall have the right to make all personnel decisions (including hiring, firing, and discipline) for the Transferred Associates during the Associate Transition Period. Supplier will promptly inform Wards of any conduct of a Transferred Associate that it manages that is relevant to such personnel decisions. 5.2 HIRING OF TRANSFERRED ASSOCIATES. Set forth in Exhibit D to this --------- Service Agreement is a listing of all Wards associates to which Supplier intends to offer employment. Offers shall be made by the Supplier no later than [JANUARY 15, 1999] for employment beginning on [FEBRUARY 15, 1999] (the "Associate Hire Date"), unless otherwise agreed by the Parties. All offers shall be made consistent with Section 7.1 of the Master Agreement. Beginning on [Februaryl 15, 1999] (or earlier date if agreed by Wards and Supplier for one or more Transferred Associates), the Transferred Associates shall become employees of Supplier. ARTICLE 6. CHARGES 6.1 CHARGES FOR MIGRATION AND TRANSITION MANAGEMENT SERVICES. Exhibit E to --------- this Service Agreement sets forth Supplier's Charges for the Migration and Transition Management Services. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Services under this Agreement, Supplier shall provide Wards with the information described in Exhibit E in sufficient detail in order to allow Wards to verify invoices. - - --------- Invoice submission and payment shall be in accordance with Article 14 of the Master Agreement. ARTICLE 7. SERVICE LEVELS FOR TRANSITION MANAGEMENT SERVICES 7.1 SERVICE LEVEL AGREEMENT. Supplier will provide the Transition Management Services at levels that are not less than the service levels currently provided 3 by Wards. In the event that Wards believes the services in any area have declined below the levels of service that were maintained prior to the Service Agreement Effective Date, Wards will notify Supplier of the problem and Supplier will use Commercially Reasonable Efforts to promptly correct the problem ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 USE OF WARDS FACILITIES, SOFTWARE AND EQUIPMENT. During the Service Agreement Term, Wards will provide Supplier access to the Wards Facilities, Software and Wards Equipment within the scope of the Transition Management Services and Supplier shall be responsible for the care, custody and control of such Wards Facilities, Software and Wards Equipment. Supplier shall comply with any reasonable physical and data security procedures and other administrative procedures as directed by Wards. Title to any owned Wards Equipment shall remain vested in Wards until the end of the Term of this Service Agreement, and the purchase of any such Wards Equipment by Supplier shall thereafter be controlled by the terms of the applicable Service Agreement. Supplier shall not subject the Wards Facilities, Software or Wards Equipment to any lien or other encumbrance. 8.2 THIRD PARTY CONTRACTS. On the Service Agreement Effective Date, and subject to Supplier having received any Third Party Consents, Supplier shall assume from Wards all of the administrative duties, and obtain or provide for such other rights or consents as are necessary, under the Third Party Contracts listed in the applicable Exhibits attached to each of the Service Agreements. The terms of Section 6.3 of the Master Agreement shall apply with respect to the Third Party Contracts and Third Party Software. This Service Agreement shall not effect an assignment of any Third Party Contract, and the assignment of Third Party Contracts shall thereafter be controlled by the terms of the applicable Service Agreement. 8.3 WARDS SOFTWARE. Supplier is granted a limited, non-exclusive and royalty-free license to use the Wards Software solely at the Wards Facilities and solely to provide the Services described in this Service Agreement. The terms of Section 8.1 of the Master Agreement shall apply with respect to the Wards Software. 8.4 SUPPLIER SOFTWARE. Supplier shall not introduce any Supplier Software into any Wards computing environment during the Term of this Service Agreement without the prior written consent of Wards. In the event Supplier Software is used, the use of such Supplier Software in providing the Services shall be in accordance with Section 8.2 of the Master Agreement. ARTICLE 9. TERMINATION 9.1 TERMINATION BY WARDS. Wards may terminate this Service Agreement: 4 (a) upon failure of Supplier to cure a default in the Preliminary Migration Plan or the Migration Plan within the time period set forth in the Preliminary Migration Plan or the Migration Plan; (b) if the damages resulting from the failure to meet a Migration Milestone exceed the amount of liquidated damages specified in Exhibit ------- C; or - (c) as provided in Article 18 of the Master Agreement. In the event of termination under this Article 9, Wards shall not be obligated to enter into any other Service Agreement. Wards shall be entitled to hire any Transferred Associate under Section 18.11 of the Master Agreement. Termination fees are stated in Exhibit E of this Service Agreement. IN WITNESS WHEREOF the Parties have executed this Service Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ---------------------- ---------------------------- Name: Don Bernheisel Name: Joseph C. Grossestreuer -------------------- --------------------------- Its: SVP, CIO Its: SVP-Outsourcing --------------------- --------------------------- 5 EXHIBITS TO MIGRATION/TRANSITION MANAGEMENT SERVICE ---------------------------------------------------- AGREEMENT --------- EXHIBIT A PRELIMINARY MIGRATION PLAN EXHIBIT B MIGRATION MILESTONES AND LIQUIDATED DAMAGES EXHIBIT C WARDS RESPONSIBILITIES EXHIBIT D TRANSFERRED ASSOCIATES EXHIBIT E CHARGES 6 EXHIBIT A PRELIMINARY MIGRATION PLAN 7 EXHIBIT B MIGRATION MILESTONES AND LIQUIDATED DAMAGES MIGRATION MILESTONES The following events are Migration Milestones under Section 4.2(f) of the Master Agreement: A. Migration Plan and Cutover Event Date Final Migration Plan [Thirty days after start of Transition Services] Network Connectivity Test [April 25, 1999] Systems Software and Application Test [May 16, 1999] Final Cutover of all Services [May 30, 1999] B. Migration Validation For the two week period following the Final Cutover, Supplier will provide the Services to Wards to validate the completion of the migration Services. Migration shall be deemed to be validated during such period when Supplier achieves four (4) consecutive business days of operations without the occurrence of a Severity 1 Problem, as defined in Section I.A. of Master Schedule D. LIQUIDATED DAMAGES A. Damages for Failure to Meet Migration Plan and Cutover The following liquidated damages shall apply for each of the designated Milestones: Milestone Liquidated Damages Final Migration Plan $25,000 Network Connectivity Test $25,000 Systems Software and Application Test $25,000 Final Cutover of all Services $25,000 8 Liquidated damages accrue upon the failure to meet any of the Milestones, provided, however, that if the final Milestone is met by Supplier, all accrued liquidated damages are waived by Wards. B. Migration Validation Liquidated Damages The liquidated damages for failure to meet the standard in Section 1.B above for Migration Validation shall not exceed $100,000. The liquidated damages shall become due upon the following events and in the amounts stated: Failure to achieve migration validation within the two week validation period; liquidated damages = $100,000. Occurrence of a Severity 1 Problem that affects external customers of Wards; liquidated damages = $100,000. EXCUSED PERFORMANCE Supplier shall not be liable to pay Wards liquidated damages for any failure to meet a Migration Milestone to the extent that such a failure is directly attributable to (i) a Force Majuere Event; or (b) the failure of Wards to meet a Wards responsibility that is specifically identified in the Migration Plan, or in Exhibit C to this Service Agreement. 9 EXHIBIT C WARDS RESPONSIBILITIES 10 EXHIBIT D TRANSFERRED ASSOCIATES 11 EXHIBIT E CHARGES ONE TIME MIGRATION CHARGE: ............................................$140,000 (payable in equal installments over 61 months commencing with the Service Agreement Commencement Date for Service Agreement No. 2, plus 8% interest) In addition, Wards shall pay Supplier monthly Special Charges of $145,985.80 commencing in January 1999 and through the term of Service Agreement No. 3 Midrange Services. A. PASS - THROUGH EXPENSES: - There is a $40,000 allowance for telecommunications charges for connectivity between Wards' corporate complex, Signature and Supplier's data center. Telecommunications charges will be reconciled to actuals at the completion of the migration. - Out of pocket expenses, including but not limited to travel, as may be approved in advance by Wards. - Actual payroll costs, including taxes and benefits, for Transferred Employees hired by Supplier, to the extent such costs are incurred prior to the Service Agreement Commencement Dates of Service Agreements 2 through 7. B. TERMINATION CHARGES - In the event of termination for any reason, Wards shall repurchase all equipment and software described in Wards' letter to Supplier dated October 28, 1998, at the unamortized principal balance set forth on the attached schedule. - In the event of Termination for Convenience or Termination for Cause by Supplier, Wards shall reimburse Supplier for documented expenses of Supplier approved in advance by Wards and directly related to the transfer and migration of Wards' data center and the provision of services to Wards. 12 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 2: DATA CENTER SERVICES ---------------------------------------------- THIS SERVICE AGREEMENT NO. 2: DATA CENTER SERVICES (the "Service Agreement") is made and entered into this 6th day of November, 1998, between Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a Delaware corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in this Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into this Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITIONS All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: "DATA CENTER" means the mainframe data processing center of Wards currently located at the Wards corporate complex on Larabee Street in Chicago, Illinois. "DATA CENTER SERVICES" has the meaning given in Section 5.1. "INITIAL TERM" has the meaning given in Section 2.1. "MASTER AGREEMENT" means the Master Service Agreement for Information Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom Corporation dated November 6, 1998, and all amendments thereto. "RENEWAL TERM" has the meaning given in Section 2.2. "SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration Plan for Data Center Services has been implemented. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any Renewal Term. "SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the meaning given in Section 7.1 of this Service Agreement. "TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning given in Section 8.1 of this Service Agreement. "WARDS PEAK SEASON" means the period in any year during the Service Agreement Term from November 20 through December 31, as such dates may be adjusted by Wards from time to time. ARTICLE 2. TERM 2.1 INITIAL TERM. The initial term of this Service Agreement (the "Initial Term") shall begin as of the Service Agreement Commencement Date and shall continue for a period of sixty-one (61) months thereafter, unless earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. 2.2 RENEWAL TERM. In accordance with Section 3.2 of the Master Agreement, Wards shall have the option to renew this Service Agreement for an additional two (2) year term (a "Renewal Term") by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final Contract Year under this Service Agreement. All of the terms of this Service Agreement and the Master Agreement shall continue to apply without change during the Renewal Term. ARTICLE 3. TERMINATION 3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate this Service Agreement for convenience in accordance with Section 18.2(a) of the Master Agreement. The convenience termination charges, if any, shall be as described in Exhibit C of this Service Agreement. ARTICLE 4. PERSONNEL MATTERS 4.1 KEY SUPPLIER POSITIONS. Exhibit A to this Service Agreement also --------- identifies the Key Supplier Positions that are subject to the provisions of Section 7.2 of the Master Agreement. 2 ARTICLE 5. SERVICES 5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide the Services described in Exhibit B, as such Exhibit may be amended and --------- supplemented from time to time pursuant to the Master Agreement (the "Data Center Services"). The Data Center Services includes all of the responsibilities (including Equipment, Software, personnel and expenses) associated with the Data Center unless specifically identified as a Wards responsibility under Section 5.4 below. The Services include: (i) functions, responsibilities and tasks performed by the Transferred Employees prior to the Service Agreement Effective Date; (ii) functions, responsibilities and tasks not specifically described in this Service Agreement but which are required for their proper performance and are an inherent part of, or a necessary sub-part included within, the Services, and (iii) functions, responsibilities and tasks that are a logical extension of existing Services as a result of changes in technology, changes in Wards business practices or changes resulting from change control procedures. Supplier will be the exclusive provider of the Services identified in this Service Agreement. 5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the Service Agreement Effective Date to the Service Agreement Commencement Date, Supplier will provide Data Center Services under Service Agreement No. 1 (Transition Migration Services). Following the Service Agreement Commencement Date, the Service Level Agreement and other obligations of this Service Agreement will become effective. 5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement Commencement Date, the Parties will appoint individuals as Project Executives under this Service Agreement to carry out the duties described in the Master Agreement. 5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in Exhibit B to this Service Agreement identifies the responsibilities of Wards - - --------- during the Term of this Service Agreement, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. The responsibilities of Wards shall be limited to those items listed in the matrix. ARTICLE 6. CHARGES 6.1 CHARGES FOR DATA CENTER SERVICES. Exhibit C to this Service --------- Agreement sets forth Supplier's Charges for the Data Center Services. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 3 6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Data Center Services, Supplier shall provide Wards with the information described in Exhibit C in sufficient detail in order to allow Wards to verify invoices. - - --------- Invoice submission and payment shall be in accordance with Article 14 of the Master Agreement. ARTICLE 7. SERVICE LEVEL AGREEMENT 7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the --------- Service Level Agreement applicable to the Data Center Services (the "Service Level Agreement"). The Service Level Agreement will become effective upon the Service Agreement Commencement Date. All of the terms of Article 5 of the Master Agreement shall apply to the Service Level Agreement. Supplier acknowledges that Wards may adjust schedules for availability and other items to meet Wards' business needs during Wards Peak Season or other events (such as extended sales) as is currently done and demonstrable today. ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date, Wards shall assign, and Supplier shall purchase or assume, Wards' purchased equipment or obligations under the applicable leases for the equipment listed on Exhibit E (the "Transferred Equipment"). The terms of Section 6.1 of the Master - - --------- Agreement shall apply with respect to the Transferred Equipment. 8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2 of the Master Agreement, Wards shall provide the Wards Facilities and Wards Equipment described in Exhibit F to this Service Agreement. --------- 8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the Service Agreement Commencement Date, and subject to Supplier having received any Third Party Consents, Supplier shall assume from Wards all of the rights and obligations of Wards under the Third Party Contracts and the Third Party Software that are listed in Exhibit G. The terms of Section 6.3 of the Master --------- Agreement shall apply with respect to the Third Party Contracts and Third Party Software. 8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is --------- proprietary to Wards and that is used in the Data Center (the "Wards Software"). The terms of Section 8.1 of the Master Agreement shall apply with respect to the Wards Software. 4 8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by Supplier to provide the Data Center Services is listed in Exhibit I. Use of --------- Supplier Software in providing the Data Center Services shall be in accordance with Section 8.2 of the Master Agreement. ARTICLE 9. TERMINATION AND TRANSITION SERVICES 9.1 TERMINATION. Wards may terminate this Service Agreement without penalty at any time prior to the Service Agreement Commencement Date if Supplier does not complete the Migration Plan described in Service Agreement No. 1. After the Service Agreement Commencement Date, Wards may terminate this Service Agreement in accordance with the terms of the Master Agreement. 9.2 TRANSITION SERVICES. In the event of a termination or expiration of this Service Agreement, Supplier shall provide the Termination/Expiration Assistance as provided in Section 18.7 of the Master Agreement and as set forth in Exhibit J. IN WITNESS WHEREOF the Parties have executed this Service Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ----------------------------- ------------------------------- Name: Don Bernheisel Name: Joseph C. Grossestreuer --------------------------- ------------------------------ Its: SVP, CIO Its: SVP-Outsourcing ---------------------------- ------------------------------- 5 EXHIBITS TO DATA CENTER SERVICE AGREEMENT ----------------------------------------- EXHIBIT A KEY SUPPLIER POSITIONS EXHIBIT B SERVICES EXHIBIT C CHARGES EXHIBIT D SERVICE LEVEL AGREEMENT EXHIBIT E TRANSFERRED EQUIPMENT EXHIBIT F WARDS FACILITIES AND EQUIPMENT EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE EXHIBIT H WARDS SOFTWARE EXHIBIT I SUPPLIER SOFTWARE EXHIBIT J TERMINATION/EXPIRATION ASSISTANCE 6 EXHIBIT A KEY SUPPLIER POSITIONS COMPUTER OPERATIONS AND OSA MANAGER COMPUTER OPERATIONS SHIFT MANAGER COMPUTER OPERATIONS SHIFT SUPERVISOR COMPUTER RESOURCE MANAGER DASD/DATA SECURITY SPECIALIST DATA SECURITY & CUSTOMER SERVICE MANAGER HARDWARE INSTALLATION SPECIALIST LEAD NETWORK CONTROL TECHNICIAN NATIONAL ACCOUNT REPRESENTATIVE NETWORK CONTROL TEAM LEADER NETWORK SOFTWARE MANAGER OSA/QA DOCUMENTATION SPECIALIST PRODUCTION CONTROL TECHNICIAN PRODUCTION CONTROL TECHNICIAN MANAGER SENIOR CAPACITY PLANNING SPECIALIST SENIOR DASD MANAGEMENT SPECIALIST SENIOR OSA DOCUMENTATION SPECIALIST SHIFT PROCESS CONTROL SUPERVISOR SYSTEMS SOFTWARE MANAGER 7 EXHIBIT B --------- SERVICES DATA CENTER SERVICES OVERVIEW - - -------- The business objective of this service category is to provide dependable, consistent and reliable levels of Data Center Services in support of Wards mainframe environment, Help Desk, and Operation Systems Acceptance. The cost- effective implementation of consistent data center infrastructure allows Wards business units to rapidly respond to changing business needs. The intent of this service description is to establish Wards expectations and criteria for providing the described services. The Supplier of Data Center Services has full responsibility for the comprehensive operational support of the Mainframe environment. These responsibilities extend to the day-to-day operations and management of the operating environment including, but not limited to, data backup and restore processes; infrastructure change management; production control; systems monitoring and reporting; data center facility monitoring; maintenance and reporting; and media management. Additionally, the Supplier will provide disaster recovery hot site services in support of Ward's Disaster Recovery Plan, for the mainframe operating environment, and test the Supplier's mainframe disaster recovery hot site as agreed upon with, and scheduled as requested by Wards management as outlined for these systems. System Management will provide for the overall management and performance of IBM MVS/JES3 mainframe processing environment. The Systems Management function will work in an integrated fashion with all other service functions to provide seamless support for the Wards business units. The Supplier will provide Wards with a consistently high level of mainframe environment reliability, availability, and performance. The system management function includes the responsibility for the management of the in-scope infrastructure as well as implementation of new technologies to support the changing business needs of Wards. The Supplier has responsibility for managing the Wards Help Desk, including first contact with Wards staff and the customer service and support of the Wards relationship. Additionally, the Supplier is responsible for opening the initial problem tracking ticket utilizing the Supplier provided problem ticket tracking system, routing of call/tickets to the appropriate Wards and third party supplier(s), providing status and updates as requested, providing and updating a problem tracking system for current users, escalating tickets with appropriate Wards and Supplier management. Currently, Wards provides problem management services for two Help Desks: End User Computing, which supports all 1/st/ level desktop/server calls and the Network Help Desk, which supports all 1/st/ level calls related to any communication, application or non desktop/server equipment problem. When a problem falls into an area as designated in the other attached Services Descriptions the Supplier has 8 full responsibility for problem resolution, excluding Wards applications. If the problem falls outside of these Services Descriptions, then the Help Desk has the responsibility of routing the call to the correct third party or Wards resource for resolution, and of managing the completion of the call to the user's satisfaction as detailed in the Help Desk section of this document. OPERATIONS MANAGEMENT - - --------------------- ACTIVITIES FOR OPERATIONS MANAGEMENT The Supplier will be responsible for all operational aspects of the in-scope mainframe computer environments.. The Supplier is expected to manage the development, test, and production-processing environments utilizing Supplier and Wards provided processes and management methodologies. 1. Supplier will provide console management functions to monitor, report, operate and IPL/reboot the mainframe systems, associated peripherals, and production job streams. 2. Supplier will provide production control as documented in the Procedures Manual. 3. Supplier will provide and adhere to change management as documented in the Procedures Manual. 4. Supplier will provide all Signature levels of service as indicated in the Signature agreement.. 5. Supplier will provide media management and media storage for all mainframe processing environments. SERVICE PARAMETERS FOR OPERATIONS MANAGEMENT 1. Supplier will provide operations management services for in-scope mainframe processing environments, on a 24 x 7 x 365 basis. 2. Supplier will capture and retain sufficient detail data to provide all required technical and managerial reports as specified within this document. 3. The Supplier will utilize and adhere to problem management procedures for reporting and responding to mainframe issues in accordance with the Procedures Manual. 4. Supplier will provide change management processes to include, but is not limited to: Wards change control, Wards OSA process, and Wards application code management between development, test, and production environments. 5. Supplier will provide production scheduling on a 7 x 24 x 365 basis. 6. No increase in the number of cross system POR's will result from the Suppliers proposed LPAR environment. 7. Supplier will provide the Account Management function, as is provided by Wards today. 8. Supplier will provide staff to maintain and support the six IBM OS/2 PC's required to support Connect: Direct and Connect: Mail. 9. Supplier will provide Wards' OSA OLCR CHANGE MANAGEMENT process. 9 10. The Supplier is responsible for controlling the movement of all Application, Software, and Hardware changes into production using the existing OSA Hardware/Software Change Management methodology. 11. The Supplier will also hold meetings with applications Development for all application changes or new technology implementations to assure adherence to Ward's standards for acceptance testing of functionality, recovery, and validation of results with the end user. 12. Supplier will enforce all existing Wards' standards covering but not limited to JCL, recovery & naming standards. 13. The Supplier will review System documentation for accuracy, standards adherence, and thoroughness of restart/recovery and backup information. 14. Supplier will conduct training for new development associates and/or consultants in the use of productivity tools, Wards' standards and preparation of documentation, procs, ENDEVOR package naming and element movement, RMDS forms, use of INFOMAN and JCLPREP. 15. Supplier will coordinate the movement of all Y2K development to and from Production MEASUREMENT TOOLS FOR OPERATIONS MANAGEMENT - - ------------------------------------------- The Supplier will utilize tools and processes provided by Wards and already in place in Wards mainframe processing environments. The Supplier is free to recommend in writing to Wards additional or alternative tools or processes for review and final approval. As a function of the Change Management Process Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards, and this approval will not be unreasonably withheld MVS . ESP Scheduler . MVS Utilities . RACF . MICS . Omegamon . Endevor . Pacbase SYSTEM MANAGEMENT - - ----------------- ACTIVITIES FOR SYSTEM MANAGEMENT 10 The Supplier has responsibility for availability, management and performance of the in-scope mainframes, systems software, and mainframe peripherals. It is the Supplier's responsibility to provide reliable, predictable, and consistent operating environments for Wards' applications systems. 1) The Supplier will provide the appropriate management methodologies, resources and tools to support the in-scope mainframe environments at performance, capacity, and availability levels as good as, or better than, prior to outsourcing. 2) The Supplier will provide proactive mainframe and peripheral performance monitoring and tuning. 3) The Supplier will provide proactive mainframe and peripheral capacity analysis, planning and resource adjustment. 4) The Supplier will utilize and adhere change management processes, and procedures as documented in the Procedures Manual. 5) The Supplier will utilize and adhere to all problem management processes, procedures and escalation guidelines as documented in the Procedures Manual. SERVICE PARAMETERS FOR SYSTEM MANAGEMENT 1) The Supplier will maintain 24x7x365 System Management support for Wards. 2) The Supplier will maintain the confidentiality of all Wards data and systems. 3) Supplier will provide off-hours on-site support during the Wards PEAK Season. This will include a freeze on all but emergency changes 4) Supplier will provide for DB2, CICS, & IMS internal sub-second response overall, except for conversational transactions. 5) The Supplier will provide hardware and software maintenance for mainframes, peripherals, and all operating system and sub-system software for which Supplier has contractual responsibility. 6) The Supplier will provide total problem solutions with the appropriate technical resources, knowledge, procedures, and management methodologies to maintain the availability and performance of the Wards development, test, and production mainframe environments to documented service levels. 7) The Supplier will be required to execute emergency change management procedures in support of the Wards mainframe environment as outlined in the Procedures Manual. 8) Escalation required to resolve mainframe problems remain within the scope of the Supplier's responsibility and are considered to be included in the overall support cost. 9) The Supplier will provide hardware and software tools, and related maintenance that is necessary to accomplish or help them accomplish the Systems Management service levels as indicated in this document. 10) The Supplier will provide sufficient detail to the help desk, within the text of each problem ticket, to include the background and history of each problem for later root cause analysis and/or support resolution or engineering corrective action. 11 11) The Supplier will monitor, alarm, and apply corrective action to pre-defined events and situations for the mainframes included in this agreement. 12) The Supplier will gather, store, and report statistics for the Wards mainframes included in this agreement in a format that is readily accessible. 13) The Supplier will work toward reducing the overall resolution time for problem tickets regardless of where the root problem resides to commercially reasonable efforts. 14) The Supplier will accept and resolve problems from the Supplier's Help Desk as determined to be in the area of support of System Management by the Help Desk within time frames as specified by severity. 15) The Supplier will re-route problems back to the Supplier's Help Desk as they are determined to be outside of area of support of System Management. 16) The Supplier will document problem resolution activities as they are completed or re-routed. 17) Supplier will provide the Technical Support function, as is provided by Wards today. TRACKING AND MEASUREMENT TOOLS FOR SYSTEMS MANAGEMENT - - ----------------------------------------------------- The Supplier is responsible for supplying all tools necessary to satisfy the specifications contained herein. The Supplier is free to recommend in writing to Wards additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. Any changes to the system management tools will be approved through the Change Management process. MVS . MVS Utilities . RACF . MICS . BGS . SAS . Omegamon HELP DESK - - --------- ACTIVITIES FOR HELP DESK The Activities and Service Parameters listed below will be broken down in to two groups, the End-User Computing Help Desk and the Network Help Desk: END USER COMPUTING HELP DESK ACTIVITIES 12 1) The Supplier will page the relevant support personnel as designated by Wards End User Computing Escalation Procedures. 2) The Supplier is responsible for the overall management of a problem from receipt to satisfactory closure, including ownership of the problem as it crosses multi-platform, and multi-vendor boundaries of support. 3) The Supplier's Help Desks will attempt to resolve all problem calls concerning Wards' IT Infrastructure and Wards' desktop/server environment. 4) The Supplier will provide security administration for servers based on documentation as included in the Procedures Manual. 5) The Supplier will provide software use assistance for MS Office Suite, (4.3, Win 95 and Office 97), Extra, Lotus Notes, Lotus 123 and Internet. SERVICE PARAMETERS FOR END USER COMPUTING HELP DESK: 1. The Supplier will implement and maintain a 6x12x365(excluding Holidays) Help Desk operation for Wards. Coverage will start at 6:00a.m. to 6:00p.m central time., Monday through Friday. The Supplier will be required to provide off- hours support Via pager. 2. The Supplier will provide, develop, document, and maintain an automated problem tracking system. 3. The Supplier will provide a process for searching existing problem resolutions and ticket histories with associated scripts and questions to be utilized by Supplier help desk personnel. 4. The Supplier will contact Wards users to provide problem status and receive any severity level adjustment within agreed upon time frames by severity. 5. The Supplier will follow Wards provided escalation procedures for severity level adjustments and problem ticket resolution. 6. The Supplier will provide a corrective action process whereby repetitive problem tickets of a similar nature will be resolved to the extent possible. 7. The Supplier will work to reduce the overall resolution time for problem tickets regardless of where the root problem resides. 8. Supplier will provide account maintenance functions including: userid creation and modification and will follow Wards published standards developed by the Systems management Supplier. 9. The Supplier will be responsible for providing total help desk solutions for End User Computing and for all problem resolutions as per the Procedures Manual. 10. The Supplier will be responsible for contacting Wards' staff by, but not limited to: paging, email, voice mail, and conference calls in accordance with the Procedures Manual. 11. The Supplier will adhere to the approved change management process for all help desk activities. 12. The Supplier will provide network connectivity for the help desk and maintain the connectivity without performance degradation. 13. The Supplier will utilize a VRU for direction of help desk calls. 13 NETWORK HELP DESK ACTIVITIES 1) The Supplier will page the relevant support personnel as designated by Wards Network Escalation Procedures. 2) The Supplier is responsible for the overall management of a problem from receipt to satisfactory closure, including ownership of the problem as it crosses multi-platform, and multi-vendor boundaries of support. 3) The Supplier's Help Desk will attempt to resolve all problem calls concerning Wards' IT Infrastructure. 4) The Supplier will provide a process for searching existing problem resolutions and ticket histories with associated scripts and questions to be utilized by Supplier help desk personnel. 5) 6) The Supplier will ensure that Level of Service for Signature has been reported correctly and that the Level of Service reports have been run. The Supplier will also ensure that the monthly level of service reports are maintained and that each outage reported is supported via an Infoman record. 7) The Supplier will be responsible for the weekly cycle of the @SPMC region, (the primary Signature Region), Sunday A.M., and that appropriate diskreaders are run while region is down. The Supplier must notify Signature, before and after the region is cycled and must ensure connectivity. SERVICE PARAMETERS FOR NETWORK HELP DESK 1) The Supplier will implement and maintain a 7x24x365 Help Desk operation for Wards The Network area will be manned with no less than two people at all times. 2) The Supplier will provide, develop, document, and maintain an automated problem tracking system. 3) The Supplier will be responsible for the start-up, monitoring, shutdown of all Wards/Signature production and test onlines, as well as started tasks, as documented in the Procedures Manual. 4) The Supplier will provide change management function for all Wards environments. (Said scheduled changes can be viewed via Exception Management, Weekend Plan Letter). 5) The Supplier will contact Wards' users to provide problem status and receive any severity level adjustment within agreed upon time frames by severity. 6) The Supplier will follow Wards' provided escalation procedures for severity level adjustments and problem ticket resolution. 7) The Supplier will provide a corrective action process whereby repetitive problem tickets of a similar nature will be resolved to the extent possible. 8) The Supplier will utilize a VRU for direction of help desk calls. 9) The Supplier will provide commercially reasonable efforts to work toward reducing the overall resolution time for problem tickets regardless of where the root problem resides. 14 10) Supplier will provide account maintenance functions including: userid creation and modification, and following Wards published standards developed by the Systems management Supplier. 11) The Supplier will be responsible for providing total help desk problem solutions for the network and for all problem resolutions as per the Procedures Manual. 12) The Supplier will be responsible for contacting Wards' staff by, but not limited to: paging, email, voice mail, and conference calls in accordance with the Procedures Manual. 13) The Supplier will adhere to the approved change management process for all help desk activities. MEASUREMENT TOOLS FOR HELP DESK - - ------------------------------- The Supplier will make every effort to utilize tools and processes owned by Wards and already in place within the Wards facilities. The Supplier is free to recommend in writing to Wards additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. Available tools are listed below. 1) MS Office (Excel, Word, PowerPoint) or equivalent. 2) Wards MS-Access Desktop Inventory database 3) Wards IT asset inventory. 4) Wards Help Desk Escalation Procedures 15 RESPONSIBILITY MATRIX
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 1. CHANGE MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- 2. Participate in scheduled change management meetings x x - - -------------------------------------------------------------------------------------------------------------------------------- 3. Provide Wards with risk assessments and anticipated impact of all proposed changes to the x operational and data center environments - - -------------------------------------------------------------------------------------------------------------------------------- 4. Implement changes in accordance with the Procedures Manual. x - - -------------------------------------------------------------------------------------------------------------------------------- 5. Provide support for both testing and production support of all changes implemented within the x environments - - -------------------------------------------------------------------------------------------------------------------------------- 6. Conduct post-implementation review meetings with Wards to review changes process x x - - -------------------------------------------------------------------------------------------------------------------------------- 7. PROBLEM MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- 8. Provide and maintain a single point of contact for the reporting and tracking of problems x - - -------------------------------------------------------------------------------------------------------------------------------- 9. Maintain an integrated problem management system for the centralized reporting and tracking x of problems under the Supplier's control - - -------------------------------------------------------------------------------------------------------------------------------- 10. Provide and maintain a method for proper escalation of problems within both the Supplier's x x and Wards' management - - -------------------------------------------------------------------------------------------------------------------------------- 11. Supplier will provide Wards with detail reporting and statistics on reported problems x - - -------------------------------------------------------------------------------------------------------------------------------- 12. Supplier will support new Wards initiatives as they may relate to Problem Management. x - - -------------------------------------------------------------------------------------------------------------------------------- 13. Supplier will provide a summary of all "Open" and "Closed" problems during the prior x twenty-four(24) hours on a daily basis - - -------------------------------------------------------------------------------------------------------------------------------- 14. Changes to Wards escalation documentation will be completed within twenty-four(24) hours of a x problem being recapped by Supplier through written or electronic means - - -------------------------------------------------------------------------------------------------------------------------------- 15. Supplier will provide the Problem Management processes on a 24x7x365 basis x - - -------------------------------------------------------------------------------------------------------------------------------- 16. Supplier will report progress to Wards based on the Wards assigned level of severity x - - -------------------------------------------------------------------------------------------------------------------------------- 17. Supplier will develop and enhance procedures for problem escalation x - - -------------------------------------------------------------------------------------------------------------------------------- 18. Supplier will conduct root cause analysis and review high-impact problems to identify x x preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate - - -------------------------------------------------------------------------------------------------------------------------------- 19. COMPUTER OPERATIONS - - -------------------------------------------------------------------------------------------------------------------------------- 20. Provide operational installation support for hardware components x - - -------------------------------------------------------------------------------------------------------------------------------- 21. Perform all manual and automated console operations and operate computer equipment x - - -------------------------------------------------------------------------------------------------------------------------------- 22. Monitor performance of operating system and sub-systems and resolve problems/exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 23. Identify and resolve systems and sub-systems problems x - - -------------------------------------------------------------------------------------------------------------------------------- 24. Complete work, turnover and status logs x - - -------------------------------------------------------------------------------------------------------------------------------- 25. Monitor and report Computer Room environmental variances and resolve problems/exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 26. Provide all media, media storage units and in scope printing supplies and consumables; office x supplies; PC's, workstations, monitoring tools etc. for Supplier's operations management staff. - - -------------------------------------------------------------------------------------------------------------------------------- 27. Adhere to all Wards IT standards, methods, processes and procedures. x - - -------------------------------------------------------------------------------------------------------------------------------- 28. PRODUCTION MONITORING AND SCHEDULING - - -------------------------------------------------------------------------------------------------------------------------------- 29. Provide production scheduling. using ESP software x - - -------------------------------------------------------------------------------------------------------------------------------- 30. Establish and maintain centralized responsibility over production systems and processes. x - - -------------------------------------------------------------------------------------------------------------------------------- 31. Provide resources for monitoring, reporting, and tracking of systems and processes. x - - -------------------------------------------------------------------------------------------------------------------------------- 32. Report, document, and track failures within the production systems. x - - -------------------------------------------------------------------------------------------------------------------------------- 33. Provide and maintain a method for proper escalation of failures. x - - -------------------------------------------------------------------------------------------------------------------------------- 34. Ensure overnight processing is completed as scheduled. x - - --------------------------------------------------------------------------------------------------------------------------------
16
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 35. Provide reporting on production systems, daily on critical systems. x - - -------------------------------------------------------------------------------------------------------------------------------- 36. Provide a master-scheduling function across environments. x - - -------------------------------------------------------------------------------------------------------------------------------- 37. Provide a process for change requests in the scheduling of processes and systems. x - - -------------------------------------------------------------------------------------------------------------------------------- 38. Develop, document, and enhance procedures for ensuring reliable monitoring and scheduling of x critical processes. - - -------------------------------------------------------------------------------------------------------------------------------- 39. Conduct root cause analysis and review high-impact failures to identify preventative x measures, assess risk, and bring to closure. - - -------------------------------------------------------------------------------------------------------------------------------- 40. Coordinate and integrate production schedules with applications groups. x - - -------------------------------------------------------------------------------------------------------------------------------- 41. Modify and verify batch production schedules without impacting service. x - - -------------------------------------------------------------------------------------------------------------------------------- 42. Maintain documentation and run books for production job streams and processes in accordance x with the Procedures Manual - - -------------------------------------------------------------------------------------------------------------------------------- 43. Provide support for the OSA group for jobs moving into or out of production x - - -------------------------------------------------------------------------------------------------------------------------------- 44. Provide monitoring functions utilizing Wards automated tools wherever possible. x - - -------------------------------------------------------------------------------------------------------------------------------- 45. TAPE MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- 46. Complete all tape mount requests x - - -------------------------------------------------------------------------------------------------------------------------------- 47. Monitor tape hardware for malfunction and resolve exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 48. Perform tape hardware maintenance x - - -------------------------------------------------------------------------------------------------------------------------------- 49. Produce reports on tape retention periods x - - -------------------------------------------------------------------------------------------------------------------------------- 50. Request changes to tape retention periods x x - - -------------------------------------------------------------------------------------------------------------------------------- 51. Implement requested changes to tape retention periods x - - -------------------------------------------------------------------------------------------------------------------------------- 52. TAPE LIBRARY x - - -------------------------------------------------------------------------------------------------------------------------------- 53. Maintain integrity of tape library system x - - -------------------------------------------------------------------------------------------------------------------------------- 54. Monitor tape usage and resolve problems/exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 55. Maintain and monitor "foreign" tape library and resolve exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 56. Initialize new tapes x - - -------------------------------------------------------------------------------------------------------------------------------- 57. Establish off-site storage requirements x - - -------------------------------------------------------------------------------------------------------------------------------- 58. Coordinate off-site storage functions including logging, tracking, labeling, ordering, x receiving and sending tapes - - -------------------------------------------------------------------------------------------------------------------------------- 59. Approve third party supplier x - - -------------------------------------------------------------------------------------------------------------------------------- 60. Manage third party contract x - - -------------------------------------------------------------------------------------------------------------------------------- 61. Audit third party supplier annually x - - -------------------------------------------------------------------------------------------------------------------------------- 62. Provide a documented and consistent process for off-site data archiving for in scope x processing environments - - -------------------------------------------------------------------------------------------------------------------------------- 63. Inspect/audit third party supplier facility as allowed by facility and with proper notice. x - - -------------------------------------------------------------------------------------------------------------------------------- 64. BACKUPS - - -------------------------------------------------------------------------------------------------------------------------------- 65. Determination of what data is backed up and when x - - -------------------------------------------------------------------------------------------------------------------------------- 66. Determination of how long data is kept x - - -------------------------------------------------------------------------------------------------------------------------------- 67. Perform backup as scheduled x - - -------------------------------------------------------------------------------------------------------------------------------- 68. Maintain library of backups x - - -------------------------------------------------------------------------------------------------------------------------------- 69. Management of off-site storage x - - -------------------------------------------------------------------------------------------------------------------------------- 70. Restore system data as required x - - -------------------------------------------------------------------------------------------------------------------------------- 71. Restore user data as required x - - -------------------------------------------------------------------------------------------------------------------------------- 72. PHYSICAL SECURITY ADMINISTRATION - SUPPLIER FACILITY - - --------------------------------------------------------------------------------------------------------------------------------
17
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 73. Provide Loss Prevention audit x - - -------------------------------------------------------------------------------------------------------------------------------- 74. Implement reasonable and industry standard security x - - -------------------------------------------------------------------------------------------------------------------------------- 75. Provide administrative and technical support for physical security x - - -------------------------------------------------------------------------------------------------------------------------------- 76. Monitor and respond to alarm system x - - -------------------------------------------------------------------------------------------------------------------------------- 77. Provide emergency response and notification (Fire etc.) x - - -------------------------------------------------------------------------------------------------------------------------------- 78. DISASTER RECOVERY SUPPORT - - -------------------------------------------------------------------------------------------------------------------------------- 79. Develop, maintain and test disaster recovery plan and procedure manuals including third x party hot and cold site recovery plans for all services provided to Supplier - - -------------------------------------------------------------------------------------------------------------------------------- 80. Maintain capacity plan for disaster recovery for all services provided to Wards x - - -------------------------------------------------------------------------------------------------------------------------------- 81. Maintain an on-line document listing which platforms and applications are covered x - - -------------------------------------------------------------------------------------------------------------------------------- 82. Maintain third party contracts x - - -------------------------------------------------------------------------------------------------------------------------------- 83. Coordinate disaster recovery testing with Wards Account Mgr. x - - -------------------------------------------------------------------------------------------------------------------------------- 84. Participate in disaster recovery testing with Supplier and perform recovery tests for all x services provided to Wards - - -------------------------------------------------------------------------------------------------------------------------------- 85. Perform disaster recovery testing, resolve cause of failure and re-test until successful for x all services provided to Wards - - -------------------------------------------------------------------------------------------------------------------------------- 86. Report disaster recovery test results to Wards x - - -------------------------------------------------------------------------------------------------------------------------------- 87. Confirm test results to Wards x - - -------------------------------------------------------------------------------------------------------------------------------- 88. Implement recovery plan at hot site/cold site for all services provided to Wards x - - -------------------------------------------------------------------------------------------------------------------------------- 89. Provide requirements to prioritize recovery of data when disaster occurs x - - -------------------------------------------------------------------------------------------------------------------------------- 90. Restore Application Data Sets x - - -------------------------------------------------------------------------------------------------------------------------------- 91. Restore to normal operations in the event of a disaster within defined service levels x - - -------------------------------------------------------------------------------------------------------------------------------- 92. STRATEGY AND PLANNING - - -------------------------------------------------------------------------------------------------------------------------------- 93. Understand & document Ward's business requirements x x - - -------------------------------------------------------------------------------------------------------------------------------- 94. Assist with direction setting and updating of standards x - - -------------------------------------------------------------------------------------------------------------------------------- 95. Research emerging technology and propose effective solutions x - - -------------------------------------------------------------------------------------------------------------------------------- 96. Assist in developing Standard Operating Procedures (SOPs) x - - -------------------------------------------------------------------------------------------------------------------------------- 97. Provide support to convert from DFP to SMS and will support all planned activities such as x the Wards big 6 projects,Y2K moves(not code changes) and conversion to parallel sysplex commensurate with current level of support. - - -------------------------------------------------------------------------------------------------------------------------------- 98. CONTRACTS MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- 99. Ensure compliance with in-scope maintenance and warranty agreements x - - -------------------------------------------------------------------------------------------------------------------------------- 100. Negotiate new and/or renew agreements for in-scope services x - - -------------------------------------------------------------------------------------------------------------------------------- 101. Manage contract terms and conditions (e.g. expiration date) for in-scope services x - - -------------------------------------------------------------------------------------------------------------------------------- 102. Communicate contract provisions internally and to Wards, as needed for in-scope services x - - -------------------------------------------------------------------------------------------------------------------------------- 103. STATUS REPORTING AND MEETINGS - - -------------------------------------------------------------------------------------------------------------------------------- 104. Conduct 2 daily operational status meetings with Wards at 8:10am CST and 4:10pm CST to report x on operational, environmental and batch job completion status for the previous twenty-four hour period. - - -------------------------------------------------------------------------------------------------------------------------------- 105. Conduct a daily status call with Signature. x - - -------------------------------------------------------------------------------------------------------------------------------- 106. Prepare weekly status report x - - -------------------------------------------------------------------------------------------------------------------------------- 107. Conduct weekly status meetings x - - --------------------------------------------------------------------------------------------------------------------------------
18
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 108. Review and edit weekly status report and attend weekly meeting x - - -------------------------------------------------------------------------------------------------------------------------------- 109. Prepare monthly service level / performance reports x - - -------------------------------------------------------------------------------------------------------------------------------- 110. Analyze results of monthly reports and historical trends x - - -------------------------------------------------------------------------------------------------------------------------------- 111. Identify areas for improvement x - - -------------------------------------------------------------------------------------------------------------------------------- 112. Prepare management briefing for service level results x - - -------------------------------------------------------------------------------------------------------------------------------- 113. Conduct monthly management review meeting x - - -------------------------------------------------------------------------------------------------------------------------------- 114. Attend monthly management review x - - -------------------------------------------------------------------------------------------------------------------------------- 115. Implement action items resulting from, & agreed to during, mgmt review meeting. x - - -------------------------------------------------------------------------------------------------------------------------------- 116. Audit/request service level/performance and activity reports as needed x - - -------------------------------------------------------------------------------------------------------------------------------- 117. Approve new or changes to service level/performance reports as needed. x - - -------------------------------------------------------------------------------------------------------------------------------- 118. HUMAN RESOURCES - - -------------------------------------------------------------------------------------------------------------------------------- 119. Ensure adequate training & review of all personnel performing Supplier activities. x - - -------------------------------------------------------------------------------------------------------------------------------- 120. Implement corrective actions as needed x - - -------------------------------------------------------------------------------------------------------------------------------- 121. FACILITIES MANAGEMENT - SUPPLIER FACILITIES - - -------------------------------------------------------------------------------------------------------------------------------- 122. Plan & manage installation of computer & environmental equipment in data center. x - - -------------------------------------------------------------------------------------------------------------------------------- 123. Oversee equipment moves/ensures operation to specifications post-move x - - -------------------------------------------------------------------------------------------------------------------------------- 124. Maintain physical inventory and blueprint of all hardware and accurate cabling diagrams. x - - -------------------------------------------------------------------------------------------------------------------------------- 125. Monitor and maintain all data center resources located at Supplier's site(s) to assure x availability, including: HVAC, Power distribution units, uninterrupted power switch (UPS), and backup power systems. - - -------------------------------------------------------------------------------------------------------------------------------- 126. Administer contract services and other third party agreements (Environmental, security and x other companies) - - -------------------------------------------------------------------------------------------------------------------------------- 127. CAPACITY PLANNING - - -------------------------------------------------------------------------------------------------------------------------------- 128. Monitor system use and capacity, and resolve problems/exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 129. Forecast resource requirements x - - -------------------------------------------------------------------------------------------------------------------------------- 130. Ensure appropriate capacity to meet resource projections x - - -------------------------------------------------------------------------------------------------------------------------------- 131. Analyze workload capacity x - - -------------------------------------------------------------------------------------------------------------------------------- 132. Prepare and produce resource planning reports x - - -------------------------------------------------------------------------------------------------------------------------------- 133. Analyze and report resource trends x - - -------------------------------------------------------------------------------------------------------------------------------- 134. Make recommendations regarding resource consumption and trends x - - -------------------------------------------------------------------------------------------------------------------------------- 135. Report usage and resource capacity to Wards on a periodic basis x - - -------------------------------------------------------------------------------------------------------------------------------- 136. PERFORMANCE TUNING - - -------------------------------------------------------------------------------------------------------------------------------- 137. Conduct system performance tuning x - - -------------------------------------------------------------------------------------------------------------------------------- 138. Conduct application performance tuning x - - -------------------------------------------------------------------------------------------------------------------------------- 139. Provide performance reporting x - - -------------------------------------------------------------------------------------------------------------------------------- 140. Conduct application and hardware benchmarks, if required x - - -------------------------------------------------------------------------------------------------------------------------------- 141. Conduct system performance reviews x - - -------------------------------------------------------------------------------------------------------------------------------- 142. Measure and analyze system performance x - - -------------------------------------------------------------------------------------------------------------------------------- 143. Review system performance and request adjustments where deemed necessary x - - -------------------------------------------------------------------------------------------------------------------------------- 144. Provide strategies and suggestions on how to maximize mainframe performance by optimizing key x process variables and implement them upon Wards' approval.. - - --------------------------------------------------------------------------------------------------------------------------------
19
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 145. DASD MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- 146. Provide DASD space allocations within Wards available resources x x - - -------------------------------------------------------------------------------------------------------------------------------- 147. Provide user support in using DASD and DASD tools x - - -------------------------------------------------------------------------------------------------------------------------------- 148. Delete expired and uncataloged data sets in accordance with Wards approved procedures. x - - -------------------------------------------------------------------------------------------------------------------------------- 149. Move data to correct DASD pools, and follow up with user to change JCL x - - -------------------------------------------------------------------------------------------------------------------------------- 150. Maintain inventory of DASD hardware, volumes and esoterics (unit=) x - - -------------------------------------------------------------------------------------------------------------------------------- 151. Clean up old data from catalogs, tapes or DASD x - - -------------------------------------------------------------------------------------------------------------------------------- 152. Create DASD pools and manage data sets within these pools x - - -------------------------------------------------------------------------------------------------------------------------------- 153. Review and repair GDG bases x - - -------------------------------------------------------------------------------------------------------------------------------- 154. Define new ICF catalogs when needed x - - -------------------------------------------------------------------------------------------------------------------------------- 155. Perform ICF daily backup, and fix errors x - - -------------------------------------------------------------------------------------------------------------------------------- 156. Define dataset aliases x - - -------------------------------------------------------------------------------------------------------------------------------- 157. Monitor and control storage performance and resolve exceptions x - - -------------------------------------------------------------------------------------------------------------------------------- 158. Assign and initialize volumes x - - -------------------------------------------------------------------------------------------------------------------------------- 159. Determine file and volume placement x - - -------------------------------------------------------------------------------------------------------------------------------- 160. Set and maintain storage resource efficiency x - - -------------------------------------------------------------------------------------------------------------------------------- 161. Maintain established storage standards x - - -------------------------------------------------------------------------------------------------------------------------------- 162. Initiate requests for storage resource increases and decreases x - - -------------------------------------------------------------------------------------------------------------------------------- 163. Solicit Wards' directors and ad hoc users twice a year for Resource Usage requirements in the x x current year and in the coming year. - - -------------------------------------------------------------------------------------------------------------------------------- 164. Maintain space requirements according to Wards demand x - - -------------------------------------------------------------------------------------------------------------------------------- 165. Summarize the Resource Usage requirements and track DASD usage against these. x - - -------------------------------------------------------------------------------------------------------------------------------- 166. Perform data migration management x - - -------------------------------------------------------------------------------------------------------------------------------- 167. Manage HSM x - - -------------------------------------------------------------------------------------------------------------------------------- 168. DATA SECURITY ADMINISTRATION - - -------------------------------------------------------------------------------------------------------------------------------- 169. Define security policies x x - - -------------------------------------------------------------------------------------------------------------------------------- 170. Provide passwords and logon ids to security officer x - - -------------------------------------------------------------------------------------------------------------------------------- 171. Administer security databases (user privileges) x - - -------------------------------------------------------------------------------------------------------------------------------- 172. Implement reasonable and industry standard security audit recommendations x - - -------------------------------------------------------------------------------------------------------------------------------- 173. Enforce security standards x - - -------------------------------------------------------------------------------------------------------------------------------- 174. Create, document and maintain security schemas, profiles and procedures for all mainframe x resources as directed by Wards security policy. - - -------------------------------------------------------------------------------------------------------------------------------- 175. SECURITY SOFTWARE MAINTENANCE - - -------------------------------------------------------------------------------------------------------------------------------- 176. Software update and implementation x - - -------------------------------------------------------------------------------------------------------------------------------- 177. Participate and approve results of changes to security software x - - -------------------------------------------------------------------------------------------------------------------------------- 178. Administer login Ids and reset passwords for data access x - - -------------------------------------------------------------------------------------------------------------------------------- 179. Information security classification x - - -------------------------------------------------------------------------------------------------------------------------------- 180. SYSTEM SOFTWARE MAINTENANCE - - -------------------------------------------------------------------------------------------------------------------------------- 181. Provide all existing software at Wards' current level of maintenance in accordance with x Change Management procedures, as indicated in the Procedures Manual, and keep all software at a vendor supportable level. - - -------------------------------------------------------------------------------------------------------------------------------- 182. Accept all Wards' existing naming conventions (DSN's, PROC's, Esoterics and Work spaces), x Documentation and standards as indicated in the Procedures Manual. - - --------------------------------------------------------------------------------------------------------------------------------
20
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 183. Maintain or remove existing software exits/mods and will coordinate any changes with Wards. x - - -------------------------------------------------------------------------------------------------------------------------------- 184. Migration support to new versions of existing software in accordance with Change Management x as indicated in the Procedures Manual. - - -------------------------------------------------------------------------------------------------------------------------------- 185. Make configuration changes for Connect:Direct and Connect:Mail x - - -------------------------------------------------------------------------------------------------------------------------------- 186. Coordinate file transfers using Connect:Direct and Connect:Mailbox. x - - -------------------------------------------------------------------------------------------------------------------------------- 187. Research, advise, and manipulate flat files in support of Wards database administration and x applications development groups as directed by Wards. - - -------------------------------------------------------------------------------------------------------------------------------- 188. Install and maintain the system software environment for the software listed. x - - -------------------------------------------------------------------------------------------------------------------------------- 189. PROBLEM MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- 190. Manage first contact with Wards x - - -------------------------------------------------------------------------------------------------------------------------------- 191. Interact with Wards staff in a professional, efficient and service oriented manner, x consistent for every call - - -------------------------------------------------------------------------------------------------------------------------------- 192. Provide and maintain a single point of contact for the reporting and tracking of problems x - - -------------------------------------------------------------------------------------------------------------------------------- 193. Log call in a Problem Ticket, assign severity, and monitor progress of trouble calls. x - - -------------------------------------------------------------------------------------------------------------------------------- 194. Query the user to get all relevant information concerning the call, including, but not x limited to, user name, user location/department, user phone number, call severity, expected time of user call back from help desk and description of problem. - - -------------------------------------------------------------------------------------------------------------------------------- 195. Verify no trouble ticket already exists for a trouble call before opening a new ticket x - - -------------------------------------------------------------------------------------------------------------------------------- 196. Page relevant support personnel as designated by Procedures Manual. x - - -------------------------------------------------------------------------------------------------------------------------------- 197. Solve problem or route Problem Ticket to appropriate service provider. x - - -------------------------------------------------------------------------------------------------------------------------------- 198. Route tickets for all Wards IT Infrastructure hardware/break-fix or deskside software support x problems for resolution within established time frames by severity and service specifications in accordance with the Procedures Manual - - -------------------------------------------------------------------------------------------------------------------------------- 199. Provide status and updates on Problem Tickets at Wards' request or according to severity x guidelines. - - -------------------------------------------------------------------------------------------------------------------------------- 200. Contact user prior to closing the call for verification that the problem has been resolved, x that the call is complete, the user is satisfied and that the ticket can be closed - - -------------------------------------------------------------------------------------------------------------------------------- 201. Maintain and Report ACD statistics. x - - -------------------------------------------------------------------------------------------------------------------------------- 202. Escalate unresolved problems that exceed established timeframes to appropriate Wards and x Supplier management as necessary. - - -------------------------------------------------------------------------------------------------------------------------------- 203. Provide First Call Resolution within established time frames x - - -------------------------------------------------------------------------------------------------------------------------------- 204. Re-route misdirected Problem Tickets x - - -------------------------------------------------------------------------------------------------------------------------------- 205. Problem Escalation - Provide Level 2 and higher support to resolve problems(including 3rd x party provider, if needed) - - -------------------------------------------------------------------------------------------------------------------------------- 206. Maintain current status on open Problem Tickets x - - -------------------------------------------------------------------------------------------------------------------------------- 207. Report on problems within established time frames x - - -------------------------------------------------------------------------------------------------------------------------------- 208. Close Problem Ticket upon acceptable problem resolution as verified by Wards' user who opened x the call, providing sufficient detail for history of problem and later analysis of trends. - - -------------------------------------------------------------------------------------------------------------------------------- 209. Provide performance metric reports x - - -------------------------------------------------------------------------------------------------------------------------------- 210. Enforce security standards and guidelines x - - -------------------------------------------------------------------------------------------------------------------------------- 211. MONITORING - - -------------------------------------------------------------------------------------------------------------------------------- 212. Monitor the Satellite Network via check of the Baseband Equipment, upon start of shift, and x hourly check of Illuminet for down sites. - - -------------------------------------------------------------------------------------------------------------------------------- 213. Dispatch service upon confirmation of remote satellite equipment failure x - - --------------------------------------------------------------------------------------------------------------------------------
21
- - -------------------------------------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------------------------------------- No. Responsibility Description WARDS SUPPLIER - - -------------------------------------------------------------------------------------------------------------------------------- 214. Dispatch service upon confirmation of remote distribution center equipment failure x - - -------------------------------------------------------------------------------------------------------------------------------- 215. Monitor the Frame Relay Network in conjunction with MCI. x - - -------------------------------------------------------------------------------------------------------------------------------- 216. Monitor the Wards Server farm by confirming connectivity to each server via Managewise x console and contacting the necessary personnel in the event of a down/unreachable condition - - -------------------------------------------------------------------------------------------------------------------------------- 217. Monitor the Health and Status of IMS, including the tracking, recovery of stopped/abended x programs, transactions or databases. - - -------------------------------------------------------------------------------------------------------------------------------- 218. Clear the Omegamon monitor at each shift start-up to ensure accurate error detection x - - -------------------------------------------------------------------------------------------------------------------------------- 219. Monitor all file transfer applications. x - - -------------------------------------------------------------------------------------------------------------------------------- 220. Monitor health and status of Tandem system. x - - -------------------------------------------------------------------------------------------------------------------------------- 221. Monitor store connectivity, as well as related process, to the mainframe on an ongoing basis x - - -------------------------------------------------------------------------------------------------------------------------------- 222. Perform an orderly system shutdown/recovery of applications, NCP's and VTAM during a x regularly scheduled IPL or system outage - - -------------------------------------------------------------------------------------------------------------------------------- 223. Perform the nightly cycle (reboot) of the Thin Client servers as well as the Sysmgate server x - - -------------------------------------------------------------------------------------------------------------------------------- 224. Monitor outbound and inbound transmissions x - - -------------------------------------------------------------------------------------------------------------------------------- 225. ADMINISTRATION - - -------------------------------------------------------------------------------------------------------------------------------- 226. Administer login Ids and reset passwords for data access x - - -------------------------------------------------------------------------------------------------------------------------------- 227. Provide passwords and logon ids to Wards x - - -------------------------------------------------------------------------------------------------------------------------------- 228. Update Wards associate profile information in problem tracking system whenever inaccurate x profile information is discovered - - -------------------------------------------------------------------------------------------------------------------------------- 229. Prepare and distribute all reports including monthly service level/performance reports. x - - -------------------------------------------------------------------------------------------------------------------------------- 230. Attend monthly management review meeting x - - -------------------------------------------------------------------------------------------------------------------------------- 231. Provide data warehouse, (weekly), and media retrieval processing, (daily), on the Unix system x - - -------------------------------------------------------------------------------------------------------------------------------- 232. Audit service level, performance and activity reports as needed x - - -------------------------------------------------------------------------------------------------------------------------------- 233. Maintain an integrated problem management system for the centralized reporting and tracking x of problems under the Supplier's control - - -------------------------------------------------------------------------------------------------------------------------------- 234. Provide and maintain a method for proper escalation of problems within both the Supplier's x and Wards' management - - -------------------------------------------------------------------------------------------------------------------------------- 235. REPORTING - - -------------------------------------------------------------------------------------------------------------------------------- 236. Provide statistics and management reports to Wards on a regularly scheduled basis as detailed x in the Procedures Manual - - -------------------------------------------------------------------------------------------------------------------------------- 237. Provide ad hoc reporting capabilities or provide access to Wards' staff to the problem x tracking system - - -------------------------------------------------------------------------------------------------------------------------------- 238. Identify and communicate to Wards help desk areas for improvement and ideas to increase x account efficiencies - - -------------------------------------------------------------------------------------------------------------------------------- 239. Supplier will provide Wards with detail reporting and statistics on reported problems x - - -------------------------------------------------------------------------------------------------------------------------------- 240. Supplier will support new Wards initiatives as they may relate to reporting. x - - -------------------------------------------------------------------------------------------------------------------------------- 241. Supplier will provide a summary of all "Open" and "Closed" problems during the prior x twenty-four(24) hours on a daily basis - - -------------------------------------------------------------------------------------------------------------------------------- 242. Changes to Wards escalation documentation will be completed within twenty-four(24) hours of a x change by Supplier through written or electronic means - - -------------------------------------------------------------------------------------------------------------------------------- 243. Supplier will provide the Problem Management processes on a 24x7x365 basis x - - -------------------------------------------------------------------------------------------------------------------------------- 244. Supplier will report progress to Wards based on the Wards assigned level of severity x - - -------------------------------------------------------------------------------------------------------------------------------- 245. Supplier will develop and enhance procedures for problem escalation x - - -------------------------------------------------------------------------------------------------------------------------------- 246. Supplier will conduct root cause analysis and review high-impact problems to identify x x preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate - - --------------------------------------------------------------------------------------------------------------------------------
22
- - -------------------------------------------------------------------------------------------------- DATA CENTER SERVICES MANAGEMENT - - -------------------------------------------------------------------------------------------------- No. Responsibility Description Wards Supplier - - -------------------------------------------------------------------------------------------------- preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate - - --------------------------------------------------------------------------------------------------
GLOSSARY OF TERMINOLOGY ----------------------- WARDS USER All users of Wards IT services including but not COMMUNITY limited to Wards' associates, subcontractors, and Customers. CONTRACT Wards staff member responsible for Supplier ADMINISTRATOR relationship and interface. Removal of a device from the Wards computing environment. DE-INSTALLATION This includes returning the device to the lessor. PERIPHERAL Describes any accessory device used in conjunction with other hardware or software devices. PLOTTER Describes both individual and networked (-shared) plotters in the Wards computing environment. PRINTER Describes both individual and networked (-shared) printers in the Wards computing environment. PROBLEM Problem, deficiency, delay as reported by a member of the Wards user community. PROBLEM TRACKING Call Center database management and problem ticket SYSTEM tracking software. RELEASE MANAGEMENT Release Management is the management and structured release of desktop, server, and network software standards that are mutually determined by Wards and Supplier. SYSTEMS MANAGED STORAGE IBM product to manage storage currently managed by (SMS) DFP and HSM in the Wards environment. WARDS DISASTER RECOVERY The written plan for the recovery of Wards Mainframe PLAN hardware and software in the event of a disaster or catastrophe failure, as such plan may be modified by Wards from time to time. 23 ONLINE SERVICES:
REGION APPLICATION DAILY SATURDAY SUNDAY USERS @WPDB BAL CATALOG 06:45-21:15 06:45-21:15 06:45-21:15 25 @WPDC CHI CATALOG 07:45-22:15 07:45-22:15 07:45-22:15 25 @WPDK KAN CATALOG 06:00-23:59 06:00-23:59 06:00-23:59 25 @WPDO OAK CATALOG 09:45-23:59 09:45-23:59 09:45-23:59 25 @WPM1 EMAIL 05:00-24:00 05:00-24:00 05:00-24:00 50 @WPFN FINANCE 06:00-19:30 06:00-19:30 06:00-19:30 50 @IMSADC IMS 00:01-24:00 00:01-24:00 00:01-24:00 1 @IRLM1 IRLM 00:01-24:00 00:01-24:00 00:01-24:00 1 @WPLN MIPS 08:00-19:30 08:00-19:30 50 @WPMP MPCS 06:00-19:30 06:00-19:30 300 NETMASTR NETMASTER 00:01-24:00 00:01-24:00 00:01-24:00 1 @WPDS NEW DISTRIBUTION 00:01-24:00 00:01-24:00 00:01-24:00 1 @WP02 PEOPLE 06:00-19:30 06:00-19:30 06:30-19:30 100 @WPTR PHOENIX 07:00-17:30 07:00-17:30 07:00-17:30 15 @WPFN PMS 06:00-19:30 06:00-19:30 06:00-19:30 25 @WPPS PRODUCT SVR 04:00-21:00 04:00-21:00 04:00-21:00 100 @GE75B00 RAPID REPLENIS 00:01-24:00 00:01-24:00 00:01-24:00 1 RJP RJP 00:01-24:00 00:01-24:00 00:01-24:00 17 RMDSPRDx RMDS ARCHIVERS 00:00-24:00 00:00-24:00 00:00-24:00 6 DBNVTAMx RMDS VIEWERS 00:01-24:00 00:01-24:00 00:01-24:00 400 @PTFFIN SIG CAS 06:00-23:00 06:00-23:00 3 @SPMC SIG CMS DAY 07:00-17:00 07:00-16:00 07:00-17:00 423 @SPMC SIG CMS EVE 17:00-24:00 16:00-24:00 17:00-24:00 158 @SPMC SIG CMS NIGHT 00:00-07:00 00:00-07:00 00:00-07:00 35 @PTFFIN SIG FINANCE 07:00-18:00 43 @SPPB SIG PACBASE 00:00-24:00 00:00-24:00 00:00-24:00 1 @SPPL SIG PALM 07:00-18:00 07:00-18:00 152 TSO SIG TSO 00:00-24:00 00:00-24:00 00:00-24:00 98 @PTFFIN SIG XYCOR 06:00-19:00 12 @WPME SMS MERCH 06:00-24:00 06:00-24:00 06:00-24:00 200 RJP SNA RJP 00:01-24:00 00:01-24:00 00:01-24:00 17 @Wtxx TEST CICS 08:00-21:00 08:00-21:00 08:00-21:00 10 TSO TSO 00:01-24:00 00:01-24:00 00:01-24:00 300 xGF43B01 WFI 00:01-24:00 00:00-24:00 00:00-24:00 21
24 BATCH REPORTS:
APPLICATION DAILY SATURDAY SUNDAY COMMENTS ACCOUNTING 8:00 8:00 8:00 Mainframe UHB20* UHB45* 8:00 8:00 8:00 Generators UHB82* ASAP Stk Ldgr UHW50* ARTHUR 7:00 7:00 7:00 Rpts UJL* BTMS 7:00 7:00 Rpts UJJD* DBSS 7:00 7:00 7:00 Rpts UJE* FASHIONS 7:00 8:00 Rpts UJF* FAST FLOW 5:00 5:00 Scan Pits xGV80* 7:00 7:00 Load Reship UGF79* 7:30 7:30 Pick/Pack UGV26* 8:00 8:00 Cust. Pick Up xGV31* 8:00 8:00 Str. Rcpts UGV26N* FLASH SALES 7:00 7:00 7:00 Rpts UEE10P* IRIS 17:00 Payroll UIC62P* 6:00 Payroll-Mon UIC50P* 6:00 6:00 6:00 Rpts UIC50P* LABOR SCHED 8:00 8:00 8:00 Rpts UES90* UES57* MAPP 17:00 17:00 To MIAS UHP16* 8:00 Rpts UHP5* PAYROLL 8:00 Ldgr chks 2 x monthly UOT35PLE 8:00 TC checks weekly UOT35P00 MPCS 7:00 7:00 Rpts UHYD* NATIONAL PARTS 6:00 Rpts UDM* PMS 10:00 10:00 Rpts UHV* 7:00 Rpts-Mon UHVW* PPLU 7:00 Xmit to Stores UJJR77* PS3 8:00 Tape ship-Mon UDD9X* PVA 7:00 7:00 7:00 Rpts UHY* RAPID REPL 16:00 16:00 16:00 Input from SMS UGE60* RECEIVING 8:00 8:00 Rpts UGB30* 8:00 8:00 Update CIM xBG24* SALES/CASH 8:00 8:00 8:00 Rpts UEH04* ASAP ASAP ASAP Bank Recon UEH80* SALES AUDIT 6:00 6:00 6:00 Broadcast xEA25P* 3:00 3:00 3:00 Credit interface xER15P00 18:00 Comm interface xER60P00 12:00 12:00 12:00 Rpts xER50P00 SMS 8:00 8:00 Order Run UJGD* 8:00 8:00 Rpts UJG27* 9:00 9:00 Rpts UJR32*
25
APPLICATION DAILY SATURDAY SUNDAY COMMENTS TANDEM 10:00 10:00 10:00 From Tandem UEL12T* 10:00 10:00 10:00 To Tandem UEL12M*
CRITICAL BATCH REPORTS:
APPLICATION DAILY SATURDAY SUNDAY COMMENTS PMS 10:00 Tue-Sat Checks UHV8T* MAP 06:00 Monday Checks UHP26* BTDC 05:00 Sun-Fri Reports URK* IRIS 05:00 Mon-Sun Inbound UIC46P* 15:00 Mon-Fri Front End UIC41P* Labor Sched 04:00 Sat To Stores UESW07* PPLU 16:00 Wed Reports for stores UJJ87P02 Officer Reports 06:00 Mon-Fri Officer reports HW670202, HW670205, HW670211, HW670230, HW670242, HW670285, EE300206, EE300212, EE300213, EE300218
26 SIGNATURE ONLINE AND BATCH SERVICES:
BATCH ONLINE COMMENTS All reports P* CAS 07:00 Mon-Fri 07:00 - 21:00 Mon - Sat All reports P* CMS 07:00 Mon - Fri 24 hours All reports P* FINANCIAL 07:00 Mon - Fri 07:00 - 18:00 Mon - Fri All reports P* PALM 06:00 Mon - Fri 07:00 - 18:00 Mon - Fri All reports P* XYCOR 07:00 Mon - Fri 07:00 - 19:00 Mon - Fri
SIGNATURE TAPE HANDLING PROCEDURES: CLIENT TAPES 1.) Client tapes will be returned to originating shipping location in 30 days 2.) All returning tapes shipped by 17:00 will be at the clients location by 10:00 the next day when reasonably possible. 3.) Special extra cost shipments picked up at Supplier Data Center by 10:00 will be shipped to any point in the United States the same day when reasonably possible. 4.) Shipments required on weekends or holidays will be coordinated between Signature and the Supplier tape library administrator. 5.) All outgoing tapes will be confirmed with copies of the DRA (Data Release Authorization) to Signature by the next morning. CLIENT TAPES RECEIVED AT Supplier Data Center 1.) Tapes received by noon will be slotted by the Supplier Tape Library by 17:00 and faxed to Signature with slot number. 2.) Tapes received after noon will be slotted by noon the next day. 27 3.) All Signature client tapes will be managed by a dedicated Supplier tape librarian. Hours are 06:00 - 18:00 Monday thru Saturday. 4.) All Signature client/production tapes will be entered into Foreign Tape System. This is a Dbase program specifically designed for Signature. CDC now owns this program & is responsible for its maintenance. 28 WARDS DISASTER RECOVERY Summary - - -------------------------------- 1.) Wards has entered into an agreement with COMDISCO to provide hot- site facilities. The entire contract is available for review. COMDISCO will provide the highlights: a.) 1 9021-900 CPU (1024 megs main, 1024 megs expanded) 1 3090-600J CPU (512 megs main, 512 megs expanded) 192 3390-3 DASD 208 3380-K DASD 16 3490 Cart 48 3480 Cart 2 3420 Tape 1 IBM 3725 b.) 1 VAX 6320 c.) 1 K20000 Tandem Himalayas 16 Mosiac Disk Drives 1 5196 Cart drive d.) VSAT Hub 1 Out route 9 In Routes 9 Data port Clusters e.) Recovery Facility 75 stations 75 Phone sets 75 PC/LAN Stations 2 Servers f.) 1 7015-J40 RS/6000 w/256 mb of memory 24gb SCSI disk 2.) Wards has a contract Illinois. Contract delivery of with Data Base inc. calls for 7days a critical data Located in Bensenville, week, 365 days per files. Emergency year, pick-up and service will be provided within 2 hours. 29 ACCOUNT MANAGEMENT FUNCTIONS PART OF THE IN-SCOPE SERVICES TO BE PROVIDED BY SUPPLIER IS THE MANAGEMENT AND COORDINATION OF THE RELATIONSHIP BETWEEN THE WARDS APPLICATIONS DEVELOPMENT GROUP, THE WARDS END USER COMMUNITY, AND THE DATA CENTER. SUPPLIER WILL PERFORM THOSE FUNCTIONS CURRENTLY PERFORMED BY WARDS IS STAFF, INCLUDING THE FOLLOWING: 1) Supplier acts as interface between the data center and development organizations A) Coordinates changes / installs B) Provides limited technical guidance to development 2) Supplier acts as interface between the data center and the user community A) Coordinates changes to processing schedules B) Negotiaties level of service agreements between users/data center B) Initiates reprints on behalf of user C) Follows escalation policy per the Procedures Manual TECHNICAL SUPPORT - MISCELLANEOUS 1) Creates userids for all mainframe, Lotus Notes, UNIX, AS400 and E-Mail 2) Provides Level 1 support for all data security issues 3) Provides Level 1 support for all technical problems - MVS 4) Provides guidance in support of the disaster recovery effort 5) Manages the supply area function 30 EXHIBIT C CHARGES INITIAL MONTHLY PROCESSING CHARGE (MPC) FOR 61 MONTH TERM:............$1,012,500 A. The Initial MPC shall be reduced during months 1 through 9 following the Service Agreement Commencement Date by $222,222. In addition, the MPC for the first month following the Service Agreement Commencement Date shall be reduced to 50% of the Initial MPC, as adjusted, resulting in an MPC of $395,239 for month 1 and an MPC of $790,478 for months 2-9. The MPC for months 10-13 shall be $1,012,500. The MPC for months 14-61 shall be $977,500. The foregoing amounts are subject to adjustments as set forth below. For these purposes, month 1 shall be deemed to be the calendar month in which the Service Agreement Commencement Date occurs. If necessary, the MPC for month 1 and for the last month of the term of the Service Agreement shall be pro-rated appropriately. If month 1 is not a full calendar month, the MPC for month 1 will be $790,478 (pro rated appropriately), and the MPC for month 2 will be $395,239. The MPC and MPC adjustment amounts described above assume that month 1 is April 1999 (completion of migration in April 1999) with the intent that Wards is granted a $2,000,000 credit against the Initial MPC in calendar year 1999. Therefore, if the migration is not completed in April 1999 and month 1 is May 1999 or a subsequent month, then the Initial MPC reduction described above for months 1 through 9 will be adjusted to grant the $2,000,000 credit for month 1 and the remaining months of 1999 and the 50% reduction will be applied to the adjusted Initial MPC. Supplier will pay to Wards or equipment lessors up to $2.4 million for acquisition of hardware from Wards and assumption of equipment leases by Supplier. In addition, Supplier shall be responsible for all transfer, upgrade or other fees charged by third party vendors under Third Party Contracts being assigned to Supplier. The MPC includes amortization of one-time costs incurred by Supplier in connection with the migration of Wards' data center, as set forth on the attached schedule. Costs included in the amortization are software transfer and upgrade costs; mainframe hardware acquisition cost; mainframe lease obligations; network extension hardware and software costs for the network extension to Supplier's data center from Wards' corporate data center; and transition equipment and moves (AS/400, Tandem, RS/6000's, DEC/VAX, Data Switch, Front-end equipment, etc.). If Wards elects to renew this Service Agreement at the end of the sixty-one (61) month term, the Initial MPC should be reduced by $125,000. B. ALLOWANCES: 31 - An Initial Monthly Processing Allowance (MPA) of up to 2,330 CPU Hours (@ 103 MIPS) - Includes all EXCP's - Processing measured to 1/100 of CPU second - CPU Hours includes TCB and SRB hours - - An Initial Monthly DASD Allowance of up to 2.7 TB (dedicated) - - An Initial Monthly On-Site Tape Storage Allowance of up to 175,000 cartridges Definitions: EXCP: Execute Channel Program, the initiation of a physical input/output request to a computer processor channel subsystem and its associated results. SRB: Supervisor Request Block refers to that portion of the CPU time, as reported by SMF, which was consumed indirectly by Wards' application processing, such as the execution of supervisor and operating system support functions. TCB: Task Control Block refers to that portion of the CPU time, as reported by SMF, which was consumed directly by Wards' application processing. SMF: System Management Facility refers to the IBM operating system option which provides for the capture of system and application perfromance and resource consumption. This is the basis for accounting for the CPU time consumed by Wards' processing workloads. C. GROWTH PROVISION At any time, Wards may elect to increase its MPA, with corresponding percentage increases to be made to its DASD and Tape Allowances, upon 60 days' prior written notice to Supplier. The MPC will be increased by the product of 70% of the percentage increase over the Initial MPA times the Initial MPC. No minimum purchase of additional capacity is required. In the absence of such an advance election, Wards will be charged on a monthly basis for resource usage in excess of allowances then in effect as set forth below in paragraph E. D. DOWNSIZING PROVISION 32 (i) DOWNSIZING. The Target CPU Hour Consumption ("TCHC") at the inception of this Agreement is 2,330 CPU hours (103 MIPS) per month. If Wards' actual CPU consumption falls 15% below the TCHC (adjusted for PWR's as described in (ii) below), Wards may elect to recalculate the MPC. The MPC will be recalculated as follows: The percentage reduction in CPU consumption below the TCHC will be calculated. The MPC will be reduced by the product of 70% of the percentage reduction in CPU consumption times the Initial MPC. Whenever a recalculation is made, the MPA, the Monthly DASD Allowance and the Monthly On-Site Tape Storage Allowance will each be reduced by the percentage reduction in TCHC. Wards may request a recalculation of the MPC under this section with 90 days' prior written notice to Supplier. Subsequent recalculations shall require 90 days' prior written notice if the percentage reduction in CPU consumption exceeds 10% and 60 days' notice if less than 10%. A recalculation of the MPC may be requested up to once in each 12-month period of this Agreement starting with the fourteenth (14th) month after the Service Agreement Commencement Date. A recalculation of the MPC may not be requested if the reduction in CPU consumption results from the transfer of processing workload to another vendor. PLANNED WORKLOAD REDUCTIONS. In addition, planned workload reductions ("PWR's") are described in the Table set forth below, and will result in reductions to CPU, DASD and Tape Allowances and the MPC as set forth therein The TCHC shall be adjusted to equal such revised CPU allowance. If, however, such PWR's do not actually result in the projected decreases in CPU, DASD and Tape consumption set forth in the Table, the cost reductions will be decreased by the excess usage charges set forth in paragraph E. Such PWR's shall result only from the sale of Signature, the migration of the merchandising system to a mid-range environment or the completion of Y2K testing, as the case may be, and not from the transfer of such workload to another vendor. PWR's may be made at any time upon 60 day's notice to Supplier and shall not be counted as a recalculation of the MPC pursuant to paragraph (i). Starting with the fourteenth (14th) month after the Service Agreement Commencement Date, Supplier may provide Services from a shared environment (dedicated LPAR) following a PWR. Election of a PWR upon the occurrence of the sale of Signature, the migration of the merchandising system to a mid-range environment, or the completion of Y2K testing is at Wards' option and if Wards elects not to take a PWR in any such event, the available capacity may be used by Wards for normal processing volume growth subject to the other terms of this Exhibit C. WORKLOAD & COST REDUCTIONS MONTGOMERY WARD MAINFRAME WORKLOAD PLANNED TO BE REMOVED 33
------------------------------------------------------------------------------------------------------ WORKLOAD CPU DASD Tape Cost Reduction Reduction Reduction Reduction ------------------------------------------------------------------------------------------------------ 614 hours Signature (103) MIP) 526 GB 105,000 tapes $250,000 ------------------------------------------------------------------------------------------------------ Merchandising 235 hours System (103 MIP) 141 GB 4,300 tapes $ 55,500 ------------------------------------------------------------------------------------------------------ 74 hours Y2K (103 MIP) 373 GB 1,500 tapes $ 40,000 ------------------------------------------------------------------------------------------------------
E. EXCESS USAGE CHARGES - Wards agrees to pay $1,250 per CPU Hour (@ 103 MIPS) per month for all CPU hours in excess of the then current Monthly Processing Allowance. - Wards agrees to pay $390 per GB, per month, for all DASD in excess of the then current Monthly DASD Allowance. - Wards to pay $1.00 per tape, per month for all tapes or cartridges in excess of the then current Monthly On-Site Tape Storage Allowance. - The Parties agree that payment of Excess Usage Charges will be assessed monthly. F. PRINTING Laser printing will be charged at the rate of $11.50 per 1000 feet (with paper) or $9.50 per 1000 feet (without paper) and will be invoiced monthly. Charges include one delivery per business day in the Chicago metropolitan area. Additional deliveries or deliveries outside of the Chicago metropolitan area will be invoiced at cost plus 20% unless such additional deliveries are due to a failure to meet Service Levels. G. PASS - THROUGH EXPENSES All telecommunications line charges and associated channel extenders and front-end processors necessary for connectivity between Wards' corporate complex, Signature and Supplier's data center, shall be Pass-Through Expenses, to be invoiced monthly to Wards without mark-up. H. MINIMUM MPC During the Term of this Service Agreement, the MPC shall in no event be less than the Minimum MPC, calculated as follows: 34 MMPC = MINIMUM MPC PWR$ = REDUCTION TO THE MPC RESULTING FROM ACTUAL PWR'S, AS SET FORTH ABOVE. Months 1-13 - 1.0x($1,012,500 - PWR$) = MMPC MONTHS 14-25 - 0.8X($1,012,500 - PWR$) = MMPC MONTHS 26-61 - 0.6X($1,012,500 - PWR$) = MMPC I. TERMINATION CHARGES In the event of Termination for Convenience by Wards under Section 18.2(a) of the Master Agreement or Termination for Cause by Supplier under Section 18.1(e) of the Master Agreement, Wards shall reimburse Supplier for the remaining unamortized costs of Supplier related to the transfer and migration of Wards' data center and the provision of Services to Wards (reduced by the amount of any lease obligations assumed by Wards), in accordance with the attached schedule. Upon such payment, Supplier shall convey and assign any Transferred Equipment to Wards, and Wards shall assume any related equipment lease and software license obligations. DATA CENTER ONE-TIME COSTS AMORTIZATION --------------------------------------- SCHEDULE --------
Beginning Unamortized Principal Monthly Interest Principal Principal Month Balance Payment Expense Reduction Balance - - ------- ------------------ --------------- -------------- --------------- ----------------- 1 $6,167,777.00 $125,060.28 $54,728.24 $ 70,332.04 $6,097,444.96 2 $6,097,444.96 $125,060.28 $60,835.30 $ 64,224.98 $6,033,219.98 3 $6,033,219.98 $125,060.28 $60,271.95 $ 64,788.32 $5,968,431.66 4 $5,968,431.66 $125,060.28 $59,704.86 $ 65,355.42 $5,903,076.23 5 $5,903,076.23 $125,060.28 $59,133.98 $ 65,926.30 $5,837,149.93 6 $5,837,149.93 $125,060.28 $58,559.29 $ 66,500.99 $5,770,648.94 7 $5,770,648.94 $125,060.28 $57,980.78 $ 67,079.50 $5,703,569.44 8 $5,703,569.44 $125,060.28 $57,398.40 $ 67,661.88 $5,635,907.57 9 $5,635,907.57 $125,060.28 $56,812.15 $ 68,248.13 $5,567,659.44
35 10 $5,567,659.44 $125,060.28 $56,221.98 $ 68,838.29 $5,498,821.14 11 $5,498,821.14 $125,060.28 $55,627.89 $ 69,432.39 $5,429,388.75 12 $5,429,388.75 $125,060.28 $55,029.83 $ 70,030.45 $5,359,358.30 13 $5,359,358.30 $125,060.28 $54,427.78 $ 70,632.50 $5,288,725.80 14 $5,288,725.80 $125,060.28 $53,821.72 $ 71,238.56 $5,217,487.25 15 $5,217,487.25 $125,060.28 $53,211.62 $ 71,848.65 $5,145,638.59 16 $5,145,638.59 $125,060.28 $52,597.46 $ 72,462.82 $5,073,175.77 17 $5,073,175.77 $125,060.28 $51,979.20 $ 73,081.08 $5,000,094.69 18 $5,000,094.69 $125,060.28 $51,356.81 $ 73,703.47 $4,926,391.22 19 $4,926,391.22 $125,060.28 $50,730.28 $ 74,330.00 $4,852,061.22 20 $4,852,061.22 $125,060.28 $50,099.57 $ 74,960.71 $4,777,100.52 21 $4,777,100.52 $125,060.28 $49,464.66 $ 75,595.62 $4,701,504.89 22 $4,701,504.89 $125,060.28 $48,825.51 $ 76,234.77 $4,625,270.13 23 $4,625,270.13 $125,060.28 $48,182.10 $ 76,878.18 $4,548,391.95 24 $4,548,391.95 $125,060.28 $47,534.40 $ 77,525.87 $4,470,866.08 25 $4,470,866.08 $125,060.28 $46,882.39 $ 78,177.89 $4,142,688.19 26 $4,142,688.19 $125,060.28 $46,226.03 $ 78,834.25 $4,063,853.94 27 $4,063,853.94 $125,060.28 $45,565.29 $ 79,494.99 $3,984,358.95 28 $3,984,358.95 $125,060.28 $44,900.15 $ 80,160.13 $3,904,198.82 29 $3,904,198.82 $125,060.28 $44,230.57 $ 80,829.71 $3,823,369.11 30 $3,823,369.11 $125,060.28 $43,556.53 $ 81,503.75 $3,741,865.36 31 $3,741,865.36 $125,060.28 $42,878.00 $ 82,182.28 $3,659,683.08 32 $3,659,683.08 $125,060.28 $42,194.94 $ 82,865.34 $3,576,817.74 33 $3,576,817.74 $125,060.28 $41,507.33 $ 83,552.95 $3,493,264.79 34 $3,493,264.79 $125,060.28 $40,815.13 $ 84,245.15 $3,409,019.64 35 $3,409,019.64 $125,060.28 $40,118.32 $ 84,941.96 $3,324,077.68 36 $3,324,077.68 $125,060.28 $39,416.86 $ 85,643.41 $3,238,434.27 37 $3,238,434.27 $125,060.28 $38,710.73 $ 86,349.55 $2,902,084.72 38 $2,902,084.72 $125,060.28 $37,999.89 $ 87,060.39 $2,815,024.33 39 $2,815,024.33 $125,060.28 $37,284.31 $ 87,775.96 $2,727,248.37 40 $2,727,248.37 $125,060.28 $36,563.97 $ 88,496.31 $2,638,752.06 41 $2,638,752.06 $125,060.28 $35,838.81 $ 89,221.46 $2,549,530.59 42 $2,549,530.59 $125,060.28 $35,108.83 $ 89,951.45 $2,459,579.14 43 $2,459,579.14 $125,060.28 $34,373.98 $ 90,686.30 $2,368,892.84 44 $2,368,892.84 $125,060.28 $33,634.22 $ 91,426.05 $2,277,466.79 45 $2,277,466.79 $125,060.28 $32,889.54 $ 92,170.74 $2,185,296.05 46 $2,185,296.05 $125,060.28 $32,139.89 $ 92,920.38 $2,092,375.67 47 $2,092,375.67 $125,060.28 $31,385.25 $ 93,675.03 $1,998,700.64 48 $1,998,700.64 $125,060.28 $30,625.57 $ 94,434.71 $1,904,265.93 49 $1,904,265.93 $125,060.28 $29,860.83 $ 95,199.45 $1,809,066.48
36 50 $1,809,066.48 $125,060.28 $29,090.99 $ 95,969.29 $1,713,097.20 51 $1,713,097.20 $125,060.28 $28,316.02 $ 96,744.26 $1,616,352.94 52 $1,616,352.94 $125,060.28 $27,535.88 $ 97,524.39 $1,518,828.55 53 $1,518,828.55 $125,060.28 $26,750.55 $ 98,309.73 $1,420,518.82 54 $1,420,518.82 $125,060.28 $25,959.97 $ 99,100.31 $1,321,418.51 55 $1,321,418.51 $125,060.28 $25,164.13 $ 99,896.15 $1,221,522.36 56 $1,221,522.36 $125,060.28 $24,362.98 $100,697.30 $1,120,825.06 57 $1,120,825.06 $125,060.28 $23,556.49 $101,503.79 $1,019,321.26 58 $1,019,321.26 $125,060.28 $22,744.62 $102,315.66 $ 917,005.60 59 $ 917,005.60 $125,060.28 $21,927.34 $103,132.94 $ 813,872.66 60 $ 813,872.66 $125,060.28 $21,104.61 $103,955.67 $ 709,916.99
EXHIBIT D SERVICE LEVEL AGREEMENT FOR DATA CENTER SERVICES ------------------------ 37 TABLE OF CONTENTS
Page ---- I. GENERAL.................................................. 1 A. General B. Definitions.......................................... 1 C. Measurement.......................................... 2 D. Effective Date for Service Levels.................... 2 E. Revisions............................................ 2 F. Single Point of Contact.............................. 3 II. SERVICE LEVELS A. Definitions.......................................... 3 B. Service Level Measures............................... 3 C. Service Levels....................................... 3 III. SERVICE LEVEL CREDITS.................................... 4 A. Credits.............................................. 4 B. Method of Calculation................................ 4 C. Frequency Factor..................................... 5 D. Excused Performance Problem.......................... 5 E. Time Limit........................................... 5 IV. SERVICE LEVEL TERMINATION EVENTS......................... 6 A. Definition........................................... 6 B. Repeated Service Level Failures...................... 6 C. Repeated Critical Service Level Failures............. 7 D. Catastrophic Level of Service........................ 7 E. Qualification........................................ 8
SERVICE LEVEL AGREEMENT ----------------------- FOR DATA CENTER SERVICES ------------------------ I. GENERAL A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT. This Service Level Agreement is entered into under the Master Agreement for Information Technology Services between Acxiom Corporation ("Supplier") and Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and pertains to Service Agreement No. 2: Data Center Services entered into by Wards and Supplier. Any inconsistency between this Agreement, the Service Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of the Master Agreement. B. DEFINITIONS In this Service Level Agreement ("SLA"), the terms listed below shall have the indicated meanings. Other terms may be defined in other sections of this SLA. Terms used in this SLA without definition have the meanings ascribed to them in the Master Agreement or Service Agreement. 1. Service Level Measure - For any Service identified in this SLA, --------------------- the method specified in this SLA for quantitatively calculating Supplier's actual performance. The results of these calculations are compared with Service Levels to evaluate Supplier's compliance with Service Levels. 2. Service Levels - For any Service identified in this SLA, the -------------- required quantitative level or degree of performance by Supplier specified in this SLA as the "Service Level." The Service Levels are the minimally acceptable levels of service for the Services. Any failure to meet a Service Level is unacceptable and may constitute, depending upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 3. Increased Impact Level - For any Service identified in this SLA, ---------------------- the required quantitative level or degree of performance by Supplier specified in this SLA as the "Increased Impact Level." Any failure to meet an Increased Impact Level is unacceptable and may constitute, depending upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 39 4. Critical Service Levels - Service Levels associated with those ----------------------- Services that are most important to the conduct of Wards' operations, which are the subject of this Service Agreement. 5. Service Level Credits - The amounts which Wards shall have the --------------------- option, but not the obligation, to recover as liquidated damages, in lieu of any other monetary remedies Wards may have, each time Supplier fails to meet the Service Levels for any reason other than those specified in Section III.D of this SLA. Service Level Credits are calculated in the manner described in Section III of this SLA. 6. Service Level Termination Event - An occurrence or series of ------------------------------- occurrences of deficient performance by Supplier in performing the Services specified in this SLA as a "Service Level Termination Event." The occurrence of a Service Level Termination Event constitutes, depending upon the facts and circumstances, a material breach of Supplier's performance obligations under this Service Agreement and gives Wards the right to terminate this Service Agreement for cause. C. MEASUREMENT Unless otherwise stated in this SLA, each Service Level Measure shall be calculated on a complete calendar month basis. Performance results shall be measured and reported based on actual results with any exceptions for Excused Performance Problems reported separately. D. EFFECTIVE DATE FOR SERVICE LEVELS The Service Levels provided for in this SLA shall be applicable beginning effective on the Service Agreement Commencement Date. E. REVISIONS 1. From time to time during the Term, the Parties agree to negotiate in good faith to add, delete, or modify then-existing Service Level Measures, Service Levels, and Increased Impact Levels to reflect changes in Wards' business requirements or objectives. All such changes shall be adopted in the form of a signed written amendment to this SLA. 2. In the event that any applicable system or function is replaced during the Term by a comparable system or function, the Service Level Measure, Service Level, and Increased Impact Level for such replacement system or function shall, to the extent reasonably practicable (i) be defined during the first 30 days of such replacement, and (ii) must be at least equivalent 40 to the then-existing Service Level Measure, Service Level, and Increased Impact Level for the replaced system or function (assuming the replacement system is capable of delivering the same Service Levels as the replaced system). 3. At all times during the Term, Supplier shall provide the Services in a manner that meets or exceeds the then-existing Service Levels. The remedies for failure to do so shall include the remedies defined in this SLA, the Service Agreement, and the Master Agreement. F. SINGLE POINT OF CONTACT Regardless of whether any failure by Supplier to meet a Service Level is attributable to Supplier or an Excused Performance Problem, Supplier shall provide a single point of contact to address resolution of such failure and shall act promptly to address the problem causing the failure. Unless otherwise agreed by Wards, the Supplier Project Executive or his/her designee, shall be the Supplier's single point of contact. II. SERVICE LEVELS A. DEFINITIONS Certain technical definitions are included in the Glossary of Terminology included as part of Exhibit B to this Service Agreement. B. SERVICE LEVEL MEASURES ONLINE AVAILABILITY -------------------- OBJECTIVE: Monitoring Online Services defined in Exhibit B (the "Online Services") availability and performance according to defined targets. Starting and stopping defined Online Services according to specified service availability schedules. Initiating Problem Management procedures to rectify any performance or availability failures. DEFINITION: To be available, each ONLINE SERVICES must be: (1) Accessible and usable to Wards User Community according to Wards established schedule indicated in Schedule ONLINE SERVICES set forth in Exhibit B; (2) Minimum required files open and accessible to each ONLINE SERVICES as documented in the Procedures Manual; (3) Availability is calculated utilizing ONLINE SERVICES as: WEIGHT is the total number of users per application as set forth in Exhibit B(Online Services). 41 WEIGHTED MINUTES SCHEDULED is defined as the number of users of an application, as indicated in Online Services, times the number of minutes that application is scheduled to be available as indicated in Online Services. WEIGHTED MINUTES LOST is defined as the number of users of an application who are impacted by the loss of online usage of that application, as indicated in Online Services, and is calculated as (which will not include calculation of files unavailable when entire region is down ): (Minutes Scheduled for that application-Region Minutes Down for that -------------------------------------------------------------------- application -File Unavailable Minutes for that application)* Weight ------------------------------------------------------------------- for that application -------------------- LEVEL OF SERVICE CALCULATION is the sum for all applications of: ----------------------------- (Weighted Minutes Scheduled)-(Weighted minutes Lost) ---------------------------------------------------- Weighted Minutes Scheduled METHOD: Monitoring all Online Services to ensure their performance and availability remains within stated service levels.. The Supplier will provide console or other appropriate management processes to control the Wards mainframe environments within their control. Service Level:
---------------------------------------------------------------------- Values Metrics ---------------------------------------------------------------------- Service Level - 99.5% of all Online Services have been maintained to Wards schedules. ---------------------------------------------------------------------- Increased Impact - Less than 99.0% of all Online Services have been maintained to Wards schedules. ----------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Associates, applications, distribution and stores. RESPONSIBILITY: Supplier PERIOD: As stated in ONLINE SERVICES in Exhibit B REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I BATCH REPORTS AVAILABILITY -------------------------- 42 OBJECTIVE: Monitoring Batch Reports availability and performance according to defined targets. Ensuring availability, electronically or otherwise of defined Batch Reports according to the service schedules stated in Exhibit B. Initiating Problem Management procedures to rectify any performance or availability failures. Certain Applications have been designated as critical to Wards' business and are included in the Table of Critical Service Levels under Section II.C. of this Service Level Agreement. The Critical Services Levels have batch reports Service Levels that are calculated in the same manner as provided below. DEFINITION: The Suppliers processes for Batch Reports monitoring and control within the Wards mainframe processing environments. METHOD: Monitoring all Batch Reports to ensure their availability remains within stated service levels. The Supplier will provide batch or other appropriate management processes to control the Wards mainframe environments within their control. SERVICE LEVEL:
----------------------------------------------------------- Values Metrics ----------------------------------------------------------- Service Level - 99.7% of all Batch Reports have been produced and made available according to Ward's schedules as outlined in Exhibit B. ----------------------------------------------------------- Increased Impact - Less than 99.5% of all Batch Reports have been produced and made available according to Ward's schedules. ------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Associates, applications, distribution and stores. RESPONSIBILITY: Supplier PERIOD: As stated in BATCH SERVICES in Exhibit B REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I CRITICAL BATCH REPORTS AVAILABILITY ----------------------------------- OBJECTIVE: Monitoring Critical Batch Reports availability according to defined targets. Ensuring availability, electronically or otherwise of defined Critical Batch Reports according to the service schedules stated in Exhibit B. Initiating Problem Management procedures to rectify any availability failures. DEFINITION: The Suppliers processes for Critical Batch Reports monitoring and control within the Wards mainframe processing environments. 43 METHOD: Monitoring all Critical Batch Reports to ensure their availability remains within stated service levels. The Supplier will provide batch or other appropriate management processes to control the Wards mainframe environments within their control. SERVICE LEVEL:
--------------------------------------------------------------- Values Metrics --------------------------------------------------------------- Service Level - No more than two (2) Critical Batch Reports have been produced or made available late according to Ward's schedules as outlined in Exhibit B . --------------------------------------------------------------- Increased Impact - More than three (3) Critical Batch Reports have been produced or made available late according to Ward's schedules as outlined in Exhibit B . ---------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Associates, applications, distribution and stores. RESPONSIBILITY: Supplier PERIOD: As stated in CRITICAL BATCH SERVICES in Exhibit B REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I SIGNATURE ONLINE AVAILABILITY ------------------------------ OBJECTIVE: Monitoring SIGNATURE ONLINE SERVICES availability and performance according to defined targets. Starting and stopping defined Signature Online Services according to specified service availability schedules. Initiating Problem Management procedures to rectify any performance or availability failures. DEFINITION: To be available, each SIGNATURE ONLINE SERVICES must be: (1) Accessible and usable to Wards User Community according to Wards established schedule indicated in the schedule of SIGNATURE ONLINE SERVICES set forth in Exhibit B; (2) Minimum required files open and accessible to each SIGNATURE ONLINE SERVICES as directed by Wards; (3) Availability is calculated utilizing SIGNATURE ONLINE SERVICES as: WEIGHT is the total number of users per application as set forth in Exhibit B(Signature Online and Batch Services). WEIGHTED MINUTES SCHEDULED is defined as the number of users of an application, as indicated in Signature Online and Batch Services, times the number of minutes that 44 application is scheduled to be available as indicated in Signature Online and Batch Services. WEIGHTED MINUTES LOST is defined as the number of users of an application who are impacted by the loss of online usage of that application, as indicated in Signature Online and Batch Services, and is calculated as (which will not include calculation of files unavailable when entire region is down): (Minutes Scheduled for that application-Region Minutes Down ----------------------------------------------------------- for that application -File Unavailable Minutes for that ------------------------------------------------------- application)* Weight for that application ----------------------------------------- LEVEL OF SERVICE CALCULATION is the sum for all applications ---------------------------- of: (Weighted Minutes Scheduled)-(Weighted minutes Lost) ---------------------------------------------------- Weighted Minutes Scheduled METHOD: Monitoring all Signature Online Services to ensure their performance and availability remains within the stated service levels. The Supplier will provide console or other appropriate management processes to control the Wards mainframe environments within their control. SERVICE LEVEL:
-------------------------------------------------------------- Values Metrics -------------------------------------------------------------- Service Level - 99.7% of all Signature Online Services have been maintained to Wards schedules. ------------------------------------------------------------- Increased Impact - Less than 99.5% of all Signature Online Services have been maintained to Wards schedules. ------------------------------------------------------------
IMPACT: High AFFECTED AREA: Ward's service level obligations to Signature RESPONSIBILITY: Supplier PERIOD: As stated in SIGNATURE ONLINE SERVICES in Exhibit B REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I 45 SIGNATURE TAPE HANDLING ACCURACY -------------------------------- OBJECTIVE: Ensuring accurate processing of Signature inbound tapes and accurate distribution of Signature outbound tapes. Initiating Problem Management procedures to rectify any tape handling failures. DEFINITION: The Suppliers processes for Signature Tape processing, distribution and control within the Wards mainframe processing environments. METHOD: Monitoring all SIGNATURE TAPE HANDLING to ensure their processing, distribution and control remains within specified tolerances. The Supplier will provide tape management processes to control the Signature Tape Handling within their control. MEASUREMENT PERIOD: Monthly SERVICE LEVEL:
------------------------------------------------------- Values Metrics ------------------------------------------------------- Service Level - More than one (1) Signature tape sent to the wrong recipient every rolling six (6) months. ------------------------------------------------------- Increased Impact - More than three (3) Signature tapes sent to the wrong recipient every rolling six (6) months. -------------------------------------------------------
IMPACT: High AFFECTED AREA: Ward's service level obligations to Signature. RESPONSIBILITY: Supplier PERIOD: 24 hours/day, 7 days/week RESOURCE RANGE: 150 Tapes every six months. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I SIGNATURE TAPE TURNAROUND TIME ------------------------------ OBJECTIVE: Ensuring processing of Signature inbound tapes and Signature outbound tapes are performed in accordance with the Signature Tape Handling procedures. Initiating Problem Management procedures to rectify any tape handling failures. 46 DEFINITION: Signature Tape Turnaround Time is defined as the time from which a Signature inbound tape is received at the data center until it is made available for use. All inbound Signature tapes are to be hung in the tape library within twenty-four (24) hours upon receipt at the data center. METHOD: Monitoring all Signature Tape Handling to ensure turnaround time remains within specified tolerances. The Supplier will provide tape management processes to control the Signature Tape Handling within their control. SERVICE LEVEL:
------------------------------------------------------------------ Values Metrics ----------------------------------------------------------------- Service Level - Supplier will be allowed no more than one (1) Signature tape not available within twenty-four (24) hours of receipt at Supplier's data center for use every rolling six (6) months. ----------------------------------------------------------------- Increased Impact - Supplier will be allowed no more than three (3) Signature tapes not available for use within twenty-four (24) hours of receipt at Supplier's data center, every rolling six (6) months. -----------------------------------------------------------------
IMPACT: High AFFECTED AREA: Ward's service level obligations to Signature. RESPONSIBILITY: Supplier PERIOD: 24 hours/day, 7 days/week RESOURCE RANGE: 150 Tapes every six months. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I SIGNATURE SCHEDULED DOWNTIME ---------------------------- OBJECTIVE: To provide for a minimum amount of required Signature scheduled mainframe downtime for each mainframe. DEFINITION: Signature scheduled downtime is the number of hours a Signature computer system is scheduled down in a given time period. 47 METHOD: The Supplier provided change management system will be used to report on all requests for Signature scheduled downtime. MEASURE PERIOD: Monthly SERVICE LEVEL:
----------------------------------------------------------- Values Metrics ----------------------------------------------------------- Service Level - The number of hours that any Signature mainframe is scheduled down will not exceed six (6) hours per month. ----------------------------------------------------------- Increased Impact - The number of hours that any Signature mainframe is scheduled down will not exceed seven (7) hours per month. -----------------------------------------------------------
IMPACT: High AFFECTED AREA: Ward's level of service obligations to Signature. RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 7x24x365. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-II DATA BACKUP, ARCHIVING, AND RESTORATION --------------------------------------- Objective: To ensure proper safeguards are being taken by the Supplier to protect critical Wards data with consistent, reliable, and documented process(es) for management of data backups, data archives, and off-site data rotation across the Wards environments under the Supplier's span of control. DEFINITION: The Suppliers processes for Data Backup and Archiving of critical data within the Wards environments. Ensuring the Supplier processes are backing up or archiving these critical files according to Wards specifications. METHOD: The Supplier will document and maintain the location of critical Wards data and the process used to backup and restore this data if required. The Supplier will provide appropriate tools and processes for managing and measuring compliance with established Data Backup and Archiving guidelines within their control. 48
SERVICE LEVEL: ---------------------------------------------------------------------------------------- VALUES METRICS ---------------------------------------------------------------------------------------- Service Level - 99.9% of all critical data is being backed up and stored as required according to Wards specifications. ---------------------------------------------------------------------------------------- Increased Impact - Less than 99.2% of all critical is being backed up and stored as required according to Wards specifications. ----------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Offices & Associates, Supplier's Operational Data Restoration Interface Plan to Wards Disaster Recovery Plan RESPONSIBILITY: Supplier PERIOD: Monthly REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I DISASTER RECOVERY SERVICES -------------------------- OBJECTIVE: To provide Mainframe Disaster Recovery services for the Wards Disaster Recovery Plan, in the event of a declared disaster to any site providing services for or to Wards by Supplier. The target is to provide on-going MVS services to Wards within 24 hours of a declared disaster. DEFINITION: A disaster is declared when Supplier services to Wards are interrupted due to significant equipment, computer or network related failure longer than a 24 hour period. METHOD: A declared disaster will be announced by the Supplier Contract Manager within 24 hours of the outage.
SERVICE LEVEL: ---------------------------------------------------------------------------------------- VALUES METRICS ---------------------------------------------------------------------------------------- Service Level Complete Operating System and sub-system restoration of Supplier services to Wards within twenty-four (24) hours of declaration of disaster or as specified by the Wards disaster recovery plan. ---------------------------------------------------------------------------------------- Increased Impact Complete Operating System and sub-system restoration of Supplier services to Wards within thirty- ----------------------------------------------------------------------------------------
49 ---------------------------------------------------------------------------------------- six (36) hours of declaration of disaster or as specified by the Wards disaster recovery plan. ----------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards RESPONSIBILITY: Supplier PERIOD: Daily Hours of Operation: N/A REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I DISASTER RECOVERY TEST ---------------------- OBJECTIVE: To ensure the restoration of Wards' mainframe processing in the event of a disaster, in accordance with the Wards' Disaster Recovery Plan. DEFINITION: The Supplier will define and demonstrate the accuracy of the documented mainframe disaster recovery plan, which is accomplished by conducting annual mainframe disaster recovery testing. METHOD: Complete restoration of mainframe operating system and sub- systems at Supplier hot-site location.
SERVICE LEVEL: --------------------------------------------------------------------------------- VALUES Metrics --------------------------------------------------------------------------------- Service Level - 90% of all scheduled activities are completed according to the Wards Disaster Recovery Test Plan. --------------------------------------------------------------------------------- Increased Impact - Less than 80% of all scheduled activities are completed according to the Wards Disaster Recovery Test Plan. ---------------------------------------------------------------------------------
IMPACT: Low AFFECTED AREA: All Wards' stores, offices, automobile centers, POS locations, and data center RESPONSIBILITY: Supplier PERIOD: The Supplier on an annual basis will conduct a disaster recovery test with selected Wards entities recovering specific operations in accordance with the Wards disaster recovery plan. The Supplier will report on the success of each 50 test within one week of the completion of a test with a designated Wards' representative. RESOURCE RANGE: This service level is valid as long as Wards participates in the disaster recovery planning and testing process as defined in the Wards Disaster Recovery Plan and as mutually agreed to by Supplier and Wards REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-III SERVICE SPECIFICATIONS FOR SYSTEM MANAGEMENT - - -------------------------------------------- REQUEST TIME TO COMPLETE ------------------------ OBJECTIVE: To insure that pre-defined mainframe environment modification requests are completed in an acceptable amount of time as mutually agreed upon by Wards and Supplier. DEFINITION: Mainframe environment modification requests are those mainframe management functions performed by the Supplier in routine support of the mainframe processing environment as requested by Wards. METHOD: The Supplier provided change management system or Supplier provided help desk problem tracking system will be used to calculate time to complete.
SERVICE LEVEL: ----------------------------------------------------------------------------------------------- VALUES METRICS ----------------------------------------------------------------------------------------------- Service Level 95% of requests completed by target date as specified in the Procedures Manual or as mutually agreed upon by Wards and Supplier. ----------------------------------------------------------------------------------------------- Increased Impact Less than 90% of requests completed by target date as specified in the Procedures Manual or as mutually agreed upon by Wards and Supplier. -----------------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards associates. RESPONSIBILITY: Supplier PERIOD: Monthly 51 HOURS OF OPERATION: 7x24x365. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - I RESPONSE TIME ------------- OBJECTIVE: Supplier will provide acceptable response times for end users. DEFINITION: The first component of response time for the mainframe on-line environment is measured by the percentage of transactions that complete within the defined time limits (internally measured elapsed time, which includes CICS and first period TSO). METHOD: Data Capture: The Supplier will use Supplier provided manual records, job logs, systems logs, and any other tools available to determine the response time Measurement Interval: At least once per period or by exception (i.e. missing a threshold). Supplier will provide monthly summary reports to Wards Management for review.
SERVICE LEVEL: -------------------------------------------------------------------------------------------------- DESCRIPTION DATA POINTS -------------------------------------------------------------------------------------------------- Service Level 98.5% of internal mainframe transactions are completed in less than one (1) second. -------------------------------------------------------------------------------------------------- Increased Impact Less than 98% of internal mainframe transactions are completed in less than one (1) second --------------------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Offices and Associates RESPONSIBILITY: Service Performance: Supplier provides all services related to this Service Level. Compliance Management: Supplier provides calculation, reporting and analysis for this Service Level PERIOD: Monthly HOURS OF OPERATION: 7 x 24 x 365. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I 52 SERVICE SPECIFICATIONS FOR HELP DESK - - ------------------------------------ FIRST CALL RESOLUTION --------------------- OBJECTIVE: To ensure the high quality and immediate resolution of user calls on the first attempt to the Supplier's Help Desk group. DEFINITION: The opening and closing of a problem ticket by the Supplier's Help Desk when an Wards user places a call. METHOD: Supplier will track and report first call resolution statistics via its problem ticket system, and will report results and resolution improvement programs to Wards monthly.
SERVICE LEVEL: ---------------------------------------------------------------------------------------------- VALUES METRICS ---------------------------------------------------------------------------------------------- Service Level 75% or more calls are resolved while user is on the initial phone call within 10 minutes. ---------------------------------------------------------------------------------------------- Increased Impact Less than 65% calls are resolved while user is on the initial phone call within 10 minutes. ----------------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards associates. RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 7x24x365. RESOURCE RANGE: This service level is valid within a range of 12,000 calls per period. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type -III ANSWER TIME ----------- OBJECTIVE: To allow Wards personnel the ability to place calls to the Supplier's Help Desk site during normal, high volume hours (Peak) without an unreasonable number of rings before the call is answered by a live agent. DEFINITION: Answer time is the number of seconds it takes a Wards associate or representative of Wards to connect with the Supplier. 53 METHOD: Answer time will be measured in the number of seconds it takes for a Wards associate or a representative of Wards to be connected to the Supplier's representative. Reporting will be tied to an automated Service Level monitoring and tracking system.
SERVICE LEVEL: ---------------------------------------------------------------------------------------------- VALUES METRICS ---------------------------------------------------------------------------------------------- Service Level 93% of total calls answered by a live agent in less than 30 seconds ---------------------------------------------------------------------------------------------- Increased Impact Less than 90% of total calls are answered by a live agent in less than 30 seconds. ----------------------------------------------------------------------------------------------
IMPACT: Medium AFFECTED AREA: Wards associates. RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 7x24x365. RESOURCE RANGE: This service level is valid within a range of 12,000 calls per period. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type -II CALL ABANDONMENT ---------------- OBJECTIVE: To insure Wards user calls to Supplier's Help Desk group for problem reporting and resolution are answered by the Supplier prior to the user giving up on reporting the problem. This is referred to as call abandonment rate. DEFINITION: The call abandonment rate is the proportion of calls that come into the Supplier's Help Desk which either hang up or are disconnected before the Supplier answers the phone. METHOD: The statistics for measuring call abandonment rates are captured via an ACD system. The Supplier will utilize statistics generated by the ACD to produce reporting that allows for the monitoring and tracking of the Supplier's compliance with this service specification.
SERVICE LEVEL: ---------------------------------------------------------------------------------------------- VALUES METRICS ---------------------------------------------------------------------------------------------- Service Level Call abandonment rate will not exceed 5% of total received calls during any period ---------------------------------------------------------------------------------------------- Increased Impact Call abandonment rate exceeds 8% of received calls during any period ----------------------------------------------------------------------------------------------
54 IMPACT: Low AFFECTED AREA: Wards associates. RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 7x24x365. RESOURCE RANGE: This service level will be valid within a range of 12,000 calls per period. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type -III HELP DESK SATISFACTION SURVEY ----------------------------- OBJECTIVE: To ensure the service levels measure those criteria which impact the Wards associates by testing to determine whether end user feedback is consistent with the reported performance against service levels. The satisfaction survey will measure the combined efforts of the Supplier and Wards to deliver a consistently high level of end support for Wards IS services. DEFINITION: The Satisfaction Survey will rate Wards user satisfaction by service category. A successful quality review is based upon the degree of correlation between the user community's perceptions of service performance and actual service level results. METHOD: Data Capture: The Wards Satisfaction Survey will be conducted at least annually. The Satisfaction Survey will be based on a scale of 1-5, with 1 being worst and 5 being best level of satisfaction. The results will be calculated by the Supplier and audited by Wards for accuracy. Measurement Intervals shall be at least once per period or at Wards's discretion.
THRESHOLD: ----------------------------------------------------------------------------------------------- VALUES METRICS ----------------------------------------------------------------------------------------------- Service Level The total average score for the Wards Satisfaction Survey is 4.01 or higher. ----------------------------------------------------------------------------------------------- Increased Impact The total average score for the Wards Satisfaction Survey is less than 4.0 -----------------------------------------------------------------------------------------------
IMPACT: Medium AFFECTED AREA: Wards associates. RESPONSIBILITY: Service Performance: The Supplier is responsible for providing satisfactory service to all end users. Compliance Management: The Supplier will provide the calculations, reporting and analysis for this Service Level. 55 PERIOD: At least annually HOURS OF OPERATION: N/A RESOURCE RANGE: N/A REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type -III C. SERVICE LEVELS The Service Levels are identified in the following table and in the Table for Critical Service Levels. Each Service Level is assigned a Severity Weight in either the following table or in this table for Critical Service Levels, which is used in the calculation of the Service Level Credits. The Severity Weights are expressed as percentages, totaling 100% for all Service Levels, and approximate the relative severity of the impact on Wards operations of failures to meet the respective Service Levels. The parties acknowledge that these percentages are approximations of probable severity and relative importance and do not limit Wards' right to contend that one or more failures to meet one or more of the Service Levels may constitute a material breach of the Agreement. Upon 60 days advance notice to Supplier, Wards may adjust the Severity Weights of the respective Service Levels as Wards deems appropriate so long as the total of such percentages does not exceed 100%.
- - ----------------------------------------------------------------------------------------------------------- SERVICE LEVEL SERVICE SERVICE LEVEL DESCRIPTION MEASUREMENT SEVERITY WEIGHT LEVEL INCREASED STANDARD ID IMPACT LEVEL - - ----------------------------------------------------------------------------------------------------------- ONLINE SERVICES ONLINE 15 99.5% of all Less than AVAILABILITY Online 99.0% of all Services have Online been Services have maintained to been Wards maintained to schedules. Wards schedules. - - ----------------------------------------------------------------------------------------------------------- BATCH REPORTS BATCH REPORTS 5 99.7% of all Less than AVAILABILITY Batch Reports 99.5% of all have been Batch Reports produced and have been made available produced and according to made available Ward's according to Ward's - - -----------------------------------------------------------------------------------------------------------
56
- - ----------------------------------------------------------------------------------------------------------- schedules. schedules. - - ----------------------------------------------------------------------------------------------------------- CRITICAL BATCH BATCH REPORTS 30 No more than More than REPORTS AVAILABILITY two (2) three (3) Critical Batch Critical Batch Reports have Reports have been produced been produced or made or made available late available late according to according to Ward's Ward's schedules as schedules as outlined in outlined in Exhibit B. Exhibit B. - - ----------------------------------------------------------------------------------------------------------- SIGNATURE ONLINE SIGNATURE 15 99.7% of all Less than SERVICES ONLINE Signature 99.5% of all AVAILABILITY Online Signature Services have Online been Services have maintained to been Wards maintained to schedules. Wards schedules. - - ----------------------------------------------------------------------------------------------------------- SIGNATURE TAPE 5 Supplier will Supplier will HANDLING be allowed no be allowed no ACCURACY more than one more than (1) Signature three (3) tape sent to Signature the wrong tapes sent to recipient the wrong every rolling recipient six (6) months. every rolling six (6) months. - - ----------------------------------------------------------------------------------------------------------- SIGNATURE TAPE 3 Supplier will Supplier will TURNAROUND TIME be allowed no be allowed no more than one more than (1) Signature three (3) tape not Signature available tapes not within available for twenty-four use within (24) hours of twenty-four receipt at (24) hours of Supplier's receipt at data center Supplier's for use data center, every rolling six (6) - - -----------------------------------------------------------------------------------------------------------
57 - - ----------------------------------------------------------------------------------------------------------- every months. rolling six (6) months. - - ----------------------------------------------------------------------------------------------------------- SIGNATURE 3 The number of The number of SCHEDULED hours that any hours that any DOWNTIME Signature Signature mainframe is mainframe is scheduled down scheduled down will not will not exceed six (6) exceed seven hours per (7) hours per month. month. - - ----------------------------------------------------------------------------------------------------------- DATA BACKUP, 2 99.9% of all Less than ARCHIVING AND critical data 99.2% of all RESTORATION is being critical is backed up and being backed stored as up and stored required as required according to according to Wards Wards specifications. specifications. - - ----------------------------------------------------------------------------------------------------------- DISASTER Complete Complete RECOVERY Operating Operating SERVICES System and System and sub-system sub-system restoration of restoration of Supplier Supplier services to services to Wards within Wards within twenty-four thirty-six (24) hours of (36) hours of declaration of declaration of disaster or as disaster or as specified by specified by the Wards the Wards disaster disaster recovery recovery plan. - - -------------------------------------------------------------------------------------------------------------------
58 - - ----------------------------------------------------------------------------------------------------------- plan. - - ----------------------------------------------------------------------------------------------------------- DISASTER 1 90% of all Less than 80% RECOVERY TEST scheduled of all activities are scheduled completed activities are according to completed the Wards according to Disaster the Wards Recovery Test Disaster Plan. Recovery Test Plan. - - ----------------------------------------------------------------------------------------------------------- REQUEST TIME TO 2 95% of Less than 90% COMPLETE requests of requests completed by completed by target date as target date as specified in specified in the Procedures the Procedures Manual or as Manual or as mutually mutually agreed upon by agreed upon by Wards and Wards and Supplier. Supplier. - - ----------------------------------------------------------------------------------------------------------- RESPONSE TIME 2 98.5% of Less than 98% internal of internal mainframe mainframe transactions transactions are completed are completed in less than in less than one (1) second. one (1) second. - - ----------------------------------------------------------------------------------------------------------- FIRST CALL 5 75% or more Less than 65% RESOLUTION calls are calls are resolved while resolved while user is on the user is on the initial phone initial phone call within 10 call within 10 minutes. minutes. - - ----------------------------------------------------------------------------------------------------------- ANSWER TIME 5 93% of total Less than 90% calls answered of total calls by a live are answered agent in less by a live than 30 seconds agent in less than 30 seconds. - - ----------------------------------------------------------------------------------------------------------- CALL ABANDONMENT 2 Call Call abandonment abandonment rate will not rate exceeds - - -----------------------------------------------------------------------------------------------------------
59 - - ----------------------------------------------------------------------------------------------------------- exceed 5% of 8% of received total received calls during calls during any period any period - - ----------------------------------------------------------------------------------------------------------- HELP DESK 5 The total The total SATISFACTION average score average score SURVEY for the Wards for the Wards Satisfaction Satisfaction Survey is 4.01 Survey is or higher. less than 4.0. - - -----------------------------------------------------------------------------------------------------------
Critical Service Levels are those so important to Customer's business that Vendor's continued failure to deliver can result in significant damage to the business. The Critical Service Levels measure Critical Batch Report Availability and are defined in the following table:
SERVICE LEVEL APPLICATION DESCRIPTION STANDARD ID - - ---------------------------------------------------------------------------------------------------------------- PMS Checks - - ---------------------------------------------------------------------------------------------------------------- MAP Checks - - ---------------------------------------------------------------------------------------------------------------- BTDC Reports - - ---------------------------------------------------------------------------------------------------------------- IRIS Inbound - - ---------------------------------------------------------------------------------------------------------------- LABOR SCHED To Stores - - ---------------------------------------------------------------------------------------------------------------- PPLU Reports for Stores - - ---------------------------------------------------------------------------------------------------------------- OFFICER REPORTS Officer Reports - - ----------------------------------------------------------------------------------------------------------------
III. SERVICE LEVEL CREDITS A. CREDITS In each case of a failure to satisfy a Service Level Supplier will, within five (5) days from the identification of the deviation from the applicable Service Level, provide to Wards a plan of activities which will allow Supplier to satisfy the applicable Service Level at the earliest date practicable. In addition, Wards shall be entitled to recover a Service Level Credit for such Service Level calculated in the manner described below, provided, however, that the aggregate amount of such Service Level Credits for any given month will not exceed ten percent (10%) of Supplier's monthly charges, under this Service Agreement, for the applicable month (excluding Pass-Through Expenses, if any). If a single event directly causes the failure to achieve more than one Service Level then only one Service Level Credit will apply. In such event, Wards will select the Service Level that will be used for the calculation of the Service Credit. B. METHOD OF CALCULATION If Supplier fails to meet or exceed a Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any). If Supplier's performance fails to meet an Increased Impact Level for any Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) (this calculation being in lieu of, and not in addition to, the credit calculation for the corresponding Service Level failure). To calculate the total Service Level Credit due to Wards for the applicable month, the amounts calculated for each Service Level or Increased Impact Level as described above will be totaled and such amount shall be available as a credit to Wards against Supplier's invoice for the applicable month. C. FREQUENCY FACTOR In any case where Supplier fails to achieve the same Service Level (including failure to achieve the designated Increased Impact Level for that Service Level) in two consecutive months or in any four months in any 12-month period, the applicable Severity Weight shall be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month(excluding Pass-Through Expenses and Special Charges, if any) and for any subsequent months in which Supplier fails to achieve such Service Level or Increased Impact Level; provided, however, that in no case will Supplier be liable for total Service Credits which exceed ten percent (10%) of the applicable monthly invoice month(excluding Pass-Through Expenses and Special Charges, if any). The Service Credits will revert to the method of calculation provided in Section III.A. above in the following circumstances: 1. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is different from the root problem that was the cause of the failure in the first month, the calculaton will revert to the method 61 of calculation in Section III.A. following four consecutive months of achieving the Service Level. 2. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is the same as the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following ten consecutive months of achieving the Service Level. Nothing in the preceding two paragraphs will excuse the application of the frequency factor in the calculation of Service Credits if a subsequent failure to achieve a Service Level would otherwise make the frequency factor apply. D. EXCUSED PERFORMANCE PROBLEM Supplier shall not be liable to pay Wards Service Level Credits for any failure to meet a Service Level to the extent that such a failure is directly attributable to (i) a Force Majeure Event; (ii) breaches of this Agreement by Wards, provided that Supplier has provided Wards with reasonable notice of such breach immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such breach; (iii) acts or omissions of Wards (including acts and omissions of third parties acting on behalf of Wards under a written agreement), provided that Supplier has provided Wards with reasonable notice of such act or omission immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of the Services and Supplier has used all commercially Reasonable Efforts to perform notwithstanding such acts or omissions or (iv) the first manifestation of an extraordinary latent error or defect in Equipment used by Supplier in providing the Services (and any related repeated instances pending the applicable Supplier's correction of the defect) if such defect was (1) unknown to Supplier and (2) not disclosed in any information distributed by the third party licensor, manufacturer, or distributor and (3) not preventable or discoverable through normal testing or maintenance procedures. The foregoing are referred to herein collectively as an "Excused Performance Problem." Supplier shall be liable to grant Wards Service Level Credits for any failure to meet a Service Level attributable to any cause other than causes expressly included in the categories listed above. E. TIME LIMIT If Supplier does not notify Wards of any Excused Performance Problem (as 62 described in Section III.D above) within ninety (90) days of the date Supplier provides Performance Reports covering the time period during which the Excused Performance Problem is alleged to have occurred, then Supplier shall be deemed to have waived the claim of an Excused Performance Problem. IV. SERVICE LEVEL TERMINATION EVENT A. DEFINITION 1. Measurement Event - For purposes of this section, a "Measurement ----------------- Event" will be the monthly calculation of Supplier's actual performance for each Service Level or Critical Service Level. The total possible Measurement Events during any specific period of time is the product of the number of months in that time period times the number of Service Levels or Critical Service Levels, as applicable. 2. Failure Event - For purposes of this section a "Failure Event" ------------- shall be a specific Measurement Event for which Supplier fails to achieve the relevant Critical Service Level(s) or Service Level(s); provided, however, that any such failure caused by an event described in Section III.D of this SLA shall not be counted as a Failure Event. Any single event, act or omission that causes multiple Service Levels to be missed will be counted as one Failure Event. B. REPEATED SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (SERVICE LEVELS) EVENTS IN MEASUREMENT PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 11 67 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve 22 134 - - --------------------------------------------------------------------------------------------------
63
- - -------------------------------------------------------------------------------------------------- Events Months - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 7 67 Failure Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 15 134 Failure Events - - --------------------------------------------------------------------------------------------------
C. REPEATED CRITICAL SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Critical Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (CRITICAL SERVICE EVENTS IN MEASUREMENT LEVELS) PERIOD - - --------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 2 6 Events - - -------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 4 12 Events - - --------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 2 6 Failure Events - - --------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 4 12 Failure Events - - ---------------------------------------------------------------------------------------------
D. CATASTROPHIC LEVEL OF SERVICE Recovery of the Data Center Services within twenty-four hours of the scheduled time to recover those Services under the Wards Disaster Recovery Plan. 64 E. QUALIFICATION Nothing in this Section IV is intended to imply that any lesser number or different combination of occurrences of deficient performance by Supplier may not also constitute a material breach of Supplier's obligations warranting termination of the Service Agreement by Wards for cause. 65 EXHIBIT E TRANSFERRED EQUIPMENT
SSID# TYPE-MODEL MFG DESCRIPTION SERIAL NUM FEATURES UCB S 5500-3128 EMC DASD 3390-3 (C27) 1814000561 CDA 2560MB CACHE 606F 5500-9M48 EMC DASD (C28) 1814001099 CDA 2560MB CACHE 101F 9393-T82 IBM DASD RVA2 RAID-6 TURBO 1322050 (1)210GB X (1)210GB A0AF (C33) ARRAY 9393-T82 IBM DASD RVA2 RAID-6 TURBO 1322065 (1)080GB X (2)210GB F0FF (C34) ARRAY 9032-2 DSW ESCON DIRECTOR 011133 IBM 9032-2 IN DSW 9B1/9B2 CABINET 9032-2 DSW ESCON DIRECTOR 011293 IBM 9032-2 IN DSW 9B1/9B2 CABINET 9032-2 DSW ESCON DIRECTOR 011131 IBM 9032-2 IN DSW 9B3/9B4 CABINET 9032-2 DSW ESCON DIRECTOR 011294 IBM 9032-2 IN DSW 9B3/9B4 CABINET 3172 IBM COMMUNICATION CTL. 03895 4410 STK LSM 403181 UPGRADED TO 9310 00L0 4410 STK LSM 404370 UPGRADED TO 9310 00L1 4410 STK LSM 404382 UPGRADED TO 9310 00L2 4410 STK LSM 404428 UPGRADED TO 9310 00L3 4410 STK LSM 406285 UPGRADED TO 9310 00L4 9310 STK LSM 401024 00L6 4411 STK LCU 803188 UPGRADED TO 9311 00L0 4411 STK LCU 804391 UPGRADED TO 9311 00L3 4411 STK LCU 804392 UPGRADED TO 9311 00L1 4411 STK LCU 804393 UPGRADED TO 9311 00L2 4411 STK LCU 806236 UPGRADED TO 9311 00L4 9311 STK LCU 810258 00L6 4430 STK LMU FEATURE #2604 DUAL PRI 601728 00LMU 4480-M20 STK TAPE-CTLR LSM 000 201003 46L0 4480-M20 STK TAPE-CTLR LSM 001 201329 41L1 4480-M20 STK TAPE-CTLR LSM 000 201330 46L0 4480-M20 STK TAPE-CTLR LSM 001 201378 41L1 4480-M20 STK TAPE-CTLR LSM 003 201566 49L3 4480-M20 STK TAPE-CTLR LSM 003 201567 49L3 4480-M202 STK TAPE-CTLR 2011420 44YY 4480-M202 STK TAPE-CTLR 2011465 44YY 4480-M202 STK TAPE-CTLR LSM 002 308906 47L2
66
SSID# TYPE-MODEL MFG DESCRIPTION SERIAL NUM FEATURES UCB S 4480-M202 STK TAPE-CTLR LSM 002 308913 47L2 ACX 4480-M22 STK TAPE-MANUAL CSL 3000990 44YY 4480-M22 STK TAPE-MANUAL CSL 3002299 41YY 4480-M22 STK TAPE-MANUAL CSL 3002301 41YY 4480-M22 STK TAPE-MANUAL CSL 3004001 44YY 4480-M22 STK TAPE-MANUAL CSL 3012380 44YY 4480-M22 STK TAPE-MANUAL CSL 3012398 44YY 4480-M24 STK TAPE-AUTO LSM 000 3001071 46YY-L0 4480-M24 STK TAPE-AUTO LSM 000 3001073 46YY-L0 4480-M24 STK TAPE-AUTO LSM 000 3001075 46YY-L0 4480-M24 STK TAPE-AUTO LSM 000 3001110 46YY-L0 4480-M24 STK TAPE-AUTO LSM 003 3001337 44YY-L3 4480-M24 STK TAPE-AUTO LSM 001 3001603 41YY-L1 4480-M24 STK TAPE-AUTO LSM 004 3002330 47YY-L4 4480-M24 STK TAPE-AUTO LSM 001 3002331 41YY-L1 4480-M24 STK TAPE-AUTO LSM 001 3002367 41YY-L1 4480-M24 STK TAPE-AUTO LSM 002 3002369 47YY-L2 4480-M24 STK TAPE-AUTO LSM 002 3002370 47YY-L2 4480-M24 STK TAPE-AUTO LSM 002 3002525 47YY-L2 4480-M24 STK TAPE-AUTO LSM 004 3002807 49YY-L4 4480-M24 STK TAPE-AUTO LSM 004 3004770 49YY-L4 4480-M24 STK TAPE-AUTO LSM 004 3018850 49YY-L4 9490- STK TAPE-AUTO LSM 003 232008985 4CYY-L3 9490- STK TAPE-AUTO LSM 003 232008972 4CYY-L3 9490- STK TAPE-AUTO LSM 006 232009171 4DYY-L6 9490- STK TAPE-AUTO LSM 006 232009173 4DYY-L6 9490- STK TAPE-AUTO LSM 006 232008973 4DYY-L6 9490- STK TAPE-AUTO LSM 005 232009172 4DYY-L5 ACX
67 EXHIBIT F WARDS FACILITIES AND EQUIPMENT The Supplier will be obligated to pay Wards actual cost, but not to exceed more than $1,500.00 monthly as rent for an estimated 1800 sq. ft. of work space for eighteen (18) Supplier staff members within the Wards Corporate Complex at location(s) as directed by Wards. 68 EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME Complex Compuware Corporation XPEDITER/CICS Complex Compuware Corporation XPEDITER/TSO & ISPF Complex Systemware, Inc. AFP Option Complex Systemware, Inc. CPU Comm Option Complex Systemware, Inc. JHS Complex Systemware, Inc. X/PTR CPU CGI Systems PACBASE PACBASE Application One non- Development System specific CPU CPU CGI Systems PACBASE PACBASE Application One non- Development Systems specific CPU CPU CGI Systems PACBASE PACBASE DB2 Interface One non- specific CPU CPU CGI Systems PACBASE PACBASE Year 2000 One non- module specific CPU CPU Compuware Abend-Aid/XLS 3 CPU's up Corporation to model 9021-982 CPU Cross Access Data Connection to One non- Corporation VSAM on MVS specific CPU CPU H&W Computer SYSM SYSM/Calendaring and One non- Systems Scheduling specific CPU CPU H&W Computer Systems SYSM SYSM/CICS One non- specific CPU CPU H&W Computer Systems SYSM SYSM/MHS Gateway One non- specific CPU CPU H&W Computer Systems SYSM SYSM/PC One non- specific CPU CPU Innovation Data Innovation Access 3 Non- Processing Method (IAM) specific CPUs CPU Isomorphic Systems ISO*FORM One non- specific CPU CPU Pathlore Software Phoenix Single non-
69
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME Corporation specific CPU CPU Platinum Technology ZARA 3 to 5 Non- specific CPUs CPU Software Engineering PDS Fast Three non- of America specific CPUs CPU Softworks VSAM I/O Plus 3 Non- specific CPUs CPU Sterling Commerce Connect:Mailbox/SPC SPC Base Option One Intel PC CPU Sterling Commerce Connect:Tracs BSC Connections One non- specific CPU CPU Xenos Group Inc. Console-Master One non- specific CPU MIPS-based Candle Corporation DB/Explain License MIPS-based Candle Corporation OMEGAVIEW License MIPS-based Computer Associates DADS Plus 690 MIPS License International, Inc. MIPS-based Computer Associates Endevor/MVS 690 MIPS License International, Inc. MIPS-based Computer Associates Endevor/MVS Endevor MVS 690 MIPS License International, Inc. Automated Configuration Manager MIPS-based Computer Associates Endevor/MVS Endevor MVS Extended 690 MIPS License International, Inc. Processor MIPS-based Computer Associates Endevor/MVS Endevor MVS External 690 MIPS License International, Inc. Security Interface MIPS-based Computer Associates Endevor/MVS Endevor MVS Parallel 690 MIPS License International, Inc. Development Manager MIPS-based Computer Associates MICS MICS Base Set 690 MIPS License International, Inc. MIPS- Computer Associates MICS MICS CICS 690 MIPS
70
CPU CPU MODEL LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL SCOPE COMPONENT NAME NUMBER RESTRICTION NUMBER based Associates Analyzer License International,Inc. MIPS-based Computer Associates MICS MICS DB2 Analyzer 690 MIPS License International, Inc. MIPS-based Computer Associates MICS MICS IMS Analyzer 690 MIPS License International, Inc. with IMS Log Data MIPS-based Computer Associates MICS MICS MVS Model 690 MIPS License International, Inc. Generator MIPS-based Computer Associates MIPS-Based License Summary Record for 690 MIPS License International, Inc. Agreement multiple software products MIPS-based Computer Associates Multi-Image Integrity 690 MIPS License International, Inc. MIPS-based Computer Associates OPS/MVS 690 MIPS License International, Inc. MIPS-based Computer Associates OPS/MVS OPS/MVS Multi-System 690 MIPS License International, Inc. Facility MIPS-based Computer Associates PMO 690 MIPS License International, Inc. MIPS-based Computer Associates Quick Fetch 690 MIPS License International, Inc. MIPS-based Computer Associates TSOMON TSOMON with Online 690 MIPS License International, Inc. Facility MIPS-based Cybermation Inc. ESP Encore 749.9 MIPS Limit License MIPS-based Cybermation Inc. ESP Workload Manager 749.9 MIPS Limit License Site License BGS Systems BEST1/MVS Site License BGS Systems Capture/MVS Site License Boole & Babbage SG-Auto Site Candle Corporation OMEGAMON II Omegamon 772 MIPS
71
CPU CPU MODEL LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL SCOPE COMPONENT NAME NUMBER RESTRICTION NUMBER License II/CICS Site License Candle Corporation OMEGAMON II Omegamon II/IMS 772 MIPS Site License Candle Corporation OMEGAMON II Omegamon II/MVS 772 MIPS Site License Chicago Interface FastList Group Site License Chicago Interface Package Utilities Group Site License Ciber, Inc. JMS Site License Computer Associates One MVS International, Inc. Site License Computer Associates Optimizer International, Inc. Site License Compuware Corporation Abend-Aid/MVS Site License Compuware Corporation File-Aid/Batch Site License CONSUL Risk Consul/RACF Management, Inc Site License GT Software Inc. GT/ASSIST DOCM/GT Site License GT Software Inc. GT/ASSIST Tutor/GT Site License Landmark The Monitor for CICS/MVS Site License MacKinney Systems CICS-Spy Site License MacKinney Systems Kwik-Key Site License MacKinney Systems Show & Tell II Site License Sterling Software Vision:Builder (IMD) Site License Sterling Software Vision:Transact (IMD) Site License TSI International Keymaster Software 01197 IBM 3725 CPU - Basic IBM Corporation Emulation Program 5735- Non-tiered XXB CPU 01197 IBM 3725 FEP - Basic IBM Corporation ACF/NCP V4 5668- 3725 FEP 854 01198 IBM 3725 FEP - DSLO IBM Corporation ACF/NCP V4 5668- 3725 FEP 854 10295 IBM CPU H&W Computer SYSB-II One Group 90
72
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME 9021-962 Systems CPU 10295 IBM IBM Corporation ACF/VTAM for V4 MVS/ESA 5695-117 Group 80 - DSLO 9021-962 10295 IBM CPU IBM Corporation CICS/ESA V3 5685-083 Group 80 - DSLO 9021-962 10295 IBM CPU IBM Corporation Database 2 Version 4 5695-DB2 Group 80 - DSLO 9021-962 10295 IBM CPU IBM Corporation High Level Assembler 5696-234 Group 80 - DSLO 9021-962 MVS, VM, VSE 10295 IBM CPU IBM Corporation ISPF V4 5655-042 Group 80 CPU 9021-962 10295 IBM CPU IBM Corporation Language Environment 5688-198 Group 80 - DSLO 9021-962 MVS & VM 10295 IBM CPU IBM Corporation MVS/DFP 5665-XA3 Group 80 CPU-DSLO 9021-962 10295 IBM CPU IBM Corporation MVS/ESA SP-JES3 V5 5655-069 Group 80 - DSLO 9021-962 10295 IBM CPU IBM Corporation OS PL/I Library 5668-911 Group 80 -DSLO 9021-962 10295 IBM CPU IBM Corporation RACF Version 2 MVS 5695-039 Group 80 - DSLO 9021-962 10295 IBM CPU IBM Corporation Report 5665-310 Non-tiered CPU 9021-962 Management/Distribution 10295 IBM CPU IBM Corporation System TCP/IP for MVS Feature 3689 5655-HAL Group 80 - DSLO 9021-962 - Base Product 10295 IBM CPU IBM Corporation TCP/IP for MVS Feature 3889 5655-HAL Group 80 - DSLO 9021-962 - CICS - Base 10295 IBM CPU IBM Corporation TSO/E V2 Product 5685-025 Group 80 - DSLO 9021-962 10295 IBM CPU Information EDA/SQL Full Function 9021-962 Builders, Inc. Server 10295 IBM CPU Information EDA/SQL LU 2 Remote Access 9021-962 Builders, Inc. Protocol 10295 IBM CPU Information EDA/SQL R/W Driver DB2 9021-962 Builders, Inc. 10295 IBM CPU Information EDA/SQL Read Driver 9021-962 Builders, Inc. VSAM...FOCUS 10295 IBM CPU Information EDA/SQL Smartmode Query 9021-962 Builders, Inc. Governor
CPU 73
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME 10295 IBM CPU SAS Institute Inc. SAS Base SAS 9021-962 10295 IBM CPU Syncsort Incorporated SyncSort/OS One Non-Specific 9021-962 CPU 10295 IBM CPU Syncsort Incorporated PROC SyncSort 9021-962 10295 IBM CPU - DSLO IBM Corporation DFDSS 5665-327 Non-tiered CPU 9021-962 10295 IBM CPU - DSLO IBM Corporation DFHSM 5665-329 Non-tiered CPU 9021-962 10295 IBM Designated BMC Software, Inc. AR/CTL for IMS Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. Data Packer/IMS Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. Delta IMS Virtual Tier Group 90 9021-962 CPU Terminal 10295 IBM Designated BMC Software, Inc. Image Copy Plus Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. Mastermind for DB2 Alter Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. Mastermind for DB2 Catalog Manager Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. Mastermind for DB2 DASD Manager Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. Pointer Checker Tier Group 90 9021-962 CPU Plus/IMS 10295 IBM Designated BMC Software, Inc. Reorg Plus for DB2 Tier Group 90 9021-962 CPU 10295 IBM Designated BMC Software, Inc. SUPEROPTIMIZER/CICS Tier Group 90 9021-962 CPU 10295 IBM Designated IBM Corporation IMS/ESA Version 5 Features 0141 5695-176 Group 80 DSLO 9021-962 CPU & 0163 10295 IBM Designated IBM Corporation Library Only 5668-940 Group 80 BASIC 9021-962 CPU 10295 IBM Designated IBM Corporation Resource MSMT Facility 5655-084 Group 80 DSLO 9021-962 CPU V5 10295 IBM Designated Information Builders, FOCUS Data Management 9021-962 CPU Inc. 10295 IBM Designated Information Builders, FOCUS DB2 R/W Interface 9021-962 CPU Inc. 10295 IBM Designated Information Builders, FOCUS Extended Matrix 9021-962 CPU Inc. Reporting 10295 IBM Designated Information Builders, FOCUS FOCNET Server Kernel 9021-962 CPU Inc. 10295 IBM Designated Information Builders, FOCUS FOCUS DBMS Server 9021-962 CPU Inc.
74
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT SERIAL MODEL SCOPE COMPONENT NUMBER NUMBER NAME 10295 IBM 9021-962 Designated Information Builders, FOCUS LU 2 Remote Access CPU Inc. FOC 10295 IBM 9021-962 Designated Information Builders, FOCUS Multiple Session CPU Inc. Option 10295 IBM 9021-962 Designated Information Builders, FOCUS Report Generator CPU Inc. 10295 IBM 9021-962 Designated Information Builders, FOCUS Smartmode for FOCUS CPU Inc. 10295 IBM 9021-962 Designated Sterling Software Solve:Central CPU (OMD) 10295 IBM 9021-962 Designated Sterling Software Solve:Netmaster CPU (OMD) 10295 IBM 9021-962 Designated Storage Technology HSC CPU Corporation 10295 IBM 9021-962 Model Compuware Corporation Abend-Aid DB2 10295 IBM 9021-962 Model Compuware Corporation Abend-Aid IMS 10295 IBM 9021-962 Model Compuware Corporation CICS Abend-Aid/FX 11714 IBM 9021-962 SAS Institute Inc. SAS Base SAS 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/Access IMS-DL/I 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/CALC 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/ETS 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/ETS 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/FSP 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/IML 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/IML 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/STAT 11714 IBM 9021-962 SAS Institute Inc. SAS SAS/STAT 11714 IBM 9021-962 CPU Computer Associates Easytrieve Plus International, Inc. 11714 IBM 9021-962 Model Compuware Corporation Abend-Aid DB2 11714 IBM 9021-962 Model Compuware Corporation Abend-Aid IMS CPU LICENSE SERIAL REGISTRATION NUMBER 10295 10295 10295 10295 10295 10295 10295 10295 Specific CPU 10295 Specific CPU 10295 Specific CPU 11714 11714 11714 11714 11714 11714 11714 11714 11714 11714 11714 Specific CPU, replaceable 11714 Specific CPU 11714 Specific CPU
75
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT SERIAL MODEL SCOPE COMPONENT NUMBER NUMBER NAME 11714 IBM 9021-962 Model Compuware Corporation CICS Abend-Aid/FX 11714 IBM 9021-962 Model Compuware Corporation File-Aid DB2 11714 IBM 9021-962 Model Compuware Corporation File-Aid/IMS (ISPF) 11714 IBM 9021-962 Model Compuware Corporation File-AID/RDX 11714 IBM 9021-962 Model Compuware Corporation File-Aid/SPF/XE 11714 IBM 9021-962 Model Compuware Corporation XPEDITER/Xchange 11741 IBM 9021-962 CPU Syncsort Incorporated SyncSort/OS 11741 IBM 9021-962 CPU Syncsort Incorporated PROC SyncSort 11741 IBM 9021-962 CPU Allen Systems Group ASG-JCLPREP 11741 IBM 9021-962 CPU IBM Corporation 3270-PC File Transfer 5665-311 Program 11741 IBM 9021-962 CPU IBM Corporation ACF/SSP 5655-041 11741 IBM 9021-962 CPU IBM Corporation ACF/SSP Version 3 for 5665-338 MVS 11741 IBM 9021-962 CPU IBM Corporation ACF/VTAM for V4 MVS/ESA 5695-117 11741 IBM 9021-962 CPU IBM Corporation BookManager Read/MVS 5695-046 11741 IBM 9021-962 CPU IBM Corporation C/370 Library V2 5688-188 11741 IBM 9021-962 CPU IBM Corporation CICS FOR MVS/ESA 5655-018 11741 IBM 9021-962 CPU IBM Corporation CICS/ESA V3 5685-083 11741 IBM 9021-962 CPU IBM Corporation COBOL and CICS/VS 5785-ABJ Command Level Conv Aid 11741 IBM 9021-962 CPU IBM Corporation Database 2 Version 4 5695-DB2 11741 IBM 9021-962 CPU IBM Corporation DFSMS/MVS V1 5695-DF1 11741 IBM 9021-962 CPU IBM Corporation Document Composition 5748-XX9 Facility 11741 IBM 9021-962 CPU IBM Corporation DSX Version 3 5668-915 CPU LICENSE SERIAL REGISTRATION NUMBER 11714 Specific CPU 11714 Specific CPU 11714 Specific CPU 11714 Specific CPU 11714 Specific CPU 11714 Specific CPU 11741 One Non-Specific CPU 11741 11741 One Group 80 CPU 11741 11741 Group 80 - Basic 11741 Group 80 - Basic 11741 Group 80 - DSLO 11741 Group 80 - Basic 11741 Group 80 - Basic 11741 Group 80 Basic 11741 Group 80 - BASIC 11741 Non-tiered CPU 11741 Group 80 - Basic 11741 Group 80 - Basic 11741 Non-tiered CPU 11741 Group 80 - Basic
76
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT SERIAL MODEL SCOPE COMPONENT NUMBER NUMBER NAME 11741 IBM 9021-962 CPU IBM Corporation GDDM/MVS 5665-356 11741 IBM 9021-962 CPU IBM Corporation High Level Assem MVS, 5696-234 VM, VSE 11741 IBM 9021-962 CPU IBM Corporation Host Command 5668-985 Facility/Version 2 11741 IBM 9021-962 CPU IBM Corporation IBM COBOL for MVS and 5688-197 VM 11741 IBM 9021-962 CPU IBM Corporation IBM 5664-322 Information/Management V3 (INFOMAN) 11741 IBM 9021-962 CPU IBM Corporation IMS/ESA BTS V2 5655-A14 11741 IBM 9021-962 CPU IBM Corporation IMS/ESA MRQ 5655-038 11741 IBM 9021-962 CPU IBM Corporation IMS/ESA Version 5 Features 0009 5695-176 11741 IBM 9021-962 CPU IBM Corporation ISPF V4 & 0031 5655-042 11741 IBM 9021-962 CPU IBM Corporation Language Environment 5688-198 MVS & VM 11741 IBM 9021-962 CPU IBM Corporation MVS/DFP 5665-XA3 11741 IBM 9021-962 CPU IBM Corporation MVS/ESA SP-JES3 V5 5655-069 11741 IBM 9021-962 CPU IBM Corporation Print Services 5695-040 Facility/MVS V2 11741 IBM 9021-962 CPU IBM Corporation RACF Version 2 MVS 5695-039 11741 IBM 9021-962 CPU IBM Corporation Report 5665-310 Management/Distribution System 11741 IBM 9021-962 CPU IBM Corporation SMP/E for 5668-949 OS/VS2(MVS)&OS/VS1 11741 IBM 9021-962 CPU IBM Corporation TSO/E V2 5685-025 11741 IBM 9021-962 CPU IBM Corporation VS COBOL II Compiler/Lib/Debug 5668-958 11741 IBM 9021-962 CPU - Basic IBM Corporation Batch Terminal V1 5668-948 Simulator 11741 IBM 9021-962 CPU - Basic IBM Corporation OGL/370 V1 5688-191 11741 IBM 9021-962 CPU - Basic IBM Corporation Page Print Format 5688-190 Aid/370 V1 CPU SERIAL LICENSE NUMBER RESTRICTION 11741 Group 80 - Basic 11741 Group 80 - DSLO 11741 Group 80 - Basic 11741 Group 80 - Basic 11741 Group 80 CPU 11741 Group 80 - DSLO 11741 Group 80 - BASIC 11741 Group 80 - Basic 11741 Group 80 CPU 11741 Group 80 - DSLO 11741 Group 80 CPU-DSLO 11741 Group 80 - DSLO 11741 Tier 1, 2, 3, 4, 5, 6 11741 Group 80 - DSLO 11741 Non-tiered CPU 11741 Group 80 - Basic 11741 Group 80 - DSLO 11741 Group 80 - Basic 11741 Non-tiered CPU 11741 Non-tiered CPU 11741 Non-tiered CPU
77
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME 11741 IBM 9021-962 CPU - IBM Corporation S/370-IBM 4300 5735- Non-tiered Basic Host Prep XR3 CPU 11741 IBM 9021-962 CPU - IBM Corporation SDF II MVS V1 5665- Non-tiered Basic 366 CPU 11741 IBM 9021-962 DSLO IBM Corporation DFDSS 5665- Non-tiered CPU - 327 CPU 11741 IBM 9021-962 DSLO IBM Corporation DFHSM 5665- Non-tiered CPU - 329 CPU 11741 IBM 9021-962 Designated BMC Software, Inc. AR/CTL for IMS Tier Group 90 CPU 11741 IBM 9021-962 Designated BMC Software, Inc. Data Packer/IMS Tier Group 90 CPU 11741 IBM 9021-962 Designated BMC Software, Inc. Delta IMS Virtual Tier Group 90 CPU Terminal 11741 IBM 9021-962 Designated BMC Software, Inc. Image Copy Tier Group 90 CPU Plus/IMS 11741 IBM 9021-962 Designated BMC Software, Inc. Load Plus/IMS Tier Group 90 CPU 11741 IBM 9021-962 Designated BMC Software, Inc. Mastermind for Alter Tier Group 90 CPU DB2 11741 IBM 9021-962 Designated BMC Software, Inc. Mastermind for Catalog Tier Group 90 CPU DB2 Manager 11741 IBM 9021-962 Designated BMC Software, Inc. Mastermind for DASD Tier Group 90 CPU DB2 Manager 11741 IBM 9021-962 Designated BMC Software, Inc. Pointer Checker Tier Group 90 CPU Plus/IMS 11741 IBM 9021-962 Designated BMC Software, Inc. Prefix Resolution Tier Group 90 CPU Plus 11741 IBM 9021-962 Designated BMC Software, Inc. Reorg Plus for Tier Group 90 CPU DB2 11741 IBM 9021-962 Designated BMC Software, Inc. Secondary Index Tier Group 90 CPU Utility 11741 IBM 9021-962 Designated BMC Software, Inc. SUPEROPTIMIZER Tier Group 90 CPU /CICS 11741 IBM 9021-962 Designated BMC Software, Inc. Unload Plus Tier Group 90 CPU 11741 IBM 9021-962 Designated Dynasoft Corp. Dynaplan CPU 11741 IBM 9021-962 Designated Information Builders, FOCUS Data CPU Inc. Management 11741 IBM 9021-962 Designated Information Builders, FOCUS DB2 R/W CPU Inc. Interface 11741 IBM 9021-962 Designated Information Builders, FOCUS Extended CPU Inc. Matrix Reporting 11741 IBM 9021-962 Designated Information Builders, FOCUS FOCNET CPU Inc. Server Kernel 11741 IBM 9021-962 Designated Information Builders, FOCUS FOCUS
78
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME 9021-962 d CPU Builders, Inc. DBMS Server 11741 IBM 9021-962 Designated Information Builders, FOCUS LU 2 Remote d CPU Inc. Access FOC 11741 IBM 9021-962 Designated Information Builders, FOCUS Multiple d CPU Inc. Option Session 11741 IBM 9021-962 Designated Information Builders, FOCUS Report d CPU Inc. Generator 11741 IBM 9021-962 Designated Information Builders, FOCUS Smartmode d CPU Inc. for FOCUS 11741 IBM 9021-962 Designated Siemens Nixdorf NMS Maintenance RPQ951 d CPU Information (FT,DH,RO) 7(18,19)M Systems UP 3 11741 IBM 9021-962 Designated Sterling Software Solve:Central d CPU (OMD) 11741 IBM 9021-962 Designated Sterling Software Solve:Netmaster d CPU (OMD) 11741 IBM 9021-962 Designated Storage Technology HSC d CPU Corporation 11741 IBM 9021-962 Designated Tone Software OMC-Flash Flasher-JES3 d CPU Corporation 11741 IBM 9021-962 CPU IBM Corporation IBM C/C++ for 5655- Group 80 MVS/ESA V3 121 CPU 11741 IBM 9021-962 CPU IBM Corporation OS PL/I Compiler 5668- Group 80 - & Library 910 Basic 40325 IBM Designated Levi, Ray & Shoup VMCF/VTAM 3090-600J d CPU 40325 IBM Designated Levi, Ray & Shoup VPS/TCPIP 3090-600J d CPU 40325 IBM Designated Levi, Ray & Shoup VPS/VTAM 3090-600J d CPU 40325 IBM Designated SAS Institute Inc. SAS Base SAS 3090-600J d CPU 40325 IBM Designated SAS Institute Inc. SAS SAS/CALC 3090-600J d CPU 40325 IBM Designated SAS Institute Inc. SAS SAS/ETS 3090-600J d CPU 40325 IBM Designated SAS Institute Inc. SAS SAS/FSP 3090-600J d CPU 40325 IBM Designated SAS Institute Inc. SAS SAS/IML
79
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION NUMBER NAME 40325 IBM d CPU 3090- 600J 40325 IBM Designate SAS Institute Inc. SAS SAS/STAT 3090- d CPU 600J 40325 IBM Designate Sterling Commerce Connect:Direct Shared DASD 3090- d CPU for MVS Facility 600J 40325 IBM Designate Sterling Commerce Connect:Direct SNA 3090- d CPU for MVS Connections 600J 40325 IBM Designate Syncsort Incorporated PROC SyncSort 3090- d CPU 600J 40325 IBM Designate Tone Software OMC-Flash Flasher-JES3 3090- d CPU Corporation 600J 40325 IBM CPU IBM Corporation ACF/VTAM for 5695-117 Group 60 - Basic 3090- V4 MVS/ESA 600J 40325 IBM CPU IBM Corporation High Level 5696-234 Group 60 - Basic 3090- Assembler 600J MVS, VM, VSE 40325 IBM CPU IBM Corporation ISPF V4 5655-042 Group 60 CPU 3090- 600J 40325 IBM CPU IBM Corporation Language 5688-198 Group 60 - Basic 3090- Environment 600J MVS & VM 40325 IBM CPU IBM Corporation MVS/DFP 5665-XA3 Group 60 CPU 3090- 600J 40325 IBM CPU IBM Corporation MVS/ESA SP- 5655-069 GROUP 60 BASIC 3090- JES3 V5 600J 40325 IBM CPU IBM Corporation OS PL/I Library 5668-911 Group 60-BASIC 3090- 600J 40325 IBM CPU IBM Corporation RACF Version 2 5695-039 Group 60 - Basic 3090- MVS 600J 40325 IBM CPU IBM Corporation Resource 5655-084 Group 60 - Basic 3090- Management 600J Facility V5 40325 IBM CPU IBM Corporation TCP/IP for MVS Feature 5655-HAL Group 60 - Basic 3090- 3633 - Base 600J Product 40325 IBM CPU IBM Corporation TCP/IP for MVS Feature 5655-HAL Group 60 - Basic
80
CPU CPU License VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE Serial Model Scope COMPONENT NUMBER RESTRICTION Number NAME 3090- 3833 - CICS HAL BASIC 600J 40325 IBM CPU IBM Corporation TSO/E V2 5685-025 Group 60 - Basic 3090- 600J 40325 IBM CPU Sterling Commerce Connect:Mailbox / Interconnect Specific CPU 3090- MVS Option 600J 40325 IBM CPU Sterling Commerce Connect:Mailbox / Mailbox Tiered, specific 3090- MVS MVS CPU 600J 40325 IBM CPU Sterling Software Sams:Disk 3090- (SMD) 600J 40325 IBM CPU Syncsort SyncSort/OS One Non-Specific 3090- Incorporated CPU 600J 40325 IBM CPU - IBM Corporation DFDSS 5665-327 Non-tiered 3090- Basic CPU 600J 40325 IBM CPU - IBM Corporation DFHSM 5665-329 Non-tiered 3090- Basic CPU 600J 40325 IBM Designate BMC Software, Inc. SUPEROPTIMIZER Tier Group 60 3090- d CPU /CICS 600J 40325 IBM Designate Sterling Commerce Connect:Mailbox/ 3090- d CPU MVS 600J 40325 IBM Designate Sterling Software Solve:Central 3090- d CPU (OMD) 600J 40325 IBM Designate Sterling Software Solve:Netmaster 3090- d CPU (OMD) 600J 40325 IBM Designate Storage ExLM 3090- d CPU Technology 600J Corporation 40325 IBM Designate Storage ExPR 3090- d CPU Technology 600J Corporation 40325 IBM Designate Storage HSC 3090- d CPU Technology 600J Corporation 40325 IBM Model Compuware Abend-Aid DB2 Specific CPU 3090- Corporation 600J 40325 IBM Model Compuware File-Aid DB2 Specific CPU
81
CPU CPU License VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE Serial Model Scope COMPONENT NUMBER RESTRICTION Number NAME 3090- Corporation 600J 40325 IBM Model Compuware File-AID/RDX Specific CPU 3090- Corporation 600J 40325 IBM Model Compuware File-Aid/SPF/XE Specific CPU 3090- Corporation 600J 40325 IBM Non IBM Corporation Library Only 5668-940 DSLO 3090- specific 600J CPU 41209 IBM 3745 CPU IBM Corporation ACF/NCP V7 5648-063 Tier 1, 2, 2.5, 3, 4 E7289 IBM 3174 CPU IBM Corporation IBM Extended 5648-A17 Non-tiered CPU Facilities Product
82 EXHIBIT H WARDS SOFTWARE APPLICATIONS *CB - CREDIT/GE INTERFACE(JOBS *CB48 ONLY) *GF - RETAIL DISTRIBUTION SYS(RDS) *GN - WARDEX TRANSPORTATION CHARGES *GS - SMALL TKT OP-REMNANTS(JOBS *GS12,*GS50,*GL50) *GV - FORMAT NEW LABELS(JOBS *GV72,*GV74,*GV79) *GV - NEW FAST FLOW(JOBS UGV06P00 THRU UGV15P00) *GV - PROCESS SCANNED LABELS(REMAINING *GV JOBS) *MC - MICS DATA BASE *RG - INVENORY PROCESSING *RK - BTDC OP ALLOCATION(JOBS *RK74 THRU *RK94) *RK - BTDC OP DBSS EXTRACT(JOBS URK61,*RC05,*RK11) *RK - BTDC OP TICKETS(JOBS *RK39 THRU *RK89) *RK - NEXT DAY HOME DELIVERY(JOBS *RK87, 88) BHY - PLAN VS ACTUAL(PVA) CGF - RETAIL DISTRIBUTION SYSTEM(RDS) CHY - PLAN VS ACTUAL(PVA) COP - PEOPLE COX - PEOPLE COY - PEOPLE ESP - SCHEDULER ADMINISTRATION JOBS KHY - PLAN VS ACTUAL(PVA) LDD - LECHMERE PRODUCT SERVICE(PS3) LHY - DECISION SUPPORT(JOB LHYE0P07) OHY - PLAN VS ACTUAL(PVA) UBF - CATALOG MDSE UBM - CATALOG MDSE UBN - RECEIPTS UBP - CATALOG MDSE UBT - CATALOG MDSE UBU - CATALOG MDSE UBX - CATALOG MDSE UBY - CATALOG MDSE UDA - PRODUCT SERVICE UDA - PRODUCT SERVICE DSX(JOBS UDA01 & UDA50) UDC - PRODUCT TRACKING UDD - PRODUCT SERVICE(PS3) UDM - NATIONAL PARTS UDR - PRODUCT SERVICE(PS3) UDT - EXCESS STOCKED PARTS(ESP) 83 UDX - MODEL INDEX UDY - PARTS BY PHONE UEA - SALES AUDIT UEC - NAME/ADDR LOOKUP(JOBS UEC38,41-43,39PXX ONLY) UEC - THIRD PARTY PAYMENT(TPPS) UEE - FLASH SALES UEE - FOCUS(JOB UEE02P01 ONLY) UEH - SALES & CASH UEK - NON RECEIPT REFUND(TANDEM) UEL - CHECK AUTHORIZATION(TANDEM) UEP - CELLULAR PHONE UER - SALES AUDIT UES - CENTRALIZED PAYROLL MGMT SYSTEM(CPMS) UEV - AMERICAN GENERAL FINANCE(AGF) UEX - DECISION SUPPORT(JOBS UEX01-UEX04) UGE - RETAIL DISTRIBUTION SYSTEM(RDS) UGF - NEW UGG - VENDOR COMPLIANCE UGN - ORDER ROUTING UGV - FAST FLOW UGY - ORDER TRACKING UHA - POM(JOBS UHA50 - UHA60 ONLY) UHA - VENDOR PURCHASE ORDERS(VPO) UHB - MIAS UHB - MIAS(JOBS UHB17 & UHB49 ONLY) UHB - MIAS(JOBS UHB82P01, 05, 09, 20 ONLY) UHC - MIAS(IRIS INTERFACE) UHF - MIAS UHJ - PRICE MANAGEMENT FACT SHEETS UHK - MPCS(EXCEPT JOBS WITH UHKAW) UHK - PROMO PLAN SUMMARY(UHKAW) UHM - RETIREMENT/BENEFITS UHN - VCB AUTHORIZATION UHP - MAP UHR - FIXED ASSETS(FA) UHS - CENTRAL INVOICE MATCH SYSTEM(CIMS) UHT - CORPORATE TAX(JOB UHT80P00 ONLY) UHT - SALES TAX TABLE UHU - MPCS UHV - PROCUREMENT MANAGEMENT SYSTEM(PMS) UHW - STOCK LEDGER UHW - STOCK LEDGER (ALL UHW5XXXX JOBS ONLY) UHX - ROBS UHY - DECISION SUPPORT(JOBS UHYE0P04-P07) 84 UHY - MPCS(JOBS UHYA-UHYD) UHY - MPCS(JOBS UHYH-UHYK) UHY - MPCS(JOBS UHYN-UHYZ) UHY - MPCS(JOBS UHY1-UHY9) UHY - PLAN VS ACTUAL(PVA) (JOBS UHYE-UHYG) UHY - RATE OF SALE(ROS) (JOBS UHYL-UHYM) UH1 - COBRA/CO-OP ADVERTISING UH2 - NAPA/VCB CONTROL NUMBER(JOB UH219 ONLY) UH2 - VCB - RGA UH2 - VCB RETURNS UH4 - VENDOR REPORT CARD UH7 - MERCHANDISE RETURN/TRANSFER SYS (MROTS) UIC - IRIS BATCH UIP - CUSTOMER SATIFACTION UIS - AUTO EXPRESS UJA - PREFERRED CUST HANDLING UJB - CAPP/RMP UJC - MIPS UJD - FACTORY ORDERS UJE - DBSS (UJE03 JOBS ONLY) UJE - DBSS SUPPORT SYSTEMS UJE - FACT TAG(PRGMS BEGIN WITH UJE05A50 AND UP) UJE - GENCO(JOBS BEGINNING WITH UJE29) UJF - FASHION PURCH ORD(FPO) (EXCEPT UJF87 & UJF88) UJF - FASHION REPORTING(JOBS UJF87 & UJF88 ONLY) UJG - E3 SYSTEM (UJG53 JOBS) UJG - SMS UJH - MARI UH7 - MERCHANDISE RETURN/TRANSFER SYS (MROTS) UIC - IRIS BATCH UIP - CUSTOMER SATIFACTION UIS - AUTO EXPRESS UJA - PREFERRED CUST HANDLING UJB - CAPP/RMP UJC - MIPS UJD - FACTORY ORDERS UJE - DBSS (UJE03 JOBS ONLY) UJE - DBSS SUPPORT SYSTEMS UJE - FACT TAG(PRGMS BEGIN WITH UJE05A50 AND UP) UJE - GENCO(JOBS BEGINNING WITH UJE29) UJF - FASHION PURCH ORD(FPO) (EXCEPT UJF87 & UJF88) UJF - FASHION REPORTING(JOBS UJF87 & UJF88 ONLY) UJG - E3 SYSTEM (UJG53 JOBS) UJG - SMS 85 UJH - MARI UJH - SKU EXPLOSION(JOBS UJH22-UJH24 ONLY) UJH - SMS AND POM SPLITTER(JOB UJH42) UJI - SMS UJJ - BIG TICKET MGMT SYS(BTMS) (JOBS UJJ01-UJJ69) UJJ - PROMO SYSTEMS(JOBS UJJ70-UJJ99 & UJJ87P16) UJK - BOIS(JOBS UJK40) UJK - SMS UJL - ARTHUR UJL - ARTHUR DOWNLOAD(JOBS UJL(B,D,Z)BR15, UHYZBR14) UJO - SMS UJP - FAST FLOW(FASHIONS) UJQ - SMS UJR - SMS (ALL UJR JOBS) UJT - DATA WAREHOUSE (AIX) UJT - DATA WAREHOUSE (MVS) UJV - EDI UJW - EDI UJX - SMS UJY - PRICE MANAGEMENT PRICE CHANGE(PCS) UJZ - MERCHANDISING XREF UKA - CONSUMER AFFAIRS ULF - EDI UND - AIMS UOR - PEOPLE AD-HOC UOS - PEOPLE MONTHEND UOT - TIMECARD AND MANAGEMENT PAYROLL UOW - COMMISSIONS UOX - PEOPLE UOY - PEOPLE TABLE MAINTENANCE URM - NEW DISTRO SYS(JOBS NOT DEFINED AS SMALL TKT) URM - NEW SMALL TKT(JOBS ORY8A THRU URM45 AND UGV39) URY - NEW DISTRIBUTION SYSTEM USA - BIG TICKET SALES HISTORY USM - ELECTRONIC MAIL(EMAIL) UZA - ENDEVOR BACKUPS 86 EXHIBIT I SUPPLIER SOFTWARE NONE 87 EXHIBIT J --------- TERMINATION/EXPIRATION ASSISTANCE --------------------------------- 1. GENERAL a. Upon termination of the Agreement and regardless of the reason for termination, Supplier will provide such information and reasonable assistance as Wards reasonably requests to facilitate the smooth transition of the Services being performed by Supplier or its agents to Wards or its designee (collectively "Successor"). In the event this Service Agreement is terminated by Supplier for cause, Supplier's pre-migration transition assistance obligations will be provided at the hourly rate set forth in Schedule E to the Master Agreement, payable in advance. b. Supplier shall cooperate fully with and provide reasonable and necessary input to Successor in the Successor's development of a plan for the transition of all requested and appropriate operations from Supplier, which plan will include performance of the Services described in Sections 2 through 4 below, and such other, similar services as Wards may reasonably require. Upon request for such assistance, Supplier shall respond as promptly as possible, but in any event within fifteen (15) days of the request, with a description of the assistance to be provided by Supplier in connection with the transition. c. Supplier's assistance in the development of the transition plan shall include but not be limited to consulting services in the areas of defining system software configurations and requirements, transferring or otherwise transitioning systems software licenses and other third party contracts, and other general assistance to the Successor to facilitate the transition of the Services to Successor. Such consulting support shall include, at a minimum, the detailed specification of Wards' hardware, software, and telecommunications configurations and capacity requirements existing at the time of termination and any future plans or requirements known at the time of termination. d. To the extent allowable, Supplier shall provide to Successor copies of software currently licensed and data (collectively "Backups") as described in Section 2 through 4 below. All such Backups shall be in machine readable form, either tape copies or direct electronic transmissions to Successor as reasonably requested by Successor. All Backups of data shall be in a reasonable format mutually agreed to and may be in an "unloaded, flat file" form or as an "image copy" that preserves the existing data base or other file structures. In addition, Supplier shall provide Wards, upon request, all most current tapes containing Wards data or software. Copies of documentation and the other types of control files or systems management information described in Sections 2 through 4 below shall be in hard copy form and, if available, in machine readable form. 88 e. Supplier shall provide to Successor reasonable access to Equipment, Software, personnel, third parties and other resources, and shall provide reasonable use of Equipment and Software then being used by Supplier to provide the Services to Wards. With regard to Software transferred to the Successor to the extent Supplier has the necessary rights, Supplier will provide available program documentation to the Successor. Supplier's obligations under this Paragraph (e) are subject to any prohibitions or restrictions on the use or disclosure of Third Party Software contained in applicable license agreements. Supplier shall provide Successor with complete and accurate copies of all leases, licenses and other documents pertinent to the resources described herein. f. Supplier shall provide the Successor with such Wards specific information and procedures as is then available regarding the Services as is reasonably prudent or necessary in order for the Successor to assume responsibility for the performance of the Services in an orderly manner and will make reasonable efforts to minimize, as much as possible, disruption in the operations of Wards. g. Prior to providing termination/expiration assistance, Supplier will have the right to require and receive from the Successor (if the Successor is not Wards) written assurances reasonably acceptable to Supplier that the Successor will maintain the confidentiality of Supplier's Confidential Information disclosed or provided to the Successor in the course of receiving the termination/expiration assistance. 2. PRE-MIGRATION SERVICES Supplier's functions shall include the following pre-migration services: a. Provide to the Successor copies of documentation used by Supplier in performing the Services. b. Provide to the Successor copies of other information then available regarding the Services that may be required to implement the transition plan, including but not limited to the following: i. a list of all libraries required to provide the Services to Wards; ii. copies of all security tables and rules utilized in the provision of the Services to Wards; iii. copies of all terminal definition tables; iv. system modifications created on behalf of Wards, if any, including documentation, run sheets, and job scheduling information; 89 v. copies of all manuals for Wards owned or retained Equipment, or Equipment acquired by Wards at the end of the Term. c. Identify and provide the control release levels for Systems Software. d. Deliver the Procedures Manual to the Successor's operations staff. e. Upon Wards' request, freeze all Software changes other than modifications necessary to address problems, to implement regulatory changes or to comply with the current service level agreements. f. Provide reasonable assistance to the Successor in notifying third party Suppliers of the procedures to be followed during the turnover phase. g. Assist Successor's operations staff by providing information for the review, test, and production Software libraries. h. Assist the Successor in establishing naming conventions by providing information about naming conventions then in effect. i. Assist the Successor in its analysis of the space required for Software libraries, by providing reasonable information of then current space requirements. j. Assist with the transfer to Successor of Third Party Software then in use to provide Services. k. Delivery to Wards of source code, object code, executables, related work product, technical specifications, database definitions and materials and technical and use documentation (where it exists) for the mainframe Wards Software and Supplier Software (and Third Party Software if permitted) used in providing the Services (subject, in the case of Supplier Software, to the licensing of object code and execution of a mutually acceptable license or access Agreement in accordance with Section 18.9 of the Master Agreement, to the extent provided for therein). l. Deliver appropriate materials and information to enable the Successor to operate the Software, including job streams and associated job control language, run documentation and Production Control applications support documentation. m. Provide to Successor reasonable access to Supplier's personnel who were performing the Services. n. Provide to Successor interim backups of Wards Data, as reasonably requested. 90 o. Provide to Successor backups of Wards DASD volumes as requested by the Successor. p. Cooperate with the Successor and provide reasonable support for the conduct of migration testing for to ensure the orderly transfer of Services. q. Perform tests of the creation and restoring of the Backups of software and data. r. Perform "dry runs" of Supplier's components of the complete final transition and migration processes. s. Provide to the Successor current and pending project plans and status authorized by Wards. t. Participate in the coordination of the final transition schedule. 3. MIGRATION SERVICES As part of the termination/expiration assistance, Supplier's functions shall include the following migration services. a. Create final backups of all requested software and data files and other Wards Data subject to a release from Wards. b. Create final backups of all requested software and data files (with content listing) and printouts of control file information to the Successor. c. Provide fallback and recovery support if necessary in the event of an unsuccessful transition, including resumption of full processing at the current applicable Charges. 4. POST-MIGRATION SERVICES As part of the termination/expiration assistance, Supplier's functions shall include the following post-migration services: a. Provide additional assistance at Wards' request to assure continuity of operations (subject to Wards and Suppliers mutual agreement to commercially reasonable rates for such assistance). b. Return to Wards, at Wards' request and expense, any remaining Wards Data in Supplier's possession, including any remaining reports, data and other Confidential Information (provided that Wards releases Supplier from any audit or record retention obligations under the Master Agreement). 91 c. Certify to Wards in writing that all Wards Data and files have been removed from Supplier's system, and all Wards Confidential Information has been returned to Wards or the Successor (provided that Wards releases Supplier from any audit or record retention obligations under the Master Agreement). 92 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 3: MIDRANGE PROCESSING SEVICES ---------------------------------------------------- THIS SERVICE AGREEMENT NO. 3: MIDRANGE PROCESSING SERVICES (the "Service Agreement") is made and entered into this 6th day of November, 1998 between Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a Delaware__ corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in the Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into the Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITION All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: "INITIAL TERM" has the meaning given in Section 2.1. "MASTER AGREEMENT" means the Master Service Agreement for Information Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom Corporation dated November 6, 1998, and all amendments thereto. "MIDRANGE PROCESSING" means the Wards application server environment (including RS/6000 and AS/400 Servers) as such environment is developed under this Service Agreement. "MIDRANGE PROCESSING SERVICES" has the meaning given in Section 5.1. "RENEWAL TERM" has the meaning given in Section 2.2. "SERVICE AGREEMENT COMMENCEMENT DATE" means the date upon which the Migration Plan for Midrange Processing Services has been implemented under Service Agreement No. 1. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any Renewal Term. "SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the meaning given in Section 7.1 of this Service Agreement. "TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning given in Section 8.1 of this Service Agreement. "WARDS PEAK SEASON" means the period in any year during the Service Agreement Term from November 20 through December 31, and as such dates may be adjusted by Wards from time to time. ARTICLE 2. TERM 2.1 INITIAL TERM. The initial term of this Service Agreement (the "Initial Term") shall begin as of the Service Agreement Commencement Date and shall continue for a period of thirty-seven (37) months thereafter, unless earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. 2.2 RENEWAL TERM. Wards shall have the option to renew this Service Agreement for up to two (2) additional annual terms (each a "Renewal Term")by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final applicable Contract Year under this Service Agreement and before expiration of each annual period thereafter as applicable. All of the terms of this Service Agreement and the Master Agreement shall continue to apply without change during any renewal period(s). ARTICLE 3. TERMINATION 3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate this Service Agreement for convenience in accordance with Section 18.2(a) of the Master Agreement. The convenience termination charges, if any, shall be as described in Exhibit C to this Service Agreement. ARTICLE 4. PERSONNEL MATTERS 4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier --------- Positions that are subject to the provisions of Section 7.2 of the Master Agreement. ARTICLE 5. SERVICES 2 GENERAL. Throughout the Service Agreement Term, Supplier shall provide the Services described in Exhibit B, as such Exhibit may be amended and supplemented --------- from time to time pursuant to the Master Agreement (the "Midrange Processing Services"). The Midrange Processing Services includes all of the responsibilities (including Equipment, Software, personnel and expenses) associated with the Midrange Processing, unless specifically identified as a Wards responsibility under Section 5.3 below. The Services include (i) functions, responsibilities and tasks performed by the Transferred Employees prior to the Service Agreement Effective Date; (ii) functions, responsibilities and tasks not specifically described in this Service Agreement but which are required for their proper performance and are an inherent part of, or a necessary sub-part included within, the Services; and (iii) functions, responsibilities and tasks that are a logical extension of existing Services as a result of changes in technology, changes in Wards business practices, or changes resulting from change control procedures.Supplier will be the exclusive provider of the Services that are identified in this Service Agreement. 5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the Service Agreement Effective Date to the Service Agreement Commencement Date, Supplier will provide Midrange Services under Service Agreement No. 1 (Transition and Migration Services). Following the Service Agreement Commencement Date, the Service Level Agreement and other obligations of this Service Agreement shall become effective. 5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement Commencement Date, the Parties will appoint individuals as Project Executives under this Service Agreement to carry out the duties described in the Master Agreement. 5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in Exhibit B to this Service Agreement identifies the responsibilities of Wards - - --------- during the Term of this Service Agreement, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. The responsibilities of Wards shall be limited to those items listed in the matrix. ARTICLE 6. CHARGES 6.1 CHARGES FOR MIDRANGE PROCESSING SERVICES. Exhibit C to this Service --------- Agreement sets forth the Charges for the Midrange Processing Services that may be charged by Supplier. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Midrange Processing Services, Supplier shall provide Wards with the information described in Exhibit C in sufficient detail in order to allow Wards to verify invoices. --------- Invoice submission and payment shall be in accordance with Article 14 of the Master Agreement. 3 ARTICLE 7. SERVICE LEVEL AGREEMENT 7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the --------- Service Level Agreement applicable to the Midrange Processing Services (the "Service Level Agreement"). All of the terms of Article 5 of the Master Agreement shall apply to the Service Level Agreement. The Parties acknowledge that the Midrange processing environment of Wards is still in development and will not be in production on the Service Agreement Effective Date. Accordingly, Service Levels and the associated performance metrics will be baselined during the six (6) month period beginning on the Service Agreement Commencement Date, will be established jointly by the Parties during such 6-month period and shall become effective beginning with the seventh (7th) month following the Service Agreement Commencement Date. ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date, Wards shall assign, and Supplier shall assume, Wards' obligations under the applicable leases for the equipment listed on Exhibit E (the "Transferred --------- Equipment"). The terms of Section 6.1 of the Master Agreement shall apply with respect to the Transferred Equipment. 8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2 of the Master Agreement, Wards shall provide the Wards Facilities and Wards owned Equipment and Third Party Software licensed to Wards described in Exhibit ------- F to this Service Agreement. For any Wards Equipment that is transferred to - - - Supplier's facilities, Supplier agrees that it will (a) maintain the Wards Equipment consistent with industry practice; (b) insure the Wards Equipment against loss; (c) keep the Wards Equipment free of any claim, lien or encumbrance of supplier or any third party; and (d) return the Equipment to Wards upon termination of this Service Agreement. 8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the Service Agreement Commencement Date, and subject to Supplier having received any Third Party Consents, Supplier shall obtain the rights necessary to use the Third Party Software that is listed in Exhibit G. 8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is --------- proprietary to Wards and that is used in Midrange Processing (the "Wards Software"). The terms of Section 8.1 of the Master Agreement shall apply with respect to the Wards Software. 8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by Supplier to provide the Midrange Processing Services is listed in Exhibit I. --------- Use of Supplier Software in providing the Midrange Processing Services shall be in accordance with Section 8.2 of the Master Agreement. 4 ARTICLE 9. TERMINATION AND TRANSITION SERVICES 9.1 TERMINATION. Wards may terminate this Service Agreement without penalty at any time prior to the Service Agreement Commencement Date if Supplier does not complete the Migration Plan described in Service Agreement No. 1. After the Service Agreement Commencement Date, Wards may terminate this Service Agreement in accordance with the terms of the Master Agreement. 9.2 TRANSITION SERVICES. In the event of a termination or expiration of this Service Agreement, Supplier shall provide the Termination/Expiration Assistance as provided in Section 18.7 of the Master Agreement. IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ----------------------- --------------------------------- Name: Don Bernheisel Name: Joseph C. Grossestreuer --------------------- ------------------------------- Its: SVP, CIO Its: SVP-Outsourcing Services ---------------------- -------------------------------- 5 EXHIBITS TO MIDRANGE SERVICE AGREEMENT -------------------------------------- EXHIBIT A KEY SUPPLIER POSITIONS EXHIBIT B SERVICES EXHIBIT C CHARGES EXHIBIT D SERVICE LEVEL AGREEMENT EXHIBIT E TRANSFERRED EQUIPMENT EXHIBIT F WARDS FACILITIES AND EQUIPMENT EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE EXHIBIT H WARDS SOFTWARE EXHIBIT I SUPPLIER SOFTWARE 6 EXHIBIT A KEY SUPPLIER POSITIONS SENIOR SYSTEMS ENGINEER 7 EXHIBIT B SERVICES OVERVIEW - - -------- The business objective of this service category is to provide midrange operations and systems management to establish consistent and reliable levels of Midrange services in support of Wards' business units, regardless of the IT architecture deployed. The Supplier of Midrange Processing Services will assist Wards with transitioning all existing midrange platforms from a development environment into a controlled production environment. The Wards midrange platforms are currently supported on an "as needed" basis to assist with development efforts. The Supplier will be required to provide managed operations and system administration support services as these platforms are transitioned into production according to Wards Operation System Acceptance guidelines that are described in Exhibit B of Service Agreement No. 2 (Data Center Services). --------- The cost-effective implementation of a midrange management infrastructure allows Wards business units to rapidly respond to changing business needs. The documented service descriptions are designed to give the Supplier an understanding of Wards business objectives for Midrange Processing Services while allowing the Supplier latitude to define their own processes and methods for providing the Services. The intent of this service description is to establish the Supplier's responsibilities and criteria for providing the Midrange Processing Services. The Supplier of Midrange Processing Services has full responsibility for the comprehensive operational support of the Wards Midrange environments that are in scope as described herein. These responsibilities extend to the day-to-day operations and management of the operating environment including, but not limited to, data backup, archival and restore processes; production control; systems monitoring and reporting; data center monitoring, and maintenance; and media management. Additionally, the Supplier will participate in the creation of Wards formal Disaster Recovery Plan for the midrange environment and test the plan as agreed upon with Wards. The Supplier of Midrange System Management will provide the comprehensive management of Wards' midrange environment that are in scope as described herein. System Management includes, but is not limited to: comprehensive management of the existing infrastructure, and implementation of new midrange systems and new technologies to support the changing business needs of Wards. Scope of responsibility currently provided includes the support of the existing Midrange operating systems, software utilities, programming languages, and related software program products. Systems Management will work in an integrated fashion with all other service functions to provide seamless support for the Wards business units. OPERATIONS MANAGEMENT - - --------------------- ACTIVITIES FOR OPERATIONS MANAGEMENT 8 The Supplier will be responsible for all operational aspects of the Wards midrange environments described in this Exhibit B. The Supplier is expected to manage the development, and production-processing environments utilizing Supplier and Wards provided processes and management methodologies. 1. Supplier will provide console management functions to monitor, report, operate and IPL/reboot the midrange systems and associated peripherals. 2. Supplier will provide system backup, archival and restoration. 3. Supplier will provide operations support to Wards for the transition of midrange platforms from development to production. 4. Supplier will provide production control for the Wards midrange production environment. 5. Supplier will provide media management and media storage for all the midrange processing environments. 6. Supplier will develop and maintain disaster recovery services for Wards' midrange production environment in accordance with the Wards Disaster Recovery Plan. SERVICE PARAMETERS FOR OPERATIONS MANAGEMENT 1. Supplier will provide operations support as directed by Wards for those midrange platforms identified by Wards as development. 2. Supplier will provide operations support as indicated in this document for those midrange platforms to be identified by Wards as production. 3. Supplier will adhere to the change management procedures as documented in the Procedures Manual. 4. Supplier will utilize their help desk to notify Supplier staff, Wards and other vendors of hardware, software, and environmental failures according to the severity definitions and reporting/escalation guidelines as listed in the Procedures Manual and Master Schedule D. 5. Supplier will provide all supplies, PCs, workstations, monitoring tools, printing consumables, media and media storage units, etc. for Supplier's operations staff. 6. Supplier will provide and maintain documentation and run books for production job streams in accordance with the Procedures Manual, as these midrange platforms are transitioned into production. 7. Supplier will provide monitoring utilizing automated tools wherever possible. 9 MEASUREMENT TOOLS FOR OPERATIONS MANAGEMENT The Supplier will make every effort to utilize tools and processes provided by Wards and already in place in Wards processing environments. The Supplier is free to recommend in writing to Wards' additional or alternative tools or processes for review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. RS/6000 . Cybermation ESP Workload Manager Extensions RS/6000 Uniprocessor . Sterling Commerce Connect:Direct for Unix (AIX) . Syncsort for UNIX. . Intersolv PVCS . Unix Utilities AS/400 . Sterling Commerce Connect:Direct for OS/400 . Cybermation ESP Workload Manager Agent for AS/400 SYSTEMS MANAGEMENT - - ------------------ ACTIVITIES FOR SYSTEM MANAGEMENT The Supplier has responsibility for management and performance of the Wards' midrange systems, midrange systems software, and peripherals described in this Exhibit B.. It is the Supplier's responsibility to provide reliable, predictable, and consistent operating environments for Wards' applications systems. 1. The Supplier will provide the appropriate management methodologies, resources and tools to support the Wards midrange environments at performance, capacity, and availability levels as good as, or better than prior to outsourcing. 2. The Supplier will provide proactive server and peripheral performance monitoring and tuning. 3. The Supplier will provide proactive server and peripheral capacity analysis, planning and resource adjustment. 4. Supplier will provide systems support to Wards for the transition of midrange platforms from development to production. SERVICE PARAMETERS FOR SYSTEM MANAGEMENT 1. Supplier will provide systems support as directed by Wards for those midrange platforms identified by Wards as development. 10 2. Supplier will provide systems support as indicated in this document for those midrange platforms to be identified by Wards as production. 3. The Supplier will utilize and adhere to all change management processes, and procedures as documented in the Procedures Manual. 4. The Supplier will utilize and adhere to all problem management processes, procedures and escalation guidelines as documented in the Procedures Manual. 5. The Supplier will provide hardware maintenance and system software maintenance for the Wards midrange systems. 6. The Supplier will maintain 24x7x365 System Management support for Wards, as is provided today and as updated as Midrange Processing moves into production 7. The Supplier will provide total problem solutions with the appropriate technical resources, knowledge, procedures, and management methodologies to maintain the availability and performance of the Wards' development, test, and production server environments to documented service levels. 8. The Supplier will provide hardware and software tools, and related maintenance that is necessary to accomplish or help them accomplish the Systems Management service levels as indicated in this document. 9. The Supplier will provide sufficient detail to the help desk, within the text of each problem ticket, to include the background and history of each problem for later root cause analysis and/or support resolution or vendor corrective action. 10. The Supplier will monitor, alarm, and apply corrective action to pre-defined events and situations for the midrange environments included in this agreement. 11. The Supplier will gather, store, and report statistics on key process variables mutually agreed to by Wards and the Supplier for the Wards midrange environment included in this agreement in a format that is readily accessible to standard ODBC type analysis tools. 12. The Supplier will create, document and maintain security schemas, profiles and procedures for all midrange environments as directed in the Procedures Manual. 13. The Supplier will work to reduce the overall resolution time for problem tickets regardless of where the root problem resides. 14. The Supplier will conduct a monthly account status review meeting with designated Wards' management. The Supplier will utilize this meeting to review regular performance reports with Wards. 15. The Supplier will work with Wards' vendors of choice for hardware, software, hardware maintenance, and software maintenance. 16. The Supplier will recommend, evaluate, and perform all tasks that mandate advanced privileges for each midrange system managed within strict guidelines of change control. 17. The Supplier will accept and resolve problems from the Supplier's Help Desk as determined to be in the area of midrange System Management support by the Help Desk within time frames as specified by severity. 18. The Supplier will re-route problems back to the Supplier's Help Desk as they are determined to be outside of area of support of System Management. 19. The Supplier will provide all installation planning, site-preparation and installation coordination for midrange systems and associated peripherals to be managed by Supplier. 11 MEASUREMENT TOOLS FOR SYSTEMS MANAGEMENT The Supplier is responsible for supplying all tools necessary to satisfy the specifications contained herein. The Supplier is free to recommend in writing to Wards additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. 12 MIDRANGE RESPONSIBILITY MATRIX
- - ------------------------------------------------------------------------------------------------------------------- MIDRANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- COMPLIANCE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Understand and document Wards in-scope business requirements X X - - ------------------------------------------------------------------------------------------------------------------- Assist in developing Standard Operating Procedures (SOPs) X X - - ------------------------------------------------------------------------------------------------------------------- Review requests for changes X - - ------------------------------------------------------------------------------------------------------------------- Determine if request is within SOPs and conforms with other standards X - - ------------------------------------------------------------------------------------------------------------------- Implement as required X - - ------------------------------------------------------------------------------------------------------------------- Document changes to the database or system application computer equipment X - - ------------------------------------------------------------------------------------------------------------------- Maintain and update system inventory database X - - ------------------------------------------------------------------------------------------------------------------- Upon request, provide documents and logs referring to qualified environment X - - ------------------------------------------------------------------------------------------------------------------- Initiate internal compliance audits X - - ------------------------------------------------------------------------------------------------------------------- Review and understand information regarding the new products X - - ------------------------------------------------------------------------------------------------------------------- Conduct regular reviews of quality standards and processes and make X recommendations on improvements to these standards and processes - - ------------------------------------------------------------------------------------------------------------------- Report to Wards any activity within the environments under the control of the X Supplier, which do not comply with documented standards defined in the Procedures Manual or manufacturer specifications - - ------------------------------------------------------------------------------------------------------------------- Adhere to all Wards IT standards, methods, processes and procedures. X - - ------------------------------------------------------------------------------------------------------------------- CHANGE MANAGEMENT(OSA) - - ------------------------------------------------------------------------------------------------------------------- Implement changes within the Wards environments using a standard and X documented process or processes - - ------------------------------------------------------------------------------------------------------------------- Provide Wards with a means to properly test all proposed changes to the X environments that are in scope prior to the implementation of the proposed change into production - - ------------------------------------------------------------------------------------------------------------------- Support Wards activities including hardware maintenance, X installation/de-installation, facility changes, software, systems, and applications installation, upgrades, and support - - ------------------------------------------------------------------------------------------------------------------- Provide Wards with risk assessments and anticipated impact of all proposed X changes to the operational and data center environments (not including applications) - - ------------------------------------------------------------------------------------------------------------------- Provide support for both testing and production changes implemented within the X environments - - ------------------------------------------------------------------------------------------------------------------- PROBLEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Provide Wards with detail reporting and statistics on reported problems X - - ------------------------------------------------------------------------------------------------------------------- Supplier will support new Wards initiatives X - - ------------------------------------------------------------------------------------------------------------------- Supplier will report progress to Wards based on the Wards assigned level of severity X - - ------------------------------------------------------------------------------------------------------------------- Supplier will develop and enhance procedures for problem escalation X - - ------------------------------------------------------------------------------------------------------------------- Supplier will conduct root cause analysis and review high-impact problems to X identify preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate - - ------------------------------------------------------------------------------------------------------------------- COMPUTER OPERATIONS - - ------------------------------------------------------------------------------------------------------------------- Perform all manual and automated console operations and operate computer equipment X - - ------------------------------------------------------------------------------------------------------------------- Monitor performance of operating system and sub-systems and resolve X problems/exceptions - - ------------------------------------------------------------------------------------------------------------------- Identify and resolve systems and sub-systems problems X - - ------------------------------------------------------------------------------------------------------------------- Complete work, turnover and status logs X - - ------------------------------------------------------------------------------------------------------------------- Monitor and report Computer Room environmental variances and resolve X problems/exceptions - - -------------------------------------------------------------------------------------------------------------------
13
- - ------------------------------------------------------------------------------------------------------------------- MIDRANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Provide operational installation support for hardware components replacement. X - - ------------------------------------------------------------------------------------------------------------------- Capture and retain sufficient detail data to provide all required technical X and managerial reports as specified within this document. - - ------------------------------------------------------------------------------------------------------------------- PRODUCTION MONITORING AND SCHEDULING - - ------------------------------------------------------------------------------------------------------------------- Establish and maintain centralized responsibility over production systems and processes. X - - ------------------------------------------------------------------------------------------------------------------- Provide resources for monitoring, reporting, and tracking of systems and processes. X - - ------------------------------------------------------------------------------------------------------------------- Report, document, and track failures within the production systems. X - - ------------------------------------------------------------------------------------------------------------------- Provide and maintain a method for proper escalation of failures. X - - ------------------------------------------------------------------------------------------------------------------- Ensure overnight processing is completed as scheduled. X - - ------------------------------------------------------------------------------------------------------------------- Provide reporting on production systems, daily on critical systems. X - - ------------------------------------------------------------------------------------------------------------------- Provide a process for change requests in the scheduling of processes and systems. X - - ------------------------------------------------------------------------------------------------------------------- Develop, document, and enhance procedures for ensuring reliable monitoring and X scheduling of critical processes. - - ------------------------------------------------------------------------------------------------------------------- Conduct root cause analysis and review high-impact failures to identify X preventative measures, assess risk, and bring to closure. - - ------------------------------------------------------------------------------------------------------------------- Coordinate and integrate production schedules with applications groups. X - - ------------------------------------------------------------------------------------------------------------------- Modify and verify batch production schedules. X - - ------------------------------------------------------------------------------------------------------------------- Provide production scheduling on a 7 x 24 basis for midrange platforms as they X move into production. - - ------------------------------------------------------------------------------------------------------------------- TAPE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Complete all tape mount requests X - - ------------------------------------------------------------------------------------------------------------------- Monitor tape hardware for malfunction and resolve exceptions X - - ------------------------------------------------------------------------------------------------------------------- Perform daily tape hardware maintenance X - - ------------------------------------------------------------------------------------------------------------------- Produce reports on tape retention periods X - - ------------------------------------------------------------------------------------------------------------------- Request changes to tape retention periods X - - ------------------------------------------------------------------------------------------------------------------- Implement requested changes to tape retention periods X - - ------------------------------------------------------------------------------------------------------------------- TAPE LIBRARY - - ------------------------------------------------------------------------------------------------------------------- Maintain integrity of tape library system X - - ------------------------------------------------------------------------------------------------------------------- Monitor tape usage and resolve problems/exceptions X - - ------------------------------------------------------------------------------------------------------------------- Maintain and monitor "foreign" tape library and resolve exceptions X - - ------------------------------------------------------------------------------------------------------------------- Initialize new tapes X - - ------------------------------------------------------------------------------------------------------------------- Establish off-site storage requirements X X - - ------------------------------------------------------------------------------------------------------------------- Coordinate offsite storage functions including logging, tracking, labeling, X ordering, receiving and sending tapes - - ------------------------------------------------------------------------------------------------------------------- Provide a documented and consistent process for offsite data archiving for X processing environments. - - ------------------------------------------------------------------------------------------------------------------- Approve third party offsite storage suppliers and facility X X - - ------------------------------------------------------------------------------------------------------------------- Manage third party offsite storage contracts X - - ------------------------------------------------------------------------------------------------------------------- Audit third party supplier annually X - - ------------------------------------------------------------------------------------------------------------------- Inspect/audit third party supplier facility as allowed X - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- BACKUPS - - ------------------------------------------------------------------------------------------------------------------- Determination of what data is backed up and how often X - - ------------------------------------------------------------------------------------------------------------------- Determination of how long data is kept X - - ------------------------------------------------------------------------------------------------------------------- Perform backups as scheduled X - - -------------------------------------------------------------------------------------------------------------------
14
- - ------------------------------------------------------------------------------------------------------------------- MIDRANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Maintain library of backups X - - ------------------------------------------------------------------------------------------------------------------- Management of backup tapes in off-site storage X - - ------------------------------------------------------------------------------------------------------------------- Restore system data as provided in the Procedures Manual X - - ------------------------------------------------------------------------------------------------------------------- Restore user data as provided in the Procedures Manual X - - ------------------------------------------------------------------------------------------------------------------- FACILITIES MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Plan & manage installation of computer & environmental equipment in data center. X - - ------------------------------------------------------------------------------------------------------------------- Oversee equipment moves/ensures operation to specifications post-move X - - ------------------------------------------------------------------------------------------------------------------- Maintain physical inventory and blueprint of all hardware and accurate cabling X diagrams. - - ------------------------------------------------------------------------------------------------------------------- Administer contract services and other third party agreements (Environmental, X security and other companies) - - ------------------------------------------------------------------------------------------------------------------- Monitor and maintain all data center resources located at Supplier's site(s) X to assure availability, including: HVAC, Power distribution units, uninterrupted power switch (UPS), and backup power systems. - - ------------------------------------------------------------------------------------------------------------------- PHYSICAL SECURITY ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------- Provide security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Implement agreed security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Provide administrative and technical support for physical security X - - ------------------------------------------------------------------------------------------------------------------- Monitor and respond to alarm systems X - - ------------------------------------------------------------------------------------------------------------------- Provide emergency response and notification (Police, Fire etc.) X - - ------------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY SUPPORT- IF ELECTED BY WARDS - - ------------------------------------------------------------------------------------------------------------------- Develop, maintain and test disaster recovery plan and procedure manuals X including third party hot site recovery plans for all services provided to Wards - - ------------------------------------------------------------------------------------------------------------------- Maintain capacity plan for disaster recovery for all services provided to Wards X - - ------------------------------------------------------------------------------------------------------------------- Maintain an on-line document listing which platforms and applications are covered X - - ------------------------------------------------------------------------------------------------------------------- Maintain third party disaster recovery contracts X - - ------------------------------------------------------------------------------------------------------------------- Coordinate disaster recovery testing with Wards X - - ------------------------------------------------------------------------------------------------------------------- Participate in disaster recovery testing with Supplier and perform recovery X tests for all services provided by Supplier - - ------------------------------------------------------------------------------------------------------------------- Perform disaster recovery testing, resolve cause of failure and re-test until X successful for all services provided by Supplier - - ------------------------------------------------------------------------------------------------------------------- Report disaster recovery test results to Wards X - - ------------------------------------------------------------------------------------------------------------------- Confirm disaster recovery test results X - - ------------------------------------------------------------------------------------------------------------------- Prioritize recovery of data when disaster occurs X - - ------------------------------------------------------------------------------------------------------------------- Restore to normal operations in the event of a disaster within defined service levels X - - ------------------------------------------------------------------------------------------------------------------- STRATEGY AND PLANNING - - ------------------------------------------------------------------------------------------------------------------- Understand & document Wards business requirements X X - - ------------------------------------------------------------------------------------------------------------------- Assist with direction setting and updating of standards X - - ------------------------------------------------------------------------------------------------------------------- Research emerging technology and propose effective solutions X - - ------------------------------------------------------------------------------------------------------------------- Assist in developing Standard Operating Procedures (SOPs) X X - - ------------------------------------------------------------------------------------------------------------------- CONTRACTS MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Ensure compliance with Equipment and Software maintenance and warranty X agreements - - ------------------------------------------------------------------------------------------------------------------- Negotiate new and/or renew agreements for Equipment and Software X - - -------------------------------------------------------------------------------------------------------------------
15
- - ------------------------------------------------------------------------------------------------------------------- MIDRANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Manage contract terms and conditions (e.g. expiration date) of Equipment and Software X - - ------------------------------------------------------------------------------------------------------------------- Communicate contract provisions internally and to Wards, as needed X - - ------------------------------------------------------------------------------------------------------------------- STATUS REPORTING AND MEETINGS - - ------------------------------------------------------------------------------------------------------------------- Participate in Wards' daily operational status meeting to report on X operational, environmental and batch job completion for the prior 24-hour period. - - ------------------------------------------------------------------------------------------------------------------- Prepare monthly service level / performance reports X - - ------------------------------------------------------------------------------------------------------------------- Analyze results of monthly reports and historical trends X - - ------------------------------------------------------------------------------------------------------------------- Identify areas for improvement X - - ------------------------------------------------------------------------------------------------------------------- Conduct monthly management review meeting X - - ------------------------------------------------------------------------------------------------------------------- Attend monthly management review X X - - ------------------------------------------------------------------------------------------------------------------- Implement action items resulting from, & agreed to during, mgmt review meeting. X - - ------------------------------------------------------------------------------------------------------------------- Audit/request service level/performance and activity reports as needed X - - ------------------------------------------------------------------------------------------------------------------- Approve new or changes to service level/performance reports as needed. X - - ------------------------------------------------------------------------------------------------------------------- HUMAN RESOURCES - - ------------------------------------------------------------------------------------------------------------------- Provide input into Suppliers personnel performance and reviews X X - - ------------------------------------------------------------------------------------------------------------------- Ensure adequate training & review of all personnel performing Supplier activities. X - - ------------------------------------------------------------------------------------------------------------------- Implement corrective actions as needed X - - ------------------------------------------------------------------------------------------------------------------- CAPACITY PLANNING - - ------------------------------------------------------------------------------------------------------------------- Monitor system use and capacity, and resolve problems/exceptions X - - ------------------------------------------------------------------------------------------------------------------- Forecast resource requirements X X - - ------------------------------------------------------------------------------------------------------------------- Ensure appropriate capacity to meet resource projections X - - ------------------------------------------------------------------------------------------------------------------- Analyze workload capacity X - - ------------------------------------------------------------------------------------------------------------------- Prepare and produce resource planning reports X - - ------------------------------------------------------------------------------------------------------------------- Analyze and report resource trends X - - ------------------------------------------------------------------------------------------------------------------- Make recommendations regarding resource consumption and trends X - - ------------------------------------------------------------------------------------------------------------------- Report usage and resource capacity to Supplier on a periodic basis X - - ------------------------------------------------------------------------------------------------------------------- PERFORMANCE TUNING - - ------------------------------------------------------------------------------------------------------------------- Conduct system performance tuning X - - ------------------------------------------------------------------------------------------------------------------- Conduct application performance tuning X - - ------------------------------------------------------------------------------------------------------------------- Provide performance reporting X - - ------------------------------------------------------------------------------------------------------------------- Conduct application and hardware benchmarks, if required X - - ------------------------------------------------------------------------------------------------------------------- Conduct system performance reviews X - - ------------------------------------------------------------------------------------------------------------------- Measure and analyze system performance X - - ------------------------------------------------------------------------------------------------------------------- Review system performance and request adjustments where deemed necessary X - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- DISK MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Monitor and control storage performance and resolve exceptions X - - ------------------------------------------------------------------------------------------------------------------- Assign and initialize volumes X - - ------------------------------------------------------------------------------------------------------------------- Determine file and volume placement X X - - -------------------------------------------------------------------------------------------------------------------
16
- - ------------------------------------------------------------------------------------------------------------------- MIDRANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Set and maintain storage resource efficiency X - - ------------------------------------------------------------------------------------------------------------------- Establish and maintain storage standards X X - - ------------------------------------------------------------------------------------------------------------------- Maintain space requirements according to Wards demand X - - ------------------------------------------------------------------------------------------------------------------- Approve requests for storage resource increases and decreases X - - ------------------------------------------------------------------------------------------------------------------- Implement requests for storage resource increases and decreases X - - ------------------------------------------------------------------------------------------------------------------- Perform data migration management X - - ------------------------------------------------------------------------------------------------------------------- DATA SECURITY ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------- Define security standards and guidelines X - - ------------------------------------------------------------------------------------------------------------------- Approve security requests X - - ------------------------------------------------------------------------------------------------------------------- Implement security requests X - - ------------------------------------------------------------------------------------------------------------------- Approve password and logon id requests X - - ------------------------------------------------------------------------------------------------------------------- Implement password and logon id requests X - - ------------------------------------------------------------------------------------------------------------------- Administer security databases (user privileges) X - - ------------------------------------------------------------------------------------------------------------------- Provide security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Implement agreed security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Enforce security standards X - - ------------------------------------------------------------------------------------------------------------------- SYSTEMS ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------- Research, advise, and provide information in support of Wards database X administration and applications development groups relating to in scope systems - - ------------------------------------------------------------------------------------------------------------------- Provide strategies and suggestions on how to maximize midrange performance by X optimizing key process variables. and implement them upon Wards' approval..... - - ------------------------------------------------------------------------------------------------------------------- Approve strategies and suggestions on how to maximize midrange performance by X optimizing key process variables - - ------------------------------------------------------------------------------------------------------------------- Implement approved strategies and suggestions on how to maximize midrange X performance by optimizing key process variables - - ------------------------------------------------------------------------------------------------------------------- Research, replace, configure, and activate midrange components, including, but X not limited to operating system generation, and dynamic environment generation for new and replacement components. - - ------------------------------------------------------------------------------------------------------------------- Document problem resolution activities as they are completed or re-routed X - - ------------------------------------------------------------------------------------------------------------------- Identify and correct problems within the midrange environments. X - - ------------------------------------------------------------------------------------------------------------------- SECURITY SOFTWARE MAINTENANCE - - ------------------------------------------------------------------------------------------------------------------- Software update and implementation X - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- Participate and approve changes to security software X - - ------------------------------------------------------------------------------------------------------------------- Administer login Ids and reset passwords for data access X - - ------------------------------------------------------------------------------------------------------------------- Determine information security classification X - - ------------------------------------------------------------------------------------------------------------------- Implement and maintain security classifications X - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- SYSTEM SOFTWARE SUPPORT - - ------------------------------------------------------------------------------------------------------------------- Identify currently installed software products that can be de-installed due to X obsolescence - - ------------------------------------------------------------------------------------------------------------------- Review and evaluate proposed software program products for possible acquisition, X X making a determination as to compatibility with current software, cost/benefit considerations, vendor support, and value compared to similar products available - - -------------------------------------------------------------------------------------------------------------------
17
- - ------------------------------------------------------------------------------------------------------------------- MIDRANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Create and/or maintain internal documentation that describes the development, X installation, and support requirements for software program products - - ------------------------------------------------------------------------------------------------------------------- Provide technical support for the DB2 DBMS operating under AIX, and related X utility software and utilities. - - ------------------------------------------------------------------------------------------------------------------- Provide a knowledge of the internal functioning of operating systems software X for the purposes of problem resolution and development of local modifications - - ------------------------------------------------------------------------------------------------------------------- Install new software products and updated versions/releases of current software X products. - - ------------------------------------------------------------------------------------------------------------------- Perform problem determination activities for in-scope Software, including X problem source identification to be performed in concert with Software vendor's Technical Support personnel. - - ------------------------------------------------------------------------------------------------------------------- Perform regression testing activities to validate preventive service within X the locally configured environment - - ------------------------------------------------------------------------------------------------------------------- Install preventive service to supported software products X - - ------------------------------------------------------------------------------------------------------------------- Install corrective service to supported software products X - - ------------------------------------------------------------------------------------------------------------------- Coordinate the support functions for operating system and related program products X - - ------------------------------------------------------------------------------------------------------------------- Review and approve software changes X - - ------------------------------------------------------------------------------------------------------------------- Participates in feasibility studies of new software or services with X application development groups, and vendor personnel, coordinating and reviewing results of technical evaluations - - ------------------------------------------------------------------------------------------------------------------- Supports off-site Disaster Recovery planning for supported operating systems software X - - ------------------------------------------------------------------------------------------------------------------- Prepares and distributes a schedule to the application development groups for X systems software changes - - ------------------------------------------------------------------------------------------------------------------- Acting as a technical advisor, maintains an effective interface with software X vendors in order to assess their products for possible utilization. - - -------------------------------------------------------------------------------------------------------------------
18 GLOSSARY OF TERMINOLOGY ----------------------- PVCS means the system utility configuration used in the Midrange Processing environment Connect:Direct / File Transfer software for moving data between different computing platforms Vendor - Provider of hardware, software or services. Supplier - Provider of outsourcing services Wards Disaster Recovery Plan /the Wards plan for recovery of midrange processing that is or will be developed, and as modified from time to time. 19 EXHIBIT C CHARGES MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM:........................$115,000 SPECIAL CHARGES AS SET FORTH ON THE ATTACHED SCHEDULE, WHICH COMMENCED JANUARY 1999 PER SERVICE AGREEMENT NO. 1, SHALL BE ADDED TO THE MSC AND PAYABLE MONTHLY. A. THE MSC SHALL INCLUDE: Mid-range support services of the mid-range environment (as it exists on the Service Agreement Effective Date) consisting of: . Eight (8) RS6000 SP2 (3 - SP2, 2 - 570 Ravens, 1 - J40, 1- G30 and 1 - F30). . One (1) DEC/VAX. . One (1) AS/400. . System management support of mid-range environment as set forth in Exhibit B. --------- B. OUT-OF-SCOPE - The MSC includes only implementation support for projects beyond the scope of the services description in Exhibit B (including by way of --------- example but not by limitation, Sunrise, Smart Store, Auto Express, Data Propagator, UOB Database implementation, ADSM implementation). Wards shall retain primary responsibility for such projects. Mid-range services currently provided by consultants retained by Wards shall remain Wards' responsibility. - Wards may, at its option, elect to have Supplier provide Disaster Recovery services. Such Disaster Recovery services, including support for testing, shall be provided to Wards at third-party cost plus 15%. C. PASS-THROUGH EXPENSES 1. Wards shall retain ownership and financial responsibility for mid-range Equipment and Software leases, licenses and maintenance. If Supplier pays such obligations directly, it shall invoice such expenses as Pass- Through Expenses to Wards at cost. 2. All telecommunications expenses, including but not limited to connectivity between Wards' corporate complex, Signature and Supplier's data center. D. EXCESS USAGE In the event that Wards requires the use of additional Equipment or Wards Equipment at Supplier's facility, Wards agrees to pay, in addition to the MSC, the following: 1. With Wards' approval, $1500 per month per 100 square feet in excess of the initial square footage used to provide the Services. 2. With Wards' approval, $5000 per month per additional full-time equivalent employee needed in excess of the initial number of Transferred Employees used to provide the Services. 3. The cost of the installation of such Equipment and Software as Pass- Through Expenses. E. DOWNSIZING In the event that the resources used to provide the Services under this Service Agreement are reduced below those used as of the Service Agreement Commencement Date, the following reductions shall be made to the MSC: 1. With Wards' approval, $1000 per month per one hundred (100) square feet at Supplier's facility removed from the initial square footage used to provide the Services. 20 2. With Wards' approval, $4000 per month per full-time equivalent employee who is no longer dedicated to providing the Services. F. MINIMUM MONTHLY CHARGE - Months 1-13 -- $115,000 (as adjusted as set forth above) plus Special Charges. - Months 14-25 -- $92,000 plus Special Charges. - Months 26-37 -- $69,000 plus Special Charges. G. TERMINATION CHARGES - In the event of termination for any reason, Wards shall repurchase all equipment and software described in Wards' letter to Supplier dated October 28, 1998, at the unamortized principal balance set forth on the attached schedule. 21 RS6000 - SP2 EQUIPMENT AMORTIZATION ----------------------------------- SCHEDULE --------
Beginning Unamortized Principal Monthly Interest Principal Principal Month Balance Payment Expense Reduction Balance ----- ------- ------- ------- --------- ------- 1 $4,658,670.51 $145,985.80 $31,057.80 $114,928.00 $4,543,742.51 2 $4,543,742.51 $145,985.80 $30,291.62 $115,694.18 $4,428,048.33 3 $4,428,048.33 $145,985.80 $29,520.32 $116,465.48 $4,311,582.85 4 $4,311,582.85 $145,985.80 $28,743.89 $117,241.92 $4,194,340.93 5 $4,194,340.93 $145,985.80 $27,962.27 $118,023.53 $4,076,317.40 6 $4,076,317.40 $145,985.80 $27,175.45 $118,810.35 $3,957,507.05 7 $3,957,507.05 $145,985.80 $26,383.38 $119,602.42 $3,837,904.63 8 $3,837,904.63 $145,985.80 $25,586.03 $120,399.77 $3,717,504.86 9 $3,717,504.86 $145,985.80 $24,783.37 $121,202.44 $3,596,302.42 10 $3,596,302.42 $145,985.80 $23,975.35 $122,010.45 $3,474,291.97 11 $3,474,291.97 $145,985.80 $23,161.95 $122,823.86 $3,351,468.11 12 $3,351,468.11 $145,985.80 $22,343.12 $123,642.68 $3,227,825.43 13 $3,227,825.43 $145,985.80 $21,518.84 $124,466.97 $3,103,358.47 14 $3,103,358.47 $145,985.80 $20,689.06 $125,296.75 $2,978,061.72 15 $2,978,061.72 $145,985.80 $19,853.74 $126,132.06 $2,851,929.67 16 $2,851,929.67 $145,985.80 $19,012.86 $126,972.94 $2,724,956.73 17 $2,724,956.73 $145,985.80 $18,166.38 $127,819.42 $2,597,137.31 18 $2,597,137.31 $145,985.80 $17,314.25 $128,671.55 $2,468,465.75 19 $2,468,465.75 $145,985.80 $16,456.44 $129,529.36 $2,338,936.39 20 $2,338,936.39 $145,985.80 $15,592.91 $130,392.89 $2,208,543.50 21 $2,208,543.50 $145,985.80 $14,723.62 $131,262.18 $2,077,281.32 22 $2,077,281.32 $145,985.80 $13,848.54 $132,137.26 $1,945,144.06 23 $1,945,144.06 $145,985.80 $12,967.63 $133,018.17 $1,812,125.88 24 $1,812,125.88 $145,985.80 $12,080.84 $133,904.96 $1,678,220.92 25 $1,678,220.92 $145,985.80 $11,188.14 $134,797.66 $1,543,423.26 26 $1,543,423.26 $145,985.80 $10,289.49 $135,696.31 $1,407,726.95 27 $1,407,726.95 $145,985.80 $ 9,384.85 $136,600.96 $1,271,125.99 28 $1,271,125.99 $145,985.80 $ 8,474.17 $137,511.63 $1,133,614.36 29 $1,133,614.36 $145,985.80 $ 7,557.43 $138,428.37 $ 995,185.99 30 $ 995,185.99 $145,985.80 $ 6,634.57 $139,351.23 $ 855,834.76
22 31 $ 855,834.76 $145,985.80 $ 5,705.57 $140,280.24 $ 715,554.53 32 $ 715,554.53 $145,985.80 $ 4,770.36 $141,215.44 $ 574,339.09 33 $ 574,339.09 $145,985.80 $ 3,828.93 $142,156.87 $ 432,182.21 34 $ 432,182.21 $145,985.80 $ 2,881.21 $143,104.59 $ 289,077.63 35 $ 289,077.63 $145,985.80 $ 1,927.18 $144,058.62 $ 145,019.01 36 $ 145,019.01 $145,985.80 $ 966.79 $145,019.01 ($0.00)
23 EXHIBIT D SERVICE LEVEL AGREEMENT SERVICE LEVEL AGREEMENT ----------------------- FOR MIDRANGE PROCESSING SERVICES -------------------------------- 24 TABLE OF CONTENTS
Page ---- I. GENERAL...................................................... 1 A. General B. Definitions............................................. 1 C. Measurement............................................. 2 D. Effective Date for Service Levels....................... 2 E. Revisions............................................... 2 F. Single Point of Contact................................. 3 II. SERVICE LEVELS A. Definitions............................................. 3 B. Service Level Measures.................................. 3 C. Service Levels.......................................... 3 III. SERVICE LEVEL CREDITS........................................ 4 A. Credits................................................. 4 B. Method of Calculation................................... 4 C. Frequency Factor........................................ 5 D. Excused Performance Problem............................. 5 E. Time Limit.............................................. 5 IV. SERVICE LEVEL TERMINATION EVENTS............................. 6 A. Definition.............................................. 6 B. Repeated Service Level Failures......................... 6 C. Repeated Critical Service Level Failures................ 7 D. Catastrophic Level of Service........................... 7 E. Qualification........................................... 8
SERVICE LEVEL AGREEMENT ----------------------- FOR MIDRANGE PROCESSING SERVICES -------------------------------- I. GENERAL A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT. This Service Level Agreement is entered into under the Master Agreement for Information Technology Services between Acxiom Corporation ("Supplier") and Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and pertains to Service Agreement No. 3: Midrange Processing Services entered into by Wards and Supplier. Any inconsistency between this Agreement, the Service Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of the Master Agreement. B. DEFINITIONS In this Service Level Agreement ("SLA"), the terms listed below shall have the indicated meanings. Other terms may be defined in other sections of this SLA. Terms used in this SLA without definition have the meanings ascribed to them in the Master Agreement or Service Agreement. 1. Service Level Measure - For any Service identified in this SLA, --------------------- the method specified in this SLA for quantitatively calculating Supplier's actual performance. The results of these calculations are compared with Service Levels to evaluate Supplier's compliance with Service Levels. 2. Service Levels - For any Service identified in this SLA, the -------------- required quantitative level or degree of performance by Supplier specified in this SLA as the "Service Level." The Service Levels are the minimally acceptable levels of service for the Services. Any failure to meet a Service Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 3. Increased Impact Level - For any Service identified in this SLA, ---------------------- the required quantitative level or degree of performance by Supplier specified in this SLA as the "Increased Impact Level." Any failure to meet an Increased Impact Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 4. Critical Service Levels - Service Levels associated with those ----------------------- Services that are most important to the conduct of Wards' operations, which are the subject of this Service Agreement. 5. Service Level Credits - The amounts which Wards shall have the --------------------- option, but not the obligation, to recover as liquidated damages, in lieu of any other monetary remedies Wards may have, each time Supplier fails to meet the Service Levels for any reason other than those specified in Section III.D of this SLA. Service Level Credits are calculated in the manner described in Section III of this SLA. 6. Service Level Termination Event - An occurrence or series of ------------------------------- occurrences of deficient performance by Supplier in performing the Services specified in this SLA as a "Service Level Termination Event." The occurrence of a Service Level Termination Event constitutes, based upon the facts and circumstances, a material breach of Supplier's performance obligations under this Service Agreement and gives Wards the right to terminate this Service Agreement for cause. C. MEASUREMENT Unless otherwise stated in this SLA, each Service Level Measure shall be calculated on a complete calendar month basis. Performance results shall be measured and reported based on actual results with any exceptions for Excused Performance Problems reported separately. D. EFFECTIVE DATE FOR SERVICE LEVELS The Service Levels provided for in this SLA shall become effective as provided for in Section 7.1 of the Service Agreement. E. REVISIONS 1. From time to time during the Term, the Parties agree to negotiate in good faith to add, delete, or modify then-existing Service Level Measures, Service Levels, and Increased Impact Levels to reflect changes in Wards' business requirements or objectives. All such changes shall be adopted in the form of a signed written amendment to this SLA. 2. In the event that any applicable system or function is replaced during the Term by a comparable system or function, the Service Level Measure, Service Level, and Increased Impact Level for such replacement system or function shall, to the extent reasonably practicable (i) be defined during the first 30 days of such replacement, and (ii) must be at least equivalent to the then- existing Service Level Measure, Service Level, and Increased Impact Level for the replaced system or function (assuming the replacement system is capable of delivering the same Service Levels as the replaced system). 3. At all times during the Term, Supplier shall provide the Services in a manner that meets or exceeds the then-existing Service Levels. The remedies for failure to do so shall include the remedies defined in this SLA, the Service Agreement, and the Master Agreement. F. SINGLE POINT OF CONTACT Regardless of whether any failure by Supplier to meet a Service Level is attributable to Supplier or an Excused Performance Problem, Supplier shall provide a single point of contact to address resolution of such failure and shall act promptly to address the problem causing the failure. Unless otherwise agreed by 27 Wards, the Supplier Project Executive or his or her designee shall be the Supplier's single point of contact. II. SERVICE LEVELS A. DEFINITIONS Certain technical definitions are included in the Glossary of Terminology attached as Appendix A to Exhibit B of the Service Agreement. B. SERVICE LEVEL MEASURES DATA BACKUP, ARCHIVING AND RESTORATION -------------------------------------- OBJECTIVE: To ensure proper safeguards are being taken by the Supplier to protect critical Wards data as identified by Wards with consistent, reliable, and documented process(es) for management of data backups, data archives, off-site data rotation and data restoration across the Wards environments under the Supplier's span of control. DEFINITION: The Suppliers process(es) for midrange data backup, archiving and restoration of data within the Wards midrange environments. Ensuring the Suppliers process(es) are backing up, archiving and restoring these files as identified by Wards. METHOD: The Supplier will document and maintain the processes used to backup and restore the Wards identified data. The Supplier will provide appropriate tools and processes for managing and measuring compliance with established Data Backup, archiving and restoration guidelines as indicated in the Procedures Manual. SERVICE LEVEL:
Values Metrics --------------------------------------------------------------------------------------- Service Level - 99.9% of all critical data identified by Wards is being backed up and stored as required per the Procedures Manual. --------------------------------------------------------------------------------------- Increased Impact - Less than 99.2% of all critical data identified by Wards is being backed up and stored as required per the Procedures Manual. ---------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards applications and Supplier's Disaster Recovery Plan RESPONSIBILITY: Supplier PERIOD: Monthly REPORT: See Master Agreement Schedule D, Reporting 28 ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I DISASTER RECOVERY SERVICES -------------------------- OBJECTIVE: To provide midrange disaster recovery services for the Wards Disaster Recovery Plan, which is a non-contractual document. The target is to provide on-going midrange services to Wards within 48 hours of a declared disaster, including system processes as well as all Wards' critical midrange applications DEFINITION: Supplier declares a disaster when Supplier services to Wards are interrupted due to significant equipment, computer or network related failure longer than the period defined in Wards Disaster Recovery Plan. METHOD: A declared disaster will be announced by the Supplier Account Manager in compliance with the Wards Disaster Recovery Plan.. SERVICE LEVEL:
Values Metrics ------------------------------------------------------------------------------------------------------------ Service Level Restoration of midrange operating system software and critical applications to Wards within 48 hours of a declared disaster and restoration of remaining applications as provided in the Wards Disaster Recovery Plan. ------------------------------------------------------------------------------------------------------------ Increased Impact Restoration of critical midrange operating system software and critical applications to Wards within 72 hours of a declared disaster and restoration of other applications by no more than 12 hours after the time specified in the Wards Disaster Recovery Plan. ------------------------------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards midrange applications and Users RESPONSIBILITY: Supplier PERIOD: Resource Range: All midrange platforms under the control of the Supplier that are in scope and included in the Wards Disaster Recovery Plan. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I 29 DISASTER RECOVERY TEST ---------------------- OBJECTIVE: Supplier will demonstrate its ability to restore Wards Midrange systems in accordance with the Wards Disaster Recovery Plan, which is a non-contractual document, in the event of a disaster. Supplier will be responsible for the successful execution of the Wards disaster recovery test plan for Wards Midrange processing. DEFINITION: Disaster recovery testing is the process by which Supplier ensures that the disaster recovery services being provided to Wards can be restored in a swift and accurate manner following a disaster situation in accordance with the Wards Disaster Recovery plan, which is a non-contractual document. This service level is valid as long as Wards participates in the disaster recovery planning, interface and testing process as defined in the Procedures Manual and as mutually agreed to by Supplier and Wards. METHOD: Supplier will test the midrange Disaster Recovery Plan as defined in the Wards Disaster Recovery Plan. Supplier will provide test results to Wards within one week of test completion. SERVICE LEVEL:
Values Metrics ---------------------------------------------------------------------------------------- Service Level 90% of all scheduled activities are completed according to the Wards Disaster Recovery Test Plan. ---------------------------------------------------------------------------------------- Increased Impact Less than 80% of all scheduled activities are completed according to the Wards Disaster Recovery Test Plan. ----------------------------------------------------------------------------------------
IMPACT: Medium AFFECTED AREA: Wards Midrange Platforms RESPONSIBILITY: Supplier PERIOD: Annually RESOURCE RANGE: All midrange platforms under the control of the Supplier and agreed to be included in the Test. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-II SYSTEMS AVAILABILITY --------------------- OBJECTIVE: Monitoring Systems availability and performance according to defined targets. Starting and stopping defined Systems Services according to specified service 30 availability schedules. Initiating Problem Management procedures to rectify any performance or availability failures. DEFINITION: Eachpplication/server is available during hours of scheduled availability. To be available, each Online Service must be: (1) Accessible and usable to Wards User Community according to Scheduled Availability; (2) Minimum required files open and accessible to each Online Service as directed by Wards; (3) Availability calculated as: (Scheduled Available - Unscheduled Outage) / scheduled available = % available i.e. (100-10)/100=90% Available SCHEDULED AVAILABILITY MEANS: MIDRANGE SCHEDULED AVAILABILITY ------------------------------- APPLICATION/SERVER AVAILABILITY Data Warehouse Mon.- Sat. 04:00 - 18:00 SP Complex Sunrise Development Mon.-Sun. 05:00 - 23:59 Sunrise Production Raven 1-2 E3 Mon. -Sun. 07:00 - 19:00 Wards SE3 ADS Mon. - Sun. 00:00-01:59 MW PROD QA 04:00-23:59 NPS/2 Mon.-Sun. 00:00-01:59 MW PROD QA 04:00-23:59 METHOD: Monitoring all Online Services to ensure their performance and availability remains within the service levels. The Supplier will provide console or other appropriate management processes to control the Wards Midrange environments within their control.
SERVICE LEVEL: Values Metrics ------------------------------------------------------------------ Service Level - 95% of all Online Services have been maintained to Wards schedules. ------------------------------------------------------------------ Increased Impact - Less than 90% of all Online Services been maintained to Wards schedules. ------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Employees, applications, distribution and stores. 31 RESPONSIBILITY: Supplier PERIOD: Monthly REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I BATCH REPORTS AVAILABILITY -------------------------- OBJECTIVE: Monitoring Batch Reports availability and performance according to defined targets. Ensuring availability, electronically or otherwise of defined Batch Reports according to specified service schedules. Initiating Problem Management procedures to rectify any performance or availability failures. DEFINITION: The Suppliers processes for Batch Reports monitoring and control within the Wards Midrange environments. METHOD: Monitoring all Batch Reports to ensure their availability remains within specified tolerances. The Supplier will provide batch management processes to control the Wards Midrange environments within their control.
SERVICE LEVEL: Values Metrics ------------------------------------------------------------------- Service Level - Batch Reports have been produced and made available according to Ward's schedules with no more than one delivery that is late by no more than 4 hours. ------------------------------------------------------------------- Increased Impact - Batch Reports have been produced and made available according to Ward's schedules with more than one delivery or the late report is not delivered within 8 hours of scheduled time. -------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Employees, applications, distribution and stores. RESPONSIBILITY: Supplier PERIOD: Monthly RESOURCE RANGE: Performance within this specification is to the extent of the Supplier's span of control. REPORT: See Master Agreement Schedule D, Reporting 32 ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I REQUEST TIME TO COMPLETE ------------------------ OBJECTIVE: To insure that midrange environment modification requests are completed in an acceptable amount of time. DEFINITION: Midrange environment modification requests are those system management functions performed by the Supplier in routine support of the midrange processing environment. METHOD: The Supplier provided change management system or Supplier provided help desk problem tracking system will be used to calculate time to complete.
SERVICE LEVEL: VALUES Metrics ------------------------------------------------------------------- Service Level - 90% of requests completed by target date as mutually agreed upon. ------------------------------------------------------------------- Increased Impact - Less than 85% of requests completed by target date as mutually agreed upon. -------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards User Community RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 24x7x365. RESOURCE RANGE: For all Wards' midrange systems, present and future, which are under the Supplier's control. Report: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - I RESPONSE TIME ------------- OBJECTIVE: Supplier will provide acceptable response times for end users. DEFINITION: The first component of response time for the midrange on-line environment is measured by the percentage of transactions that complete within the defined time limits (internally measured elapsed time). Each online environment has its own response time objectives based on the workload they support and their 33 historical response time trends. The baseline for response times will be tracked by Supplier during the period from the Service Agreement Effective Date to the Service Agreement Commencement Date and included in this Service Level.
TRANSACTION BY OPERATING Baseline Measurement SYSTEM ------------------------------------------------------------------- RS/6000 Baseline provided by Supplier and agreed upon by Wards. ------------------------------------------------------------------- AS/400 Baseline provided by Supplier and agreed upon by Wards. -------------------------------------------------------------------
METHOD: Data Capture: The Supplier will use Supplier provided manual records, job logs, systems logs, and any other tools available to determine the response time Measurement Interval: At least once per period or by exception (i.e. missing a threshold). Supplier will provide monthly summary reports to Wards Management for review.
SERVICE LEVEL: Description Data Points ------------------------------------------------------------------- Service Level 98% of midrange system transactions are completed[based upon measurement methods determined during the Transition Period]. ------------------------------------------------------------------- Increased Impact Less than 95% of midrange system transactions are completed [based upon measurement methods determined during the Transition Period]. -------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Offices and Employees RESPONSIBILITY: Service Performance: Supplier provides baseline and all services related to this Service Level. Compliance Management: Supplier provides calculation, reporting and analysis for this Service Level PERIOD: Monthly HOURS OF OPERATION: 24x7x365 RESOURCE RANGE: This service level is valid, provided the transaction volumes do not exceed baseline transaction volumes per day: Report: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Type-I 34 C. SERVICE LEVELS The Service Levels are identified in the following table(s). Each Service Level is assigned a Severity Weight in the following table(s), which is used in the calculation of the Service Level Credits. The Severity Weights are expressed as percentages, totaling 100% for all Service Levels, and approximate the relative severity of the impact on Wards' operations of failures to meet the respective Service Levels. The parties acknowledge that these percentages are approximations of probable severity and relative importance and do not limit Wards' right to contend that one or more failures to meet one or more of the Service Levels may constitute a material breach of the Agreement. Upon 30 days advance notice to Supplier, Wards may adjust the Severity Weights of the respective Service Levels as Wards deems appropriate so long as the total of such percentages does not exceed 100%.
- - ------------------------------------------------------------------------------------------------------------------ SERVICE LEVEL DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED STANDARD ID MEASUREMENT WEIGHT IMPACT LEVEL - - ------------------------------------------------------------------------------------------------------------------ DATA BACKUP, PERCENTAGE 15 99.9% LESS THAN ARCHIVING BACKED UP 99.2% AND RESTORATION - - ------------------------------------------------------------------------------------------------------------------ DISASTER RECOVERY RESTORATION 10 WITHIN 48 WITHIN 72 PLAN TIME HOURS HOURS - - ------------------------------------------------------------------------------------------------------------------ DISASTER RECOVERY TEST 5 90% of all Less than 80% TEST PERFORMANCE scheduled of all activities are scheduled completed activities are according to completed the Wards according to Disaster the Wards Recovery Test Disaster Plan. Recovery Test Plan. - - ------------------------------------------------------------------------------------------------------------------ SYSTEMS AVAILABILITY PERFORMANCE 20 95% of all Less than 90% Online Services of all Online have been Services have maintained to been maintained Wards schedules. to Wards schedules. - - ------------------------------------------------------------------------------------------------------------------ BATCH REPORT PERFORMANCE 15 Batch Reports Batch Reports AVAILABILITY have been have been produced and produced and made available made available - - ------------------------------------------------------------------------------------------------------------------
35 - - ------------------------------------------------------------------------------------------------------------------- according to according to Ward's Ward's schedules with schedules with no more than more than one one delivery delivery or the that is late by late report is no more than 4 not delivered hours. within 8 hours of scheduled time. - - ------------------------------------------------------------------------------------------------------------------- REQUEST TIME TO PERFORMANCE 15 90% of requests Less than 85% COMPLETE completed by of requests target date as completed by mutually agreed target date as upon. mutually agreed upon. - - ------------------------------------------------------------------------------------------------------------------- RESPONSE TIME TRANSACTION TIME 20 98% of midrange Less than 95% system of midrange transactions system are transactions completed[based are completed upon [based upon measurement measurement methods methods determined determined during the during the Transition Transition Period Period - - -------------------------------------------------------------------------------------------------------------------
The following Service Levels are designated as Critical Service Levels: --------------------------------------------------------------------------- SERVICE APPLICATION DESCRIPTION LEVEL STANDARD ID --------------------------------------------------------------------------- ONLINE AVAILABILITY --------------------------------------------------------------------------- RESPONSE TIME --------------------------------------------------------------------------- III. SERVICE LEVEL CREDITS A. CREDITS In each case of a failure to satisfy a Service Level Supplier will, within five (5) days from the identification of the deviation from the applicable Service Level, provide to Wards a plan of activities which will allow Supplier to satisfy the applicable Service Level at the earliest date practicable. In addition, Wards shall be entitled to recover a Service Level Credit for such Service Level calculated in the manner described below, 36 provided, however, that the aggregate amount of such Service Level Credits for any given month will not exceed ten percent (10%) of Supplier's monthly charges under this Service Agreement for the applicable month (excluding Pass-Through Expenses, if any). If a single event directly causes a failure to achieve more than one Service Level, then only one Service Credit will apply. In such event, Wards will select the Service Level that will be used for the calculation of the Service Credit. B. METHOD OF CALCULATION If Supplier fails to meet or exceed a Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any). If Supplier's performance fails to meet an Increased Impact Level for any Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) (this calculation being in lieu of, and not in addition to, the credit calculation for the corresponding Service Level failure). To calculate the total Service Level Credit due to Wards for the applicable month, the amounts calculated for each Service Level or Increased Impact Level as described above will be totaled and such amount shall be available as a credit to Wards against Supplier's invoice for the applicable month. C. FREQUENCY FACTOR In any case where Supplier fails to achieve the same Service Level (including failure to achieve the designated Increased Impact Level for that Service Level) in two consecutive months or in any four months in any 12-month period, the applicable Severity Weight shall be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any), and for any subsequent months in which Supplier fails to achieve such Service Level or Increased Impact Level; provided, however, that in no case will Supplier be liable for total Service Credits which exceed ten percent (10%) of the applicable monthly invoice (excluding Pass-Through Expenses and Special Charges, if any). The Service Credits will revert to the method of calculation provided in Section III.A. above in the following circumstances: 1. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is different from the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following four consecutive months of achieving the Service Level. 37 2. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is the same as the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following ten consecutive months of achieving the Service Level. Nothing in the preceding two paragraphs will excuse the application of the frequency factor in the calculation of Service Credits if a subsequent failure to achieve a Service Level would otherwise make the frequency factor apply. D. EXCUSED PERFORMANCE PROBLEM Supplier shall not be liable to pay Wards Service Level Credits for any failure to meet a Service Level to the extent that such a failure is directly attributable to (i) a Force Majeure Event; (ii) breaches of this Agreement by Wards, provided that Supplier has provided Wards with reasonable notice of such breach immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such breach; (iii) acts or omissions of Wards (or third parties acting on behalf of Wards under a written agreement), provided that Supplier has provided Wards with reasonable notice of such act of omission immediately after becoming aware of it and determining that such problem will adversely impact Supplier's performance of the Services and Supplier has used Commercially Reasonable Efforts to perform notwithstanding the act or omission; or (iv) the first manifestation of an extraordinary latent error or defect in Equipment used by Supplier in providing the Services (and any related repeated instances pending the applicable Supplier's correction of the defect) if such defect was (1) unknown to Supplier and (2) not disclosed in any information distributed by the third party licensor, manufacturer, or distributor and (3) not preventable or discoverable through normal testing or maintenance procedures. The foregoing are referred to herein collectively as an "Excused Performance Problem." Supplier shall be liable to grant Wards Service Level Credits for any failure to meet a Service Level attributable to any cause other than causes expressly included in the categories listed above. E. TIME LIMIT If Supplier does not notify Wards of any Excused Performance Problem (as described in Section III.D above) within ninety (90) days of the date Supplier provides Performance Reports covering the time period during which the Excused Performance Problem is alleged to have occurred, then Supplier shall be deemed to have waived the claim of an Excused Performance Problem. IV. SERVICE LEVEL TERMINATION EVENT 38 A. DEFINITION 1. Measurement Event - For purposes of this section, a "Measurement ----------------- Event" will be the monthly calculation of Supplier's actual performance for each Service Level or Critical Service Level. The total possible Measurement Events during any specific period of time is the product of the number of months in that time period times the number of Service Levels or Critical Service Levels, as applicable. 2. Failure Event - For purposes of this section a "Failure Event" ------------- shall be a specific Measurement Event for which Supplier fails to achieve the relevant Critical Service Level(s) or Service Level(s); provided, however, that any such failure caused by an event described in Section III.D of this SLA shall not be counted as a Failure Event. Any single event, act or omission that causes multiple Service Levels to be missed will be counted as one Failure Event. B. REPEATED SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (CRITICAL SERVICE EVENTS IN MEASUREMENT LEVELS) PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 6 18 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 12 37 Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 6 18 Failure Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 12 37 Failure Events - - --------------------------------------------------------------------------------------------------
C. REPEATED CRITICAL SERVICE LEVEL FAILURES 39 Certain repeated failures by Supplier to achieve the required Critical Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (CRITICAL SERVICE EVENTS IN MEASUREMENT LEVELS) PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 3 12 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 6 24 Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 3 12 Failure Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 6 24 Failure Events - - --------------------------------------------------------------------------------------------------
D. CATASTROPHIC LEVEL OF SERVICE Recovery of the Midrange Services identified as in production, within seventy-two (72) hours of any Failure Event. E. QUALIFICATION Nothing in this Section IV is intended to imply that any lesser number or different combination of occurrences of deficient performance by Supplier may not also constitute a material breach of Supplier's obligations warranting termination of the Service Agreement by Wards for cause. 40 EXHIBIT E TRANSFERRED EQUIPMENT NONE 41 EXHIBIT F WARDS FACILITIES AND EQUIPMENT MIDRANGE HARDWARE DATA WAREHOUSE SP2 SERIAL NUMBER 78788 9076-30A RS/6000 SP 1009 EXP FRAME-604E HIGH NODE 1 1250 STND CUSTOMIZE PREINSTALL 1 2009 ONE 604E HIGH NODE EXP DRA 2 2022 EXP DRAWER 2-160 MHZ TN 4 2412 ENHANCED SCSI-2 DIFF F/W A 2 2415 SCSI-2 F/W ADAPTER /A 3 2424 0.6M 16-BIT SCSI-2 SYS CBL 1 2426 16-BIT Y-CBL FOR SCSI-2 F/ W 1 2980 ETHERNET LAN ADAPTER 7 3031 2.2GB SCSI-2 DISK DRIVE 7 3034 4.5GB SCSI-2 F/W DISK 10 4011 SP SWITCH 2 4020 SP SWITCH ADAPTER 13 4030 1GB SMP DIMMS ON 1GB CARD 3 4089 256MB S6 MEMORY CARD 20 4154 512MB SMP DIMMS ON 1GB CAR 2 4158 512MB MEMORY CARD 4 4224 ETHERNET 10BASET TRANSCEIV 4 4324 604E SMP 2W 200 MHZ PROC 6 6217 SSA 4-PORT RAID ADAPTOR 14 9203 SP WIDE NODE SRVC LADDER 1 9310 SP SWITCH CABLE-10 METERS 16 9420 AIX 4.2 AND PSSP FOR AIX 13 9422 AIX V4.2 AND PSSP V2.2 13 9920 LOW VOLTAGE POWER 1 9986 LINE CORD, CHICAGO 1 7133-020 SSA DISK SUBSYSTEM 4 3416 4.5GB DSK DRV 64 5100 10.0M SSA COPPER CABLE 32 7133-020 SSA DISK SUBSYSTEM 4 3416 4.5GB DSK DRV 64 5100 10.0M SSA COPPER CABLE 32 7133-020 SSA DISK SUBSYSTEM 2 3416 4.5GB DSK DRV 32 5100 10.0M SSA COPPER CABLE 16 3590-B11 TAPE DRIVE WITH RACL 2 42 7015-R00 RISC SYSTEM 6000 2 CONTROL WORKSTATION 7025-F30 RISC SYSTEM 6000 1 2839 POWER GXT110P GRAPHICS ADAPTER 1 2901 4.5GB ULTRA-SCSI 16-BIT HOT SW 1 2902 4.5GB ULTRA-SCSI 16-BIT HOT S 1 2931 8PORT ASYNCH ADPT EIA-232 1 2985 PCI ETHERNET BNC/RJ-45 ADAPTER 3 3614 P200 COLOR MONITOR 1 4164 64MB DIMM MEM 1 4168 128MB DIMM MEM 1 4314 166MHZ POWERPC 604E PROC 1MB 1 5005 AIX OPERATING SYSTEM PREINSTAL 1 6041 3 BUTTON MOUSE 1 6147 5GB/10GB 8MM INTERNAL TAPE DR 1 MWRAVEN1 SERIAL NUMBER 91334 7017-S70 ENTERPRISE SERVER 1 0009 LT MFG INDICATOR-DO NOT BUILD 1 2901 4.5GB ULTR-SCSI16BIT HOT SWAP 2 2963 TURBOWAYS 155 PCI UTP ATM ADA 2 2979 PCI AUTO LANSTRTOKEN-RING ADAP 1 2986 3COM 10/100 MBPS FST ETHERLINK 2 4175 2048MB R1 MEM GROUP (4X512MB) 1 4176 2048MB R1 MEM GRP (4X512) SEL 1 5316 PROC.,4W, 262MHZ, 8MB L2,RIGHT 1 6154 20/40GB 16BIT 8MM INT TAPE DR 1 6171 PWR DIST UNIT SIDE MNT, 1-PHS 1 6215 PCI SSA, 4-PORTMULTI-INTI ADAP 2 9060 BASE I/O RACK 1 9136 BASE PCI SCSI-2 F/W SINGLE-EN 2 9171 PWR DIST UNIT SPECIFY-BASE/SI 1 9295 BASE SCSI I/O DRAWER 7EIA 1 9300 LANGUAGE GROUP SPEC-US ENGLISH 1 9394 BASE 4.5GB F/W ULTRA SCSI DISK 1 9619 BASE 12-20X CD-ROM WITH 16B CO 1 9800 PWR CORD SPEC-US/CANADA 1 7133-020 SSA DISK SUBSYSTEM 3 3416 4.5GB DSK DRV 42 5100 10.0M SSA COPPER CABLE 16 43 MWRAVEN2 SERIAL NUMBER 91256 7017-S70 ENTERPRISE SERVER 1 0009 LT MFG INDICATOR-DO NOT BUILD 1 2901 4.5GB ULTR-SCSI16BIT HOT SWAP 2 2963 TURBOWAYS 155 PCI UTP ATM ADA 2 2979 PCI AUTO LANSTRTOKEN-RING ADAP 1 2986 3COM 10/100 MBPS FST ETHERLINK 2 4175 2048MB R1 MEM GROUP (4X512MB) 1 4176 2048MB R1 MEM GRP (4X512) SEL 1 5316 PROC.,4W, 262MHZ, 8MB L2,RIGHT 1 6154 20/40GB 16BIT 8MM INT TAPE DR 1 6171 PWR DIST UNIT SIDE MNT, 1-PHS 1 6215 PCI SSA, 4-PORTMULTI-INTI ADAP 2 9060 BASE I/O RACK 1 9136 BASE PCI SCSI-2 F/W SINGLE-EN 2 9171 PWR DIST UNIT SPECIFY-BASE/SI 1 9295 BASE SCSI I/O DRAWER 7EIA 1 9300 LANGUAGE GROUP SPEC-US ENGLISH 1 9394 BASE 4.5GB F/W ULTRA SCSI DISK 1 9619 BASE 12-20X CD-ROM WITH 16B CO 1 9800 PWR CORD SPEC-US/CANADA 1 7133-020 SSA DISK SUBSYSTEM 2 3416 4.5GB DSK DRV 32 5100 10.0M SSA COPPER CABLE 16 MWPRODQA J30 SERIAL NUMBER 50647 7012-340 RISC/6000 1 2555 1GB SCSI-2 DISK DRIVE 2 2558 1GB SCSI-2 DISK DR SELECT 1 2790 POWER GT4X 8-BIT FEATURE 1 2810 GRAPHICS APPL INPU ADP 1 4074 64MB HD3 MEMORY SELECT FEATURE 1 5005 SOFTWARE PRE-LOAD 1 6010 KEYBOARD U.S. 101 KEYS 1 6041 3 BUTTON MOUSE 1 9000 ETHERNET THICK THIN CONN SPE 1 9221 3.5" DISKETTE SPECIFY 1 44 9300 LANGUAGE GROUP U.S.ENGLISH 1 9800 LINE CORD 1 6091-019 19 INCH COLOR DISPLAY MONITO 1 MWPROD01 G30 SERIAL NUMBER 84848 7012-G30 RISC SYSTEM/6000 2415 SCSI-2 FAST/WIDE ADPT/A 1 2416 SCSI-2 DIFFERENTIAL FW ADPT 2 2936 ASYN CBL EIA232/V.24 1 2937 PTR/TERM INTERP EIA232 1 2980 ETHER HI PERF LAN ADPT 1 3034 4.5GB SCS-2 F/W DSK DR 2 3056 2.2GB SCSI-2 F/W DSK DR SEL 1 4142 256MB MP/DT MEM SELECT 1 4224 ETHERNT 10BASET TRANSCEIVER 1 5005 SOFTWARE PRE-LOAD 1 5307 DUAL POWERPC604 PROC CD UP 1 6511 MEDIA DSK BAY CONV HW 1 6513 INTERPOSER 16-8BIT CBL CONV 1 9216 SCSI-2 F/W ADPT/A SPECIFY 1 9221 3.5" DISKETTE SPECIFY 1 9300 LANGUAGE GROUP U.S.ENGLISH 1 9440 BASE CBL SCSI INT 4DROP 16BIT 1 9606 8X SPEED TRAY LOADING CD-ROM 1 9800 LINE CORD 1 ISERV01 G30 SERIAL NUMBER 84849 7012-G30 RISC SYSTEM/ 2416 SCSI-2 DIFFERENTIAL FW ADPT 2 2936 ASYN CBL EIA232/V.24 1 2937 PTR/TERM INTERP EIA232 1 2980 ETHER HI PERF LAN ADPT 2 3033 2.2GB SCSI-2 F/W DSK DR 2 3056 2.2GB SCSI-2 F/W DSK DR SEL 1 4142 256MB MP/DT MEM SELECT 1 4224 ETHERNT 10BASET TRANSCEIVER 2 5005 SOFTWARE PRE-LOAD 1 5307 DUAL POWERPC604 PROC CD UP 1 6511 MEDIA DSK BAY CONV HW 1 6513 INTERPOSER 16-8BIT CBL CONV 1 9216 SCSI-2 F/W ADPT/A SPECIFY 1 9221 3.5" DISKETTE SPECIFY 1 9300 LANGUAGE GROUP U.S.ENGLISH 1 9440 BASE CBL SCSI INT 4DROP 16BIT 1 9606 8X SPEED TRAY LOADING CD-ROM 1 9800 LINE CORD 1 WARDSE3 SERIAL NUMBER 10-2RRMM 45 9406-640 AS/400E SYSTEM UNIT 1 0003 ORDER INSTALLED BY IBM 1 0028 MIGRATE 3490E C10,C11,C22 1 0044 DATA LOSS PROTECTION 1 0330 V.24/EIA232 20-FT CABLE 3 2237 MODEL 640 PROCESSOR 1 2644 3490 MAGNETIC TAPE ATTACH/HP 1 2688 OPTICAL LINK PROC(1063MBPS) 1 2699 TWO-LINE WAN IOA 1 2810 LAN/WAN IOP 5 2815 PCI 155MBPS UTP OC3 ATM 2 2816 PCI 155MBPS MMF ATM 2 2838 PCI 100/10MBPS ETHERNET IOA 1 2924 ENGLISH 1 5024 SOFTWARE VERSION V4R2 1 5055 STORAGE EXPANSION UNIT 1 5058 STORAGE EXPANSION UNIT 2 5073 1063MBPS SYS UNIT EXP TOWER 1 5083 1063MBPS STORAGE EXP TOWER 1 5151 POWER SUPPLY (650 WATTS) 1 5512 ALT IPL SPEC FOR 3490 CXX 1 5520 COMPLETE SYSTEM ORDER 1 5540 ATTACH TWNAXAL WKSTA CTRL 1 6533 RAID DISK UNIT CONTROLLER 3 6534 MAGNETIC MEDIA CONTROLLER 1 6907 4.19GB DISK UNIT 65 8180 OPT BASE 512MB MAIN STORAGE 2 9082 14 FOOT LINE CORD 1 9083 LOCKING LINE CORD PLUG 1 9182 14FT LINE CORD SPECIFY 1 9183 LOCKING LINE CORD PLUG SPECIFY 1 9280 BASE TWINAXIAL WSC 1 9699 BASE TWO-LINE WAN IOA 1 9754 BASE MFIOP WITH RAID 1 9907 BASE 4.19GB DISK UNIT 1 9309-002 RACK ENCLOSURE, 1.6 METER 1 9171 GENERAL PURPOSE I/O RACK 1 9986 6 FT CABLE (CHICAGO) 1 46 EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE MIDRANGE SOFTWARE DATA WAREHOUSE SP2 SERIAL NUMBER 78788 5765-C34 AIX VERSION 4 5765-421 C SET + + FOR AIX VERSION 3 1 5765-654 PERF TBX NETWK FOR AIX V 2.2 1 5765-145 LOADLEVELER RS6000 SP FAMILY 1 DB2 UDB EEE 5.0 ADSM CLIENT / SERVER MWRAVEN1 SERIAL NUMBER 91334 5765-C34 AIX VERSION 4 5270 IBM C and C++ Compiler 8297 ADSM User MWRAVEN2 SERIAL NUMBER 91256 5765-C34 AIX VERSION 4 5270 IBM C and C++ Compiler 8297 ADSM User MWPRODQA J30 SERIAL NUMBER 50647 5601-257 AIX WINDOWS ENVMNT/6000 1 0173 GRAD GRP E5 BASIC OTC 1 0960 PG E5 BASIC OTC 1 0966 BASIC 3D UPDATE GRP E5 1 3407 8MM TAPE 1 3444 SERIAL NUMBER ONLY 1 3466 PRELOAD FXD W/BKP COPY OPT 1 4968 PRELOAD DASD W/BKP OPT OTC 1 5005 PRELOAD FIXED DISK STORAGE 1 5051 3D PRODUCT CODE 1 5052 PRODUCT CODE 2D 1 7960 PERSONAL GRAPHIGS 1 7961 GKS-CO 1 9001 ASSET REGISTRATION 1 5756-030 AIX V/3 FOR RISC SYS/6000 1 47 0190 SW LEV AIX V3.2.3 R6000 BSE 1 0193 AIX VER 3.2.5 1 1504 BASIC OTC GRP E5 UL 1-2 1 3317 OTC 8MM PROCESS CHARGE 1 3444 SERIAL NUMBER ONLY 1 3466 PRELOAD W/BKP COPY OPT 1 4961 PRELOAD W/BKP COPY OPT 1 5050 PRODUCT CODE 1 5061 VISUAL SYS MGR 1 5445 PREINSTAL DASD 1 5700 UPGRADE/RECONFIGURATION 1 9001 ASSET REGISTRATION 1 5601-457 AIX XSTATION MANAGER/6000 1 1121 GRAD GRP E5 BASIC OTC 1 3407 8MM TAPE 1 3444 SYSTEM PROGRAM ORDER 1 4268 MASTER COPY FEATURE 1 5051 PRODUCT CODE 1 9001 ASSET REGISTRATION 1 5696-907 PEX AND PHIGS VERSION 4.1.5 1 3444 SERIAL NUMBER ONLY 1 4003 PG G5 BUPG VER 4.1 1 9001 ASSET REGISTRATION 1 5765-393 AIX VERSION 4.1 1 3444 SERIAL NUMBER ONLY 1 3621 BUPG PG G5 V3.2-4.1 (3603) 1 3632 BUPG V3.2-4.1 NSU 1 2 9001 ASSET REGISTRATION 1 5765-660 PEX & PHIGS AIX 4.2 1 4003 UPG F P&PH V4.1 T P&PH V4.2 1 9001 ASSET REGISTRATION 1 5765-C34 AIX VERSION 4 (REPACKAGED) 1 4038 FR 5765-393 TO C34 UPG 1-2 1 4044 FR 5765-393 TO C34 UPG NS U AL 2 5012 NETSCAPE 4.2.X NON-EXP NA 1 5014 LOTUS DOM 64B 4.2.X NA 1 9001 ASSET REGISTRATION 1 5750-AFC SYSTEM PROGRAM ORDER 1 0400 5756-030 3.2 1 0409 5601-257 3D 1 0419 BOTC AIX XL FORTRAN 2.3.0 1 0457 5601-257 2D 1 0465 BOTC AIX XSTATION MGR 1.4.1 1 0482 VISUAL SYS MGR 1 3407 8MM TAPE 1 5700 UPGRADE/RECONFIGURATION 1 48 7960 BOTC GRAPHIGS PUB 1 7961 BOTC GKS PUBS 1 9001 ASSET REGISTRATION 1 5692-AIX SYSTEM PROGRAM ORDER 1 0808 5765-660 PEX & PHIGS F AIX V4 1 0821 BONUS PACK FOR AIX 4.2 1 0852 5765-C34 AIX 4.2.X 1 3430 HARDCOPY DOCUMENTATION 1 3470 SHIP MEDIA ONLY 1 9001 ASSET REGISTRATION 1 5692-ADV SW UPGRADE PROTECTION FOR AI 1 4776 BOTC 5765-C34 AIX V4 1 9001 ASSET REGISTRATION 1 MWPROD01 G30 SERIAL NUMBER 84848 5765-393 AIX VERSION 4.1 1 3603 BOTC PG G5 1-2 USERS 1 3604 BOTC DS USERS 1 14 5005 PREINSTALL OPTION (AIX V4.1) 1 9001 ASSET REGISTRATION 1 5765-652 COMM SERVER FOR AIX, V4 1 4000 BOTC 1 USER SESS 1 4018 USE PK 10 USER SESS 1 9001 ASSET REGISTRATION 1 5765-C34 AIX VERSION 4 (REPACKAGED) 1 4038 FR 5765-393 TO C34 UPG 1-2 1 4042 FR 5765-393TOC34 UPG DS U E5+ 14 5012 NETSCAPE 4.2.X NON-EXP NA 1 5014 LOTUS DOM 64B 4.2.X NA 1 9001 ASSET REGISTRATION 1 5692-AIX SYSTEM PROGRAM ORDER 1 0821 BONUS PACK FOR AIX 4.2 1 0852 5765-C34 AIX 4.2.X 1 1008 CD-ROM UPG 1 3410 CD-ROM 1 9001 ASSET REGISTRATION 1 ISERV01 G30 SERIAL NUMBER 84849 5765-393 AIX VERSION 4.1 1 3444 SERIAL NUMBER ONLY 1 3603 BOTC PG G5 1-2 USERS 1 3604 BOTC DS USERS 1 14 49 5005 PREINSTALL OPTION (AIX V4.1) 1 9001 ASSET REGISTRATION 1 5765-C34 AIX VERSION 4 (REPACKAGED) 1 4038 FR 5765-393 TO C34 UPG 1-2 1 4042 FR 5765-393TOC34 UPG DS U E5+ 14 5012 NETSCAPE 4.2.X NON-EXP NA 1 5014 LOTUS DOM 64B 4.2.X NA 1 9001 ASSET REGISTRATION 1 5692-AIX SYSTEM PROGRAM ORDER 1 0821 BONUS PACK FOR AIX 4.2 1 0852 5765-C34 AIX 4.2.X 1 1002 BASIC MRM SPO 8MM TAPE 1 3407 8MM TAPE 1 9001 ASSET REGISTRATION 1 WARDSE3 SERIAL NUMBER 10-2RRMM 5716-CX5 VISUALAGE FOR C++ FOR AS400 1 2689 PG P40 BASIC OTC 1 3645 VIS C++ WIN95 PER USER OTC 1 9001 ASSET REGISTRATION 1 5755-AS5 V4 SYSTEM PROGRAM ORDER 1 1463 VALUPAK (5769-VP1) 1 2132 VIS AGE C++ WIN (5716-CX5) 1 2220 VIS AGE WIN 95 CLI (5716CX5) 1 2501 OS/400 (5769-SS1) 1 2508 QUERY (5769-QU1) 1 2511 DB2 QRY KIT (5769-ST1) 1 2512 ILE RPG (5769-RG1) 1 2516 CA WINDOWS (5769-XW1) 1 2525 PERF TOOLS (5769-PT1) 1 2526 ADTS (5769-PW1) 1 2529 TCP/IP/400 (5769-SS1) 1 2556 PERF MANAGER (5769-SS1) 1 2585 JAVA TOOLS (5769-SS1) 1 2586 JAVA KIT (5769-SS1) 1 2610 PT/400 MGR (5769-PT1) 1 2691 PSF/400 (5769-SS1) 1 2924 ENGLISH U/L SBCS PRIMARY 1 3410 CD-ROM MEDIA 1 3446 CUSTOMER EXPEDITE CHARGE 1 3520 VERSION 4 RELEASE 2.0 1 8115 RPG400-RPG III-NEW CUST (RG1) 1 8124 ADTS FOR OS/400 5716-RG1 1 50 9001 ASSET REGISTRATION 1 5769-PT1 PERFORMANCE TOOLS 1 1104 P40 BASIC BASE OTC VP,GP 1 1109 P40 BASIC OTC MGR VP,GP 1 9001 BASIC ASSET REGISTRATION 1 9500 BASIC PKG REGISTR VP,GP 1 5769-PW1 APPL DEVEL TOOLSET 1 0899 P40 BASIC OTC 1 9001 BASIC ASSET REGISTRATION 1 5769-QU1 QUERY FOR AS/400 1 0352 PG P40 BASIC OTC VP,GP 1 9001 BASIC ASSET REGISTRATION 1 9500 BASIC PKG REGISTRATION VP 1 5769-RG1 ILE RPG FOR AS/400 1 0989 P40 BASIC OTC 1 9001 BASIC ASSET REGISTRATION 1 5769-SS1 OPERATING SYSTEM/400 1 0279 PG P40 BASIC OTC 1 0359 PSF/400 1-19 IPM, VP 1 9001 BASIC ASSET REGISTRATION 1 9500 BASIC PCKG REGISTRATION - VP 1 5769-ST1 DB2 QUERY MGR & SQL DEV KIT 1 0357 PG P40 BASIC OTC VP,GP 1 9001 BASIC ASSET REGISTRATION 1 9500 BASIC PKG REGISTRATION VP 1 5769-VP1 VALUPAK FOR AS/400 1 0347 PG P40 BASIC OTC 1 9001 BASIC ASSET REGISTRATION 1 9500 BASIC PKG REGISTRATION VP 1 5769-XW1 AS400 CLIENT ACCESS WIN FAMILY 1 0264 P40 GROUP, CAP = 200 1 0358 PER USER, VP, GP 125 9001 BASIC ASSET REGISTRATION 1 9500 BASIC PKG REGISTRATION VP 1 51 APPLICATION SOFTWARE:
- - ------------------------------------------------------------------------------------------------------ PLATFORM SYSTEM BUSINESS APPLICATION SOFTWARE APPLICATION VENDOR SYSTEM - - ------------------------------------------------------------------------------------------------------ AS/400 WARDSE3 Merchandise Replenishment E3SLIM E3 Corporation - - ------------------------------------------------------------------------------------------------------ RS/6000 MWRAVEN1 Merchandise Planning Evolution, DecisionMaster Intrepid MWRAVEN2 Systems, Inc. - - ------------------------------------------------------------------------------------------------------ RS/6000 ISERV01 Backup Fire Wall - - ------------------------------------------------------------------------------------------------------ RS/6000 Data Data Warehouse DB2 UDB EEE IBM Warehouse Corporation SP2 - - ------------------------------------------------------------------------------------------------------
52 EXHIBIT H WARDS SOFTWARE
- - -------------------------------------------------------------------------------------------- PLATFORM SYSTEM BUSINESS APPLICATION SOFTWARE APPLICATION VENDOR SYSTEM - - -------------------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------------------- RS/6000 MWPROD01 Development In-House - - -------------------------------------------------------------------------------------------- RS/6000 MWPRODQA Delivery System & Parts System ADS & NPS/II In-House - - --------------------------------------------------------------------------------------------
53 EXHIBIT I SUPPLIER SOFTWARE NONE 54 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 4: NETWORK SERVICES ----------------------------------------- THIS SERVICE AGREEMENT NO. 4: NETWORK SERVICES (the "Service Agreement") is made and entered into this 6th day of November, 1998 between Montgomery Ward & --- -------- Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a Delaware corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in the Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into the Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITION All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: "INITIAL TERM" has the meaning given in Section 2.1. "MASTER AGREEMENT" means the Master Service Agreement for Information Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom Corporation dated November 6, 1998, and all amendments thereto. "NETWORK SERVICES" has the meaning given in Section 5.1. "NETWORK SYSTEM" means the switches, hubs, routers, relays and other connectivity systems utilized by Wards as of the Service Agreement Effective Date and as subsequently modified under this Service Agreement. "RENEWAL TERM" has the meaning given in Section 2.2. "SERVICE AGREEMENT COMMENCEMENT DATE" means the Date upon which the Migration Plan for Network Services has been implemented under Service Agreement No. 1. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any Renewal Term. "SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the meaning given in Section 7.1 of this Service Agreement. "TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning given in Section 8.1 of this Service Agreement. "WARDS PEAK SEASON" means the period in any year during the Service Agreement term from November 20 through December 31, and as such dates may be adjusted by Wards from time to time. ARTICLE 2. TERM 2.1 INITIAL TERM. The initial term of this Service Agreement (the "Initial Term") shall begin as of the Service Agreement Commencement Date and shall continue for a period of thirty-seven (37) months thereafter, unless earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. 2.2 RENEWAL TERM. Wards shall have the option to renew this Service Agreement for up to two (2) additional annual terms (each a "Renewal Term")by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final applicable Contract Year under this Service Agreement and before expiration of each annual period thereafter as applicable. All of the terms of this Service Agreement and the Master Agreement shall continue to apply without change during any renewal period(s). ARTICLE 3. TERMINATION 3.1 Convenience Termination Fee. Wards shall have the option to terminate this Service Agreement for Convenience in accordance with Section 18.2(a) of the Master Agreement. The Convenience termination charges, if any, shall be as described in Exhibit C to this Service Agreement. ARTICLE 4. PERSONNEL MATTERS 4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier --------- Positions that are subject to the provisions of Section 7.2 of the Master Agreement. ARTICLE 5. SERVICES 5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide the Services described in Exhibit B, as such Exhibit may be amended and --------- supplemented from time to time pursuant to the Master Agreement (the "Network Services"). The Network Services includes all of the responsibilities (including Equipment, Software, personnel and expenses) associated with the Network Systems unless specifically identified as a Wards responsibility under Section 5.4 below. The Services include: (i) functions, responsibilities and tasks performed by the Transferred Employees prior to the Service Agreement Effective Date; (ii) functions, responsibilities and tasks not specifically described in this Service Agreement but which are required for their proper performance and are an inherent part of, or a necessary sub-part included within, the Services, and (iii) functions, responsibilities and tasks that are a logical extension of existing services as a result of changes in technology, changes in Wards business practices or changes resulting from change control procedures. Supplier will be the exclusive provider of the Services described in this Service Agreement. 5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the Service Agreement Effective Date to the Service Agreement Commencement Date, Supplier will provide Network Services under Service Agreement No. 1 (Transition and Migration Services). Following the Service Agreement Commencement Date, the Service Level Agreement and other obligations of this Service Agreement shall become effective. 5.3 APPOINTMENT OF PROJECT EXECUTIVES. Upon the Service Agreement Commencement Date the Parties will appoint individuals as Project Executives under this Service Agreement to carry out the duties described in the Master Agreement: 5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in Exhibit B to this Service Agreement identifies the responsibilities of Wards - - --------- during the Term of this Service Agreement, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. The responsibilities of Wards shall be limited to those items listed in the matrix. ARTICLE 6. CHARGES 6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement --------- sets forth the Charges for the Network Services that may be charged by Supplier. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 6.2 INVOICES for Charges and Expenses. In all invoices for Network Services, Supplier shall provide Wards with the information described in Exhibit ------- C in sufficient detail in order to allow Wards to verify invoices. Invoice - - - submission and payment shall be in accordance with Article 14 of the Master Agreement. ARTICLE 7. SERVICE LEVEL AGREEMENT 7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the --------- Service Level Agreement applicable to the Network Services (the "Service Level Agreement") All of the terms of Article 5 of the Master Agreement shall apply to the Service Level Agreement. Supplier further acknowledges that Wards may adjust schedules contained in Service Levels 3 (such as availability) to meet Wards' needs during Wards Peak Season or other events (such as extended sales) as is currently done and demonstrable today. Service Levels and associated performances metric will be baselined during the six (6) month period beginning on the Service Agreement Commencement Date, will be established jointly by the Parties during such 6-month period and shall become effective beginning with the seventh (7th) month following the Service Agreement Commencement Date. ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date, Wards shall assign, and Supplier shall purchase or assume, Wards' purchased equipment or obligations under the applicable leases for the equipment listed on Exhibit E (the "Transferred Equipment"). The terms of Section 6.1 of the - - --------- Master Agreement shall apply with respect to the Transferred Equipment. 8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2 of the Master Agreement, Wards shall provide the Wards Facilities and Wards Equipment described in Exhibit F to this Service Agreement. --------- 8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the Service Agreement Commencement Date, and subject to Supplier having received any Third Party Consents, Supplier shall assume from Wards all of the rights and obligations of Wards under the Third Party Contracts and the Third Party Software that are listed in Exhibit G. The terms of Section 6.3 of the ---------- Master Agreement shall apply with respect to such to Third Party Contracts and the Third Party Software. 8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is --------- proprietary to Wards and that is used in Network Systems (the "Wards Software"). The terms of Section 8.1 of the Master Agreement shall apply with respect to the Wards Software. 8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by Supplier to provide the Network Services is listed in Exhibit I. Use of --------- Supplier Software in providing the Network Services shall be in accordance with Section 8.2 of the Master Agreement. ARTICLE 9. TERMINATION AND TRANSITION SERVICES 9.1 TERMINATION. Wards may terminate this Service Agreement without penalty at any time prior to the Service Agreement Commencement Date if Supplier does not complete the Migration Plan described in Service Agreement No. 1. After the Service Agreement Commencement Date, Wards may terminate this Service Agreement in accordance with the terms of the Master Agreement. 4 9.2 TRANSITION SERVICES. In the event of a termination or expiration of this Service Agreement, Supplier shall provide the Termination/Expiration Assistance as provided in Section 18.7 of the Master Agreement. IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ---------------------------- ------------------------------------ Name: Don Bernheisel Name: Joseph C. Grossestreuer -------------------------- ---------------------------------- Its: SVP, CIO Its: SVP-Outsourcing Services --------------------------- ----------------------------------- 5 EXHIBITS TO NETWORK SERVICE AGREEMENT ------------------------------------- EXHIBIT A KEY SUPPLIER POSITIONS EXHIBIT B SERVICES EXHIBIT C CHARGES EXHIBIT D SERVICE LEVEL AGREEMENT EXHIBIT E TRANSFERRED EQUIPMENT EXHIBIT F WARDS FACILITIES AND EQUIPMENT EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE Exhibit H WARDS SOFTWARE EXHIBIT I SUPPLIER SOFTWARE 6 EXHIBIT A KEY SUPPLIER POSITIONS DATA TELECOMMUNICATIONS MANAGER DATA NETWORK DESIGN MANAGER DATA NETWORK INSTALLATION AND MAINTENANCE MANAGER NETWORK PLANNING MANAGER TELECOMMUNICATIONS ENGINEER/ANALYST 7 EXHIBIT B SERVICES OVERVIEW - - -------- This detailed service description establishes the processes, measurement tools, service specifications, and assumptions associated with IS Network Services for Wards. The documented service descriptions are designed to give the Supplier an understanding of Wards' business objectives for Network Services while allowing the Supplier latitude to define their own processes and methods for providing the services. A glossary of terminology and definitions may be found in Appendix A. The business objective of this service category is to provide Wards with consistently efficient network support and cost-effective telecommunications procurement. The Supplier will provide and maintain Wards' data network provisioning, design, network installation, a network management methodology, a monitoring platform, and tools to support the Wards network. Wards will retain responsibility over Wards local and long distance voice services and equipment defined as: PBX and voice mail administration, associated hardware and software, telephone moves, adds, and changes, CO trunks, CO access T1 and fiber facilities, DID numbers, and associated terminating equipment. Network Services will provide for the overall management and performance of Wards' LAN and WAN services. This includes support of network telecommunications including: T1's, Frame-Relay, Internet access, and point-to- point circuits (PTP). The Network management function will work in an integrated fashion with all other service functions to provide seamless support for the Wards business units. Costs for network circuit provisioning will be passed through to Wards at cost with no mark up or service fee. All pricing provided to Wards by the Supplier for this service category will be considered inclusive of all charges related to the Supplier's performance of the service within the described level of service, including, but not limited to, escalation to hardware/software manufacturer(s) and escalation to telecommunications service providers. The Supplier's responsibilities for performance of this service description include, but are not limited to, the following: ACTIVITIES FOR NETWORK SERVICES It is the Supplier's responsibility to provide a reliable, predictable, and consistent network environment for Wards' location connectivity and application access. 1. The Supplier will proactively monitor Wards network for availability and performance. 2. The Supplier will provide problem resolution for all Wards network outages and network performance degradation. 3. The Supplier will provide the telecommunications facilities and data communications equipment pricing and provisioning function according to Wards' requests and acceptance criteria. 4. The Supplier will provide the provisioning, design and planning function for all network components including hardware, software, telecommunications and facilities at In-scope Locations. 8 5. The Supplier will coordinate the installation function for all network components including hardware, software, telecommunications and facilities at In-scope Locations. 6. The Supplier will utilize and adhere to the change management procedures stated in the Procedures Manual for implementing changes to the Wards' network infrastructure. 7. The Supplier will utilize and adhere to problem management procedures for reporting and responding to network issues. 8. The Supplier will provide network disaster recovery services for the Wards network in accordance with Wards' disaster recovery plan. SERVICE PARAMETERS FOR NETWORK SERVICES 1. The Supplier will provide the appropriate resources, reports, tools, procedures and management methodologies to comprehensively manage, proactively monitor and support all Wards network problem resolutions and performance degradation corrective actions. 2. The Supplier will be required to design, price, propose and plan new Wards' initiatives, and Wards' network growth at In-scope Locations. 3. Supplier will be required to provide network management on a 24x7x365 basis. 4. Supplier will provide proactive monitoring, performance tuning and corrective actions for the WAN and all LAN segments indicating impending network problems. 5. The Supplier will provide proactive automated or manual monitoring of managed and unmanaged network devices via a Supplier provided, installed, and maintained network management platform, which will be accessible to any Wards on-site, or Supplier on-site network personnel. 6. When a network outage or performance degradation is identified, the Supplier will provide notification and escalation to Wards management utilizing the problem management procedures, methodologies and tools stated in the Procedures Manual. 7. The Supplier will provision all network hardware, software, and facilities with a focus on cost while maintaining a stable infrastructure. 8. The Supplier will schedule all planned network modifications and outages through the Supplier provided change management process in accordance with the Procedures Manual. 9. The Supplier will provide advisement for selecting and installing new network technology. 10. The Supplier will provide and maintain documentation of Wards' network topology. 11. The Supplier will provide and maintain documentation of Wards' network operations, circuits, and equipment. 12. The Supplier will periodically report on Wards' network availability, performance and service level attainment to Wards' management as required in Master Schedule E. 13. The Supplier will act as Wards' agent for obtaining network circuits, hardware, software and maintenance for Wards provided or Supplier provided services. 14. The Supplier will provide support for remote network dial-in access. 15. The Supplier will provide WAN support and maintenance for the Wards network including, but not limited to, Cisco router configurations and stat mux/modem support. 16. The Supplier will provide physical LAN troubleshooting and support for WardsCORPORATE COMPLEX locations. 17. The Supplier will provide support, documentation, address allocation and maintenance for all required protocols including, but not limited to, TCP/IP, AppleTalk, SNA, Bi-sync, IPX, LAT and DECnet. 19 18. The Supplier will document and report problems with associated corrective actions to Wards in the weekly status meeting that will address all events, issues and activities for the previous seven (7) day period. 19. The Supplier will provide and perform to the network baselines to establish acceptable response time and performance for the Wards network. 20. The Supplier will perform all data network design, provisioning, and installation in accordance with Wards' requirements and mutually agreed timeframes. 21. The Supplier will schedule all planned network modifications and outages through the established change management process in accordance with the Procedures Manual. 22. The Supplier will adhere to Wards reporting requirements as stipulated in Master Agreement Schedule D. 23. The Supplier will provide network Disaster Recovery testing on an agreed to schedule in accordance with Wards' disaster recovery plan. MEASUREMENT TOOLS FOR NETWORK MANAGEMENT The Supplier is free to recommend in writing to Wards any additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. A list of available tools is shown below: 1) Compass 2) MS Office or equivalent 3) Network Sniffer or equivalent 10
NETWORK RESPONSIBILITY MATRIX - - --------------------------------------------------------------------------------------------------------------------------------- NETWORK MANAGEMENT - - --------------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - --------------------------------------------------------------------------------------------------------------------------------- CAPACITY PLANNING - - --------------------------------------------------------------------------------------------------------------------------------- Monitor network use and capacity, and resolve problems and performance degradation X - - --------------------------------------------------------------------------------------------------------------------------------- Forecast capacity and bandwidth requirements X - - --------------------------------------------------------------------------------------------------------------------------------- Ensure appropriate bandwidth to meet capacity projections X - - --------------------------------------------------------------------------------------------------------------------------------- Make recommendations regarding bandwidth consumption and trends X - - --------------------------------------------------------------------------------------------------------------------------------- Make recommendations regarding configuration changes X - - --------------------------------------------------------------------------------------------------------------------------------- Implement approved configuration changes X - - --------------------------------------------------------------------------------------------------------------------------------- Report usage and bandwidth capacity to Wards on a periodic basis X - - --------------------------------------------------------------------------------------------------------------------------------- PROCUREMENT AND ADMINISTRATION - - --------------------------------------------------------------------------------------------------------------------------------- Research and price network devices and network software/firmware from manufacturer, aggregator or reseller X - - --------------------------------------------------------------------------------------------------------------------------------- Approve procurement of network devices and network software/firmware X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain network devices and network software/firmware from manufacturer, aggregator or reseller X - - --------------------------------------------------------------------------------------------------------------------------------- Manage Purchase Orders, verify and advise Wards of receipt of equipment and assist WardS accounting with X invoice resolution. - - --------------------------------------------------------------------------------------------------------------------------------- Research and price telecommunications from service provider X - - --------------------------------------------------------------------------------------------------------------------------------- Approve procurement of telecommunications from service provider X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain telecommunications from service provider X - - --------------------------------------------------------------------------------------------------------------------------------- Configure network devices according to pre-defined hardware, software/firmware and performance definitions X (Currently performed by aggregator) - - --------------------------------------------------------------------------------------------------------------------------------- Monitor, control, and manage recovery from any virus invasion X - - --------------------------------------------------------------------------------------------------------------------------------- NETWORK DEVICES INSTALLATION - - --------------------------------------------------------------------------------------------------------------------------------- Schedule network devices installation activity with WardS in accordance with change management procedures X - - --------------------------------------------------------------------------------------------------------------------------------- Install network devices at Wards site within specified time frame X - - --------------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on network devices, X X software/firmware - - --------------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for installation X - - --------------------------------------------------------------------------------------------------------------------------------- De-install and remove displaced network devices, as required X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off as required by the procedures manual X - - --------------------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to X reflect changes - - --------------------------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE PLANNING AND MANAGEMENT - - --------------------------------------------------------------------------------------------------------------------------------- Notify Wards of new releases of appropriate software/firmware per network device model X - - --------------------------------------------------------------------------------------------------------------------------------- Plan and schedule major software/firmware changes such as operating system installs X - - --------------------------------------------------------------------------------------------------------------------------------- Approve major software/firmware changes such as operating system installs X - - --------------------------------------------------------------------------------------------------------------------------------- Install maintenance (i.e. patches) on Supplier supported software/firmware in accordance with defined X service levels - - --------------------------------------------------------------------------------------------------------------------------------- Monitor, control, and manage recovery from any virus invasion X - - --------------------------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE INSTALLATION AND UPGRADES - - --------------------------------------------------------------------------------------------------------------------------------- Schedule software/firmware installation activity with Wards in accordance with change management procedures X - - --------------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on network devices, X X software/firmware - - --------------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for installation or upgrade X - - --------------------------------------------------------------------------------------------------------------------------------- Provide initial instructions to end customers for the new software/firmware X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off as required by the procedures manual. X - - --------------------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to X reflect changes - - ---------------------------------------------------------------------------------------------------------------------------------
11
- - --------------------------------------------------------------------------------------------------------------------------------- NETWORK MANAGEMENT - - --------------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - --------------------------------------------------------------------------------------------------------------------------------- NETWORK CONNECTION - - --------------------------------------------------------------------------------------------------------------------------------- Define logical network X - - --------------------------------------------------------------------------------------------------------------------------------- Create logical connections and assign IP address as necessary X - - --------------------------------------------------------------------------------------------------------------------------------- Install cabling required for connection to network node (from wall jack to network interface card) X - - --------------------------------------------------------------------------------------------------------------------------------- Coordinate network connection with Supplier help desk X - - --------------------------------------------------------------------------------------------------------------------------------- Verify network access and availability of authorized network resources X - - --------------------------------------------------------------------------------------------------------------------------------- Review and understand network performance, implications; make necessary adjustments X - - --------------------------------------------------------------------------------------------------------------------------------- MOVES - - --------------------------------------------------------------------------------------------------------------------------------- Schedule network devices move with Wards X - - --------------------------------------------------------------------------------------------------------------------------------- Visit receiving Wards Corporate Complex location to review space, electricity, and cabling requirements if X necessary and approved by Wards - - --------------------------------------------------------------------------------------------------------------------------------- Disconnect network devices from network X - - --------------------------------------------------------------------------------------------------------------------------------- Leave the service location in a clean and orderly manner X - - --------------------------------------------------------------------------------------------------------------------------------- Physically move network devices to new location and install X - - --------------------------------------------------------------------------------------------------------------------------------- Re-connect network devices to network at new location X - - --------------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on network devices, X X software/firmware - - --------------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for reinstallation X - - --------------------------------------------------------------------------------------------------------------------------------- De-install and remove displaced network devices, as required X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - --------------------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to X reflect changes - - --------------------------------------------------------------------------------------------------------------------------------- NETWORK DEVICES BREAK/FIX - - --------------------------------------------------------------------------------------------------------------------------------- Schedule network devices repair activity with WardS in accordance with change management procedures X - - --------------------------------------------------------------------------------------------------------------------------------- Identify problems X - - --------------------------------------------------------------------------------------------------------------------------------- Install and test needed replacement parts for network devices X - - --------------------------------------------------------------------------------------------------------------------------------- Resolve problems X - - --------------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on network devices, X X software/firmware - - --------------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - --------------------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to X reflect changes - - --------------------------------------------------------------------------------------------------------------------------------- Manage use of manufacturer warranty, reseller replacement/repair policies, etc. to limit total repair costs X in accordance with asset management function - - --------------------------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE SUPPORT - - --------------------------------------------------------------------------------------------------------------------------------- Identify problems X - - --------------------------------------------------------------------------------------------------------------------------------- Resolve problems X - - --------------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on network devices, X X software/firmware - - --------------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required X - - --------------------------------------------------------------------------------------------------------------------------------- Provide initial instructions to end customers X - - --------------------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - --------------------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to X reflect changes - - --------------------------------------------------------------------------------------------------------------------------------- PERFORMANCE TUNING - - --------------------------------------------------------------------------------------------------------------------------------- Conduct network performance tuning X - - --------------------------------------------------------------------------------------------------------------------------------- Conduct application performance tuning for supported applications X X - - ---------------------------------------------------------------------------------------------------------------------------------
12
- - --------------------------------------------------------------------------------------------------------------------------------- NETWORK MANAGEMENT - - --------------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - --------------------------------------------------------------------------------------------------------------------------------- Measure and analyze network availability and performance X - - --------------------------------------------------------------------------------------------------------------------------------- Approve use of any Supplier provided measurement and monitoring tools X - - --------------------------------------------------------------------------------------------------------------------------------- Administer measuring and monitoring tools as required X - - --------------------------------------------------------------------------------------------------------------------------------- Review network performance and make adjustments as necessary X - - --------------------------------------------------------------------------------------------------------------------------------- Provide performance reporting X - - --------------------------------------------------------------------------------------------------------------------------------- DISPOSAL (DISPOSITION) - - --------------------------------------------------------------------------------------------------------------------------------- Determine final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X - - --------------------------------------------------------------------------------------------------------------------------------- Verify final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X - - --------------------------------------------------------------------------------------------------------------------------------- Remove all data files, custom configurations, licensed software/firmware, etc. X - - --------------------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to X reflect changes - - --------------------------------------------------------------------------------------------------------------------------------- "Warehouse" of network devices components for later use X - - -------------------------------------------------------------------------------------------------------------------------------- "Warehouse" of software/firmware licenses for reuse X - - -------------------------------------------------------------------------------------------------------------------------------- Reload leased machines with original configuration prior to return X - - -------------------------------------------------------------------------------------------------------------------------------- Return assets to lessor, Asset inventory or manufacturer X - - -------------------------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY SUPPORT - - -------------------------------------------------------------------------------------------------------------------------------- Develop, maintain and test network Disaster Recovery Plan and procedure manuals X - - -------------------------------------------------------------------------------------------------------------------------------- Coordinate network disaster recovery testing with Wards X - - -------------------------------------------------------------------------------------------------------------------------------- Participate in network disaster recovery test X - - -------------------------------------------------------------------------------------------------------------------------------- Perform periodic network disaster recovery testing, resolve cause of failure and re-test X - - -------------------------------------------------------------------------------------------------------------------------------- Review network disaster recovery test results X - - -------------------------------------------------------------------------------------------------------------------------------- Report network disaster recovery test results to Wards X - - -------------------------------------------------------------------------------------------------------------------------------- Declare disaster (when necessary) to initiate Supplier's recovery plan execution X - - -------------------------------------------------------------------------------------------------------------------------------- In the event of a disaster, restore network to pre-defined operations capability within defined service X levels in accordance with the existing Wards disaster recovery plan - - -------------------------------------------------------------------------------------------------------------------------------- OUT-OF-SCOPE SERVICE REQUESTS - - -------------------------------------------------------------------------------------------------------------------------------- Initiate service requests X - - -------------------------------------------------------------------------------------------------------------------------------- Receive, record, monitor and report service requests X - - -------------------------------------------------------------------------------------------------------------------------------- Create/review project plans and cost of service request X - - -------------------------------------------------------------------------------------------------------------------------------- Estimate time and costs for changes where applicable X - - -------------------------------------------------------------------------------------------------------------------------------- Write cost justification X - - -------------------------------------------------------------------------------------------------------------------------------- Identify and communicate alternatives X - - -------------------------------------------------------------------------------------------------------------------------------- Approve, prioritize, and re-prioritize service requests X - - -------------------------------------------------------------------------------------------------------------------------------- Assist in prioritization of service requests X - - -------------------------------------------------------------------------------------------------------------------------------- Maintain and communicate prioritization and schedule of service requests X - - -------------------------------------------------------------------------------------------------------------------------------- Perform approved Out-of-Scope Service Request activities within budget and schedule X - - --------------------------------------------------------------------------------------------------------------------------------
13 GLOSSARY OF TERMINOLOGY DATA COMMUNICATIONS EQUIPMENT: Modems; CSUs; DSUs; multiplexers (muxes); FRADs; routers; bridges; ethernet or token ring hubs; ATM, ethernet or token ring switches; cluster controllers; data communication matrix switches; channel switches; FEPs; and other similar or related equipment or components and modules thereof. WARDS DISASTER RECOVERY PLAN: The Wards approved Plan for providing required standard data communications services to the appropriate Wards facilities where circumstances, events, or safety concerns at a central or hub location prevents these standard services to be provided. This plan is to be developed so that standard business operations can resume as normal in an organized, timely, and effective manner. FACILITIES: Elements that support or allow effective communications to occur between two Data Communication Equipment devices. This includes, but is not limited to: coaxial cable; fiber optic cable; radio frequency; copper twisted pair cable (e.g. 10BaseT); telephone company service, wire, cable, and components. PROVISIONING: Acquiring proper and necessary materials and/or services required to fulfill initiatives led or supported by the network management team. The cost of such provisioned equipment will be the responsibility of Wards. WARDS IN-SCOPE LOCATIONS: Defined as the Wide-Area Network (WAN) from the Wards corporate complex, to the remote point-of-presence, including any modem or router at the remote location or store, and also the Local Area Network (LAN) from any network interface card on a server or device to any other network interface card on a server or device located at the Wards corporate complex. 14 WARDS CRITICAL APPLICATIONS: Defined as those applications required by Wards to conduct normal business operations as described in the Wards Disaster Recovery Plan. 15 EXHIBIT C CHARGES THE MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM:....................$85,000 A. ALLOWANCES: Current Volumes Module Size --------------- ----------- Servers supported 17 5 Locations supported 380 50 B. PRICING ADJUSTMENT For each increase by one module in the number of servers or locations supported, the MSC shall be increased by $75,000 per year, such increase to commence with the MSC for the following month. For each decrease by one module in the number of servers or locations supported, the MSC shall be decreased by $55,000 per year, such decrease to commence with the MSC for the following month. C. OUT-OF-SCOPE - The MSC does not include support for POS equipment or store LAN support. - Wards may, at its option, elect to have Supplier provide Disaster Recovery services. Such Disaster Recovery services, including support for testing, shall be provided to Wards at third-party cost plus 15%. D. PASS-THROUGH EXPENSES - Network circuit costs including but not limited to, MCI Data Circuits. - Telecommunications charges, including but not limited to connectivity between Wards' corporate complex, Signature and Supplier's data center. E. MINIMUM MONTHLY SERVICE CHARGE (EXCLUSIVE OF PASS-THROUGH EXPENSES) - Months 1-13 -- $85,000 - Months 14-25 -- $68,000 - Months 26-37 -- $51,000 F. TERMINATION FEES There are no termination fees under this Service Agreement. 16 EXHIBIT D SERVICE LEVEL AGREEMENT SERVICE LEVEL AGREEMENT ----------------------- FOR NETWORK SERVICES -------------------- 17 TABLE OF CONTENTS
Page ---- I. GENERAL.......................................................... 19 A. General.................................................... 19 B. Definitions................................................ 19 C. Measurement................................................ 20 D. Effective Date for Service Levels.......................... 20 E. Revisions.................................................. 20 F. Single Point of Contact.................................... 20 II. SERVICE LEVELS A. Definitions................................................ 21 B. Service Level Measures..................................... 21 C. Service Levels............................................. 26 III. SERVICE LEVEL CREDITS............................................ 28 A. Credits.................................................... 29 B. Method of Calculation...................................... 29 C. Frequency Factor........................................... 29 D. Excused Performance Problem................................ 29 E. Time Limit................................................. 30 IV. SERVICE LEVEL TERMINATION EVENTS................................. 30 A. Definition................................................. 31 B. Repeated Service Level Failures............................ 31 C. Repeated Critical Service Level Failures................... 31 D. Catastrophic Level of Service.............................. 32 E. Qualification.............................................. 32
SERVICE LEVEL AGREEMENT ----------------------- FOR NETWORK SERVICES -------------------- I. GENERAL A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT. This Service Level Agreement is entered into under the Master Agreement for Information Technology Services between Acxiom Corporation ("Supplier") and Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and pertains to Service Agreement No. 4: Network Services entered into by Wards and Supplier. Any inconsistency between this Agreement, the Service Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of the Master Agreement. B. DEFINITIONS In this Service Level Agreement ("SLA"), the terms listed below shall have the indicated meanings. Other terms may be defined in other sections of this SLA. Terms used in this SLA without definition have the meanings ascribed to them in the Master Agreement or Service Agreement. 1. Service Level Measure - For any Service identified in this SLA, --------------------- the method specified in this SLA for quantitatively calculating Supplier's actual performance. The results of these calculations are compared with Service Levels to evaluate Supplier's compliance with Service Levels. 2. Service Levels - For any Service identified in this SLA, the -------------- required quantitative level or degree of performance by Supplier specified in this SLA as the "Service Level." The Service Levels are the minimally acceptable levels of service for the Services. Any failure to meet a Service Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 3. Increased Impact Level - For any Service identified in this SLA, ---------------------- the required quantitative level or degree of performance by Supplier specified in this SLA as the "Increased Impact Level." Any failure to meet an Increased Impact Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 4. Critical Service Levels - Service Levels associated with those ----------------------- Services that are most important to the conduct of Wards' operations, which are the subject of this Service Agreement. 5. Service Level Credits - The amounts which Wards shall have the --------------------- option, but not the obligation, to recover as liquidated damages, in lieu of any other monetary remedies Wards may have, each time Supplier fails to meet the Service Levels for any reason other than those specified in Section III.D of this SLA. Service Level Credits are calculated in the manner described in Section III of this SLA. 6. Service Level Termination Event - An occurrence or series of ------------------------------- occurrences of deficient performance by Supplier in performing the Services specified in this SLA as a "Service Level Termination Event." The occurrence of a Service Level Termination Event constitutes, based upon the facts and circumstances, a material breach of Supplier's performance obligations under this Service Agreement and gives Wards the right to terminate this Service Agreement for cause. C. MEASUREMENT Unless otherwise stated in this SLA, each Service Level Measure shall be calculated on a complete calendar month basis. Performance results shall be measured and reported based on actual results with any exceptions for Excused Performance Problems reported separately. D. EFFECTIVE DATE FOR SERVICE LEVELS The Service Levels provided for in this SLA shall become effective as provided for in Section 7.1 of this Service Agreement. E. REVISIONS 1. From time to time during the Term, the Parties agree to negotiate in good faith to add, delete, or modify then-existing Service Level Measures, Service Levels, and Increased Impact Levels to reflect changes in Wards' business requirements or objectives. All such changes shall be adopted in the form of a signed written amendment to this SLA. 2. In the event that any applicable system or function is replaced during the Term by a comparable system or function, the Service Level Measure, Service Level, and Increased Impact Level for such replacement system or function shall, to the extent reasonably practicable (i) be defined during the first 30 days of such replacement, and (ii) must be at least equivalent to the then- existing Service Level Measure, Service Level, and Increased Impact Level for the replaced system or function (assuming the replacement system is capable of delivering the same Service Levels as the replaced system). 3. At all times during the Term, Supplier shall provide the Services in a manner that meets or exceeds the then-existing Service Levels. The remedies for failure to do so shall include the remedies defined in this SLA, the Service Agreement, and the Master Agreement. F. SINGLE POINT OF CONTACT Regardless of whether any failure by Supplier to meet a Service Level is attributable to Supplier or an Excused Performance Problem, Supplier shall provide a single point of contact to address resolution of such failure and shall act promptly to address the problem causing the failure. Unless otherwie agreed by Wards, the Supplier Project Executive or his or her designee shall be the Supplier's single point of contact. 20 II. SERVICE LEVELS A. DEFINITIONS Certain technical definitions are included in the Glossary of Terminology included as Appendix A to Exhibit B of the Service Agreement. B. SERVICE LEVEL MEASURES NETWORK AVAILABILITY -------------------- OBJECTIVE: For the Supplier to determine and maintain the availability of the devices and data communications services that comprise the Wards network. DEFINITION "Availability" is calculated by subtracting Unscheduled Downtime from total amount of Scheduled Availability and dividing the result by the total amount of Scheduled Availability. "Unscheduled Downtime" means the elapsed time from when any network hardware or software component prevents a user from connecting to a device within or across the WAN or any LAN segments until processing is available again, or degraded performance to a point that the network device is unusable for the necessary business purpose. "Scheduled Availability" means the network is available to Wards users, subject to adjustment for Wards Peak Season and special events] METHOD: Data Capture: Wards, Supplier and telecommunications Vendor initiated network availability problem tickets as tracked and reported through the problem management system per the Procedures Manual or Supplier initiated problem tickets, logs, timestamps or alerts as proactively identified through the Supplier's network monitoring and performance tools. Measurement Interval: Monthly SERVICE LEVEL: ----------------------------------------------------------------- Description Data Points ----------------------------------------------------------------- Service Level Wards network maintains 99.5% of Availability. ----------------------------------------------------------------- Increased Impact Wards network maintains 99.0% of Availability. ----------------------------------------------------------------- IMPACT: High AFFECTED AREAS: All Wards Offices, Associates & Outprocessors RESPONSIBILITY: Service Performance: Supplier provides all services and infrastructure related to network availability. Compliance Management: Supplier provides calculation, reporting and analysis for this Service Level. REPORTING PERIOD: Monthly HOURS OF OPERATIONS: 24x7x365 REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level 21 Metrics, Action Type-I NETWORK INSTALLATIONS / DE-INSTALLATIONS ---------------------------------------- OBJECTIVE: For the Supplier to perform installations and de-installations in accordance with the requirements and schedules identified by Wards through the Change Management process in accordance with the Procedures Manual. DEFINITION Installations and de-installations of network LAN and WAN facilities which support Wards business, legal, or regulatory requirements. METHOD: Installations and de-installations involve a process of learning the Wards requirements; designing the new network environment; provisioning for or planning redeployment or removal of the equipment, facilities, and software; and installing or de- installing the network entities in a non-disruptive manner. Measurement Interval: Monthly SERVICE LEVEL: ----------------------------------------------------------------- Description Data Points ----------------------------------------------------------------- Service Level Wards network installations and de- installations are completed within mutually agreed time frames. ----------------------------------------------------------------- Increased Impact Less than 90% of Wards network installations and de-installations are completed within the mutually agreed time frame. ----------------------------------------------------------------- IMPACT: High AFFECTED AREAS: All Wards Offices, Associates & Outprocessors RESPONSIBILITY: Service Performance: Supplier provides all services and infrastructure related to network installations / de- installations. REPORTING PERIOD: As required under Master Schedule D. HOURS OF OPERATIONS: 24 x 7 x 365 RESOURCE RANGE: This service level relates to network requirements ranging from the addition of a single user device upward to entire Wards Offices and Operation Centers. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I NETWORK RESPONSE TIME --------------------- OBJECTIVE: Supplier will establish and perform to the network response time and performance baseline for the Wards network. DEFINITION: Response time for the Wards network is defined as the amount of time it takes to receive a response from the destination network device, once a Wards end user has initiated any 22 action to communicate to it from the source network device. Network includes protocols and topologies to be maintained throughout the year regardless of peak or non-peak seasonal activity. METHOD: Data Capture: Response time will be measured by Supplier provided network monitoring and performance tools or periodic manual checks from end user network attached devices. Wards network response time issues will also be captured in the Supplier provided problem management system for any Wards or Supplier reported network response time problems. Measurement Interval: Monthly SERVICE LEVEL: ----------------------------------------------------------------- Description Data Points ----------------------------------------------------------------- Service Level Average response time is ___ seconds or less ----------------------------------------------------------------- Increased Impact Average response time is more than ___ seconds ----------------------------------------------------------------- IMPACT: High AFFECTED AREA: All Wards Offices, Associates and Outprocessors RESPONSIBILITY: Service Performance: Supplier is responsible for all services related to this Service Level Compliance Management: Supplier provides calculation, reporting and analysis for this Service Level. REPORTING PERIOD: Monthly. HOURS OF OPERATION: During Scheduled Availability. RESOURCE RANGE: This service specification will apply to all network mediums and protocols in use by Wards during peak and non-peak seasonal periods. This service level does not apply during scheduled network downtime. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-II DISASTER RECOVERY PLANNING -------------------------- OBJECTIVE: To ensure the Supplier has developed and documented a comprehensive network disaster recovery plan for each Wards In- scope Location in accordance with the existing Wards Disaster Recovery plan, which is a non-contractual document. DEFINITION: The goal of the Supplier's documented network disaster recovery plan is to restore Wards network connectivity and continuity within times specified in the Wards Disaster Recovery Plan. METHOD: The Supplier will participate and provide documented network disaster recovery plans during the Wards disaster recovery planning meetings or as requested by Wards. SERVICE LEVEL: ----------------------------------------------------------------- VALUES METRICS ----------------------------------------------------------------- 23 ----------------------------------------------------------------- ----------------------------------------------------------------- Service Level - Recovery of network connectivity and continuity to support Wards' Critical Applications within the timeframes outlined in the Wards Disaster Recovery Plan. ----------------------------------------------------------------- Increased Impact - Recovery of network connectivity and continuity to support Wards' Critical Applications within 12 hours of the timeframes outlined in the Wards Disaster Recovery Plan. ----------------------------------------------------------------- IMPACT: Medium AFFECTED AREA: Wards Offices & Associates RESPONSIBILITY: Supplier PERIOD: Duration of any declared disaster HOURS OF OPERATION: N/A RESOURCE RANGE: Bandwidth to process all Wards' critical applications during a disaster in accordance with Wards Disaster Recovery Plan. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-III DISASTER RECOVERY TEST (WAN) ---------------------------- OBJECTIVE: To ensure restoration of Wards Critical Applications as documented within the Supplier disaster recovery plans for the Wide Area Network. DEFINITION: The Supplier will define and demonstrate the accuracy of the documented network disaster recovery plans by conducting one disaster recovery test per year for Wide Area network connectivity. METHOD: Disconnect all or an agreed upon subset of the Wide Area Network and verify that the backup connection is functional. SERVICE LEVEL: ----------------------------------------------------------------- VALUES METRICS ----------------------------------------------------------------- Service Level - 90% of the scheduled recovery activities are performed during the test using the documented plans. ----------------------------------------------------------------- Increased Impact - Less than 80% of the scheduled recovery activities are performed during the test using the documented plans. ----------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Offices and Associates RESPONSIBILITY: Supplier 24 PERIOD: Semi-annually. RESOURCE RANGE: This service level is valid as long as Wards participates in the disaster recovery planning and testing process as defined in the Wards disaster recovery plan and as mutually agreed to by Supplier and Wards. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-III PROBLEM RESPONSE TIME ---------------------- OBJECTIVE: To ensure repairs to network devices, software/firmware, and telecommunications within the Wards enterprise are completed in a timely and orderly manner such that end-users may resume their duties as quickly as possible. DEFINITION: A reactive maintenance activity required to repair, reroute and/or replace network devices, telecommunications or software/firmware. The service levels are measured in terms of overall time to have the third party supplier respond to the request for repair. Time starts accumulating from the point at which a problem ticket is opened and a corresponding problem ticket number has been assigned. Problems within the Supplier's control will be handled through standard problem management procedures. This Service Level applies to problems that are not within Supplier's direct control. METHOD: Problem tracking for initial entry, arrival times and repair times are recorded and reported using the automated problem ticket tracking system. Number of tickets closed within the standard set of hours / number of tickets opened during the period. SERVICE LEVEL: ----------------------------------------------------------------- VALUES METRICS ----------------------------------------------------------------- Service Level - More than one network problem not within Supplier's direct control is not responded to within four hours of the time the problem is reported ----------------------------------------------------------------- Increased Impact - More than two network problems not within Supplier's direct control are not responded to within four hours of the time the problem is reported ----------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Offices, Associates and Outprocessors RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 24 x 7 x 365 RESOURCE RANGE: All Wards network devices and facilities in all Distribution Centers and areas affecting 100 or more users within the Wards enterprise. 25 REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - I SOFTWARE/FIRMWARE RELEASE MANAGEMENT ------------------------------------ OBJECTIVE: To maintain the currency and thereby the capability for support of the Wards investment in software/firmware within the facilities. To ensure the Supplier implements changes to the Wards environment in the prescribed manner in accordance with the change management processes with minimal impact on Wards' users and processing schedules. DEFINITION: Software release management is the process of maintaining a consistent level of currency and compatibility across network devices, ensuring they are at a level that supports business initiatives and regulatory requirements. The Supplier and Wards personnel will have access to a Supplier-provided isolated network test environment to support initial and quality assurance testing of changes to the Wards network prior to implementation. METHOD: All software installations, maintenance implementations and enhancements will follow the standard change management process. SERVICE LEVEL: VALUES METRICS ------------------------------------------------------------ Service Level - software/firmware maintained at a release level of n-2 or to a mutually agreed level ------------------------------------------------------------ Increased Impact - software/firmware maintained at a release level of n-3 or to a mutually agreed release level ------------------------------------------------------------ IMPACT: Medium AFFECTED AREA: Wards Offices, Associates and Outprocessors RESPONSIBILITY: Supplier PERIOD: Monthly RESOURCE RANGE: None REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - II C. SERVICE LEVELS The Service Levels are identified in the following table(s). Each Service Level is assigned a Severity Weight in the following table(s), which is used in the calculation of the Service Level Credits. The Severity Weights are expressed as percentages, totaling 100% for all Service Levels, and approximate the relative severity of the impact on Wards' operations of failures to meet the respective Service Levels. The parties acknowledge that these percentages are approximations of probable severity and relative importance and do not limit Wards' right to contend that one or more failures to meet one or more of the Service Levels may constitute a material breach of the Agreement. Upon sixty (60) days 26 advance notice to Supplier, Wards may adjust the Severity Weights of the respective Service Levels as Wards deems appropriate so long as the total of such percentages does not exceed 100%.
- - ----------------------------------------------------------------------------------------------------------------- SERVICE INCREASED IMPACT LEVEL DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL LEVEL STANDARD MEASUREMENT WEIGHT ID - - ----------------------------------------------------------------------------------------------------------------- NETWORK AVAILABILITY MINUTES OF 25 99.5% 99.0% NETWORK AVAILABILITY AVAILABILITY DOWNTIME - - ----------------------------------------------------------------------------------------------------------------- NETWORK PERFORMANCE 5 NOT LESS THAN 90% OF INSTALLATION/DE- COMPLETED WARDS NETWORK INSTALLATION WITHIN AGREED INSTALLATIONS AND TIME FRAMES DE-INSTALLATIONS ARE COMPLETED WITHIN THE MUTUALLY AGREED TIME FRAME - - ----------------------------------------------------------------------------------------------------------------- NETWORK RESPONSE PERFORMANCE 25 __ SECONDS OR MORE THAN ___ TIME LESS SECONDS - - ----------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY RESTORATION 5 RECOVERY OF RECOVERY OF PLANNING TIME NETWORK NETWORK CONNECTIVITY CONNECTIVITY AND AND CONTINUITY CONTINUITY TO TO SUPPORT SUPPORT WARDS' CRITICAL WARDS' APPLICATIONS CRITICAL WITHIN 12 HOURS APPLICATIONS OF THE WITHIN THE TIMEFRAMES TIMEFRAMES OUTLINED IN THE OUTLINED IN WARDS DISASTER THE WARDS RECOVERY PLAN. DISASTER RECOVERY PLAN. - - ----------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY TEST TEST 15 90% OF THE LESS THAN 80% (WAN) PERFORMANCE SCHEDULED OF THE RECOVERY SCHEDULED ACTIVITIES ARE RECOVERY PERFORMED ACTIVITIES ARE DURING THE PERFORMED TEST USING DURING THE TEST THE USING THE DOCUMENTED DOCUMENTED PLANS. PLANS. - - -----------------------------------------------------------------------------------------------------------------
27 - - ---------------------------------------------------------------------------------------------------------------- PROBLEM RESPONSE TIME PERFORMANCE 20 MORE THAN ONE MORE THAN TWO NETWORK PROBLEM NETWORK PROBLEMS not within not within Supplier's Supplier's direct direct control control ARE NOT IS NOT RESPONDED TO RESPONDED TO WITHIN FOUR HOURS WITHIN FOUR OF THE TIME THE HOURS OF THE PROBLEM IS TIME THE REPORTED PROBLEM IS REPORTED - - ---------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE RELEASE PERFORMANCE 5 ALL SOFTWARE AT ALL SOFTWARE AT MANAGEMENT LEAST AT N-2 LEAST AT N-3 RELEASE LEVEL RELEASE LEVEL OR OR AS AGREED AS AGREED - - ----------------------------------------------------------------------------------------------------------------
The following Service Levels are designated as Critical Service Levels:
SERVICE APPLICATION DESCRIPTION LEVEL STANDARD ID -------------------------------------------------------------------------------------- NETWORK AVAILABILITY -------------------------------------------------------------------------------------- NETWORK RESPONSE TIME --------------------------------------------------------------------------------------
III. SERVICE LEVEL CREDITS A. CREDITS In each case of a failure to satisfy a Service Level Supplier will, within five (5) days from the identification of the deviation from the applicable Service Level, provide to Wards a plan of activities which will allow Supplier to satisfy the applicable Service Level at the earliest date practicable. In addition, Wards shall be entitled to recover a Service Level Credit for such Service Level calculated in the manner described below, provided, however, that the aggregate amount of such Service Level Credits for any given month will not exceed ten percent (10%) of Supplier's monthly charges under this Service Agreement for the applicable month (excluding Pass-Through Expenses, if any). If a single event directly 28 causes a failure to achieve more than one Service Level, then only one Service Credit will apply. In such event, Wards will select the Service Level that will be used for the calculation of the Service Credit. B. METHOD OF CALCULATION If Supplier fails to meet or exceed a Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any). If Supplier's performance fails to meet an Increased Impact Level for any Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) (this calculation being in lieu of, and not in addition to, the credit calculation for the corresponding Service Level failure). To calculate the total Service Level Credit due to Wards for the applicable month, the amounts calculated for each Service Level or Increased Impact Level as described above will be totaled and such amount shall be available as a credit to Wards against Supplier's invoice for the applicable month. C. FREQUENCY FACTOR In any case where Supplier fails to achieve the same Service Level (including failure to achieve the designated Increased Impact Level for that Service Level) in two consecutive months or in any four months in any 12-month period, the applicable Severity Weight shall be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) and for any subsequent months in which Supplier fails to achieve such Service Level or Increased Impact Level; provided, however, that in no case will Supplier be liable for total Service Credits which exceed ten percent (10%) of the applicable monthly invoice (excluding Pass-Through Expenses and Special Charges, if any). The Service Credits will revert to the method of calculation provided in Section III.A. above in the following circumstances: 1. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is different from the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following four consecutive months of achieving the Service Level. 2. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is the same as the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following ten consecutive months of achieving the Service Level. Nothing in the preceding two paragraphs will excuse the application of the frequency factor in the calculation of Service Credits if a subsequent failure to achieve a Service Level would otherwise make the frequency factor apply. D. EXCUSED PERFORMANCE PROBLEM Supplier shall not be liable to pay Wards Service Level Credits for any failure to meet a Service Level to the extent that such a failure is directly attributable to (i) a Force 29 Majeure Event; (ii) breaches of this Agreement by Wards, provided that Supplier has provided Wards with reasonable notice of such breach immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such breach; (iii) acts or omissions of Wards (or third parties acting on behalf of Wards under a written agreement), provided that Supplier has provided Wards with reasonable notice of such software problem immediately after becoming aware of it and determining that such problem will adversely impact Supplier's performance of the Services and Supplier has used Commercially Reasonable Efforts to perform notwithstanding such breach; or (iv) the first manifestation of an extraordinary latent error or defect in Equipment used by Supplier in providing the Services (and any related repeated instances pending the applicable Supplier's correction of the defect) if such defect was (1) unknown to Supplier and (2) not disclosed in any information distributed by the third party licensor, manufacturer, or distributor and (3) not preventable or discoverable through normal testing or maintenance procedures. The foregoing are referred to herein collectively as an "Excused Performance Problem." Supplier shall be liable to grant Wards Service Level Credits for any failure to meet a Service Level attributable to any cause other than causes expressly included in the categories listed above. E. TIME LIMIT If Supplier does not notify Wards of any Excused Performance Problem (as described in Section III.D above) within ninety (90) days of the date Supplier provides Performance Reports covering the time period during which the Excused Performance Problem is alleged to have occurred, then Supplier shall be deemed to have waived the claim of an Excused Performance Problem. IV. SERVICE LEVEL TERMINATION EVENT A. DEFINITION 1. Measurement Event - For purposes of this section, a "Measurement ----------------- Event" will be the monthly calculation of Supplier's actual performance for each Service Level or Critical Service Level. The total possible Measurement Events during any specific period of time is the product of the number of months in that time period times the number of Service Levels or Critical Service Levels, as applicable. 2. Failure Event - For purposes of this section a "Failure Event" ------------- shall be a specific Measurement Event for which Supplier fails to achieve the relevant Critical Service Level(s) or Service Level(s); provided, however, that any such failure caused by an event described in Section III.D of this SLA shall not be counted as a Failure Event. Any single event, act or omission that causes multiple Service Levels to be missed will be counted as one Failure Event. B. REPEATED SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Service Levels will constitute a Service Level Termination Event. 30 The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - ---------------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT EVENTS (SERVICE LEVELS) IN MEASUREMENT PERIOD - - ---------------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 6 19 Events - - ---------------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 12 37 Events - - ---------------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 4 19 Failure Events - - ---------------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 8 37 Failure Events - - ----------------------------------------------------------------------------------------------------------
C. REPEATED CRITICAL SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Critical Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (CRITICAL SERVICE EVENTS IN MEASUREMENT LEVELS) PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 2 12 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 4 24 Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 2 12 - - --------------------------------------------------------------------------------------------------
31 - - --------------------------------------------------------------------------------------------------- Failure Events - - --------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 4 24 Failure Events - - --------------------------------------------------------------------------------------------------
D. CATASTROPHIC LEVEL OF SERVICE Recovery of the Network Services within twenty-four hours of the scheduled time to recover those Services under the Wards Disaster Recovery Plan. E. QUALIFICATION Nothing in this Section IV is intended to imply that any lesser number or different combination of occurrences of deficient performance by Supplier may not also constitute a material breach of Supplier's obligations warranting termination of the Service Agreement by Wards for cause. 32 EXHIBIT E TRANSFERRED EQUIPMENT NONE 33 EXHIBIT F WARDS FACILITIES AND EQUIPMENT Wards Facilities that have been designated for use by Supplier at the Wards' headquarters as described in Service Agreement No. 2 (Data Center Services). SUMMARY OF NETWORK DEVICES - - -------------------------- MODEMS / MUXES: 200 - General DataComm (GDC) NMS9600 Standalone Modems 100 - GDC NMS9600 Rackmount Modems 60 - GDC 500/600 Series Desktop Modems 130 - 3/rd/ Party provided and supported miscellaneous modems 5 - GDC Megamuxes ROUTERS: 1 - Cisco 7513 2 - Cisco 4000 Series 40 - Cisco 2500 Series ETHERNET HUBS: 30 - Synoptics 300 Series and Allied Telesyn (Corporate Campus) Multiple remote devices (See attached) ETHERNET SWITCHES: 25 - IBM 8271-524 39 - IBM 8271-624 30 - IBM 8271-712 ATM SWITCHES: 4 - IBM 8274 4 - IBM 8210 MATRIX SWITCHES: 1 - Bytex Unity50-LE; 448X448 RS232 32X32 V.35 CHANNEL SWITCHES: 34 1 - Beall 6E, Group 1, 12X16 REMOTE LOCATIONS - - ---------------- CHARLOTTE Number of HUBS = 1 Number of PORTS = 8 Number of Ports in Use = 8 Make and Model = CentreCom MR820TR PHOENIX 1 - 3Com office connect 4 port 1 - 3Com super stack 24 port (in use) 3 - 100 Base-T 3Com super stack 12 port 1 - 10 Base-T 3Com super stack 12 port KANSAS CITY 3COM HUB10 SUPERSTACK 24 PORTS 24 IN USE 3COM HUB10 SUPERSTACK 24 PORTS 11 IN USE CISCO 1503 MICRO HUB 8 PORTS 5 IN USE SACRAMENTO Two hubs - HP HPJ2601p-24 ports per hub. One port open BRANDYWINE 3Com: 1.) 2 Super Stack II Hub 100 TX 2.) 3 Super Stack II Hub 10 3.) 1 Super Stack II Port Switch Hub 4.) 1 Super Stack II PS Hub 40 Number of ports in the Hub: 1.) 2 have 12 2.) 2 have 12 and 1 has 24 3.) 12 4.) 12 Number of ports being used: 1.) 10 and 12 used 35 2.) 12 & 20 & 3 used 3.) 6 used 4.) 3 used PENNSAUKEN In operation: 3 Com Super Stack II with 24 ports. 11 in use TAMPA ? HOUSTON 1 Cisco 2500-Super Stack II, Hub 10 Model: All are 3Com Super Stack II GARDEN GROVE Model: All are 3Com Super Stack II Total Ports Ports in Use In Use At 12 8 Computer Room/Whse Office 24 2 Computer Room/Whse Office 12 4 Receiving Office 12 2 Sortation/LP Office 24 15 Customer Care/Main Whse Office 24 18 Customer Care/Main Whse Office GRAND LEDGE 1 HUB 24 PORTS 17 PORTS IN USE 7 PORTS AVAILABLE 3COM SUPERSTACK II HUB10 NEW STANTON 36 1 HUB - 3COM SUPERSTACK II HUB10 24 PORTS ....23 IN USE....1 AVAILABLE NOTE: There are two repeater HUBS in the ceiling for linear runs of over 300 Ft. to timeclocks in the building. PORTLAND 3COM, Super Stack II, 24 Port Hub, 13 ports in use FT. WORTH 1 Cisco Router 2 3COM SUPERSTACK II HUBS 24 Ports Each 23 Ports Available ROMEOVILLE Computer Room Synoptics Lattiss Hub 2813 16 5 Computer Room Synoptics Lattiss Hub 2813 16 0 Computer Room Synoptics Lattiss Hub 2803 16 1 Computer Room Synoptics Lattiss Hub 2803 16 0 Computer Room Synoptics Lattiss Hub 2803 16 1 Computer Room Synoptics Lattiss Hub 2803 16 3 Computer Room 3Com Super Stack 20 2 Computer Room Bay Networks Baystack 12 11 Computer Room Bay Networks Baystack 12 12 Computer Room Bay Networks Baystack 12 12 Computer Room Bay Networks Distributed 5000 14 1 Shipping 3Com Super Stack 20 16 Receiving Bay Networks Distributed 5000 12 6 ST. PAUL 1-24 port 3Com Super Stack II 18 are available 37 EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE MCI DATA CIRCUITS CONTRACT PROVIDED UNDER SEPARATE COVER. 38 EXHIBIT H WARDS SOFTWARE NONE 39 EXHIBIT I SUPPLIER SOFTWARE NONE 40 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 5: DESKTOP/LAN SERVICES --------------------------------------------- THIS SERVICE AGREEMENT NO. 5: DESKTOP/LAN (the "Service Agreement") is made and entered into this 6th day of November, 1998 between Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a Delaware corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in the Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into the Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITION All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: DESKTOP/LAN ENVIRONMENT" means all of the desktop, laptop, peripheral devices, servers(only those on Schedule E which will be amended based on final asset inventory) and local area network devices utilized by Wards at the Wards Corporate Complex, as of the Service Agreement Effective Date and as subsequently modified under this Service Agreement. "DESKTOP/LAN SERVICES" has the meaning given in Section 5.1. "INITIAL TERM" has the meaning given in Section 2.1. "MASTER AGREEMENT" means the Master Service Agreement for Information Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom Corporation dated November 6, 1998, and all amendments thereto. "RENEWAL TERM" has the meaning given in Section 2.2. "SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration Plan for Desktop/LAN Services has been implemented. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any Renewal Term. "SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the meaning given in Section 7.1 of this Service Agreement. "TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning given in Section 8.1 of this Service Agreement. "WARDS PEAK SEASON" means the period in any year during the Service Agreement Term from November 20 through December 31, as such dates may be adjusted by Wards from time to time. ARTICLE 2. TERM 2.1 INITIAL TERM. The initial term of this Service Agreement (the "Initial Term") shall begin as of the Service Agreement Commencement Date and shall continue for a period of thirty-seven (37) months thereafter, unless earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. 2.2 RENEWAL TERM. Wards shall have the option to renew this Service Agreement for up to two (2) additional annual terms (each a "Renewal Term")by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final applicable Contract Year under this Service Agreement and before expiration of each annual period thereafter as applicable. All of the terms of this Service Agreement and the Master Agreement shall continue to apply without change during any renewal period(s). ARTICLE 3. TERMINATION 3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate this Service Agreement for Convenience in accordance with Section 18.2(a) of the Master Agreement. The Convenience termination charges, if any, shall be as described in Exhibit C to this Service Agreement. ARTICLE 4. PERSONNEL MATTERS 4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier --------- Positions that are subject to the provisions of Section 7.2 of the Master Agreement. 2 ARTICLE 5. SERVICES 5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide the Services described in Exhibit B, as such Exhibit may be amended and --------- supplemented from time to time pursuant to the Master Agreement (the "Desktop/LAN Services"). The Desktop/LAN Services includes all of the responsibilities associated with the Desktop/LAN Environment, unless specifically identified as a Wards responsibility under Section 6.3 below. The Services include (i) functions, responsibilities and tasks performed by the Transferred Employees prior to the Service Agreement Effective Date; (ii) functions, responsibilities and tasks not specifically described in this Service Agreement but which are required for their proper performance and are an inherent part of, or a necessary sub-part included within, the Services; and (iii) functions, responsibilities and tasks that are a logical extension of existing Services as a result of changes in technology, changes in Wards business practices, or changes resulting from change control procedures. Supplier will be the exclusive provider of the services described in this Service Agreement. 5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the Service Agreement Effective Date through the Service Agreement Commencement Date, Supplier will provide the Desktop/LAN Services under Service Agreement No. 1 (Transition and Migration Services). Following the Service Agreement Commencement Date, the Service Level Agreement and other obligations of this Service Agreement will become effective. 5.3 APPOINTMENT OF PROJECT EXECUTIVES. Upon the Service Agreement Commencement Date the Parties will appoint individuals as Project Executives under this Service Agreement to carry out the duties described in the Master Agreement. 5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in Exhibit B to this Service Agreement identifies the responsibilities of Wards - - --------- during the Term of this Service Agreement, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. The responsibilities of Wards shall be limited to those items listed in the matrix. ARTICLE 6. CHARGES 6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement --------- sets forth the Charges for the Desktop/LAN Services that may be charged by Supplier. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Desktop/LAN Services, Supplier shall provide Wards with the information described in Exhibit ------- C in sufficient detail in order to allow Wards to verify invoices. Invoice - - - submission and payment shall be in accordance with Article 14 of the Master Agreement. 3 ARTICLE 7. SERVICE LEVEL AGREEMENT 7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the --------- Service Level Agreement applicable to contains quantitative Service Levels for the Desktop/LAN Services (the "Service Level Agreement"). The Service Level Agreement will become effective upon the Service Agreement Commencement Date. Service Levels and the associated performance metrics will be baselined during the six (6) month period beginning on the Service Agreement Commencement Date, will be established jointly by the Parties during such 6-month period and shall become effective beginning with the seventh (7/th/) month following the Service Agreement Commencement Date.. ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date, Wards shall assign, and Supplier shall assume, Wards' obligations under the applicable leases for the equipment listed on Exhibit E (the "Transferred --------- Equipment"). The terms of Section 6.1 of the Master Agreement shall apply with respect to the Transferred Equipment. 8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2 of the Master Agreement, Wards shall provide the Wards Facilities and Wards Equipment described in Exhibit F to this Service Agreement. --------- 8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the Service Agreement Commencement Date, and subject to Supplier having received any Third Party Consents, Supplier shall assume from Wards all of the rights and obligations of Wards under the Third Party Contracts and the Third Party Software that are listed in Exhibit G. The terms of Section 6.3 of the Master --------- Agreement shall apply with respect to Third Party Contracts and to Third Party Software. 8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is --------- proprietary to Wards and that is used in Desktop/LAN Systems (the "Wards Software"). The terms of Section 8.1 of the Master Agreement shall apply with respect to the Wards Software. 8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by Supplier to provide the Desktop/LAN Services is listed in Exhibit I. Use of --------- Supplier Software in providing the Desktop/LAN Services shall be in accordance with Section 8.2 of the Master Agreement. ARTICLE 9. TERMINATION AND TRANSITION SERVICES 9.1 TERMINATION. Wards may terminate the Service Agreement without penalty at any time prior to the Service Agreement Commencement Date if Supplier does not complete the Migration Plan described in Service Agreement No. 1. After the Service Agreement 4 Commencement Date, this Service Agreement may be terminated pursuant to the terms of the Master Agreement. 9.2 TRANSITION SERVICES. In the event of a termination or expiration of this Service Agreement, Supplier shall provide the Termination/Expiration Assistance as provided in Section 18.7 of the Master Agreement. IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ----------------------------- ------------------------------------ Name: Don Bernheisel Name: Joseph C. Grossestreuer --------------------------- ---------------------------------- Its: SVP, CIO Its: SVP-Outsourcing Services ---------------------------- ----------------------------------- 5 EXHIBITS TO DESKTOP/LAN SERVICE AGREEMENT ----------------------------------------- EXHIBIT A KEY SUPPLIER POSITIONS Exhibit B SERVICES EXHIBIT C CHARGES EXHIBIT D SERVICE LEVEL AGREEMENT EXHIBIT E TRANSFERRED EQUIPMENT EXHIBIT F WARDS FACILITIES AND EQUIPMENT EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE EXHIBIT H WARDS SOFTWARE EXHIBIT I SUPPLIER SOFTWARE 6 EXHIBIT A KEY SUPPLIER POSITIONS NETWORK SERVICES AND SUPPORT MANAGER PC PROJECT AND SUPPORT MANAGER PC PROCUREMENT MANAGER SENIOR PC/LAN SUPPORT SPECIALIST SENIOR PC PRODUCT ANALYST 7 EXHIBIT B SERVICES DESKTOP MANAGEMENT OVERVIEW - - -------- This detailed service description establishes the processes, measurement tools, service specifications, and assumptions associated with Desktop Management for Wards IS. The documented service descriptions are designed to give the Supplier an understanding of Wards' business objectives for Desktop Management while allowing the Supplier latitude to define their own processes and methods for providing the services. The intent of the Desktop/Server Management service agreement is for the Supplier to provide hardware and software support in the Wards end-user computing environment. The Supplier will be expected to provide Wards end-user installations, upgrades and Wards' end-user problem resolution for hardware and software. Provided that such installations and upgrades that affect more than 20 users will be treated as a project and will be subject to the terms of the jointly developed project plan. The Supplier will provide desktop and server hardware, software, and project support to ensure user satisfaction with the Wards NT and other LAN environments. The desktop/server group provides server interface support for various other Wards' platforms and departments such as Store Support, Store Planning, Advertising, product service, and merchandise distribution departments. The Supplier will be expected to provide total support from receipt of the problem or request, through the resolution and closing of the problem or requests, by the Wards user who initiated the problem or request. The Supplier will be expected to provide software use assistance for the Wards standard software configuration products. ACTIVITIES FOR DESKTOP MANAGEMENT - - --------------------------------- 1. The Supplier will provide hardware break/fix labor solutions for both mission critical (VIP) and non-mission critical (non-VIP) hardware at the Wards Corporate Complex. Wards will fund third-party hardware maintenance adequate for Supplier to meet the service levels. 2. The Supplier will provide software break/fix solutions and work-around at the Wards Corporate Complex including, but not limited to: operating systems and contained components, file corruption and deletion, Wards standard software configuration products., and will provide best effort support for Wards non-standard software products. 3. The Supplier will provide and coordinate the hardware installation function for new, upgrade and redeployment situations at the Wards corporate complex. 8 4. The Supplier will provide the software upgrade function, the software installation and the software distribution function for Wards' standard software configuration products and best effort on Wards' non-standard software products at the Wards corporate complex. 5. The Supplier will provide software use assistance, through the Supplier help desk, for Wards' standard software products and best effort on Wards' non- standard software products at the Wards corporate complex. 6. The Supplier will provide the parts administration function such as parts ordering, parts receipt and distribution, parts warranty administration and stocking recommendations for Supplier provided or Wards provided parts. 7. The Supplier will provide preventative maintenance for all assets, in accordance with change management procedures as documented in the Procedures Manual. SERVICE PARAMETERS FOR DESKTOP/SERVER MANAGEMENT - - ------------------------------------------------ 1. The Supplier will be required to provide desktop management services 6am-6pm Monday through Friday, CT. Desktop management support will be available during all off-hour periods reachable via pager. 2. Desktop management support will be required for on-site support during Wards Peak Season and off-hours periods as problem resolutions may dictate. 3. Supplier will be required to support all Wards Corporate Complex hardware and software on-site at the location of the failed hardware or software per the problem escalation procedures specified during normal business hours, and best effort at all other times. 4. The Supplier, if contracted to supply the hardware, will be required to contact the user within three (3) business days of the purchase order receipt to schedule a mutually agreeable installation date, and the user should expect installation within five (5) business days from receipt of the purchase order by the Supplier. 5. The Supplier, if not contracted to supply the hardware, will schedule the installation with the user within three (3) business days of the equipment receipt, and the user should expect installation within five (5) business days from equipment receipt at Wards. 6. The Supplier will provide software certified support staff who are competent with the standard software product image and hardware certified support staff who are competent with standard hardware configuration. 7. The Supplier will be required to research, create, document and validate the Wards standard software image and the Wards standard hardware configuration for all new images and configurations based upon Wards' approval. 8. The Supplier will be required to provide any and all resources or level of expertise needed to resolve any problems or issues governed by the service levels stated in this agreement, except for non-standard software products and non-standard configurations. 9. Devices within the Supplier's scope of responsibility include network interface cards or equivalent, and network access methods (e.g. wireless Ethernet interface cards). 10. The Supplier will provide initial technical expertise for Wards' end-user initiatives dependent upon Wards' approval and the determination whether the request is in scope or out of scope. 9 11. The Supplier will provide those functions required to de-install any end- user asset including, software removal, hard drive reformatting, removal from asset inventory. Supplier will remove decommissioned asset according to Wards' directive for either lease return, storage, or disposal. 12. The Supplier will be required to research and present the most economical pricing options for hardware and software procurement while ensuring compatibility (i.e. meeting manufacturers' specifications) of all parts and equipment used in hardware installation and break/fix for Wards end-user computing assets. 13. The Supplier will be responsible to ensure correct application of all expected credits for returned hardware and software. 14. The Supplier will assist Wards Human Resources department with asset control related to departing associates. 15. The Supplier will track and manage any desktop/server requests and Help Desk tickets for Wards' users. 16. The Supplier, while not currently responsible for the daily support of any Wards' Apple MacIntosh assets, will provide secondary support for device connectivity to host and LAN environments, provided that if the number of MacIntosh assets increases, Supplier will pass-thru any additional costs incurred. 17. The Supplier will be responsible to assist Wards in completing the thin client implementation. This is considered out-of-scope work currently in progress and should not be construed as permanent in regards to staffing levels. 18. The Supplier will be required to assist Wards in the completion of the building/facility consolidation, which is currently scheduled to be complete by 12/31/98. Tasks would include, but not be limited to Desktop/Server de-install and install, and documentation of Corporate Inventory. This is considered out-of-scope work currently in progress and should not be construed as permanent in regards to staffing levels. 10 MEASUREMENT TOOLS FOR DESKTOP MANAGEMENT - - ---------------------------------------- The Supplier is free to recommend in writing to Wards any additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. Available tools are listed below. 1) Microsoft Internet Explorer web browser or equivalent 2) MS Exchange Email or equivalent 3) CA-Advance Help Desk(HD) or equivalent(Purchased & Planned) 4) MS Office (Excel, Word, PowerPoint) or equivalent 5) Equipment manufacturer technical manuals 6) MS-Access Proprietary Help Desk/Inventory Software or equivalent 11 RESPONSIBILITY MATRIX
- - ------------------------------------------------------------------------------------------------------------------------- DESKTOP/SERVER MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------------- SERVICE AREA ACCOUNT ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------------- Set Standards, Architecture and Design (using Wards products whenever possible) X - - ------------------------------------------------------------------------------------------------------------------------- Document and approve any exceptions to standards X - - ------------------------------------------------------------------------------------------------------------------------- Test compatibility of new Standards, Architecture and Design with existing infrastructure X - - ------------------------------------------------------------------------------------------------------------------------- Conduct product evaluations, for proposed product procurement, including testing compatibility with existing infrastructure and ensure year 2000 compliance X - - ------------------------------------------------------------------------------------------------------------------------- Support staff will interface and respond to Supplier primary help desk X - - ------------------------------------------------------------------------------------------------------------------------- Log all new problem calls if calls do not originate at the help desk X - - ------------------------------------------------------------------------------------------------------------------------- Prepare and distribute all reports including monthly service level / performance reports X - - ------------------------------------------------------------------------------------------------------------------------- Prepare monthly hardware repair and software support activity report for monthly review X - - ------------------------------------------------------------------------------------------------------------------------- Conduct monthly management review meeting X - - ------------------------------------------------------------------------------------------------------------------------- Attend monthly management review X - - ------------------------------------------------------------------------------------------------------------------------- Audit service level, performance and activity reports as needed X - - ------------------------------------------------------------------------------------------------------------------------- Manage consequences (e.g. failure to meet service levels) resulting from monthly management review X - - ------------------------------------------------------------------------------------------------------------------------- Approve new or changed service level/performance reports as needed X - - ------------------------------------------------------------------------------------------------------------------------- Identify areas for improvement X - - ------------------------------------------------------------------------------------------------------------------------- Implement action items from monthly management review meeting X - - ------------------------------------------------------------------------------------------------------------------------- HARDWARE PROCUREMENT - - ------------------------------------------------------------------------------------------------------------------------- Wards user to submit requisition to Supplier X - - ------------------------------------------------------------------------------------------------------------------------- Supplier to research, price and verify availability and return information to Wards X - - ------------------------------------------------------------------------------------------------------------------------- Accept or reject procurement X - - ------------------------------------------------------------------------------------------------------------------------- Track all hardware orders requested by Wards X - - ------------------------------------------------------------------------------------------------------------------------- Provide confirmation of correct order receipt X - - ------------------------------------------------------------------------------------------------------------------------- Obtain hardware from manufacturer, aggregator or reseller X - - ------------------------------------------------------------------------------------------------------------------------- Configure hardware according to pre-defined hardware, software and performance definitions (Currently performed by PC aggregator) X - - ------------------------------------------------------------------------------------------------------------------------- INSTALLATION AT WARDS CORPORATE COMPLEX - - ------------------------------------------------------------------------------------------------------------------------- Visit Wards end customer location to review space, electricity, and cabling requirements if necessary X - - ------------------------------------------------------------------------------------------------------------------------- Schedule hardware installation activity with end customer X - - ------------------------------------------------------------------------------------------------------------------------- Transport or ship any equipment between or within any Wards' site or Supplier site contained within acceptable packaging. X - - ------------------------------------------------------------------------------------------------------------------------- Provide and install OEM parts where and when directed by Wards X - - ------------------------------------------------------------------------------------------------------------------------- Install additional approved devices X - - ------------------------------------------------------------------------------------------------------------------------- Install hardware at end customer site within specified time frame X - - ------------------------------------------------------------------------------------------------------------------------- Backup and transfer of any end customer data and/or applications X - - ------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on hardware, software and peripherals X X - - ------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for installation X - - ------------------------------------------------------------------------------------------------------------------------- Provide initial instructions to the end customer for the new system X - - ------------------------------------------------------------------------------------------------------------------------- De-install and remove displaced hardware, as required X - - ------------------------------------------------------------------------------------------------------------------------- Ensure work area is returned to a neat and orderly state prior to departing X - - ------------------------------------------------------------------------------------------------------------------------- Obtain end customer's sign-off X - - ------------------------------------------------------------------------------------------------------------------------- Update problem ticket, electronic inventory and asset inventory system to reflect changes X - - ------------------------------------------------------------------------------------------------------------------------- MOVES - - -------------------------------------------------------------------------------------------------------------------------
12
- - ------------------------------------------------------------------------------------------------------------------------- DESKTOP/SERVER MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION - - ------------------------------------------------------------------------------------------------------------------------- Schedule hardware move with Wards end customers X - - ------------------------------------------------------------------------------------------------------------------------- Visit receiving end customer location to review space, electricity, and cabling requirements if necessary X - - ------------------------------------------------------------------------------------------------------------------------- Disconnect hardware from network X - - ------------------------------------------------------------------------------------------------------------------------- Leave the "from" location in a clean and orderly manner X - - ------------------------------------------------------------------------------------------------------------------------- Physically move hardware to new location and install X - - ------------------------------------------------------------------------------------------------------------------------- Install additional approved applications X - - ------------------------------------------------------------------------------------------------------------------------- Backup and transfer of any end customer data and/or applications X - - ------------------------------------------------------------------------------------------------------------------------- Re-connect hardware to network (if necessary) at new location X - - ------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on hardware, software and peripherals X X - - ------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for reinstallation X - - ------------------------------------------------------------------------------------------------------------------------- Provide initial instructions to the end customer for the hardware X - - ------------------------------------------------------------------------------------------------------------------------- De-install and remove displaced hardware, as required X - - ------------------------------------------------------------------------------------------------------------------------- Ensure work area is returned to a neat and orderly state prior to departing X - - ------------------------------------------------------------------------------------------------------------------------- Obtain end customer's sign-off X - - ------------------------------------------------------------------------------------------------------------------------- Update problem ticket, electronic inventory and asset inventory system to reflect changes X - - ------------------------------------------------------------------------------------------------------------------------- HARDWARE BREAK/FIX - - ------------------------------------------------------------------------------------------------------------------------- Schedule hardware repair activity with Wards end customer X - - ------------------------------------------------------------------------------------------------------------------------- Identify problems X - - ------------------------------------------------------------------------------------------------------------------------- Backup LAN attached end customer data and/or applications if necessary X - - ------------------------------------------------------------------------------------------------------------------------- Install and test needed replacement parts for hardware X - - ------------------------------------------------------------------------------------------------------------------------- Resolve problems X - - ------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on hardware, software and peripherals X - - ------------------------------------------------------------------------------------------------------------------------- Provide or adjust configuration options as required X - - ------------------------------------------------------------------------------------------------------------------------- Ensure work area is returned to a neat and orderly state X - - ------------------------------------------------------------------------------------------------------------------------- Obtain end customer's sign-off X - - ------------------------------------------------------------------------------------------------------------------------- Update problem ticket, electronic inventory and asset inventory system to reflect changes X - - ------------------------------------------------------------------------------------------------------------------------- Manage use of manufacturer warranty, reseller replacement/repair policies, etc. to limit total repair costs X - - ------------------------------------------------------------------------------------------------------------------------- Perform and manage all Return Material Authorization (RMA)/shipping arrangements, provided that Wards is responsible for shipping costs X - - ------------------------------------------------------------------------------------------------------------------------- Manage hardware spare parts X - - ------------------------------------------------------------------------------------------------------------------------- Provide Wards with timely invoicing for hardware and software purchases made on Wards behalf X - - ------------------------------------------------------------------------------------------------------------------------- Provide monthly status reports detailing hardware repair activity X - - ------------------------------------------------------------------------------------------------------------------------- Provide monthly report showing hardware spare parts inventory & usage rates X - - ------------------------------------------------------------------------------------------------------------------------- DISPOSAL (DISPOSITION) - - ------------------------------------------------------------------------------------------------------------------------- All shipping to be borne by Wards X - - ------------------------------------------------------------------------------------------------------------------------- Verify final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X - - ------------------------------------------------------------------------------------------------------------------------- Gain Wards approval for replacement or disposal of any Wards failed desktop/server device X - - ------------------------------------------------------------------------------------------------------------------------- Remove all data files, custom applications, licensed software, etc. X - - ------------------------------------------------------------------------------------------------------------------------- Update problem ticket, electronic inventory and asset inventory system to reflect changes X - - ------------------------------------------------------------------------------------------------------------------------- "Warehouse" of hardware components in Wards provided space at Wards corporate complex.for later disposition to be provided by Wards. X - - ------------------------------------------------------------------------------------------------------------------------- "Warehouse" of software licenses (i.e. MS Office license) for reuse at Wards corporate complex. X - - ------------------------------------------------------------------------------------------------------------------------- Return assets to lessor, Strategic Asset Redeployment (SAR) or manufacturer X - - -------------------------------------------------------------------------------------------------------------------------
13
- - ------------------------------------------------------------------------------------------------------------------------- DESKTOP/SERVER MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------------- SUPPLIER SUPPORTED SOFTWARE PLANNING AND MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------------- Notify liason of new releases of Supplier supported software X - - ------------------------------------------------------------------------------------------------------------------------- Conduct performance tuning on Supplier support software X - - ------------------------------------------------------------------------------------------------------------------------- Plan and schedule major software changes such as operating system installs X - - ------------------------------------------------------------------------------------------------------------------------- Install maintenance (i.e. patches) on Supplier supported software in accordance with defined service levels X - - ------------------------------------------------------------------------------------------------------------------------- Monitor, control, and manage recovery from any virus invasion X - - ------------------------------------------------------------------------------------------------------------------------- Maintain and validate Wards' standard software product image for all new images. X - - ------------------------------------------------------------------------------------------------------------------------- Train end customer on Supplier supported software and upgrades X - - ------------------------------------------------------------------------------------------------------------------------- SOFTWARE PROCUREMENT - - ------------------------------------------------------------------------------------------------------------------------- Wards user to submit requisition to Supplier X - - ------------------------------------------------------------------------------------------------------------------------- Supplier to research, price and verify availability and return information to Wards X - - ------------------------------------------------------------------------------------------------------------------------- Accept or reject procurement X - - ------------------------------------------------------------------------------------------------------------------------- Track all software orders requested by Wards X - - ------------------------------------------------------------------------------------------------------------------------- Provide confirmation of correct order receipt X - - ------------------------------------------------------------------------------------------------------------------------- Obtain software, or software upgrade from manufacturer, aggregator or reseller X - - ------------------------------------------------------------------------------------------------------------------------- Configure software according to pre-defined hardware, software and performance definitions X - - ------------------------------------------------------------------------------------------------------------------------- SUPPLIER SUPPORTED STANDARD SOFTWARE INSTALLATION AND UPGRADES - - ------------------------------------------------------------------------------------------------------------------------- Schedule software installation activity with end customer X - - ------------------------------------------------------------------------------------------------------------------------- Backup and transfer of any LAN attached end customer data and/or applications X - - ------------------------------------------------------------------------------------------------------------------------- Check, test, against viruses X - - ------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on hardware, software and peripherals X X - - ------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for installation X - - ------------------------------------------------------------------------------------------------------------------------- Provide initial instructions to the end customer for the new software X - - ------------------------------------------------------------------------------------------------------------------------- Obtain end customer's sign-off X - - ------------------------------------------------------------------------------------------------------------------------- Update problem ticket, electronic inventory and asset inventory system to reflect changes X - - ------------------------------------------------------------------------------------------------------------------------- SOFTWARE SUPPORT - - ------------------------------------------------------------------------------------------------------------------------- Identify problems X - - ------------------------------------------------------------------------------------------------------------------------- Backup and transfer of any end customer data and/or applications X - - ------------------------------------------------------------------------------------------------------------------------- Assist users with data restoration from backup media on the various Wards servers. X - - ------------------------------------------------------------------------------------------------------------------------- Check, test, and warrant against viruses X - - ------------------------------------------------------------------------------------------------------------------------- Resolve problems following Wards documented Escalation Procedures X - - ------------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on hardware, software and peripherals X X - - ------------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required X - - ------------------------------------------------------------------------------------------------------------------------- Provide initial instructions to the end customer X - - ------------------------------------------------------------------------------------------------------------------------- Obtain end customer's sign-off X - - ------------------------------------------------------------------------------------------------------------------------- Update problem ticket, electronic inventory and asset inventory system to reflect changes X - - ------------------------------------------------------------------------------------------------------------------------- OUT-OF-SCOPE SERVICE REQUESTS - - ------------------------------------------------------------------------------------------------------------------------- Initiate service requests X - - ------------------------------------------------------------------------------------------------------------------------- Receive, record, monitor and report service requests X - - ------------------------------------------------------------------------------------------------------------------------- Create/cost of service request X - - ------------------------------------------------------------------------------------------------------------------------- Review project plans X - - ------------------------------------------------------------------------------------------------------------------------- Estimate time and costs for changes where applicable X - - -------------------------------------------------------------------------------------------------------------------------
14
- - ------------------------------------------------------------------------------------------------------------------------- DESKTOP/SERVER MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------------- Quote resource rates and obtain Wards' pre-authorization for any overtime or special project activity X - - ------------------------------------------------------------------------------------------------------------------------- Write cost justification X - - ------------------------------------------------------------------------------------------------------------------------- Identify and communicate alternatives X - - ------------------------------------------------------------------------------------------------------------------------- Approve, prioritize, and reprioritize service requests X - - ------------------------------------------------------------------------------------------------------------------------- Assist in prioritization of service requests X - - ------------------------------------------------------------------------------------------------------------------------- Maintain and communicate prioritization and schedule of service requests X - - ------------------------------------------------------------------------------------------------------------------------- Perform approved Out-of-Scope Service Request activities within budget and schedule X - - -------------------------------------------------------------------------------------------------------------------------
15 GLOSSARY OF TERMINOLOGY ----------------------- EUC End User Computing. User community at Wards corporate complex related to use of desktop/server hardware and software and desktop/server applications. WARDS DEVELOPED Describes any software application developed by Wards SOFTWARE personnel as a stand alone application, client or server application, system device driver, adjunct or peripheral device driver, or application enhancement capable of operating in the Wards network computing environment. WARDS PURCHASED Describes any software application not developed by SOFTWARE Wards personnel capable of operating in the Wards network-computing environment. WARDS USER All users of Wards IT services including but not COMMUNITY limited to Wards' associates, subcontractors, and customers. HARDWARE MOVE, A move describes physically relocating a hardware ADD, CHANGE (MAC) device. Add is a new installation of a hardware device. Change is an upgrade, or reconfiguration of a hardware device. MEDIA Any removable and transportable data storage medium used to backup, retain, and restore data, including but not limited to: reel tape, cartridge tape (3490, TK50, TK70, DAT, 4mm, 8mm), keyboards or Compact Disc. PERIPHERAL Describes any accessory device used in conjunction with other hardware or software devices. PLOTTER Describes both individual and networked (-shared) plotters in the Wards computing environment. PRINTER Describes both individual and networked (-shared) printers in the Wards computing environment. PROBLEM Problem, deficiency, delay or request as reported by a member of the Wards user community. PROBLEM TRACKING Call Center database management and problem ticket SYSTEM tracking software. 16 RELEASE Release Management is the management and structured MANAGEMENT release of desktop, server, and network software standards that are mutually determined by Wards and Supplier. SERVER Describes a networked computer hosting applications or services to client computers on the network. Currently servers at Wards are based. In the future the Operating Systems for Servers may change as technology and business requirements demand. SOFTWARE MOVE, A move describes physically relocating a software ADD, CHANGE (MAC) license. Add is a new installation of software. Change is an upgrade, or reconfiguration of software. SYSTEMS MANAGED MS remote system management software used to SOFTWARE (SMS) distribute software. EUC - HELP DESK PROBLEM DEFINITION, CLASSIFICATION AND ACTION REQUIREMENTS - - --------------------------------------------------------------------------
SEVERITY PROBLEM DESCRIPTION ACTION RESPONSE ESCALATION - - -------- ------------------- ------ -------- ---------- 1 All or large portion of *Group1 page sent to all EUC Assigned L3 arrives If unresolved after 30 ------------ Client/Server user environment staff, and Mgmt. (6am-6pm). or calls NetOps ASAP, min, - call/page to is down or degraded. - Follow escalate list for NSS Mgr. Examples: Merch Server is down. offshift. Call/page L3 tech, (within 10 min). After 1hr, TS/EUC page NSS Mgr, TS/EUC Mgr, and * Group1 page sent Mgr, & IT Plan Dir. ------------- IT Plan Dir. when problem resolved. 2hr - CIO 1-VIP Officer, VIP, or their Admin *Group2 Page to Swat Team, Assigned ST member If unresolved after 30 ------------ is down, or has problem requiring TS/EUC Mgr, IT Plan Dir calls NetOps ASAP. min, - call/page to service. (within 10 min) NSS Mgr. ST member onsite After 1hr, TS/EUC ...If it is a minor problem that with VIP-User within Mgr. 2hr - IT Plan can be handle deffectively over 30 min. Dir, & CIO phone, such as access permission, * Group1 page sent ------------- ....no need to dispatch SWAT. when problem resolved. 2 Single user down or can't get HD assigns problem to L2, Tech assigned and If no response within work done and indentifies problem as B/F, or L3 onsite within 2-4 4 hrs, or not fixed business critical. hrs. Resolved in 8 hours - call/page within 4-8 hrs. Mgr, & escalate to ----------- Sev-1. After 6 hrs, ----- TS/EUC Mgr. 3 User impacted but not critical, HD assigns problem to L2, Tech assigned and If no response within or user has a workaround. B/F, or L3 onsite within 24 24 hrs, or not resolved hrs. Resolved in 48, call /page Mgr, within 48 hrs. and escalate to Sev-2. ----------------- 4 User question or response HD assigns problem to L2, Tech assigned and If no response within requested. B/F, or L3 contact to user 48 hrs, or resolved in within 48 hrs. 72 hrs, 3 days, - Resolved in 72 notify Mgr, and
17 hours. escalate to Sev-3. -----------------
LOS OBJECTIVES - - -------------- Until we have some history, we will follow these objectives as guidelines. After a few weeks of gathering data, we will formalize objectives, and make any adjustments and/or staffing changes. GROUP1 PAGE (SEV-1) GROUP2 PAGE - SWAT TEAM (SEV-1 AND VIP) - - ------------------- --------------------------------------- IT Planning & Tech Dir. - Morton Assoc Tech Spec -EUC L3 - Carlos Acosta Tech Serv & EUC Mgr. - TBD Assoc Tech Spec -EUC L3- John Boekeloo Network Serv & Soft Mgr - Josh Sr Netk Tech - Netwk L3 - Bob Davenport VP Comp Servs - Irv Netwk Data Inst Mgr - Henry Harper Prod Mgr Opers - Larry Adv Sys Desgn Mgr - Bobby Ervin EUC Staff - All Network Serv & Soft Mgr - Josh Taylor 18 MISSION CRITICAL DEVICES AND APPLICATIONS ----------------------------------------- MISSION CRITICAL(VIP) DESKTOP/LAPTOP HARDWARE TSO ID USER NAME: VIP INDICATOR SYSTEM TH0760 VOLLMAN, SANDY Y DT TH1118 PELEJ, LINDA Y LT TO5107 JENKINS, CHERYL Y DT TO5510 ANDRESEN, JOANNE Y DT TO6056 GARRETT, REG Y DT TO6213 MAIER, MICHELLE Y DT TS0023 DOSHAN, JEFFREY R. Y DT TS0078 RUFFALO, MARGARET Y DT TS0269 MCDOWELL, STEVE Y DT TS0360 COPENHAVER, MIKE Y DT TS0567 JUDY GUSTAFSON Y DT TS1023 PEIRINI, MARY JANE Y DT ts1125 Staack, Craig Y DT TS1218 Tim Watkins Y DT TS3074 DIGANGI, AL Y LT TS3136 Gatewood, Dan Y DT TS3720 BASS, BILL Y TC TS3824 NUGENT, RON Y DT TS4046 ZUCCHERO, MARYANN Y DT TS4487 BYRD, DIANA Y DT TS4755 STEFANIAK, MAMIE Y DT TS5188 DELK, PHILIP Y DT TS5251 FARMER, ROSIE Y DT TS5311 TOENINGS, JUDITH Y DT TS5614 WEIL, KATHY Y TC TS5620 KRAWCZYK, RITA Y DT ts5640 Laura M. Martinez Y DT TS5853 WOODS, INITA Y DT TS5923 SILVESTRI, COOKIE Y DT TS5930 SAMPSON, GAIL Y DT TS5939 Jenny Alvarez Y DT TS6239 MENDEZ, ELEANOR Y DT TS6301 JOANNA DWYER Y DT TS6378 BOLDA, IRENE Y TC B TS6425 HEINE, SPENCER Y DT TS6535 MORTON MEASE Y LT/TC 19 TSO ID USER NAME: VIP INDICATOR SYSTEM TS6849 BOHNTINSKY, JOHN Y DT TS6958 BUREL, MARK Y DT TS7158 BURDI, ANGIE Y DT TS7272 LAY, SCOTT Y DT TS7466 ARMSTRONG, CHARLES Y LT TS7653 CLAXTON, ROBERT Y DT TS7663 FREEMAN, KEVIN Y TC TS8098 HURLEY, KATHY Y DT TS8140 SEARLES, MIKE Y DT TS8370 BERNHEISEL, DON Y LT TS8503 KYSER, ERIC Y DT TS8540 BAIRD, BOB Y DT TS8766 GODDU, ROGER Y LT/DT TS9014 TAYLOR, KARL Y LT TS9213 CIVGIN, DON Y LT ts9245 Austin, Tom Y LT TS9246 Caporale, Louis (Lou) Y LT TS9573 PAUP, THOMAS J. Y DT TS9620 WANGSTAD, KAROLYN Y DT TS9641 KLEIN, STEWART Y LT TS9844 STEIN, ANDY Y LT TY1242 HAMMER, IRVING Y TC MISSION CRITICAL(VIP) LAN SERVERS All Servers at Wards Corporate Complex MISSION CRITICAL(VIP) APPLICATIONS MS-NT Novell Lotus-Notes Windows 95 `Standard' Server Applications 20 STANDARD HARDWARE CONFIGURATION (NEW PURCHASE) Processor model within 2 versions of most recently released 32 MB Memory 4 GB Hard Drive CD Drive 17" Monitor Standard Hardware Configuration Selection Criteria 1. Special user needs (i.e. IBM workstation for DB2 developers) 2. Thinclient where available and appropriate 3. Re-utilization of existing assets where available and appropriate 4. Standard Hardware Configuration (new purchase) 21 EXHIBIT C CHARGES MONTHLY SERVICES CHARGE (MSC) FOR 37 MONTH TERM:.....................$85,000 A. ALLOWANCES: - Up to 250 shrink wrap software service calls per month - Up to 1500 keyboards, including associated devices such as terminals, printers, scanners, workstations and PCs, at Wards corporate headquarters B. PRICING ADJUSTMENTS Any increase or decrease in the number of keyboards or number of end users shall result in adjustments to the MSC as follows: (i) For each 100 unit increase in keyboards, the MSC shall be increased by $75,000 per year, such increase to commence with the MSC for the following month. (ii) For any 100 unit decrease in keyboards, the MSC shall be decreased by $55,000 per year, such decrease to take effect with the MSC for the following month. (iii) The MSC shall be increased by (x) $25 per month for each additional non-thin-client desktop/laptop device (non-mission critical) beyond an initial allowance of 300 and (y) $50 per month for each distributed client/server mission critical device. C. PASS -THROUGH EXPENSES - All telecommunications line charges necessary for connectivity between Wards' corporate complex, Signature and Supplier's data center, shall be Pass-Through Expenses, to be invoiced monthly to Wards without mark-up. D. OUT OF SCOPE - Wards will provide all desktop-related Equipment and Software. - Optional pricing available for technology refresh. - Wards may at its option, elect to have Supplier provide disaster recovery services. Such disaster recovery services, including support for testing, shall be provided to Wards at third-party cost plus 15%. - IMACs except at Wards corporate headquarters tower. 22 E. MINIMUM MONTHLY CHARGE - Months 1-13 -- $85,000 - Months 14-25 -- $68,000 - Months 26-37 -- $51,000 F. TERMINATION FEES There are no termination fees under this Service Agreement. 23 EXHIBIT D SERVICE LEVEL AGREEMENT FOR DESKTOP SERVICES -------------------- 24 TABLE OF CONTENTS
Page ---- I. GENERAL.............................................................. 26 A. General........................................................ 26 B. Definitions.................................................... 26 C. Measurement.................................................... 27 D. Effective Date for Service Levels.............................. 27 E. Revisions...................................................... 27 F. Single Point of Contact........................................ 28 II. SERVICE LEVELS A. Definitions.................................................... 28 B. Service Level Measures......................................... 28 C. Service Levels................................................. 34 III. SERVICE LEVEL CREDITS................................................ 36 A. Credits........................................................ 36 B. Method of Calculation.......................................... 36 C. Frequency Factor............................................... 36 D. Excused Performance Problem.................................... 37 E. Time Limit..................................................... 38 IV. SERVICE LEVEL TERMINATION EVENTS..................................... 38 A. Definition..................................................... 38 B. Repeated Service Level Failures................................ 38 C. Repeated Critical Service Level Failures....................... 39 D. Catastrophic Level of Service.................................. 40 E. Qualification.................................................. 40
SERVICE LEVEL AGREEMENT ----------------------- FOR DESKTOP SERVICES -------------------- I. GENERAL A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT. This Service Level Agreement is entered into under the Master Agreement for Information Technology Services between Acxiom Corporation ("Supplier") and Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and pertains to Service Agreement No. 5: Desktop Services entered into by Wards and Supplier. Any inconsistency between this Agreement, the Service Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of the Master Agreement. B. DEFINITIONS In this Service Level Agreement ("SLA"), the terms listed below shall have the indicated meanings. Other terms may be defined in other sections of this SLA. Terms used in this SLA without definition have the meanings ascribed to them in the Master Agreement or Service Agreement. 1. Service Level Measure - For any Service identified in this --------------------- SLA, the method specified in this SLA for quantitatively calculating Supplier's actual performance. The results of these calculations are compared with Service Levels to evaluate Supplier's compliance with Service Levels. 2. Service Levels - For any Service identified in this SLA, the -------------- required quantitative level or degree of performance by Supplier specified in this SLA as the "Service Level." The Service Levels are the minimally acceptable levels of service for the Services. Any failure to meet a Service Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 3. Increased Impact Level - For any Service identified in this ---------------------- SLA, the required quantitative level or degree of performance by Supplier specified in this SLA as the "Increased Impact Level." Any failure to meet an Increased Impact Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 4. Critical Service Levels - Service Levels associated with ----------------------- those Services that are most important to the conduct of Wards' operations, which are the subject of this Service Agreement. 5. Service Level Credits - The amounts which Wards shall have --------------------- the option, but not the obligation, to recover as liquidated damages, in lieu of any other monetary remedies Wards may have, each time Supplier fails to meet the Service Levels for any reason other than those specified in Section III.D of this SLA. Service Level Credits are calculated in the manner described in Section III of this SLA. 6. Service Level Termination Event - An occurrence or series of ------------------------------- occurrences of deficient performance by Supplier in performing the Services specified in this SLA as a "Service Level Termination Event." The occurrence of a Service Level Termination Event constitutes, based upon the facts and circumstances, a material breach of Supplier's performance obligations under this Service Agreement and gives Wards the right to terminate this Service Agreement for cause. C. MEASUREMENT Unless otherwise stated in this SLA, each Service Level Measure shall be calculated on a complete calendar month basis. Performance results shall be measured and reported based on actual results with any exceptions for Excused Performance Problems reported separately. D. EFFECTIVE DATE FOR SERVICE LEVELS The Service Levels provided for in this SLA shall become effective as provided for in Section 7.1 of the Service Agreement. E. REVISIONS 1. From time to time during the Term, the Parties agree to negotiate in good faith to add, delete, or modify then-existing Service Level Measures, Service Levels, and Increased Impact Levels to reflect changes in Wards' business requirements or objectives. All such changes shall be adopted in the form of a signed written amendment to this SLA. 2. In the event that any applicable system or function is replaced during the Term by a comparable system or function, the Service Level Measure, Service Level, and Increased Impact Level for such replacement system or function shall, to the extent reasonably practicable (i) be defined during the first 30 days of such replacement, and (ii) must be at least equivalent to the then-existing Service Level Measure, Service Level, and Increased Impact Level for the replaced system or function (assuming the replacement system is capable of delivering the same Service Levels as the replaced system). 3. At all times during the Term, Supplier shall provide the Services in a manner that meets or exceeds the then-existing Service Levels. The 27 remedies for failure to do so shall include the remedies defined in this SLA, the Service Agreement, and the Master Agreement. F. SINGLE POINT OF CONTACT Regardless of whether any failure by Supplier to meet a Service Level is attributable to Supplier or an Excused Performance Problem, Supplier shall provide a single point of contact to address resolution of such failure and shall act promptly to address the problem causing the failure. Unless otherwise agreed by Wards, the Supplier Project Executive shall be the Supplier's single point of contact. II. SERVICE LEVELS A. DEFINITIONS Certain technical definitions are included in the Glossary of Terminology included as part of Exhibit B to this Service Agreement. B. SERVICE LEVEL MEASURES SERVER AVAILABILITY ------------------- OBJECTIVE: Monitoring LAN Servers availability and performance according to defined targets. Starting and stopping defined Online Services according to specified service availability schedules. Initiating Problem Management procedures to rectify any performance or availability failures. DEFINITION: To be available, each LAN Servers must be accessible and usable to Wards Associates according to Wards established schedule. Ward's LAN Servers are scheduled to be available as follows: 7x22x365 04:00-02:00 CT everyday Availability is calculated as: (Minutes Scheduled)-( Minutes Lost) ----------------------------------- Minutes Scheduled METHOD: Monitoring all LAN Servers to ensure their performance and availability remains within stated service levels. The Supplier will provide console or other appropriate management processes to control the Wards LAN Server environments within their control. SERVICE LEVEL: ---------------------------------------------------------------- VALUES METRICS ---------------------------------------------------------------- 28 ---------------------------------------------------------------- ---------------------------------------------------------------- Service Level - 99.5% availability of all LAN Servers have been maintained to Wards schedules. ---------------------------------------------------------------- Increased Impact - Less than 98.5% availability of all LAN Servers have been maintained to Wards schedules. ---------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Associates, applications, distribution and stores. RESPONSIBILITY: Supplier PERIOD: 7x22x365 as stated above. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I PROBLEM RESPONSE TIME --------------------- OBJECTIVE: To ensure that Supplier's response and initiation of corrective measures for mission critical desktop problems are accomplished in a timely and orderly manner. DEFINITION: The timeframe within which Supplier staff must be on-site at the location of the failed device or software. Time starts accumulating from the point at which a problem ticket is opened and a corresponding problem ticket number is assigned, based on the escalation procedures. Tickets are categorized as mission critical or non-mission critical. Mission critical desktop devices are required for Wards to conduct business, with the required on-site response time of forty (40) minutes during normal business hours or best effort at all other times. The overall time to respond to non-mission critical desktop devices is only restricted by the service specification for desktop problem resolution time which stipulates non-mission critical desktop devices and software must be operational within two (2) business day of an initial problem ticket being opened with a corresponding problem ticket number. METHOD: Problem tracking for initial entry, arrival times and repair times are recorded and reported using the help desk's ACD and automated problem ticket tracking system. Measurement will be performed, for reporting purposes, at the first hour and one business day from opening of the help desk problem ticket for mission critical and non-mission critical problem tickets, respectively. SERVICE LEVEL: - - -------------------------------------------------------------------------------- VALUES METRICS - - -------------------------------------------------------------------------------- Service Level - Response to Mission critical problems accomplished 95 % of the time within forty (40) minutes during normal business hours or best effort at all other times of a problem ticket being created with a corresponding problem ticket number, per the escalation procedures. - - -------------------------------------------------------------------------------- Increased Impact - Response to Mission critical problems accomplished 90 % of the time - - -------------------------------------------------------------------------------- 29 - - -------------------------------------------------------------------------------- within forty (40) minutes during normal business hours or best effort at all other times of a problem ticket being created with a corresponding problem ticket number, per the escalation procedures. - - -------------------------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Offices & Associates RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 06:00-18:00 Monday-Friday, best effort during off-hours RESOURCE RANGE: For all Wards designated mission critical hardware and applications REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - I PROBLEM RESOLUTION TIME ----------------------- OBJECTIVE: To ensure that repairs to equipment, software and systems within the Wards environment are completed in a timely and orderly manner such that end-users may resume their duties as quickly as possible. DEFINITION: A reactive maintenance activity required to repair and/or replace a piece of equipment or one of its components and or software. The service levels are measured in terms of overall time to repair. Time starts accumulating from the point at a problem management ticket is opened at the Supplier help desk. Tickets are categorized as mission critical or non-mission critical. Mission critical desktop devices are required for Wards to conduct business with the overall time to repair or provide workaround within two (2) hours (elapsed clock time) of Supplier's on-site response. The overall time to repair non- mission critical desktop devices is in accordance with the EUC escalation procedures. METHOD: Problem tracking for initial entry, arrival times and repair times are recorded and reported using the help desk's problem ticket tracking system Calculations will be performed separately for mission critical and non-mission critical problem tickets. PERFORMANCE MEASUREMENT FOR MISSION CRITICAL REPAIR TICKETS: SERVICE LEVEL: - - ------------------------------------------------------------------------------- VALUES METRICS - - ------------------------------------------------------------------------------- Service Level - Mission critical repairs completed 95 % of the time within two (2) hours of Supplier's initial on-site arrival or user contact - - ------------------------------------------------------------------------------- Increased Impact - Mission critical repairs completed 90 % of the time within two (2) hours of Supplier's initial on-site arrival or user contact - - ------------------------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Corporate Offices & Associates RESPONSIBILITY: Supplier 30 PERIOD: Monthly HOURS OF OPERATION: 06:00-18:00 central Monday thru Friday; best effort during off-hours. RESOURCE RANGE: For all Wards designated mission critical(VIP) hardware and applications. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement, Corrective Action for Service Level Metrics, Action Type - I PERFORMANCE MEASUREMENT FOR NON-MISSION CRITICAL REPAIR TICKETS: SERVICE LEVEL: - - ------------------------------------------------------------------------------- VALUES METRICS - - ------------------------------------------------------------------------------- Service Level - Non-mission critical repairs completed 95% of the time within timeframes established by the EUC escalation procedures. - - ------------------------------------------------------------------------------- Increased Impact - Non-mission critical repairs completed 90% of the time within timeframes established by the EUC escalation procedures. - - ------------------------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Corporate Offices & Associates RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 06:00-18:00 central Monday through Friday; best effort during off-hours. RESOURCE RANGE: For all Wards designated non-mission critical hardware and software REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - I STANDARD HARDWARE AND SOFTWARE INSTALLATIONS/UPGRADES/RE-DEPLOYMENTS -------------------------------------------------------------------- OBJECTIVE: To provide Wards with timely installation, upgrade and re- deployment of Wards standard hardware and software for non- project requests only. Project requests will be scheduled. DEFINITION: The Supplier will schedule and install, upgrade or re-deploy Wards hardware and software assets based on the following scheduling criteria: Installation, upgrade or re-deployment is to be scheduled with the Wards user and completed within: a) Five (5) days from receipt of the Wards standard hardware or software, if the Supplier is responsible for providing the required Wards standard hardware or software; b) Five (5) days from receipt of the Wards standard hardware or software, if the Supplier is not responsible for providing the required Wards standard hardware or software; 31 c) Five (5) days from the user availability or user requested date if the user requested date is beyond the timeframes indicated in a) or b) above. METHOD: The Supplier, using Supplier provided manual/automated change management and tracking processes will log and manage the date, time, and Wards personnel spo ken with to schedule installations.
SERVICE LEVEL: - - ------------------------------------------------------------------------------ Values Metrics - - ------------------------------------------------------------------------------ Service Level - On average, 95% of all installation/upgrade/re- deployment requests will be scheduled and completed according to the scheduling criteria defined above. - - ------------------------------------------------------------------------------ Increased Impact - On average, less than 90% of all installation/upgrade /re-deployment requests will be scheduled and completed according to the scheduling criteria defined above. - - ------------------------------------------------------------------------------
IMPACT: Medium AFFECTED AREA: Wards Corporate Offices & Associates RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: N/A RESOURCE RANGE: N/A REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - II SOFTWARE RELEASE MANAGEMENT --------------------------- OBJECTIVE: To maintain the current version and thereby the capability for manufacturer support of the Wards investment in software. To ensure the Supplier implements changes to the Wards environment in the prescribed manner with minimal impact on Wards' users and processing schedules. DEFINITION: Software release management is the process of maintaining a consistent level of software version across platforms. Software will be maintained at no older than the current minus two(n-2) version, unless otherwise mutually agreed. METHOD: The Supplier will research and notify Wards about all software version upgrades, as they become available. Upon Wards' approval, Supplier will plan all software installations, upgrades, maintenance implementations and enhancements following the documented change management process.
SERVICE LEVEL: ---------------------------------------------------- Values Metrics ---------------------------------------------------- Service Level - 95% of all software installs and upgrades are ----------------------------------------------------
32 --------------------------------------------------------------- completed as scheduled --------------------------------------------------------------- Increased Impact - 90% or less of all software installs and upgrades are completed as scheduled --------------------------------------------------------------- IMPACT: Low AFFECTED AREA: Wards Offices & Associates RESPONSIBILITY: Supplier PERIOD: Semi-annual RESOURCE RANGE: The Supplier and Wards personnel will have access to a Supplier-provided isolated test environment to support initial and quality assurance testing of changes to the environment prior to implementati on. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - III DESKTOP/SERVER, REPEAT TICKETS/REWORK ------------------------------------- OBJECTIVE: To insure the Supplier provides personnel skilled in the disciplines appropriate to their assignments. DEFINITION: Supplier personnel will perform their duties with a minimum of rework. METHOD: The Supplier will monitor and report on calls that resulted from incorrect actions being initially performed by Supplier personnel.
SERVICE LEVEL: ------------------------------------------------------------- values Metrics ------------------------------------------------------------- Service Level - 95% of calls will be resolved successfully the first time the Supplier desktop solution is implemented. ------------------------------------------------------------- Increased Impact - 90% or less of calls will be resolved successfully the first time the Supplier desktop solution is implemented. ---------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards Offices & Associates RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: N/A. RESOURCE RANGE: Limited to a total of 7,000 calls per month(total current EUC calls). 33 REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type - I C. SERVICE LEVELS The Service Levels are identified in the following table(s). Each Service Level is assigned a Severity Weight in the following table(s), which is used in the calculation of the Service Level Credits. The Severity Weights are expressed as percentages, totaling 100% for all Service Levels, and approximate the relative severity of the impact on Wards operations of failures to meet the respective Service Levels. The parties acknowledge that these percentages are approximations of probable severity and relative importance and do not limit Wards' right to contend that one or more failures to meet one or more of the Service Levels may constitute a material breach of the Agreement. Upon 30 days advance notice to Supplier, Wards may adjust the Severity Weights of the respective Service Levels as Wards deems appropriate so long as the total of such percentages does not exceed 100%.
- - ------------------------------------------------------------------------------------------------------------------------------------ SERVICE DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED LEVEL ------------- WEIGHT IMPACT LEVEL STANDARD ID MEASUREMENT ------------- - - ----------------------------------------------------------------------------------------------------------------------------------- SERVER 25 99.5% of all LAN Servers have Less than 98.5% of AVAILABILITY been maintained to Wards all LAN Servers schedules. have been maintained to Wards schedules. - - ------------------------------------------------------------------------------------------------------------------------------------ PROBLEM 25 Response to Mission critical Response to Mission RESPONSE TIME the time within forty (40) critical problems hour or best effort at all accomplished 90 % other times of a problem of the time within ticket being created forty (40) minutes with a corresponding problem during normal ticket number, per the business hours or escalation procedures. best effort at all other times of a problem ticket being created with a corresponding problem ticket number, per the escalation procedures. - - ----------------------------------------------------------------------------------------------------------------------------------- PROBLEM 25 Mission critical Mission critical - - -----------------------------------------------------------------------------------------------------------------------------------
34
- - ------------------------------------------------------------------------------------------------------------------------------------ SERVICE DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED LEVEL ------------- WEIGHT IMPACT LEVEL STANDARD ID MEASUREMENT ------------- - - ----------------------------------------------------------------------------------------------------------------------------------- RESOLUTION TIME repairs completed 95 % of the repairs completed 90% time within two (2) hours of of the time within Supplier's initial on-site two (2) hours of arrival or user contact. Supplier's initial Non-mission critical repairs on- site arrival or completed 95% ofthe time within user contact. Non- timeframes established by the mission critical EUC escalation procedures. repairs completed 90% of the time within timeframes established by the EUC escalation procedures. - - ------------------------------------------------------------------------------------------------------------------------------------ STANDARD HARDWARE 5 On average, 95% of all On average, less than AND SOFTWARE installation/upgrade/ 90% of all installation INSTALLATIONS/UPGRADES re-deployment requests /upgrade/re-deployment /RE-DEPLOYMENTS will be scheduled and request will be completed as according scheduled and completed to the scheduling criteria according to the defined above. scheduling criteria defined above. - - ----------------------------------------------------------------------------------------------------------------------------------- SOFTWARE RELEASE 5 95% of all software installs 90% or less of all MANAGEMENT and upgrades are completed as software installs and scheduled upgrades are completed as scheduled - - ------------------------------------------------------------------------------------------------------------------------------------ DESKTOP/SERVER 15 95% calls will be resolved 90% or less of calls REPEAT TICKETS/REWORK successfully the first time will be resolved the Supplier desktop solution successfully the first is implemented. time the Supplier desktop solution is implemented. - - -----------------------------------------------------------------------------------------------------------------------------------
The following Service Levels are designated as Critical Service Levels: 35
- - ------------------------------------------------------------- SERVICE LEVEL APPLICATION DESCRIPTION STANDARD ID ----------- ------------ - - ------------- - - ------------------------------------------------------------- SERVER AVAILABILITY - - ------------------------------------------------------------- PROBLEM RESPONSE TIME - - ------------------------------------------------------------- PROBLEM RESOLUTION TIME - - -------------------------------------------------------------
III. SERVICE LEVEL CREDITS A. CREDITS In each case of a failure to satisfy a Service Level Supplier will, within five (5) days from the identification of the deviation from the applicable Service Level, provide to Wards a plan of activities which will allow Supplier to satisfy the applicable Service Level at the earliest date practicable. In addition, Wards shall be entitled to recover a Service Level Credit for such Service Level calculated in the manner described below, provided, however, that the aggregate amount of such Service Level Credits for any given month will not exceed ten percent (10%) of Supplier's monthly charges under this Service Agreement for the applicable month (excluding Pass-Through Expenses, if any). If a single event directly causes a failure to achieve more than one Service Level, then only one Service Credit will apply. In such event, Wards will select the Service Level that will be used for the calculation of the Service Credit. B. METHOD OF CALCULATION If Supplier fails to meet or exceed a Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any). If Supplier's performance fails to meet an Increased Impact Level for any Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) (this calculation being in lieu of, and not in addition to, the credit calculation for the corresponding Service Level failure). To calculate the total Service Level Credit due to Wards for the applicable month, the amounts calculated for each Service Level or Increased Impact Level as described above will be totaled and such amount shall be available as a credit to Wards against Supplier's invoice for the applicable month. C. FREQUENCY FACTOR 36 In any case where Supplier fails to achieve the same Service Level (including failure to achieve the designated Increased Impact Level for that Service Level) in two consecutive months or in any four months in any 12-month period, the applicable Severity Weight shall be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any), and for any subsequent months in which Supplier fails to achieve such Service Level or Increased Impact Level; provided, however, that in no case will Supplier be liable for total Service Credits which exceed ten percent (10%) of the applicable monthly invoice (excluding Pass-Through Expenses and Special Charges, if any). The Service Credits will revert to the method of calculation provided in Section III.A. above in the following circumstances: 1. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is different from the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following four consecutive months of achieving the Service Level. 2. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is the same as the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following ten consecutive months of achieving the Service Level. Nothing in the preceding two paragraphs will excuse the application of the frequency factor in the calculation of Service Credits if a subsequent failure to achieve a Service Level would otherwise make the frequency factor apply. D. EXCUSED PERFORMANCE PROBLEM Supplier shall not be liable to pay Wards Service Level Credits for any failure to meet a Service Level to the extent that such a failure is directly attributable to (i) a Force Majeure Event; (ii) breaches of this Agreement by Wards, provided that Supplier has provided Wards with reasonable notice of such breach immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such breach; (iii) Wards acts or omissions (or those of third parties acting on behalf of Wards under a written agreement), provided that Supplier has provided Wards with reasonable notice of such act or omission immediately after becoming aware of it and determining such act or omission will adversely impact Supplier's performance of the Services and Supplier has used Commercially Reasonable Efforts to perform notwithstanding the problem; or (iv) the first manifestation of an extraordinary latent error or defect in Equipment used by Supplier in providing the Services (and any related repeated instances pending the applicable Supplier's correction of 37 the defect) if such defect was (1) unknown to Supplier and (2) not disclosed in any information distributed by the third party licensor, manufacturer, or distributor and (3) not preventable or discoverable through normal testing or maintenance procedures. The foregoing are referred to herein collectively as an "Excused Performance Problem." Supplier shall be liable to grant Wards Service Level Credits for any failure to meet a Service Level attributable to any cause other than causes expressly included in the categories listed above. E. TIME LIMIT If Supplier does not notify Wards of any Excused Performance Problem (as described in Section III.D above) within ninety (90) days of the date Supplier provides Performance Reports covering the time period during which the Excused Performance Problem is alleged to have occurred, then Supplier shall be deemed to have waived the claim of an Excused Performance Problem. IV. SERVICE LEVEL TERMINATION EVENT A. DEFINITION 1. Measurement Event - For purposes of this section, a ----------------- "Measurement Event" will be the monthly calculation of Supplier's actual performance for each Service Level or Critical Service Level. The total possible Measurement Events during any specific period of time is the product of the number of months in that time period times the number of Service Levels or Critical Service Levels, as applicable. 2. Failure Event - For purposes of this section a "Failure ------------- Event" shall be a specific Measurement Event for which Supplier fails to achieve the relevant Critical Service Level(s) or Service Level(s); provided, however, that any such failure caused by an event described in Section III.D of this SLA shall not be counted as a Failure Event. Any single event, act or omission that causes multiple Service Levels to be missed will be counted as one Failure Event. B. REPEATED SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table: 38
- - ------------------------------------------------------------------------------------------------------------ SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (SERVICE LEVELS) EVENTS IN MEASUREMENT PERIOD - - ------------------------------------------------------------------------------------------------------------ Service Level Failure Rolling Six Months 6 13 Events - - ------------------------------------------------------------------------------------------------------------ Service Level Failure Rolling Twelve Months 12 26 Events - - ------------------------------------------------------------------------------------------------------------ Increased Impact Level Rolling Six Months 6 13 Failure Events - - ------------------------------------------------------------------------------------------------------------ Increased Impact Level Rolling Twelve Months 12 26 Failure Events - - ------------------------------------------------------------------------------------------------------------
C. REPEATED CRITICAL SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Critical Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT (CRITICAL SERVICE EVENTS IN MEASUREMENT LEVELS) PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 3 18 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 6 36 Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 3 18 Failure Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 6 36 Failure Events - - --------------------------------------------------------------------------------------------------
39 --------------------------------------------------------------------- --------------------------------------------------------------------- D. CATASTROPHIC LEVEL OF SERVICE Recovery of the Desktop/LAN Services within twenty-four hours of the Scheduled time to recover such Services under the Wards Disaster Recovery Plan. E. QUALIFICATION Nothing in this Section IV is intended to imply that any lesser number or different combination of occurrences of deficient performance by Supplier may not also constitute a material breach of Supplier's obligations warranting termination of the Service Agreement by Wards for cause. 40 EXHIBIT E TRANSFERRED EQUIPMENT NONE 41 EXHIBIT F WARDS FACILITIES AND EQUIPMENT THE WARDS FACILITIES DESIGNATED FOR USE BY SUPPLIER IN THE WARDS CORPORATE HEADQUARTERS AS DESCRIBED IN EXHIBIT F TO SERVICE AGREEMENT NO. 2 (DATA CENTER SERVICES). Wards Desktop and LAN Equipment: To be determined by Acxiom physical inventory 42 EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE TO BE RETAINED BY WARDS. 43 EXHIBIT H WARDS SOFTWARE None 44 EXHIBIT I SUPPLIER SOFTWARE NONE 45 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 6: SATELLITE SERVICES ------------------------------------------- THIS SERVICE AGREEMENT NO. 6: SATELLITE SERVICES (the "Service Agreement") is made and entered into this 6th day of November, 1998, between Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a Delaware corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in the Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into the Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITION All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: "INITIAL TERM" has the mean given in Section 2.1. "MASTER AGREEMENT" means the Master Service Agreement for Information Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom Corporation dated November 6, 1998, and all amendments thereto. "RENEWAL TERM" has the meaning given in Section 2.2. "SATELLITE ENVIRONMENT" means the satellite hub, personal earth stations and related devices used by Wards to transmit information between the Wards Data Center and remote locations. "SATELLITE SERVICES" has the meaning given in Section 5.1. "SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration Plan for Satellite Service has been implemented. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any Renewal Term. "SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the meaning given in Section 7.1 of this Service Agreement. "TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning given in Section 8.1 of this Service Agreement. "WARDS PEAK SEASON" means the period in any year during the Service Agreement Term from November 20 through December 31, and as such dates are adjusted by Wards from time to time. ARTICLE 2. TERM 2.1 INITIAL TERM. The initial term of this Service Agreement (the "Initial Term") shall begin as of the Service Agreement Commencement Date and shall continue for a period of thirty-seven (37) months thereafter, unless earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. 2.2 RENEWAL TERM. Wards shall have the option to renew this Service Agreement for up to two (2) additional annual terms (each a "Renewal Term")by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final applicable Contract Year under this Service Agreement and before expiration of each annual period thereafter as applicable. All of the terms of this Service Agreement and the Master Agreement shall continue to apply without change during any renewal period(s). ARTICLE 3. TERMINATION 3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate this Service Agreement for convenience in accordance with Section 18.2(a) of the Master Agreement. The Convenience termination charges, if any, shall be as described in Exhibit C to this Service Agreement. ARTICLE 4. PERSONNEL MATTERS KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier --------- Positions that are subject to the provisions of Section 7.2 of the Master Agreement. 2 ARTICLE 5. SERVICES 5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide the Services described in Exhibit B, as such Exhibit may be amended and --------- supplemented from time to time pursuant to the Master Agreement (the "Satellite Services"). The Satellite Services includes all of the responsibilities (including Equipment, Software, personnel and expenses) associated with the Satellite Environment unless specifically identified as a Wards responsibility under Section 5.3 below. The Services include (i) functions, responsibilities and tasks performed by the Transferred Employees prior to the Service Agreement Effective Date; (ii) functions, responsibilities and tasks not specifically described in this Service Agreement but which are required for their proper performance and are an inherent part of, or a necessary sub-part included within, the Services; and (iii) functions, responsibilities and tasks that are a logical extension of existing Services as a result of changes in technology, changes in Wards business practices, or changes resulting from change control procedures. Supplier will be the exclusive provider of the Services identified in this Service Agreement. 5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the Service Agreement Effective Date to the Service Agreement Commencement Date, Supplier will provide the Satellite Services under Service Agreement No. 1 (Transition and Migration Services). Following the Service Agreement Commencement Date, the Service Level Agreement and other obligations of this Agreement shall become effective. 5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement Commencement Date, the Parties will appoint individuals as Project Executives under this Service Agreement to carry out the duties described in the Master Agreement. 5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in Exhibit B to this Service Agreement identifies the responsibilities of Wards - - --------- during the Term of this Service Agreement, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. The responsibilities of Wards shall be limited to those items listed in the matrix. ARTICLE 6. CHARGES 6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement --------- sets forth the Charges for the Satellite Services that may be charged by Supplier. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Satellite Services, Supplier shall provide Wards with the information described in Exhibit ------- C in sufficient detail in order to allow Wards to verify invoices. Invoice - - - submission and payment shall be in accordance with Article 14 of the Master Agreement. 3 ARTICLE 7. SERVICE LEVEL AGREEMENT 7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the --------- Service Level Agreement Applicable for the Satellite Services (the "Service Level Agreement"). The Service Level Agreement will become effective upon the Service Agreement Commencement Date. All of the terms of Article 5 of the Master Agreement shall apply to the Service Level Agreement. Supplier acknowledges that Wards may adjust schedules for availability and other items to meet Wards' business needs during Wards Peak Season or other events (such as extended sales). ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Effective Date, Wards shall assign, and Supplier shall assume, Wards' obligations under the applicable leases for the equipment listed on Exhibit E (the "Transferred Equipment. ") --------- The terms of Section 6.1 of the Master Agreement shall apply with respect to the Transferred Equipment. 8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2 of the Master Agreement, Wards shall provide the Wards Facilities and Wards Equipment described in Exhibit F to this Service Agreement. --------- 8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the Service Agreement Commencement Date, and subject to Supplier having received any Third Party Consents, Supplier shall assume from Wards all of the rights and obligations of Wards under the Third Party Contracts and the Third Party Software that are listed in Exhibit G. The terms of Section 6.3 of the Master ---------- Agreement shall apply with respect to Third Party Contracts and the Third Party Software. 8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is --------- proprietary to Wards and that is used in Satellite Systems (the "Wards Software). The terms of Section 8.1 of the Master Agreement shall apply with respect to the Wards Software. 8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by Supplier to provide the Satellite Services is listed in Exhibit I. Use of --------- Supplier Software in providing the Satellite Services shall be in accordance with Section 8.2 of the Master Agreement. ARTICLE 9. TERMINATION ANDTRANSITION SERVICES 9.1 TERMINATION. Wards may terminate this Service Agreement without penalty at any time prior to the Service Agreement Commencement Date if Supplier does not complete the Migration Plan described in Service Agreement No. 1. After the Service Agreement Commencement Date. This Service Agreement may be terminated pursuant to the Master Agreement. 4 9.1 TRANSITION SERVICES In the event of a termination or expiration of this Service Agreement, Supplier shall provide the Termination/Expiration Assistance as provided in Section 18.7 of the Master Agreement. IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By:/s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer ----------------------- ------------------------------- Name: Don Bernheisel Name: Joseph C. Grossestreuer -------------------- ----------------------------- Its: SVP,CIO Its: SVP-Outsourcing Services --------------------- ------------------------------ 5 EXHIBITS TO SATELLITE SERVICE AGREEMENT --------------------------------------- EXHIBIT A KEY SUPPLIER POSITIONS EXHIBIT B SERVICES EXHIBIT C CHARGES EXHIBIT D SERVICE LEVEL AGREEMENT EXHIBIT E TRANSFERRED EQUIPMENT EXHIBIT F WARDS FACILITIES AND EQUIPMENT EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE EXHIBIT H WARDS SOFTWARE EXHIBIT I SUPPLIER SOFTWARE 6 EXHIBIT A KEY SUPPLIER POSITIONS Senior Telecommunications Engineer/Analyst SENIOR NETWORK PROJECT ENGINEER 7 EXHIBIT B SERVICES OVERVIEW - - -------- This detailed service description establishes the processes, measurement tools, service specifications, and assumptions associated with Satellite Services for Wards IS. The documented service descriptions are designed to give the Supplier an understanding of Wards business objectives for Satellite Services while allowing the Supplier latitude to define their own processes and methods for providing the services. The business objective of this service category is to provide Wards with stable, high availability satellite connectivity, management and cost-effective procurement in support of all Wards' satellite locations,. The Supplier will provide and maintain a satellite configuration, satellite monitoring, methodologies, processes and tools to support the Wards' satellite communications at levels as good as, or better than Wards provided prior to outsourcing. The Supplier will be required to provide the RF and Baseband equipment and management functions necessary to establish, install, operate, and maintain the Wards Ku-band satellite communications network. The complete operational system to be supported by the Supplier consists of a hub earth station, hub Baseband equipment with redundant components, and the personal earth stations(PES). The Satellite management function will work in an integrated fashion with all other service functions to provide seamless support for the Wards' business units and remote locations. All pricing provided to Wards by the Supplier for this service category will be considered inclusive of all charges related to the Supplier's performance of the service within the described level of service, including, but not limited to, escalation to hardware/software manufacturer(s) and escalation to telecommunications service providers. The Supplier's responsibilities for performance of this service description include, but are not limited to, the following: ACTIVITIES FOR SATELLITE MANAGEMENT It is the Supplier's responsibility to provide a reliable, predictable, and stable satellite environment for Wards' remote location connectivity and application access. 1. The Supplier will proactively monitor Wards satellite network for availability and performance to the extent it is provided today.. 2. The Supplier will provide problem resolution for all Wards' RF and Baseband satellite outages and Wards' satellite performance degradation. 3. The Supplier will provide the satellite pricing, upgrade and procurement function according to Wards' requests and acceptance criteria. 4. The Supplier will provide installation, management and support for all Wards hub and remote RF and Baseband satellite equipment, and software. 5. The Supplier will provide management and support for all Wards' hub and remote satellite facilities. 6. The Supplier will utilize and adhere to change management procedures for implementing changes to the Wards satellite infrastructure in accordance with the Procedures Manual. 7. The Supplier will utilize and adhere to problem management procedures for reporting and responding to satellite issues in accordance with the Procedures Manual. 8 8. Supplier will provide new ideas and recommendations on how the Wards Satellite Management function can be improved or made more cost effective as referenced in the Master Agreement. 9. The Supplier will provide satellite disaster recovery services for the Ward's satellite configuration, including any disaster recovery terrestrial circuits, in accordance with Wards' disaster recovery plan under the new CDRS agreement. SERVICE PARAMETERS FOR SATELLITE MANAGEMENT 1. The Supplier will provide the appropriate resources, reports, tools, procedures and management methodologies to comprehensively manage, proactively monitor and support all Wards satellite problem resolutions, performance degradation corrective actions, new Wards satellite initiatives, and Wards satellite growth. 2. The Supplier will be required to provide satellite management on a 24x7x365 basis. 3. The Supplier will be required to provide hub hardware and software maintenance on a 24x7x365 basis. 4. The Supplier will be required to provide remote PES hardware and software maintenance on a 24x7x365 basis with a required response per location.. 5. The Supplier will provide proactive monitoring, performance tuning and corrective actions for LAN segments indicating impending Satellite problems, which utilize LAN Advantage via the satellite communications. 6. The Supplier will be required to provide installation, troubleshooting and support for remote telecommunication supplier provided point-to-point MPE circuits connected to satellite communications. 7. When a satellite outage or performance degradation is identified, the Supplier will provide notification to Wards' management utilizing the escalation procedures in accordance with the established problem management procedures, methodologies and tools as indicated in The Procedures Manual and in accordance with the Procedures Manual. 8. The Supplier will schedule all planned satellite modifications and outages through the established change management process per the Procedures Manual. 9. The Supplier will provide advisement for selecting and installing new satellite technology. 10. The Supplier will provide and maintain documentation of Ward's satellite topology. 11. The Supplier will provide and maintain documentation of Ward's satellite operations, help desk diagnostic procedures, escalation procedures, links, and equipment. 12. The Supplier will act as Ward's agent for providing satellite links, hardware, software and maintenance for Wards provided or Supplier provided services as directed by Wards. 13. The Supplier will provide support and configuration assistance for the Wards remote PES attached routers. 14. The Supplier will provide all satellite installation support, including but not limited to: documentation, sizing including protocol selection, host and remote data communications connectivity, and software customization for all satellite hub and remote PES locations. 15. The Supplier will document and report problems with associated corrective actions to Wards in the daily status meeting, which will address all events, issues and activities for the previous twenty-four (24) hour period. 16. The Supplier will provide annual satellite disaster recovery testing in accordance with the Wards disaster recovery plan. 9 17. Supplier will provide and perform to the satellite measurement baselines to maintain specified response time, performance, and availability for the Ward's satellite network. 18. The Supplier will maintain a consistent version level of software releases with a minimum release version of current minus one. 19. The Supplier will be required to perform monthly space segment alignment, i.e. center-box adjustment. 20. The Supplier will adhere to Wards reporting requirements. 21. The Supplier will be responsible for the operation of the ADT/ Wells Fargo and Broadcast International equipment. 22. The Supplier will periodically report on Wards' satellite availability, performance, and service level attainment to Wards' management. MEASUREMENT TOOLS FOR SATELLITE MANAGEMENT The Supplier is free to recommend in writing to Wards additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. A list of available tools is shown below: 1) Problem Management System(Help Desk) 2) SCP(System Control Processor) 3) Ingres Database or equivalent 4) Illuminate or equivalent 5) Spectrum Analyzer 6) Voltmeter 7) Frequency Counter 8) Event Printer 10
SATELLITE RESPONSIBILITY MATRIX - - ----------------------------------------------------------------------------------------------------------------------- SATELLITE MANAGEMENT - - ----------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ----------------------------------------------------------------------------------------------------------------------- CAPACITY PLANNING - - ----------------------------------------------------------------------------------------------------------------------- Monitor Satellite use and capacity, and resolve problems and performance degradation X - - ----------------------------------------------------------------------------------------------------------------------- Forecast capacity and bandwidth requirements X - - ----------------------------------------------------------------------------------------------------------------------- Ensure appropriate bandwidth to meet capacity projections X - - ----------------------------------------------------------------------------------------------------------------------- Make recommendations regarding bandwidth consumption and trends X - - ----------------------------------------------------------------------------------------------------------------------- Make recommendations regarding configuration changes X X - - ----------------------------------------------------------------------------------------------------------------------- Implement approved configuration changes X - - ----------------------------------------------------------------------------------------------------------------------- Report usage and bandwidth capacity to Wards on a periodic basis X - - ----------------------------------------------------------------------------------------------------------------------- PROCUREMENT AND ADMINISTRATION - - ----------------------------------------------------------------------------------------------------------------------- Research and price satellite devices and satellite software/firmware from manufacturer, aggregator or reseller X - - ----------------------------------------------------------------------------------------------------------------------- Approve procurement of satellite devices and satellite software/firmware X - - ----------------------------------------------------------------------------------------------------------------------- Obtain satellite devices and satellite software/firmware from manufacturer, aggregator or reseller X - - ----------------------------------------------------------------------------------------------------------------------- Research and price telecommunications from service provider X - - ----------------------------------------------------------------------------------------------------------------------- Approve procurement of telecommunications from service provider X - - ----------------------------------------------------------------------------------------------------------------------- Obtain telecommunications from service provider X - - ----------------------------------------------------------------------------------------------------------------------- Configure satellite devices according to pre-defined hardware, software/firmware and performance definitions X - - ----------------------------------------------------------------------------------------------------------------------- Monitor, control, and manage recovery from any virus invasion X - - ----------------------------------------------------------------------------------------------------------------------- SATELLITE NETWORK DEVICES INSTALLATION - - ----------------------------------------------------------------------------------------------------------------------- Schedule satellite devices installation activity with Wards in accordance with change management procedures X - - ----------------------------------------------------------------------------------------------------------------------- Install satellite devices at Wards site within mutually agreed uponed time frame X - - ----------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on satellite devices, software/firmware X X - - ----------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for installation X - - ----------------------------------------------------------------------------------------------------------------------- De-install and remove displaced satellite devices, as required X - - ----------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - ----------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to reflect changes X - - ----------------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE PLANNING AND MANAGEMENT - - ----------------------------------------------------------------------------------------------------------------------- Notify Wards of new releases of appropriate software/firmware per satellite device model X - - ----------------------------------------------------------------------------------------------------------------------- Plan and schedule major software/firmware changes such as operating system installs X - - ----------------------------------------------------------------------------------------------------------------------- Approve major software/firmware changes such as operating system installs X - - ----------------------------------------------------------------------------------------------------------------------- Install maintenance (i.e. patches) on Supplier supported software/firmware in accordance with defined service levels X - - ----------------------------------------------------------------------------------------------------------------------- Monitor, control, and manage recovery from any virus invasion X - - ----------------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE INSTALLATION AND UPGRADES - - ----------------------------------------------------------------------------------------------------------------------- Schedule software/firmware installation activity with Wards in accordance with change management procedures X - - ----------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on satellite devices, software/firmware X X - - ----------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for installation or upgrade X - - ----------------------------------------------------------------------------------------------------------------------- Provide initial instructions to end customers for the new software/firmware X - - ----------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - ----------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to reflect changes X - - ----------------------------------------------------------------------------------------------------------------------- SATELLITE NETWORK CONNECTION (AS NECESSARY) - - ----------------------------------------------------------------------------------------------------------------------- Define logical network X - - ----------------------------------------------------------------------------------------------------------------------- Create logical connections and assign IP address as necessary X - - -----------------------------------------------------------------------------------------------------------------------
11
- - ----------------------------------------------------------------------------------------------------------------------- SATELLITE MANAGEMENT - - ----------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ----------------------------------------------------------------------------------------------------------------------- Install cabling required for connection to network node (from wall jack to network interface card) X - - ----------------------------------------------------------------------------------------------------------------------- Coordinate satellite connection with Supplier help desk X - - ----------------------------------------------------------------------------------------------------------------------- Verify satellite access and availability of authorized network resources X - - ----------------------------------------------------------------------------------------------------------------------- Review and understand satellite performance, implications; make necessary adjustments X X - - ----------------------------------------------------------------------------------------------------------------------- MOVES - - ----------------------------------------------------------------------------------------------------------------------- Schedule satellite devices move with Wards X - - ----------------------------------------------------------------------------------------------------------------------- Visit receiving WardS location to review space, electricity, and cabling requirements if necessary X - - ----------------------------------------------------------------------------------------------------------------------- Disconnect satellite devices from network X - - ----------------------------------------------------------------------------------------------------------------------- Leave the service location in a clean and orderly manner X - - ----------------------------------------------------------------------------------------------------------------------- Physically move satellite devices to new location and install X - - ----------------------------------------------------------------------------------------------------------------------- Re-connect satellite devices to network at new location X - - ----------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on satellite devices, software/firmware X X - - ----------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required for reinstallation X - - ----------------------------------------------------------------------------------------------------------------------- De-install and remove displaced satellite devices, as required X - - ----------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - ----------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to reflect changes X - - ----------------------------------------------------------------------------------------------------------------------- SATELLITE NETWORK DEVICES BREAK/FIX - - ----------------------------------------------------------------------------------------------------------------------- Schedule satellite devices repair activity with Wards in accordance with change management procedures X - - ----------------------------------------------------------------------------------------------------------------------- Identify problems X - - ----------------------------------------------------------------------------------------------------------------------- Install and test needed replacement parts for satellite devices X - - ----------------------------------------------------------------------------------------------------------------------- Resolve problems X - - ----------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on satellite devices, software/firmware X X - - ----------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required X - - ----------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - ----------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to reflect changes X - - ----------------------------------------------------------------------------------------------------------------------- Manage use of manufacturer warranty, reseller replacement/repair policies, etc. to limit total repair costs in accordance with asset management function X - - ----------------------------------------------------------------------------------------------------------------------- SOFTWARE/FIRMWARE SUPPORT - - ----------------------------------------------------------------------------------------------------------------------- Identify problems X - - ----------------------------------------------------------------------------------------------------------------------- Resolve problems X - - ----------------------------------------------------------------------------------------------------------------------- Conduct performance and functional testing (including year 2000 compliance) on satellite devices, software/firmware X X - - ----------------------------------------------------------------------------------------------------------------------- Adjust configuration options as required X - - ----------------------------------------------------------------------------------------------------------------------- Provide initial instructions to end customers X - - ----------------------------------------------------------------------------------------------------------------------- Obtain Wards' sign-off X - - ----------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to reflect changes X - - ----------------------------------------------------------------------------------------------------------------------- PERFORMANCE TUNING - - ----------------------------------------------------------------------------------------------------------------------- Conduct satellite performance tuning X - - ----------------------------------------------------------------------------------------------------------------------- Conduct application performance tuning for supported applications X - - ----------------------------------------------------------------------------------------------------------------------- Measure and analyze satellite availability and performance X - - ----------------------------------------------------------------------------------------------------------------------- Approve use of any Supplier provided measurement and monitoring tools X - - ----------------------------------------------------------------------------------------------------------------------- Administer measuring and monitoring tools as required X - - ----------------------------------------------------------------------------------------------------------------------- Review network performance and make adjustments as necessary X - - ----------------------------------------------------------------------------------------------------------------------- Provide performance reporting X - - -----------------------------------------------------------------------------------------------------------------------
12
- - ---------------------------------------------------------------------------------------------------------------------- SATELLITE MANAGEMENT - - ----------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ----------------------------------------------------------------------------------------------------------------------- DISPOSAL (DISPOSITION) - - ----------------------------------------------------------------------------------------------------------------------- Determine final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X - - ----------------------------------------------------------------------------------------------------------------------- Verify final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X - - ----------------------------------------------------------------------------------------------------------------------- Remove all data files, custom configurations, licensed software/firmware, etc. X - - ----------------------------------------------------------------------------------------------------------------------- Update problem ticket, change management documentation, electronic inventory and asset management system to reflect changes X - - ----------------------------------------------------------------------------------------------------------------------- "Warehouse" of satellite devices components for later use X - - ----------------------------------------------------------------------------------------------------------------------- "Warehouse" of software/firmware licenses for reuse X - - ----------------------------------------------------------------------------------------------------------------------- Reload leased machines with original configuration prior to return X - - ----------------------------------------------------------------------------------------------------------------------- Return assets to lessor, Asset inventory or manufacturer X - - ----------------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY SUPPORT - - ----------------------------------------------------------------------------------------------------------------------- Responsibility for expenses associated with disaster recovery hub - If not in maintenance agreement then Pass-thru back to Wards from Supplier X - - ----------------------------------------------------------------------------------------------------------------------- Provide disaster recovery hub - If not in maintenance agreement then Pass-thru back to wards from Supplier X - - ----------------------------------------------------------------------------------------------------------------------- Responsibility for expenses associated with remote PES field service and PES alignment - If not in maintenance agreement then Pass-thru back to Wards from Supplier X - - ----------------------------------------------------------------------------------------------------------------------- Provide remote PES field service and PES alignment - If not in maintenance agreement then Pass-thru back to Wards from Supplier X - - ----------------------------------------------------------------------------------------------------------------------- Responsibility for expenses associated with circuit from hot site hub location to Wards mainframe location X - - ----------------------------------------------------------------------------------------------------------------------- Provide circuit from hot site hub location to Wards mainframe location X - - ----------------------------------------------------------------------------------------------------------------------- Decommission remote PES test locations. X - - ----------------------------------------------------------------------------------------------------------------------- Commission remote PES test locations X - - ----------------------------------------------------------------------------------------------------------------------- Connect satellite ports to Wards Tandem system X - - ----------------------------------------------------------------------------------------------------------------------- Activate VTAM connections between Tandem and mainframe X - - ----------------------------------------------------------------------------------------------------------------------- Activate Wards Tandem CMA application X - - ----------------------------------------------------------------------------------------------------------------------- Develop, maintain and test satellite Disaster Recovery Plan and procedure manuals X - - ----------------------------------------------------------------------------------------------------------------------- Coordinate satellite Disaster Recovery testing with Wards X - - ----------------------------------------------------------------------------------------------------------------------- Participate in the satellite Disaster Recovery Test X - - ----------------------------------------------------------------------------------------------------------------------- Perform periodic satellite Disaster Recovery testing, resolve cause of failure and retest X - - ----------------------------------------------------------------------------------------------------------------------- Review results of satellite Disaster Recovery testing X - - ----------------------------------------------------------------------------------------------------------------------- Report satellite disaster recovery test results to Wards X - - ----------------------------------------------------------------------------------------------------------------------- Declare disaster (when necessary) to initiate Supplier's recovery plan execution X - - ----------------------------------------------------------------------------------------------------------------------- In the event of a disaster, restore satellite to pre-defined operations capability within defined service levels in accordance with the existing Wards disaster recovery plan X - - ----------------------------------------------------------------------------------------------------------------------- OUT-OF-SCOPE SERVICE REQUESTS - - ----------------------------------------------------------------------------------------------------------------------- Initiate service requests X - - ----------------------------------------------------------------------------------------------------------------------- Receive, record, monitor and report service requests X - - ----------------------------------------------------------------------------------------------------------------------- Create/review project plans and cost of service request X - - ----------------------------------------------------------------------------------------------------------------------- Estimate time and costs for changes where applicable X - - ----------------------------------------------------------------------------------------------------------------------- Write cost justification X - - ----------------------------------------------------------------------------------------------------------------------- Identify and communicate alternatives X - - ----------------------------------------------------------------------------------------------------------------------- Approve, prioritize, and reprioritize service requests X X - - ----------------------------------------------------------------------------------------------------------------------- Assist in prioritization of service requests X - - ----------------------------------------------------------------------------------------------------------------------- Maintain and communicate prioritization and schedule of service requests X - - ----------------------------------------------------------------------------------------------------------------------- Perform approved Out-of-Scope Service Request activities within budget and schedule X - - -----------------------------------------------------------------------------------------------------------------------
13 GLOSSARY OF TERMINOLOGY RF: Radio frequency modulated signals that are radiated and received by the antenna. BASEBAND: The combined video and audio signals prior to processing. KU-BAND: A range of frequencies between 11.7 and 12.7 gigahertz that has been set aside for use by communications satellites. HUB: Central device that connects several satellite remotes together. PERSONAL EARTH STATION: A complete satellite receiving system. LAN ADVANTAGE: Software that provides ethernet connection. MPE CIRCUITS: Point to Point circuits from main store to remote location. SPACE SEGMENT: A communications signal that goes from the earth to a satellite and back to earth. CENTER BOX: Peak Utilization of Frequency. ADT/WELLS FARGO EQUIP: Modems that provide connectivity through the satellite system to provide security. BROADCAST INTERNATIONAL: A provider of music and video. FIRMWARE: Software stored in ROM or PROM. These are essential programs that remain even when the system is turned off. POINT OF SALE (POS): The time and place in which a transaction is made. This includes cash registers, scanners, magnetic card readers and special terminals. BANDWIDTH: The amount of data that can be sent through the network connection. EBNO: Energy per Bit/Noise Level Ratio ODLC: Optimum Data Link Control 14 EXHIBIT C CHARGES MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM: . . . . . . . . . . ..$45,000 A. PASS-THROUGH EXPENSES The following expenses incurred by Supplier shall be invoiced to Wards as Pass-Through Expenses at cost: 1. Satellite hub leases and maintenance. 2. Base band leases and maintenance. 3. PES leases and maintenance. 4. Satellite space segment. 5. Background music. 6. Video conference charges. 7. De-installation, movement and transition of satellite from Wards' facility to Supplier's facility and site preparation of and installation and testing of satellite at Supplier's facility. Satellite bandwith required during the transition, currently scheduled to be provided by Hughes Germantown, Maryland facility, and all associated connectivity and telecommunications expenses shall be Pass-Through Expenses. 8. Telecommunications line charges necessary for connectivity between Wards corporate complex, Signature and Supplier's data center. B. DISASTER RECOVERY Disaster recovery is included within the scope of Services as set forth in Exhibit B. C. TERMINATION FEES ---------------- There are no termination fees under this Service Agreement. 15 EXHIBIT D SERVICE LEVEL AGREEMENT SERVICE LEVEL AGREEMENT ----------------------- FOR SATELLITE SERVICES 16 SERVICE LEVEL AGREEMENT FOR SATELLITE SERVICES I. GENERAL A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT. This Service Level Agreement is entered into under the Master Agreement for Information Technology Services between Acxiom Corporation ("Supplier") and Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and pertains to Service Agreement No. 6: Satellite Services entered into by Wards and Supplier. Any inconsistency between this Agreement, the Service Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of the Master Agreement. B. DEFINITIONS In this Service Level Agreement ("SLA"), the terms listed below shall have the indicated meanings. Other terms may be defined in other sections of this SLA. Terms used in this SLA without definition have the meanings ascribed to them in the Master Agreement or Service Agreement. 1. Service Level Measure - For any Service identified in this SLA, --------------------- the method specified in this SLA for quantitatively calculating Supplier's actual performance. The results of these calculations are compared with Service Levels to evaluate Supplier's compliance with Service Levels. 2. Service Levels - For any Service identified in this SLA, the -------------- required quantitative level or degree of performance by Supplier specified in this SLA as the "Service Level." The Service Levels are the minimally acceptable levels of service for the Services. Any failure to meet a Service Level is unacceptable and may constitute, based on the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 3. Increased Impact Level - For any Service identified in this SLA, ---------------------- the required quantitative level or degree of performance by Supplier specified in this SLA as the "Increased Impact Level." Any failure to meet an Increased Impact Level is unacceptable and may constitute, based on the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 4. Critical Service Levels - Service Levels associated with those ----------------------- Services that are most important to the conduct of Wards' operations, which are the subject of this Service Agreement. 5. Service Level Credits - The amounts which Wards shall have the --------------------- option, but not the obligation, to recover as liquidated damages, in lieu of any other monetary remedies Wards may have, each time Supplier fails to meet the Service Levels for any reason other than those specified in Section III.D of this SLA. Service Level Credits are calculated in the manner described in Section III of this SLA. 6. Service Level Termination Event - An occurrence or series of ------------------------------- occurrences of deficient performance by Supplier in performing the Services specified in this SLA as a "Service Level Termination Event." The occurrence of a Service Level Termination Event constitutes, based on the facts and circumstances, a material breach of Supplier's performance obligations under this Service Agreement and gives Wards the right to terminate this Service Agreement for cause. C. MEASUREMENT Unless otherwise stated in this SLA, each Service Level Measure shall be calculated on a complete calendar month basis. Performance results shall be measured and reported based on actual results with any exceptions for Excused Performance Problems reported separately. D. EFFECTIVE DATE FOR SERVICE LEVELS The Service Levels provided for in this SLA shall become effective as provided for in Section 7.1 of the Service Agreement. E. REVISIONS 1. From time to time during the Term, the Parties agree to negotiate in good faith to add, delete, or modify then-existing Service Level Measures, Service Levels, and Increased Impact Levels to reflect changes in Wards' business requirements or objectives. All such changes shall be adopted in the form of a signed written amendment to this SLA. 2. In the event that any applicable system or function is replaced during the Term by a comparable system or function, the Service Level Measure, Service Level, and Increased Impact Level for such replacement system or function shall, to the extent reasonably practicable (i) be defined during the first 30 days of such replacement, and (ii) must be at least equivalent to the then- existing Service Level Measure, Service Level, and Increased Impact Level for the replaced system or function (assuming the replacement system is capable of delivering the Service Levels previously achieved by the replaced system). 3. At all times during the Term, Supplier shall provide the Services in a manner that meets or exceeds the then-existing Service Levels. The remedies for failure to do so shall include the remedies defined in this SLA, the Service Agreement, and the Master Agreement. F. SINGLE POINT OF CONTACT Regardless of whether any failure by Supplier to meet a Service Level is attributable to Supplier or an Excused Performance Problem, Supplier shall provide a single point of contact to address resolution of such failure and shall act promptly to address the problem causing the failure. Unless otherwise agreed by Wards, the Supplier Project Executive or his or her designee shall be the Supplier's single point of contact. 19 II. SERVICE LEVELS A. DEFINITIONS Certain technical definitions are included in the Glossary of Terminology in Exhibit B of the Service Agreement. B. SERVICE LEVEL MEASURES SATELLITE Availability ---------------------- OBJECTIVE: For the Supplier to determine and maintain the availability of the devices, software and data communications services that comprise the Wards satellite network. DEFINITION: Availability is determined as the percentage of uptime against the Total Scheduled Store Satellite Usage Hours per Month. Downtime is the elapsed time from when any satellite link, hardware or software component prevents a user or store from connecting to a device within or across LAN segments or host connectivity until processing is available again, or degraded performance to a point that the satellite link is unusable for the necessary business purpose(s). METHOD: Data Capture: Wards, Supplier or telecommunications Vendor initiated satellite availability problem tickets as tracked and reported through the problem management system per the Procedures Manual or Supplier initiated problem tickets, logs, timestamps or alerts as proactively identified through the Supplier's satellite monitoring and performance tools. Calculation: (24 hrs/day) X (Number days/month) X (Total number of stores) = Total Scheduled Store Satellite Usage Hours per Month Measurement Interval: Monthly SERVICE LEVEL: - - -------------------------------------------------------------------------------- DESCRIPTION DATA POINTS - - -------------------------------------------------------------------------------- Service Level Wards satellite network hub will be available 99.5% of the Total Scheduled Store Satellite Usage Hours per Month or each PES will incur no more than two (2) days of downtime/network performance degradation events per measurement interval. - - -------------------------------------------------------------------------------- Increased Impact Wards satellite network hub will be available 99.0% of the Total Scheduled Store Satellite Usage Hours per Month or each PES will incur no more than three (3) days of downtime/network performance degradation events per measurement interval. - - -------------------------------------------------------------------------------- IMPACT: High 20 AFFECTED AREAS: All Wards stores RESPONSIBILITY: Service Performance: Supplier provides all services and infrastructure related to satellite availability. Compliance Management: Supplier provides calculation, reporting and analysis for this Service Level. REPORTING PERIOD: Monthly HOURS OF OPERATIONS: Total Scheduled Store Satellite Usage Hours per Month REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I SATELLITE RESPONSE TIME ----------------------- OBJECTIVE: Supplier will provide and perform to the satellite baseline to establish acceptable response time and performance for the Wards satellite network. DEFINITION: Response time for the Wards satellite network is defined as the amount of time it takes to receive a response from the destination PES satellite device, once a Wards end user or store has initiated any action to communicate to it from the source hub device. Response time is represented as the hub to Pes to hub roundtrip delay. METHOD: Data Capture: Response time will be measured by Supplier provided satellite network monitoring and performance tools or periodic manual checks from end user or store satellite network attached devices. Wards satellite response time issues will also be captured in the Supplier provided problem management system for any Wards or Supplier reported satellite response time problems. Measurement Interval: Monthly SERVICE LEVEL: ------------------------------------------------------------------- DESCRIPTION DATA POINTS ------------------------------------------------------------------- Service Level Average response time is 3 seconds or less ------------------------------------------------------------------- Increased Impact Average response time is more than 3.5 seconds ------------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards satellite network RESPONSIBILITY: Service Performance: Supplier is responsible for all services related to this Service Level, including but not limited to,establishing baseline performance of Satellite response time, as approved by Wards, determination of most relevant measurement(s) component for each of the Satellite mediums and protocols in use at Wards, and historical trending of Satellite response times in comparison to baseline data. Compliance Management: Supplier provides calculation, reporting and analysis 21 for this Service Level. REPORTING PERIOD: Monthly. HOURS OF OPERATION: Total Scheduled Store Satellite Usage Hours per Month Resource Range: This service specification will apply to all Satellite mediums and protocols in use by Wards Report: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-II DISASTER RECOVERY SERVICES -------------------------- OBJECTIVE: To ensure the Supplier has developed and documented a comprehensive Satellite disaster recovery plan for the satellite network under the Supplier span of control, in accordance with the existing Wards disaster recovery plan. DEFINITION: The goal of the Supplier's documented satellite disaster recovery plan is to restore Wards' satellite connectivity and continuity within forty-eight (48) hours of a declared disaster. METHOD: The Supplier will participate and provide documented satellite disaster recovery plans during the Wards disaster recovery planning meetings or as requested by Wards. SERVICE LEVEL: --------------------------------------------------------------- VALUES METRICS --------------------------------------------------------------- Service Level - 98 % of Wards' Satellite locations are recovered within 48 hours which includes Wards' critical processes. --------------------------------------------------------------- Increased Impact - 95 % of Wards' Satellite locations are recovered within 48 hours which includes Wards' critical processes. --------------------------------------------------------------- IMPACT: Low AFFECTED AREA: Wards satellite network. RESPONSIBILITY: Supplier as an agent of Wards for the Wards disaster recovery contract. PERIOD: Duration of any declared disaster HOURS OF OPERATION: N/A REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-III 22 DISASTER RECOVERY TEST ---------------------- OBJECTIVE: To ensure restoration of Wards' satellite network in the event of a disaster, in accordance with the Wards' satellite disaster recovery plan, which is a non-contractual document. DEFINITION: The Supplier will define and demonstrate the accuracy of the documented satellite disaster recovery plan, which is a non- contractual document, by conducting semi-annually disaster recovery testing for satellite network connectivity. METHOD: Execute disaster recovery plan with designated test PES locations Measurement Interval: Semi-Annually SERVICE LEVEL: ------------------------------------------------------------ VALUES METRICS ------------------------------------------------------------ Service Level - 90% of scheduled recovery activities are recovered according to the documented plans. ------------------------------------------------------------ Increased Impact - Less than 85% of scheduled recovery activities are recovered according to the documented plans. ------------------------------------------------------------ IMPACT: Low AFFECTED AREA: Wards satellite disaster recovery plan RESPONSIBILITY: Supplier PERIOD: The Supplier will conduct a disaster recovery test with selected Wards entities recovering specific operations in accordance with the Wards disaster recovery plan. The Supplier will report on the success of each test within one week of the completion of a test with a designated Wards' representative. RESOURCE RANGE: This service level is valid as long as Wards participates in the disaster recovery planning and testing process as defined in the Wards disaster recovery plan and as mutually agreed to by Supplier and Wards REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-III PROBLEM RESPONSE TIME --------------------- OBJECTIVE: To ensure on-site response to satellite repairs for satellite devices, software/firmware, and telecommunications, within the Wards enterprise, are completed in a timely and orderly manner such that end-users may resume their duties as quickly as possible. DEFINITION: Problem Response Time is defined as the maximum amount of time the Supplier has to respond on-site to a satellite problem regardless of the physical location of the device, based on Wards current Satellite Response Requirements per Location. A reactive maintenance activity required to affect repair, reroute and/or replace satellite devices, telecommunications or software/firmwareTime starts accumulating from the point at 23 which a problem ticket is opened and a corresponding problem ticket number has been assigned. METHOD: Problem tracking for initial entry, arrival times and repair times are recorded and reported using the automated problem ticket tracking system. Measurement will be performed, for reporting purposes, each hour from opening the problem ticket to the resolution for both Hub and PES problem tickets. SERVICE LEVEL - - ------------------------------------------------------------------------------ VALUES METRICS - - ------------------------------------------------------------------------------ Service Level - On-site response for all satellite repairs are missed no more than once (1) per period in accordance with the Wards Satellite Response Requirements per Location. - - ------------------------------------------------------------------------------ Increased Impact - On-site response for all satellite repairs are missed no more than twice (2) per period. - - ------------------------------------------------------------------------------ IMPACT: High AFFECTED AREA: All Wards' stores, offices, automobile centers, POS locations, and data center RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 24 x 7 x 365 RESOURCE RANGE: All Wards Satellite devices and cabling under Supplier control. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-II SOFTWARE/FIRMWARE RELEASE MANAGEMENT ------------------------------------ OBJECTIVE: To maintain the current software/firmware version and thereby the capability for support of the Wards investment in software/firmware within the facilities. To ensure the Supplier implements changes to the Wards environment in the prescribed timeframes and manner in accordance with the documented change management processes with minimal impact on Wards' users and processing schedules. DEFINITION: Software release management is the process of maintaining a consistent level of currency and compatibility across satellite devices. Supplier will research and advise Wards on new version releases. Prescribed timeframes require that all software releases stay at the current minus two version level. The Supplier and Wards personnel will have access to a 24 Supplier-provided isolated satellite test environment to support initial and quality assurance testing of changes to the Wards Satellite prior to implementation in production. METHOD: All software installations, maintenance implementations and enhancements will follow the standard change management process. SERVICE LEVEL: ------------------------------------------------------------ VALUES METRICS ------------------------------------------------------------ Service Level - Supplier will maintain all software releases at least at the current minus two version level or as otherwise agreed. ------------------------------------------------------------ Increased Impact - Supplier will maintain all software releases at least a the current minus three version level or as otherwise agreed. ------------------------------------------------------------ IMPACT: Medium AFFECTED AREA: Wards satellite network RESPONSIBILITY: Supplier PERIOD: Monthly REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-II C. SERVICE LEVELS The Service Levels are identified in the following table(s). Each Service Level is assigned a Severity Weight in the following table(s), which is used in the calculation of the Service Level Credits. The Severity Weights are expressed as percentages, totaling 100% for all Service Levels, and approximate the relative severity of the impact on Wards' operations of failures to meet the respective Service Levels. The parties acknowledge that these percentages are approximations of probable severity and relative importance and do not limit Wards' right to contend that one or more failures to meet one or more of the Service Levels may constitute a material breach of the Agreement. Upon 30 days advance notice to Supplier, Wards may adjust the Severity Weights of the respective Service Levels as Wards deems appropriate so long as the total of such percentages does not exceed 100%.
- - ------------------------------------------------------------------------------------------------------------- SERVICE LEVEL DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED STANDARD MEASUREMENT WEIGHT IMPACT LEVEL ID - - ------------------------------------------------------------------------------------------------------------- Satellite Percentage of 85 Wards satellite Wards satellite Availability Downtime network hub hub will be will be available 99.0% available 99.5% of the Total of the Total Scheduled Store Satelite Usage Hours per - - --------------------------------------------------------------------------------------------------------------
25 - - ------------------------------------------------------------------------------------------------------------- Scheduled Store Month or each Satellite Usage PES will incur Hours per Month no more than or each PES three (3) days of will incur no downtime/network more than two performance (2) days of degradation events downtime/network per measurement degradation interval. events per measurement interval. - - ------------------------------------------------------------------------------------------------------------- Satellite Response Performance 15 3 seconds or More than 3.5 Time less average seconds average response time. response time. - - ------------------------------------------------------------------------------------------------------------- Disaster Recovery Percentage of 98% of Wards' 95% of Wards' Services locations Satellite Satellite locations are locations are recovered recovered within within 48 hours 48 hours which which includes includes Wards' Wards' critical critical processes processes. - - ------------------------------------------------------------------------------------------------------------- Disaster Recovery Test Performance 90% of Less than 85% of Test scheduled scheduled recovery recovery activities are activities are recovered recovered according to according to the the documented documented plans. plans. - - ------------------------------------------------------------------------------------------------------------- Problem Response Performance On-site On-site response Time response for for all satellite all satellite repairs are repairs are missed no more missed no more than twice (2) than once (1) per period. per period in accordance with the Wards Satellite Response Requirements - - -------------------------------------------------------------------------------------------------------------
26 - - ---------------------------------------------------------------------------------------------------------------- per Location - - ----------------------------------------------------------------------------------------------------------------- Software/Firmware Version Supplier will Supplier will Release Management Maintenance maintain all maintain all software software releases releases at at least at the least at the current minus current minus three version two version level. level - - -------------------------------------------------------------------------------------------------------------
The following Service Levels are designated as Critical Service Levels: - - ----------------------------------------------------------------------------- SERVICE APPLICATION DESCRIPTION LEVEL STANDARD ID - - ----------------------------------------------------------------------------- Satellite Availability - - ----------------------------------------------------------------------------- Satellite Response Time - - ----------------------------------------------------------------------------- III. SERVICE LEVEL CREDITS A. CREDITS In each case of a failure to satisfy a Service Level Supplier will, within five (5) days from the identification of the deviation from the applicable Service Level, provide to Wards a plan of activities which will allow Supplier to satisfy the applicable Service Level at the earliest date practicable. In addition, Wards shall be entitled to recover a Service Level Credit for such Service Level calculated in the manner described below, provided, however, that the aggregate amount of such Service Level Credits for any given month will not exceed ten percent (10%) of Supplier's monthly charges under this Service Agreement for the applicable month (excluding Pass-Through Expenses, if any). If a single event directly causes a failure to achieve more than one Service Level, then only one Service Credit will apply. In such event, Wards will select the Service Level that will be used for the calculation of the Service Credit. B. METHOD OF CALCULATION If Supplier fails to meet or exceed a Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any). If Supplier's performance fails to meet an Increased Impact Level for any Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) (this calculation being in lieu of, and not in addition to, the credit calculation for the corresponding Service Level failure). 27 To calculate the total Service Level Credit due to Wards for the applicable month, the amounts calculated for each Service Level or Increased Impact Level as described above will be totaled and such amount shall be available as a credit to Wards against Supplier's invoice for the applicable month. C. FREQUENCY FACTOR In any case where Supplier fails to achieve the same Service Level (including failure to achieve the designated Increased Impact Level for that Service Level) in two consecutive months or in any four months in any 12-month period, the applicable Severity Weight shall be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through expenses and Special Charges, if any), and for any subsequent months in which Supplier fails to achieve such Service Level or Increased Impact Level; provided, however, that in no case will Supplier be liable for total Service Credits which exceed ten percent (10%) of the applicable monthly invoice (excluding Pass-Through expenses and Special Charges, if any). The Service Credits will revert to the method of calculation provided in Section III.A. above in the following circumstances: 1. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is different from the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following four consecutive months of achieving the Service Level. 2. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is the same as the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation in Section III.A. following ten consecutive months of achieving the Service Level. Nothing in the preceding two paragraphs will excuse the application of the frequency factor in the calculation of Service Credits if a subsequent failure to achieve a Service Level would otherwise make the frequency factor apply. D. EXCUSED PERFORMANCE PROBLEM Supplier shall not be liable to pay Wards Service Level Credits for any failure to meet a Service Level to the extent that such a failure is directly attributable to (i) a Force Majeure Event; (ii) breaches of this Agreement by Wards, provided that Supplier has provided Wards with reasonable notice of such breach immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such breach; (iii) acts or omissions of Wards (or third parties acting on behalf of Wards under a written agreement), provided that Supplier has provided Wards with reasonable notice of such software problem immediately after becoming aware of it and determining that such problem will adversely impact Supplier's performance of the Services and Supplier has used Commercially Reasonable Efforts to perform notwithstanding the problem;or (iv) the first manifestation of an extraordinary latent error or defect in Equipment used by Supplier in providing the Services (and any related repeated instances pending the applicable Supplier's correction of the defect) if such defect was (1) unknown to Supplier and (2) not disclosed in any information distributed 28 by the third party licensor, manufacturer, or distributor and (3) not preventable or discoverable through normal testing or maintenance procedures. The foregoing are referred to herein collectively as an "Excused Performance Problem." Supplier shall be liable to grant Wards Service Level Credits for any failure to meet a Service Level attributable to any cause other than causes expressly included in the categories listed above. E. TIME LIMIT If Supplier does not notify Wards of any Excused Performance Problem (as described in Section III.D above) within ninety (90) days of the date Supplier provides Performance Reports covering the time period during which the Excused Performance Problem is alleged to have occurred, then Supplier shall be deemed to have waived the claim of an Excused Performance Problem. IV. SERVICE LEVEL TERMINATION EVENT A. DEFINITION 1. Measurement Event - For purposes of this section, a "Measurement ----------------- Event" will be the monthly calculation of Supplier's actual performance for each Service Level or Critical Service Level. The total possible Measurement Events during any specific period of time is the product of the number of months in that time period times the number of Service Levels or Critical Service Levels, as applicable. 2. Failure Event - For purposes of this section a "Failure Event" ------------- shall be a specific Measurement Event for which Supplier fails to achieve the relevant Critical Service Level(s) or Service Level(s); provided, however, that any such failure caused by an event described in Section III.D of this SLA shall not be counted as a Failure Event. Any single event, act or omission that causes multiple Service Levels to be missed will be counted as one Failure Event. B. REPEATED SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table: 29
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE TOTAL MEASUREMENT EVENTS (SERVICE EVENTS IN LEVELS) MEASUREMENT PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 3 13 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve 4 26 Events Months - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 2 13 Failure Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Failure Events Months 3 26 - - --------------------------------------------------------------------------------------------------
C. REPEATED CRITICAL SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Critical Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT MEASURE (CRITICAL SERVICE EVENTS IN LEVELS) MEASUREMENT PERIOD - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Six Months 2 12 Events - - -------------------------------------------------------------------------------------------------- Service Level Failure Rolling Twelve Months 3 24 Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 1 12 Failure Events - - -------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 2 24 Failure Events - - --------------------------------------------------------------------------------------------------
30 D. CATASTROPHIC LEVEL OF SERVICE Recovery of the Satellite Services within twenty-four hours of the scheduled time to recover those Services under the Wards Disaster Recovery Plan. E. QUALIFICATION Nothing in this Section IV is intended to imply that any lesser number or different combination of occurrences of deficient performance by Supplier may not also constitute a material breach of Supplier's obligations warranting termination of the Service Agreement by Wards for cause. 31 TABLE OF CONTENTS
Page ---- I. GENERAL................................................... 18 A. General.......................................... 18 B. Definitions...................................... 18 C. Measurement...................................... 19 D. Effective Date for Service Levels................ 19 E. Revisions........................................ 19 F. Single Point of Contact.......................... 19 II. SERVICE LEVELS A. Definitions...................................... 20 B. Service Level Measures........................... 20 C. Service Levels................................... 25 III. SERVICE LEVEL CREDITS..................................... 27 A. Credits.......................................... 27 B. Method of Calculation............................ 27 C. Frequency Factor................................. 28 D. Excused Performance Problem...................... 28 E. Time Limit....................................... 29 IV. SERVICE LEVEL TERMINATION EVENTS.......................... 29 A. Definition....................................... 29 B. Repeated Service Level Failures.................. 29 C. Repeated Critical Service Level Failures......... 30 D. Catastrophic Level of Service.................... 31 E. Qualification.................................... 31
EXHIBIT E TRANSFERRED EQUIPMENT NONE 32 EXHIBIT F WARDS FACILITIES AND EQUIPMENT Wards Facilities The Wards facilities designated for use by Supplier at Wards corporate headquarters as described in Exhibit F to Service Agreement No. 2 (Data Center Services). The following locations for Personal Earth Stations:
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP 1002 MOUNT PROSPECT IL NORTHEAST 847-506-5000 999 ELMHURST ROAD 60056 1019 GREENWOOD IN NORTHEAST 317-885-8001 1251 US 31 SOUTH 46142 1037 GREENVILLE SC NORTHEAST 864-213-2500 WOODRUFF ROAD & I-38 29607 1040 BECKLEY WV NORTHEAST 304-252-0781 RALEIGH MALL BOX 1-A 25801 1042 JOHNSON CITY NY NORTHEAST 607-729-4961 REYNOLDS RD. & HARRY L DRIVE 13790 1047 BUTLER PA NORTHEAST 412-285-1721 300 NEW CASTLE ROAD 16001 1049 CARLISLE PA NORTHEAST 717-243-2021 N. HANOVER & ROUTE 81 17013 1050 CHARLEROI PA NORTHEAST 412-489-9555 300 CHAMBER PLAZA 15022 1055 CLEARWATER FL NORTHEAST 813-796-2357 HIGHWAYS 60 & 19 33516 1063 DOTHAN AL NORTHEAST 334-794-2611 3555 ROSS CLARK CIRCLE NW 36301 1065 DUBOIS PA NORTHEAST 814-371-6330 ROUTE 225 & SHAFFER ROAD 15801 1071 FALLS CHURCH VA NORTHEAST 703-241-8700 6100 ARLINGTON BOULEVARD 22044 1073 GAITHERSBURG MD NORTHEAST 301-921-0012 600 NORTH FREDERICK AVENUE 20877 1075 GLEN BURNIE MD NORTHEAST 410-787-3000 6721 GOVERNOR RITCHIE HWY 21061 1079 HAGERSTOWN MD NORTHEAST 301-582-3100 17318 VALLEY MALL ROAD 21740 1084 INDIANA PA NORTHEAST 412-463-9101 1550 ROUTE 286 S 15701 1090 KINGSPORT TN NORTHEAST 423-246-7188 NEASTMAN ROAD 37660 1092 KINGSTON NY NORTHEAST 914-336-5020 1165 ULSTER AVENUE 12401 1097 HYATTSVILLE MD NORTHEAST 301-322-5200 6200 ANNAPOLIS ROAD 20784 1102 WALDORF MD NORTHEAST 301-932-9321 5010 HIGHWAY 301 S 20603 1104 LOCKPORT NY NORTHEAST 716-434-6671 ROUTE 78 & SHIMER ROAD 14094 1108 MEADVILLE PA NORTHEAST 814-724-5880 1200 CONNEAUT LAKE ROAD 16335 1112 HARRISBURG PA NORTHEAST 717-540-6500 5100 JONESTOWN ROAD 17112 1113 MORGANTOWN WV NORTHEAST 304-292-6321 500 GREENBAG ROAD 26505 1116 NEW BERN NC NORTHEAST 919-638-5181 2101-13 NEUSE BOULEVARD 28560 1117 LOWER BURRELL PA NORTHEAST 412-339-5200 100 BURRELL PLAZA 15068 1120 OCALA FL NORTHEAST 352-237-0001 2701 SW COLLEGE, SUITE 400 32674 1124 PARKERSBURG WV NORTHEAST 304-422-8571 1600 GARFIELD AVENUE 26401 1136 ROCKY MOUNT NC NORTHEAST 919-443-4111 2320 SUNSET AVENUE 27801 1149 STAUNTON VA NORTHEAST 540-885-0381 1311-13 GREENVILLE AVENUE 24401 1151 SUNBURY PA NORTHEAST 717-286-7151 1125 N. FOURTH STREET 17801 1153 TOWSON MD NORTHEAST 410-337-4600 1238 PUTTY HILL AVENUE 21204 1163 WHEATON MD NORTHEAST 301-468-5300 11160 VIERS MILL ROAD 20902 1166 WINCHESTER VA NORTHEAST 540-667-1300 2280 VALLEY AVENUE 22601 1167 SALISBURY MD NORTHEAST 410-546-6500 2302 N. SALISBURY 21801 1169 CAMP HILL PA NORTHEAST 717-730-7500 3203 TRINDLE ROAD 17011 1178 EL PASO/SUNLAND TX WEST 915-585-4400 750 SUNLAND PARK DRIVE 79912 1188 BISMARCK SD NORTHEAST 701-223-0313 613 KIRKWOOD MALL 58504 1190 BLOOMINGTON MN NORTHEAST 612-885-1000 7831 SOUTHTOWN CENTER 55431 1191 BRAINERD MN NORTHEAST 218-829-4731 HIGHWAYS 210 & 25 56401 1205 CUYAHOGA FALLS OH NORTHEAST 330-929-1831 2891 STATE ROAD 44223 1207 DAVENPORT IA NORTHEAST 319-386-2831 320 W. KIMBERLY RD. 52806 1208 DEARBORN MI NORTHEAST 313-943-4300 13551 MICHIGAN AVENUE 48120 1235 GRAND RAPIDS/ SOUTH MI NORTHEAST 616-538-1000 1100 28TH STREET SW 49509 1236 GREEN BAY WI NORTHEAST 414-494-9611 101 BAY PARK SQUARE 54304 1261 TUCSON/NORTH AZ WEST 520-292-4700 4147 N. ORACLE ROAD 85705
33
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP 1471 ROANOKE VA NORTHEAST 540-265-0634 4802 VALLEY VIEW BLVD. NW 24012 1473 BAKERSFIELD CA WEST 805-328-5100 3201 F STREET 93301 1475 CANOGA PARK CA WEST 818-883-1000 6601 OWENSMOUTH 91304 1477 CHICO CA WEST 916-894-4212 801 EAST AVENUE 95926 1262 LEXINGTON KY NORTHEAST 606-278-5421 2021 HARRODSBURG PK 40504 1265 LIVONIA MI NORTHEAST 313-427-1600 29501 PLYMOUTH ROAD 48150 1266 FORT SMITH AR TEXAS 501-484-4400 4900 ROGERS AVENUE, SUITE 102 72903 1267 CORPUS CHRISTI TX TEXAS 512-994-3400 5858 SOUTH PADRE ISLAND DRIVE 78411 1272 MANSFIELD OH NORTHEAST 419-529-2111 1200 PARK AVENUE WEST 44906 1289 MOUNT CLEMENS MI NORTHEAST 810-791-2000 35151 S. GRATRIOT 48035 1308 PONTIAC/WATERFORD MI NORTHEAST 810-682-4940 409 N. TELEGRAPH ROAD 48328 1319 ROCHESTER MN NORTHEAST 507-288-8333 BLDG. 201, 1100 HWY 14 SW 55901 1338 SOUTHGATE MI NORTHEAST 313-285-4400 13665 EUREKA ROAD 48195 1341 BALTIMORE/SECURITY PARK MD NORTHEAST 410-265-9508 6901 SECURITY BOULEVARD 21207 1353 PHOENIX/ARCADIA AZ WEST 602-952-5800 4769 EAST THOMAS ROAD 85018 1355 WARREN MI NORTHEAST 810-751-7500 28800 DEQUINDRE 48092 1365 ST. PAUL/MIDWAY MN NORTHEAST 612-647-3200 1400 UNIVERSITY AVENUE 55104 1371 ABILENE TX TEXAS 915-692-1260 4601 SOUTH FIRST STREET 79605 1374 ALBUQUERQUE NM WEST 505-888-5500 2100 LOUISIANA NE #90 87110 1376 AMARILLO TX TEXAS 806-354-3400 29 WESTERN PLAZA 79109 1379 ARDMORE OK TEXAS 405-223-2442 15 ARDMORE MALL 73401 1380 SALINAS CA WEST 408-442-1400 1690 NORTH MAIN 93906 1381 RANCHO CUCAMONGA CA WEST 909-466-0600 10788 FOOT HILL BOULEVARD 91730 1382 AUSTIN/CAPITAL TX TEXAS 512-465-5800 5621 INTER-REGIONAL HIGHWAY 78723 1385 BATON ROUGE LA TEXAS 504-922-4100 7401 FLORIDA BOULEVARD 70806 1386 CHES/GREENBRIER VA NORTHEAST 757-420-8299 1412 GREENBRIER 23320 1390 BLYTHEVILLE AR TEXAS 501-763-1100 HIGHWAY 61 & MOULTRIE DRIVE 72315 1391 SCRANTON PA NORTHEAST 717-341-1980 200 THE MALL AT STEAMBOAT 18503 1393 SAVANNAH GA NORTHEAST 912-920-9080 4045 ABERCORN EXPRESSWAY 31420 1396 BRYAN TX TEXAS 409-823-5483 HIGHWAY 6 & VILLA MARIA ROAD 77805 1397 BURLINGTON IA WEST 319-754-6581 2720 MOUNT PLEASANT 52601 1400 CEDAR RAPIDS IA NORTHEAST 319-396-1200 2500 EDGEWOOD ROAD SW 52404 1403 WESTMINSTER MD NORTHEAST 410-857-8500 400 N. CENTER STREET 21157 1404 CHEYENNE WY WEST 307-634-1381 1501 EAST PERSHING 82001 1406 TOPEKA KS WEST 913-271-2200 1831 SW WANAMAKER ROAD 66604 1410 COLORADO SPRINGS CO WEST 719-630-6543 2420 EAST PIKES PEAK AVENUE 80909 1425 DENVER/LAKESIDE CO WEST 303-480-6600 5801 WEST 54TH AVENUE 80212 1426 ORANGE PARK FL NORTHEAST 904-278-4981 1919 WELLS ROAD UNIT 2 32073 1428 JACKSONVILLE/REGENCY FL NORTHEAST 904-724-0401 9501 ARLINGTON EXPRESSWAY 32225 1429 DES MOINES/MERLE HAY IA NORTHEAST 515-278-3500 1100 MERLE HAY PLAZA 50310 1430 MESA/EAST AZ WEST 602-396-8000 6230 SUPERSTITION SPRINGS BLVD. 85206 1436 BRADENTON FL NORTHEAST 941-751-5599 1205 44 AVENUE WEST 34207 1437 LAKELAND FL NORTHEAST 941-858-1745 4005 US 98 N 33809 1438 FORT MYERS FL NORTHEAST 941-278-0877 4650 SOUTH CLEVELAND 33907 1439 POUGHKEEPSIE NY NORTHEAST 914-298-0145 790 SOUTH ROAD 12601 1440 FAYETTESVILLE AR TEXAS 501-443-4591 HIGHWAYS 71 & 62 72701 1441 ST. PETERSBURG FL NORTHEAST 813-347-0001 2170 TYRONE BOULEVARD 33710 1444 FORT WORTH/7TH STREET TX TEXAS 817-336-1170 2600 W. 7TH STREET 76107 1446 TAMPA BAY/UNIVERSITY FL NORTHEAST 813-971-4300 2252 E. FOWLER AVENUE 33612 1447 FLINT MI NORTHEAST 810-230-3900 4400 MILLER ROAD 48507 1457 GREELEY CO WEST 970-356-2000 HIGHWAY 32 & 23RD AVENUE 80631 1464 HOUSTON/NORTHLINE TX TEXAS 713-691-8700 500 NORTHLINE MALL 77022 1466 HOUSTON/SHARPSTOW TX TEXAS 713-778-5900 7500 BELLAIRE BOULEVARD 77036 1471 ROANOKE VA NORTHEAST 540-265-O634 4802 VALLEY VIEW BLVD. NW 24012 1473 BAKERSFIELD CA WEST 805-328-5100 3201 F STREET 93301 1475 CANOGA PARK CA WEST 818-883-1000 6601 OWENSMOUTH 91304 1477 CHICO CA WEST 916-894-4212 801 EAST AVENUE 95926
34
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP 1478 COEUR D'ALENE ID WEST 208-667-7451 101 BEST AVENUE 83814 1481 EUGENE OR WEST 541-485-0611 500 VALLEY RIVER CENTER 97401 1483 EUREKA CA WEST 707-444-0300 2525 FOURTH STREET 95501 1486 GREAT FALLS MT WEST 406-761-5950 900 10TH AVENUE SOUTH 59401 1492 SAN DIEGO/LA MESA CA WEST 619-698-5200 5500 GROSSMONT CENTER DRIVE 92042 1494 LONGVIEW WA WEST 360-425-2930 #1 TRIANGLE SHOPPING CENTER 98632 1501 MEDFORD OR WEST 541-857-0400 1700 NORTH RIVERSIDE 97501 1502 DALLAS/REDBIRD TX TEXAS 972-296-6372 3662 WEST CAMP WISDOM ROAD 75237 1505 UTICA NY NORTHEAST 315-797-7457 710 HORATIO STREET 13502 1508 OROVILLE CA WEST 916-534-1800 2450 OROVILLE DAM BOULEVARD 95966 1509 PANORAMA CITY CA WEST 818-894-8211 14665 ROSCOE BOULEVARD 91402 1510 WESTMINSTER CO WEST 303-657-2300 5451 WEST 88TH AVENUE 80030 1511 PHOENIX/CHRISTOWN AZ WEST 602-433-5399 1751 W. BETHANY HOME ROAD 85015 1515 PLEASANT HILL CA WEST 510-674-6200 2302 MONUMENT BOULEVARD 94523 1517 PORTERVILLE CA WEST 209-782-5000 825 WEST HENDERSON AVENUE 93257 1519 ALBUQUERQUE/COTTO NM WEST 505-890-3500 10129 COORS BOULEVARD NW 87114 1520 GLENDALE/ARROWHEAD AZ WEST 602-412-4100 7780 W. ARROWHEAD TOWNE CENTER 85308 1522 REDDING CA WEST 916-244-5500 300 LOCUST AVENUE 96001 1523 PHOENIX/PARADISE AZ WEST 602-953-5800 4747 ESAT CACTUS ROAD 85032 1524 RENO NV WEST 702-355-3000 1900 SILVERADA BOULEVARD 89512 1525 RICHMOND CA WEST 510-231-9200 4300 MCDONALD AVENUE 94805 1529 SALEM OR WEST 503-363-3191 833 LANCASTER DRIVE NE 97301 1530 PHOENIX/DESERT SKY AZ WEST 602-849-7300 7611 WEST THOMAS ROAD 85033 1532 MISSION VALLEY CA WEST 619-692-5400 1288 CAMINO DEL RIO 92108 1533 SAN JOSE/EAST CA WEST 408-272-6200 444 NORTH CAPITOL AVENUE 95133 1535 SANA ANA CA WEST 714-973-6600 1351 WEST 17TH STREET 92706 1540 STOCKTON CA WEST 209-473-5300 5400 PACIFIC AVENUE 95207 1541 TUCSON/EL CON AZ WEST 520-321-3200 3601 NORTH BROADWAY 85716 1547 VISALIA CA WEST 209-734-7411 3535 WEST MINERAL KING AVENUE 93277 1556 MODESTO CA WEST 209-576-3000 2001 MCHENRY AVENUE 95350 1557 NAPA CA WEST 707-252-5000 4000 BEL AIRE PLAZA 94558 1567 CHICAGO RIDGE IL NORTHEAST 708-423-3880 9650 S. RIDGELAND AVE. 60415 1569 READING PA NORTHEAST 610-921-5700 3050 NORTH 5TH STREET HWY. 19605 1579 VENTURA CA WEST 805-642-7541 500 SOUTH MILLS ROAD 93003 1588 JUNCTION CITY KS WEST 913-238-2161 1010 WEST SIXTH STREET 66441 1591 KCM/BLUE RIDGE MO WEST 816-737-9200 4100 BLUE RIDGE BOULEVARD 64133 1592 KCM/WARD PARKWAY MO WEST 816-276-2600 8627 STATE LINE ROAD 64114 1600 LAFAYETTE LA TEXAS 318-232-5800 1700 NE EVANGLINE THRUWAY 70501 1601 NORTH LITTLE ROCK AR TEXAS 501-945-7070 4220 E. MCCAIN BOULEVARD 72117 1602 WATERTOWN NY NORTHEAST 315-786-6400 1300 ARSENAL 13601 1605 LAWTON OK TEXAS 405-581-4600 SHERIDAN ROAD & GORE BLVD. 73501 1608 LINCOLN NE WEST 402-465-7200 61 & O STREETS 68505 1611 LUBBOCK TX TEXAS 806-795-8221 5015 BOSTON AVENUE 79413 1614 ASHEVILLE NC NORTHEAST 704-298-0785 3 SOUTH TUNNEL ROAD 28805 1618 MESQUITE TX TEXAS 214-327-4100 500 EAT PIKE ROAD 75149 1621 MONROE LA TEXAS 318-324-5000 1100 OLIVER ROAD 71201 1630 OKC/PENN SQUARE OK TEXAS 405-840-6100 1901 NEW EXPRESSWAY S 1800 73118 1640 PORT CHARLOTTE FL NORTHEAST 941-255-1700 1441 TAMIAMI TRAIL, UNIT 501 33948 1647 PUEBLO CO WEST 719-546-0910 3201 DILLON DRIVE 81008 1651 ST. JOSEPH MO WEST 816-271-5700 3702 DREDERICK BOULEVARD 64506 1654 SA/MCCRELESS TX TEXAS 210-533-2426 600 MCCRELESS MALL 78223 1655 SA/CROSSROADS TX TEXAS 210-733-5600 4522 FREDERICKSBURG ROAD 78201 1663 SHERMAN TX TEXAS 903-893-7581 3201 TEXOMA PARKWAY SUITE 700 75090 1666 TEXARKANA TX TEXAS 903-838-6570 10 OAKLAWN VILLAGE 75501 1670 TYLER TX TEXAS 903-531-7000 1818 ROSELAND BOULEVARD 75701 1672 WACO TX TEXAS 817-776-1050 5201 BOSQUE BOULEVARD 76714 1675 WICHITA/EAST KS WEST 316-681-4704 3805 HARRY STREET 67218
35
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP 1723 CLARKSVILLE TN NORTHEAST 615-647-0291 PADGENT LANE & CROSSLAND AV 37040 1732 CARBONDALE IL NORTHEAST 618-549-8600 1265 E. MAIN 62901 1738 YAKIMA WA WEST 509-248-5850 2410 NOB HILL BOULEVARD 98901 1748 LAKEWOOD CO WEST 303-937-6400 7200 WEST ALAMEDA AVENUE 80226 1755 PLANO TX TEXAS 972-578-5500 900 WEST 15TH STREET 75075 1794 GREENSBURG PA NORTHEAST 412-832-6300 2370 GREENGATE MALL 15607 1797 GRANTS PASS OR WEST 541-479-2643 1101 NE D STREET 97528 1822 JEFFERSON CITY MO WEST 573-635-7271 709 MISSOURI BOULEVARD 65101 1886 TEMPLE HILLS MD NORTHEAST 301-899-3700 3745 BRANCH AVENUE 20748 1887 COVINA CA WEST 818-966-7411 848 SOUTH BARRANCA STREET 91723 1888 MARYSVILLE CA WEST 916-741-7000 915 EIGHTHH STREET 95901 1953 YORK PA NORTHEAST 717-755-2936 2801 E. MARKET STREET 17402 1959 HUNTINGTON BEACH CA WEST 714-892-6611 7777 EDINGER AVENUE 92647 1961 LITTLE ROCK AR TEXAS 501-661-7200 300 UNIVERSITY AVENUE 72205 1962 SPRINGFIELD MO WEST 417-885-1500 POST OFFICE BOX 35 65808 1965 ROSEMEAD CA WEST 818-573-3110 3600 ROSEMEAD BOULEVARD 91770 2005 PASADENA TX TEXAS 713-943-6800 2222 SPENCER HIGHWAY 77504 2018 SOUTHFIELD/TELEGRAPH MI NORTHEAST 810-358-1200 28500 TELEGRAPH ROAD 48034 2023 SANTA MARIA CA WEST 805-922-6611 1318 SOUTH BROADWAY 93454 2024 ESCONDIDO CA WEST 619-740-2200 311 NORTH ESCONDIDO BOULEVARD 92025 2045 NORWALK CA WEST 562-868-0911 12051 IMPERIAL HIGHWAY 90650 2070 CANTON OH NORTHEAST 330-477-9561 4004 W. TUSCARAWAS STREET 44708 2071 DALY CITY CA WEST 415-991-6200 133 SERRAMONTE CENTER 94015 2072 LANSING MI NORTHEAST 517-323-4550 5220 W. SAGINAW HWY. 48917 2083 LAUREL MD NORTHEAST 301-498-3100 14700 BALTIMORE AVENUE 20707 2101 SACRAMENTO/FLORIN CA WEST 916-424-7700 5601 FLORIN ROAD 95823 2129 PHARR TX TEXAS 210-781-8300 500 NORTH JACKSON ROAD 78577 2136 JOPLIN MO WEST 417-625-6500 3100 DAVIS BOULEVARD 64801 2142 MANASSAS VA NORTHEAST 703-369-9600 8234 SUDLEY ROAD 22110 2143 FAIRFAX VA NORTHEAST 703-934-7005 112840 JAMES SWART CIRCLE 0 22030 2145 GRAND RAPIDS/NORTH MI NORTHEAST 616-365-7525 4311 PLAINFIELD AVE., NE 49505 2147 NORFOLK VA NORTHEAST 757-466-2200 5803 VIRGINIA BEACH BLVD. 23502 2148 PENSACOLA FL NORTHEAST 904-477-2480 5100 N. NINTH AVENUE 32504 2153 UNIONTOWN PA NORTHEAST 412-628-0300 LAUREL MALL ROUTE 119 S 15425 2155 PORTLAND.MALL 205 OR WEST 503-251-4500 9800 SE WASHINGTON 97216 2156 LOS ANGELES WEST CA WEST 310-202-4600 1833 S. LACIENEGA BOULEVARD 90035 2157 MERCED CA WEST 209-384-5222 1111 WEST OLIVE AVENUE 95348 2161 PERU IL NORTHEAST 815-224-2040 1607 36TH STREET 61354 2162 KALAMAZOO MI NORTHEAST 616-382-5850 5030 W. MAIN STREET 49009 2164 LAS CRUCES NM WEST 505-526-3331 2300 EAST LOHMAN PLAZA 88001 2168 ALEXANDRIA LA TEXAS 318-448-3211 1804 MCARTHUR DRIVE 71301 2170 ARLINGTON TX TEXAS 817-633-1100 2700 EAST PIONEER PARKWAY 76010 2171 CHESAPEAKE/PORTSMOUTH VA NORTHEAST 757-465-4500 4200 PORTSMOUTH BOULEVARD 23321 2194 BEAUMONT TX TEXAS 409-898-2010 6175 EASTEX FREEWAY 77706 2195 TORRANCE CA WEST 310-542-6971 21405 SOUTH MADRONA AVENUE 90503 2196 AURORA CO WEST 303-696-3000 1400 HAVANA STREET 80012 2203 JACKSON MI NORTHEAST 517-787-3000 1700 W. MICHIGAN 49201 2208 KCK/INDIAN SPRINGS KS WEST 913-596-7700 4601 STATE AVENUE 66102 2211 BELAIR MD NORTHEAST 410-836-6000 658 BEL AIR ROAD 21014 2212 FREDERICK MD NORTHEAST 301-662-9100 FRED. TWN MALL PAT ST EX 21701 2213 TALLAHASSEE FL NORTHEAST 850-385-7111 US 27 & KNOX ROAD 32303 2215 FRESNO CA WEST 209-431-0410 5740 NORTH BLACKSTONE 93710 2219 SAN LEANDRO/BAYFAIR CA WEST 510-481-3200 300 BAYFAIR MALL 94578 2220 SAN BERNARDINO CA WEST 909-381-7000 144 CAROUSEL MALL 92401 2221 LA/EAGLE ROCK CA WEST 213-254-9261 2626 COLORADO BOULEVARD 90041 2233 SPRINGFIELD VA NORTHEAST 703-922-3500 6600 SPRINGFIELD MALL 22150 2237 PORTLAND/JANTZEN OR WEST 503-283-4411 1400 NORTH HAYDEN ISLAND DRIVE 97217
36
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP 2238 CITRUS HEIGHTS CA WEST 916-728-3500 6199 SUNRISE BOULEVARD 95610 2239 SAM JOSE/OAKRIDGE CA WEST 408-224-2300 879 BLOSSOM HILL ROAD 95123 2245 LAKE CHARLES LA TEXAS 318-478-4500 638 WEST PRIEN LAKE ROAD 70601 2246 DENTON TX TEXAS 940-566-6969 2201 EAST I-35 SOUTH 76201 2248 ROSEDALE MD NORTHEAST 410-780-5000 6400 ROSSVILLE BOULEVARD 21237 2251 LAS VEGAS/WEST NV WEST 702-251-7300 2120 EAST DECATUR ROAD 89102 2253 TOLEDO/SOUTH OH NORTHEAST 419-865-1311 2110 REYNOLD ROAD 43614 2254 HOUSTON/MEMORIAL TX TEXAS 713-932-3100 970 GESSNER 77024 2257 BLAINE MN NORTHEAST 612-780-7400 99 NORTHTOWN DRIVE 55434 2258 ELKHART IN NORTHEAST 219-875-6541 3701 S. MAIN 46517 2259 ODESSA TX TEXAS 915-362-7343 3909 EAST 42ND STREET 79762 2260 ANNAPOLIS MD NORTHEAST 410-224-2500 200 ANNAPOLIS MALL 21401 2278 SOUTH BEND IN NORTHEAST 219-291-7910 1390 SCOTTSDALE MALL 46612 2289 EL PASO/CIELO VISTA TX WEST 915-779-6699 8401 GATEWAY WEST 79925 2290 BROWNSVILLE TX TEXAS 210-544-3600 MEXICO STREET & PALM BLVD. 78520 2292 OKC/CROSSROADS OK TEXAS 405-636-3100 5000 CROSSROADS BOULEVARD 73149 2296 DULUTH MN NORTHEAST 218-727-6677 1600 MILLER TRUNK HWY 55811 2323 MOBILE AL NORTHEAST 334-476-5100 3250 AIRPORT BOULEVARD 36606 2326 MOLINE IL NORTHEAST 309-797-7100 4500 16TH STREET 61265 2336 SA/WINDSOR PARK TX TEXAS 210-654-2200 7900 IH 35 NORTH 78218 2337 SHREVEPORT LA TEXAS 318-687-7600 8924 JEWELLA ROAD 75081 2366 GREENSBORO NC NORTHEAST 910-375-4000 100 CAROLINA CIRCLE MALL 27405 2369 OVERLAND PARK KS WEST 913-541-6500 11201 WEST 95TH STREET 66214 2374 CHARLESTON SC NORTHEAST 803-554-4400 2401 MALL DRIVE 29418 2383 PINELLAS PARK FL NORTHEAST 813-522-5517 7200 US HIGHWAY 19 33565 2388 SPRINGFIELD IL NORTHEAST 217-787-8000 2501 W. WABASH AVENUE 62704 2393 COLUMBUS GA NORTHEAST 706-322-6761 3091 MANCHESTER EXPRESSWAY 31908 2401 SACRAMENTO/C/CLUB CA WEST 916-978-3300 3460 EL CAMINO AVENUE 95821 2406 VIRGINIA BEACH VA NORTHEAST 757-463-4560 701 LYNN HAVEN PARKWAY 23452 2411 BILLINGS MT WEST 406-656-9000 320 SOUTH 24TH STREET WEST 59102 2412 KCM/METRO NORTH MO WEST 816-468-2600 BARRY ROAD & HIGHWAY 69 64155 2425 BEAVERTON OR WEST 503-646-7212 4401 SW 110 AVENUE 97005 2426 RIVERSIDE CA WEST 909-784-3000 3530 RIVERSIDE DRIVE 92506 2438 NEWPORT NEWS VA NORTHEAST 757-874-0100 14316 WARWICK BOULEVARD 23602 2443 RICHARDSON TX TEXAS 972-680-7421 603 SOUTH PLANO ROAD 75081 2445 SAN JOSE/WESTGATE CA WEST 408-886-3200 1600 SARATOGA ROAD 95129 2448 FORT WORTH/HULEN TX TEXAS 817-294-9930 4900 SOUTH HULEN 76132 2488 AUGUSTA GA NORTHEAST 706-771-3200 1700 GORDON HIGHWAY 30904 2489 FRIENDSWOOD/BAYBR TX TEXAS 281-486-8989 100 BAYBROOK MALL 77546 2490 HOUSTON/GREENSPOINT TX TEXAS 281-873-1600 600 GREENSPOINT MALL 77022 2495 LAREDO TX TEXAS 956-721-2000 5300 NORTH SAN DARIO 78041 2509 HURST TX TEXAS 817-284-4700 6000 NORTHEAST MALL 76053 2526 SUNNYVALE CA WEST 408-746-0200 211 WEST IOWA STREET 94086 2559 WICHITA/WEST KS WEST 316-946-8141 4600 WEST KELLOGG 67209 2560 MIDWEST CITY OK TEXAS 405-733-1260 6777 E. RENO AVENUE 73110 2561 DES MOINES/SOUTHRIDGE IA NORTHEAST 515-287-8700 1111 SE ARMY POST ROAD 50315 2565 TAMPA BAY FL NORTHEAST 813-877-6161 3202 W. DR. MILK JR. BOULEVARD 33607 2571 DUBLIN CA WEST 510-833-3227 6900 AMADOR PLAZA ROAD 94568 2572 MESA/WEST AZ WEST 602-890-5599 1625 WEST SOUTHERN AVENUE 85202 2573 PICO RIVERA CA WEST 562-948-3631 8800 WHITTIER ROAD 90660 2576 AUSTIN/BARTON CREEK TX TEXAS 512-479-1000 2901 CAPITAL OF TEXAS HIGHWAY 78746 2579 BRIDGEPORT WV NORTHEAST 304-842-7700 MEADOWBROOK ROAD & I-79 26330 2580 PORT RICHEY FL NORTHEAST 813-849-8438 9409 US HIGHWAY 19 N 34668 2604 ROSEVILLE MN NORTHEAST 612-631-6800 600 ROSEDALE CENTER 55113 2608 LEWISVILLE TX TEXAS 972-315-1411 2428 SOUTH STEMMONS FREEWAY 75067
37
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP 2611 BAYTOWN TX TEXAS 281-421-3100 3000 SAN JACINTO 77521 2612 SPOKANE WA WEST 509-482-5100 5830 NORTH DIVISION STREET 99207 2632 PORTLAND/CLACKAMAS OR WEST 503-652-3800 8800 SE MONTEREY BOULEVARD 97266 2635 HOUSTON/WILLOWBROOK TX TEXAS 281-955-4100 7925 FM 1960 WEST 77070 2707 FREDERICKSBURG VA NORTHEAST 540-786-7060 I-95 & ROUTE 3 22401 2710 HAMPTON VA NORTHEAST 757-838-3000 1800 W. MERCURY BOULEVARD 23666 2713 TOLEDO/NORTH OH NORTHEAST 419-478-4120 343 NEW TOWN SQUARE DRIVE 43612 2744 LITTLETON CO WEST 303-972-5250 8501 WEST BOWLES AVENUE 80123 2753 SAN DIEGO/BONITA CA WEST 619-470-2100 3050 PLAZA BONITA 92050 2755 CHARLESTON WV NORTHEAST 304-343-7665 P.O. BOX 75059 25301 2757 SA/MERCADO TX EAST 210-670-1200 1401 SW LOOP 410 78227 2816 TEMPLE TX TEXAS 817-778-4871 3002-A 31ST STREET 76502
SUMMARY OF SATELLITE DEVICES - - ----------------------------- HUB NETWORK CONTROL CLUSTERS 1 - Primary NCC 1 - bkup NCC BURST CHANNEL DEMODULATOR 9 - Inroutes at 128k 1 - Inroute bkup 1 - Outroute at 512k DATA PORT CLUSTERS (7) remote sites at 19.2 with 8 remotes per port (1) mpe locations/diagnostics (1) ADT/WELLS FARGO (3) backups SYSTEM INTERFACE CLUSTER Ethernet Connection VAX 4000/500 bkup 4000/60 7D software REMOTE'S DISH SIZE 1.0 meter = 134 38 1.2 meter = 122 1.8 meter = 130 2.4 meter = 5 PERSONAL EARTH STATIONS PES 6000 = 286 PES 8000 = 21 PES in storage 6000 = 63 JUNCTION BOX 183 remotes have no ports available 209 remotes have 1 or more ports available VIDEO CONFERENCE 71 - LOCATIONS 39 EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE NONE 40 EXHIBIT H WARDS SOFTWARE NONE 41 EXHIBIT I SUPPLIER SOFTWARE None 42 10.(i)(R) SERVICE AGREEMENT BETWEEN MONTGOMERY WARD & CO., INCORPORATED AND ACXIOM CORPORATION SERVICE AGREEMENT NO. 7: TANDEM SERVICES ---------------------------------------- THIS SERVICE AGREEMENT NO. 7: TANDEM SERVICES (the "Service Agreement") is made and entered into as of the 6th_ day of November, 1998 between Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a Delaware corporation ("Supplier"). This Service Agreement is entered into between Wards and Supplier pursuant to the Master Agreement (defined below). Wards and Supplier agree that: (i) except to the extent expressly provided otherwise in the Service Agreement, all the terms and definitions of the Master Agreement are incorporated by reference into the Service Agreement, and (ii) in the event of any inconsistent or contradictory terms between the Master Agreement and the Service Agreement, the terms of Section 2.3 of the Master Agreement shall control. The Parties hereby agree as follows: ARTICLE 1. DEFINITION All defined terms that are used in the Master Agreement will have the same meaning in this Service Agreement. In addition, for purposes of this Service Agreement, the following terms shall have the indicated meanings: "INITIAL TERM" has the meaning given in Section 2.1. "MASTER AGREEMENT" means the Master Service Agreement for Information Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom Corporation dated November 6, 1998, and all amendments thereto. "RENEWAL TERM" has the meaning given in Section 2.2. "SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration Plan for Tandem Services has been implemented under Service Agreement No. 1. "SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998. "SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any Renewal Term. "SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the meaning given in Section 7.1 of this Service Agreement. "TANDEM ENVIRONMENT" means the Tandem processing environment that is operated by Wards as of the Service Agreement Effective Date. "Tandem Services" has the meaning given in Section 5.1. "TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning given in Section 8.1 of this Service Agreement. "WARDS PEAK SEASON" means the period in any year during the Service Agreement Term from November 20 through December 31, and as such dates may be adjusted by Wards from time to time. ARTICLE 2. TERM 2.1 INITIAL TERM. The initial term of this Service Agreement (the "Initial Term") shall begin as of the Service Agreement Commencement Date and shall continue for a period of thirty-seven (37) months thereafter, unless earlier terminated or renewed in accordance with the provisions of this Service Agreement or the Master Agreement. 2.2 RENEWAL TERM. Wards shall have the option to renew this Service Agreement for up to two (2) additional annual terms (each a "Renewal Term")by delivering written notice of such renewal to Supplier at least ninety (90) days before expiration of the final applicable Contract Year under this Service Agreement and before expiration of each annual period thereafter as applicable. All of the terms of this Service Agreement and the Master Agreement shall continue to apply without change during any renewal period(s). ARTICLE 3. TERMINATION 3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate this Service Agreement for Convenience in accordance with Section 18.2(a) of the Master Agreement. The Convenience termination charges, if any, shall be as described in Exhibit C of this Service Agreement. ARTICLE 4. PERSONNEL MATTERS 4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier --------- Positions that are subject to the provisions of Section 7.2 of the Master Agreement. 2 ARTICLE 5. SERVICES 5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide the Services described in Exhibit B, as such Exhibit may be amended and --------- supplemented from time to time pursuant to the Master Agreement (the "Tandem Services"). The Tandem Services includes all of the responsibilities (including Equipment, Software, personnel and expenses) associated with the Tandem Environment, unless specifically identified as a Wards responsibility under Section 5.3 below. The Services include (i) functions, responsibilities and tasks performed by the Transferred Employees prior to the Service Agreement Effective Date; (ii) functions, responsibilities and tasks not specifically described in this Service Agreement but which are required for their proper performance and are an inherent part of, or a necessary sub-part included within, the Services; and (iii) functions, responsibilities and tasks that are a logical extension of existing Services as a result of changes in technology, changes in Wards business practices, or changes resulting from change control procedures. Supplier will be the exclusive provider of the Services identified in this Service Agreement. 5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the Service Agreement Effective Date to the Service Agreement Commencement Date, Supplier will provide Tandem Services under Service Agreement No. 1 (Transition and Migration Services). Following the Service Agreement Commencement Date, the Service Level Agreement and other obligations of this Service Agreement shall become effective. 5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement Commencement Date, the Parties appoint individuals as Project Executives under this Service Agreement to carry out the duties described in the Master Agreement. 5.4 RESPONSIBILITIES OF WARDS The responsibility matrix included in Exhibit B to this Service Agreement identifies the responsibilities of Wards - - --------- during the Term of this Service Agreement, as such Exhibit may be amended and supplemented from time to time pursuant to the Master Agreement. The responsibilities of Wards shall be limited to those items listed in the matrix. ARTICLE 6. CHARGES 6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement --------- sets forth the Charges for the Tandem Services that may be charged by Supplier. All Charges and all Pass-Through Expenses are subject to the provisions of Article 13 of the Master Agreement. 6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Tandem Services, Supplier shall provide Wards with the information that is described in Exhibit C in sufficient detail in order to verify invoices provided by Supplier. - - --------- Invoice submission and payment shall be in accordance with Article 14 of the Master Agreement. 3 ARTICLE 7. SERVICE LEVEL AGREEMENT 7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the --------- Service Level Agreement applicable to quantitative Service Levels for the Tandem Services (the "Service Level Agreement"). The Service Level Agreement will become effective upon the Service Agreement Commencement Date. All of the terms of Article 5 of the Master Agreement shall apply to the Service Level Agreement. Supplier acknowledges that Wards may adjust schedules for availability and other items to meet Wards need during Wards Peak Season or other events (such as extended sales). ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS 8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date, Wards shall assign, and Supplier shall assume, Wards' obligations under the applicable leases for the equipment listed on Exhibit E (the "Transferred --------- Equipment"). The terms of Section 6.1 of the Master Agreement shall apply with respect to the Transferred Equipment. 8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2 of the Master Agreement, Wards shall provide the Wards Facilities and Wards Equipment described in Exhibit F to this Service Agreement. --------- 8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the Service Agreement Commencement Date, and subject to Supplier having received any Third Party Consents,Wards shall retain the rights to the license of the Third Party Software listed in Exhibit G, and Supplier shall obtain rights to access -------------- and use such Third Party Software. In the event that the licensor does not consent to such terms, then subject to Supplier having received any Third Party consents, Supplier shall assume from Wards all of the rights and obligations(other than financial responsibilities) of Wards under the Third Party Contracts and the Third Party Software that are listed in Exhibit G, and -------------- in such event, the terms of 6.3 of the Master Agreement shall apply with respect - - ---------------- to Third Party Contracts and Third Party Software. 8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is --------- proprietary to Wards and that is used in Tandem Systems (the "Wards Software"). The terms of Section of the Master Agreement shall apply with respect to the Wards Software. 8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by Supplier to provide the Tandem Services is listed in Exhibit I. Use of Supplier --------- Software in providing the Tandem Services shall be in accordance with Section 8.2 of the Master Agreement. ARTICLE 9. TERMINATION AND TRANSITION SERVICES 9.1 TERMINATION. Wards may terminate this Service Agreement without penalty at any time prior to the Service Agreement Commencement Date if Supplier does not complete the Migration Plan described in Service Agreement No. 1. After the Service Agreement 4 Commencement Date, Wards may terminate this Service Agreement in accordance with the terms of the Master Agreement. 9.2 TERMINATION. In the event of a termination or expiration of this Service Agreement, Supplier shall provide the Termination/Expiration Assistance as provided in Section 18.7 of the Master Agreement. IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day and year first above written. MONTGOMERY WARD & CO., INCORPORATED ACXIOM CORPORATION By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer --------------------------- ---------------------------------- Name: Don Bernheisel Name: Joseph C. Grossestreuer ------------------------- -------------------------------- Its: SVP, CIO Its: SVP- Outsourcing Services -------------------------- --------------------------------- 5 EXHIBITS TO TANDEM SERVICE AGREEMENT ------------------------------------ EXHIBIT A KEY SUPPLIER POSITIONS EXHIBIT B SERVICES EXHIBIT C CHARGES EXHIBIT D SERVICE LEVEL AGREEMENT EXHIBIT E TRANSFERRED EQUIPMENT EXHIBIT F WARDS FACILITIES AND EQUIPMENT EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE EXHIBIT H WARDS SOFTWARE EXHIBIT I SUPPLIER SOFTWARE 6 EXHIBIT A KEY SUPPLIER POSITIONS SENIOR TECH SPECIALIST TECH SPECIALIST 7 EXHIBIT B SERVICES OVERVIEW - - -------- The business objective of this service category is to provide the operational, system, and Application Support for the dependable, consistent and reliable operation of the Wards stores credit approval, data collection and NSF check collection related applications which reside in the Wards Tandem environment. Wards has a support contract in place with Primary Resource, Inc. (PRI) to maintain the current Tandem application source code through June 30, 1999. This maintenance contract includes necessary adjustments to correctly handle Year 2000 issues. Wards pays a monthly fee to PRI for the support contract. In December 1996 an amendment was signed to the original contract that increased the covered scope of software to include the newly purchased Banctec Payment Systems software. It is anticipated that PRI will maintain the service contract with Wards and in turn will interact with the Supplier in the same fashion as with the in-house Tandem support group (ADCU). PRI, in addition to supporting the Wards Tandem system, also performs system and program development for Wards, usually on a fixed-bid basis. It is considered that this work will continue to be contracted with Wards and that Wards will coordinate testing and implementation of new/enhanced systems with the Supplier and PRI. As a part of the PRI relationship, Wards has purchased a small Tandem configuration which has been installed in the PRI facility for development and testing as it may pertain to the Wards Tandem environment. The Supplier will be required to remotely perform the same systems and Applications Support services as is currently provided in the Tandem production environment, in addition to the creation of test environments including providing a quality assurance environment for new application code as provided by PRI. The supplier of Tandem operations management services has full responsibility for the comprehensive operational support of the Wards Tandem environment as described in Exhibit B of this document. These responsibilities include the day-to-day operations and management of the operating environment including, but not limited to, data backup and restore processes, infrastructure change management, production control, systems monitoring and reporting, data center facility monitoring, maintenance and reporting, and media management. Additionally, the Supplier will provide disaster recovery hot site services in support of Ward's formal Disaster Recovery Plan for this operating environment, and test the Supplier's documented operational hot site activation plan as agreed upon with, and scheduled as requested by Wards management on a business unit basis as outlined for these Tandem systems. The supplier of Tandem systems management services is to provide Wards with a consistently high level of Tandem environment reliability, availability, and performance. System Management includes the responsibility for the management of the existing infrastructure as well as implementation of new Tandem systems and new technologies to support the changing business needs of Wards. The Supplier's System Management will provide for the overall 8 management and performance of Ward's Tandem processing environment as indicated in Exhibit B. Systems Management will work in an integrated fashion with all other service functions to provide seamless support for the Wards business units. The cost-effective implementation of consistent Tandem operations management, systems management, and applications support will allow Wards business units to rapidly respond to changing business needs. The intent of this service description is to establish Ward's expectations and criteria for providing the described service. The intent of this service description is to establish Ward's expectations and criteria for providing the described services. OPERATIONS MANAGEMENT - - --------------------- ACTIVITIES FOR OPERATIONS MANAGEMENT The supplier will be responsible for all operational aspects of the Wards Tandem System computer environment defined as "in scope" in Exhibit B. The supplier is expected to manage the development, and production-processing environments utilizing the Procedures Manual. 1. Supplier will provide console management functions to monitor, report, operate and IPL/reboot the Tandem system, associated peripherals, and production job streams. 2. Supplier will provide production control function for the Ward's Tandem environments. 3. Supplier will provide media management and media storage for all the Tandem System processing environments. 4. Supplier will maintain a working relationship with Primary Resource, Inc. (PRI) for the purpose of resolving production problems, planning new system installations, and status of the development Tandem system. 5. Supplier will provide new ideas and recommendations quarterly on how the Wards Tandem Operations Management function can be improved or made more cost effective. SERVICE PARAMETERS FOR OPERATIONS MANAGEMENT - - -------------------------------------------- 1. Supplier will provide operations management services for Wards Tandem System processing environments as listed in Exhibit B, on a 24x7x365 basis. 2. Supplier will schedule all operational and environmental events in accordance with the documented change management procedures, as defined in the Procedures Manual. 3. Supplier will provide and maintain the Procedures Manual. 4. Supplier will provide expertise for operational problem resolution in conjunction with: Store Support, Network Operations, credit authorizers and vender support. 5. Supplier will maintain a management interface with the following Wards areas/departments: Loss Prevention, Store Support, and SmartStore. 6. Supplier will capture and retain sufficient detail data to provide all required technical and managerial reports as specified within this document. 7. Supplier will maintain documentation and run books for production job streams as described in the Procedures Manual. 9 8. Supplier will provide monitoring function, utilizing automated tools wherever possible. MEASUREMENT TOOLS FOR OPERATIONS MANAGEMENT - - ------------------------------------------- The Supplier will make every effort to utilize tools and processes provided by Wards and already in place in Wards' Tandem environments. The Supplier is free to recommend in writing to Wards, additional or alternative tools for review and final approval. Wards must approve use of any new or equivalent tools not already in place at Wards. Wards approval will not be unreasonably witheld. TANDEM SYSTEM . MEASURE/GPA . EMSA . VIEWPT . DSAP . DCOM . VIEWPROC . NMS . TACL: HCHECK . TACL: AMCHKMM . CMACOM (CMCOMO) . SCF . CMI . FUP . PUP . PRIINFO 10 . NETBATCH . ADCUINST SYSTEM MANAGEMENT - - ----------------- ACTIVITIES FOR SYSTEM MANAGEMENT: The Supplier has responsibility for management and performance of the Wards Tandem systems, systems software, and Tandem system peripherals as indicated in the Appendices. It is the Supplier's responsibility to provide reliable, predictable, and consistent operating environments for Ward's applications systems. 1. The Supplier will provide the management methodologies, resources and tools to support the Wards Tandem environments at performance, capacity, and availability levels as good as, or better than currently provided. 2. The Supplier will provide proactive Tandem system and peripheral performance monitoring and tuning. 3. The Supplier will provide proactive Tandem system and peripheral capacity analysis, planning and resource adjustment. 4. Supplier will provide applications support functions as defined in the glossary in Exhibit B, and as delineated in the Responsibility Matrix under "Application Support". Service Parameters for System Management: - - ----------------------------------------- 1. The Supplier will maintain System Management support for Wards Monday thru Friday 8am - 5pm, reachable by pager at all other times. On-site weekend support will be required during Ward's Peak Season. 2. The Supplier will utilize and adhere to all Supplier provided change management processes, and procedures. 3. The Supplier will utilize and adhere to all Supplier provided problem management processes, procedures and escalation guidelines. 4. The Supplier will provide total problem solutions with the appropriate technical resources, knowledge, procedures, and management methodologies to maintain the availability and performance of the Wards development, test, and production Tandem system environments to documented service levels. 11 5. Escalation to hardware or software vendors required to resolve Tandem system problems remain within the scope of the Supplier's responsibility and are considered to be included in the overall support cost. 6. The Supplier will provide hardware and software tools, and related maintenance that is necessary to accomplish or help them accomplish the Systems Management service levels as indicated in this document. 7. The Supplier will provide sufficient detail to the help desk, within the text of each problem ticket, to include the background and history of each problem for later root cause analysis and/or support resolution or engineering corrective action. 8. The Supplier will monitor, alarm, and apply corrective action to pre- defined events and situations for the Tandem systems included in this agreement. 9. The Supplier will gather, store, and report statistics on process variables for the Wards Tandem systems included in this agreement in a format that is readily accessible. 10. The Supplier will provide strategies and suggestions on how to maximize Tandem system performance by optimizing process variables and implement them upon Ward's approval. 11. The Supplier will research, configure, and activate Wards Tandem components, including, but not limited to operating system generation, and dynamic environment generation for new and replacement hardware components. 12. The Supplier will provide hardware maintenance and system software maintenance for the Wards Tandem systems. 13. The Supplier will recommend, evaluate, and perform all tasks that mandate advanced privileges for each system managed within strict guidelines of change control. 14. The Supplier will work with Wards and, if necessary PRI, to identify and correct problems within the Tandem system environments. 15. The Supplier will generate Ad-Hoc reports for Tandem systems and Pathway support in Enform, Cobol, TACL and ACCESS as required. 16. The Supplier will assist in providing project planning and quality assurance/testing for new or enhancement program implementation on Wards Tandem systems. TRACKING AND MEASUREMENT TOOLS FOR SYSTEMS MANAGEMENT - - ----------------------------------------------------- The Supplier is responsible for supplying all tools necessary to satisfy the specifications contained herein. The Supplier will make every effort to utilize tools and processes owned by Wards and already in place within the Wards facilities. The Supplier is free to recommend in writing to Wards additional or alternative tools or processes for Wards review and final approval. Wards must approve use of any new or equivalent tools and/or processes not already in place at Wards. TANDEM GUARDIAN . VIEWPT . VIEWPROC . EMSA . MEASURE . GPA . SCF . FUP 12 . PUP . CTTW . NMS . DSAP . DCOM . CMACOM(CMCOMO) . CMA . MS/ACCESS . AMCHKMM . MONITOR . REPORTVIEW
TANDEM MANAGEMENT RESPONSIBILITY MATRIX - - ------------------------------------------------------------------------------ TANDEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- CHANGE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Participate in the change management system used by Wards among all IS X operatives. - - ------------------------------------------------------------------------------------------------------------------- Review, provide and approve Change management system for implementation to X Wards system, environmental, and application environments. - - ------------------------------------------------------------------------------------------------------------------- Implement changes within the Wards environments using Wards standard and X documented process or processes - - ------------------------------------------------------------------------------------------------------------------- Disseminate information on scheduled or planned changes to Wards user community X - - ------------------------------------------------------------------------------------------------------------------- Provide Wards with regular reporting, by environment, of planned changes to X occur and the anticipated impact of the change - - ------------------------------------------------------------------------------------------------------------------- Provide a means to properly test all proposed changes to the environments X X prior to the implementation of the proposed change - - ------------------------------------------------------------------------------------------------------------------- Post all approved, planned changes on the Wards change Management system X - - ------------------------------------------------------------------------------------------------------------------- Provide methods and processes for accommodating regular, minor, major, and X emergency changes within the Wards environments - - ------------------------------------------------------------------------------------------------------------------- Support WARDS activities including hardware maintenance, X installation/de-installation, and facility changes in the Tandem processing facilities, as well as, software, systems, and applications installation, upgrades, and support - - ------------------------------------------------------------------------------------------------------------------- Provide WARDS with a weekly summary meeting and reporting of all proposed X changes to the environment on a rolling thirty (30), sixty (60), and ninety (90) day basis - - ------------------------------------------------------------------------------------------------------------------- Provide WARDS with risk assessments and anticipated impact of all proposed X changes to the operational and data center environments - - ------------------------------------------------------------------------------------------------------------------- Implement changes in accordance with established standards in the Procedures X Manual - - ------------------------------------------------------------------------------------------------------------------- Supplier will provide support for both testing and production support of all X changes implemented within the environments - - ------------------------------------------------------------------------------------------------------------------- Conduct post-implementation review meetings with Wards to review changes process X X - - ------------------------------------------------------------------------------------------------------------------- Provide emergency change management procedures in support of the Wards Tandem X environment where production issues involve product quality, personal safety, and Wards profitability. - - ------------------------------------------------------------------------------------------------------------------- PROBLEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Supplier will support new Wards initiatives X - - ------------------------------------------------------------------------------------------------------------------- Supplier will report progress to Wards based on the Wards assigned level of X severity - - ------------------------------------------------------------------------------------------------------------------- Supplier will develop and enhance procedures for problem escalation X - - ------------------------------------------------------------------------------------------------------------------- Conduct root cause analysis and review high-impact problems to identify X preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate - - -------------------------------------------------------------------------------------------------------------------
13
- - ------------------------------------------------------------------------------------------------------------------- TANDEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Utilize Supplier help desk to notify Supplier staff, Wards and other vendors X of hardware, software, and environmental failures according to the severity definitions and reporting/escalation guidelines in the procedures manual. - - ------------------------------------------------------------------------------------------------------------------- Initiating user verification of problem resolution. X - - ------------------------------------------------------------------------------------------------------------------- Work to reduce the overall resolution time for problem tickets regardless of X X where the root problem resides. - - ------------------------------------------------------------------------------------------------------------------- Escalate unresolved problem tickets that exceed agreed upon time frames by X severity to Wards as required. - - ------------------------------------------------------------------------------------------------------------------- Accept and resolve problems from the Supplier's Help Desk as determined to be X in the area of support of System Management by the Help Desk within time frames as specified by severity. - - ------------------------------------------------------------------------------------------------------------------- Re-route problems back to the Supplier's Help Desk as they are determined to X be outside of area of support of System Management. - - ------------------------------------------------------------------------------------------------------------------- Document problem resolution activities as they are completed or re-routed. X - - ------------------------------------------------------------------------------------------------------------------- COMPUTER OPERATIONS - - ------------------------------------------------------------------------------------------------------------------- Perform all manual and automated console operations and operate computer X equipment - - ------------------------------------------------------------------------------------------------------------------- Monitor performance of operating system and sub-systems and resolve problems/exceptions X - - ------------------------------------------------------------------------------------------------------------------- Identify and resolve systems and sub-systems problems X - - ------------------------------------------------------------------------------------------------------------------- Complete work, turnover and status logs X - - ------------------------------------------------------------------------------------------------------------------- Monitor and report Computer Room environmental variances and resolve X problems/exceptions - - ------------------------------------------------------------------------------------------------------------------- Provide all office and operations supplies including, but not limited to: X media, media storage units, printing consumables, PCs, workstations, monitoring tools etc. for Supplier's operations management staff. - - ------------------------------------------------------------------------------------------------------------------- Adhere to all Wards standards, methods, processes, and procedures X - - ------------------------------------------------------------------------------------------------------------------- PRODUCTION MONITORING AND SCHEDULING X - - ------------------------------------------------------------------------------------------------------------------- Establish and maintain centralized responsibility over production systems and X processes. - - ------------------------------------------------------------------------------------------------------------------- Provide resources for monitoring, reporting, and tracking of systems and X processes. - - ------------------------------------------------------------------------------------------------------------------- Report, document, and track failures within the production systems. X - - ------------------------------------------------------------------------------------------------------------------- Provide and maintain a method for proper escalation of failures. X - - ------------------------------------------------------------------------------------------------------------------- Ensure overnight processing is completed as scheduled. X - - ------------------------------------------------------------------------------------------------------------------- Provide reporting on production systems, daily on critical systems. X - - ------------------------------------------------------------------------------------------------------------------- Provide a master-scheduling function across environments. X - - ------------------------------------------------------------------------------------------------------------------- Provide a process for change requests in the scheduling of processes and X systems. - - ------------------------------------------------------------------------------------------------------------------- Develop, document, and enhance procedures for ensuring reliable monitoring and X scheduling of critical processes. - - ------------------------------------------------------------------------------------------------------------------- Conduct root cause analysis and review high-impact failures to identify X preventative measures, assess risk, and bring to closure. - - ------------------------------------------------------------------------------------------------------------------- Coordinate and integrate production schedules with applications groups. X - - ------------------------------------------------------------------------------------------------------------------- Modify and verify batch production schedules. X - - ------------------------------------------------------------------------------------------------------------------- Monitor, control and update the Tandem Netbatch processing systems. X - - ------------------------------------------------------------------------------------------------------------------- Generate required Ad-Hoc reports as required X - - ------------------------------------------------------------------------------------------------------------------- TAPE MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Complete all tape mount requests X - - -------------------------------------------------------------------------------------------------------------------
14
- - ------------------------------------------------------------------------------------------------------------------- TANDEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Monitor tape hardware for malfunction and resolve exceptions X - - ------------------------------------------------------------------------------------------------------------------- Perform daily tape hardware maintenance X - - ------------------------------------------------------------------------------------------------------------------- Specify tape retention periods X - - ------------------------------------------------------------------------------------------------------------------- Request changes to tape retention periods X - - ------------------------------------------------------------------------------------------------------------------- Implement requested changes to tape retention periods X - - ------------------------------------------------------------------------------------------------------------------- TAPE LIBRARY - - ------------------------------------------------------------------------------------------------------------------- Maintain integrity of tape library system X - - ------------------------------------------------------------------------------------------------------------------- Monitor tape usage and resolve problems/exceptions X - - ------------------------------------------------------------------------------------------------------------------- Maintain and monitor "foreign" tape library and resolve exceptions X - - ------------------------------------------------------------------------------------------------------------------- Initialize new tapes X - - ------------------------------------------------------------------------------------------------------------------- Establish off-site storage requirements X - - ------------------------------------------------------------------------------------------------------------------- Coordinate offsite storage functions including logging, tracking labeling, X ordering, receiving and sending tapes - - ------------------------------------------------------------------------------------------------------------------- Approve third party suppliers and facility X - - ------------------------------------------------------------------------------------------------------------------- Manage third party contract X - - ------------------------------------------------------------------------------------------------------------------- Audit third party supplier annually X - - ------------------------------------------------------------------------------------------------------------------- Inspect/audit third party supplier facility as deemed necessary X - - ------------------------------------------------------------------------------------------------------------------- BACKUPS - - ------------------------------------------------------------------------------------------------------------------- Determination of what data is backed up and how much X - - ------------------------------------------------------------------------------------------------------------------- Determination of how long data is kept X - - ------------------------------------------------------------------------------------------------------------------- Perform backup as scheduled X - - ------------------------------------------------------------------------------------------------------------------- Maintain library of backups X - - ------------------------------------------------------------------------------------------------------------------- Management of off-site storage X - - ------------------------------------------------------------------------------------------------------------------- Restore system data as required X - - ------------------------------------------------------------------------------------------------------------------- Restore user data as required X - - ------------------------------------------------------------------------------------------------------------------- FACILITIES MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Plan & manage installation of computer & environmental equipment in data X center. - - ------------------------------------------------------------------------------------------------------------------- Oversee equipment moves/ensures operation to specifications post-move X - - ------------------------------------------------------------------------------------------------------------------- Maintain physical inventory and blueprint of all hardware and accurate cabling X diagrams. - - ------------------------------------------------------------------------------------------------------------------- Administer contract services and other third party agreements (Environmental, X security and other companies) - - ------------------------------------------------------------------------------------------------------------------- Monitor and maintain all data center facilities located at Supplier's site(s) X to assure availability, including: HVAC, Power distribution units, uninterruptable power switch (UPS), and backup power systems. - - ------------------------------------------------------------------------------------------------------------------- PHYSICAL SECURITY ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------- Implement mutually agreed security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Provide administrative and technical support for physical security X - - ------------------------------------------------------------------------------------------------------------------- Monitor and respond to Supplier alarm system X - - ------------------------------------------------------------------------------------------------------------------- Provide emergency response and notification (Fire etc.) X - - ------------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY SUPPORT - - ------------------------------------------------------------------------------------------------------------------- Develop, maintain and test disaster recovery plan and procedure manuals including third X - - -------------------------------------------------------------------------------------------------------------------
15
- - ------------------------------------------------------------------------------------------------------------------- TANDEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- party hot and cold site recovery plans for all Tandem services provided to Wards - - ------------------------------------------------------------------------------------------------------------------- Maintain capacity plan for disaster recovery for all services provided to Supplier X - - ------------------------------------------------------------------------------------------------------------------- Maintain an on-line document listing which platforms and applications are covered X - - ------------------------------------------------------------------------------------------------------------------- Maintain third party contracts X - - ------------------------------------------------------------------------------------------------------------------- Coordinate disaster recovery testing. X X - - ------------------------------------------------------------------------------------------------------------------- Participate in disaster recovery testing with Supplier and perform recover X tests for all services provided to Supplier - - ------------------------------------------------------------------------------------------------------------------- Perform disaster recovery testing, resolve cause of failure and re-test until X successful for all services provided to Supplier - - ------------------------------------------------------------------------------------------------------------------- Report disaster recovery test results to Supplier X - - ------------------------------------------------------------------------------------------------------------------- Confirm test results X - - ------------------------------------------------------------------------------------------------------------------- Implement recovery plan at hot site/cold site for all services provided to X Supplier - - ------------------------------------------------------------------------------------------------------------------- Prioritize recovery of data when disaster occurs X - - ------------------------------------------------------------------------------------------------------------------- Restore to normal operations in the event of a disaster within defined service X levels - - ------------------------------------------------------------------------------------------------------------------- Assure TOS version/module update matches production system X - - ------------------------------------------------------------------------------------------------------------------- Maintain D/R site sys procs synchronous to production X - - ------------------------------------------------------------------------------------------------------------------- Supplier will maintain disaster recovery Tandem systems to match production X system TOS release and system installation configuration to assure CMA/Network/Pathway environment synchronicity. - - ------------------------------------------------------------------------------------------------------------------- STRATEGY AND PLANNING - - ------------------------------------------------------------------------------------------------------------------- Understand & document Ward's business requirements X X - - ------------------------------------------------------------------------------------------------------------------- Assist with direction setting and updating of standards X - - ------------------------------------------------------------------------------------------------------------------- Research emerging technology and propose effective solutions X X - - ------------------------------------------------------------------------------------------------------------------- Advise on use of emerging technology and proposed solutions X - - ------------------------------------------------------------------------------------------------------------------- Assist in developing Standard Operating Procedures (SOPs) X - - ------------------------------------------------------------------------------------------------------------------- CONTRACTS MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Ensure compliance with maintenance and warranty agreements X - - ------------------------------------------------------------------------------------------------------------------- Negotiate new and/or renew agreements X - - ------------------------------------------------------------------------------------------------------------------- Manage contract terms and conditions (e.g. expiration date) X - - ------------------------------------------------------------------------------------------------------------------- Communicate contract provisions internally and to Wards, as needed X - - ------------------------------------------------------------------------------------------------------------------- The Supplier will act as third party maintenance provider interface for all X services under control of the Supplier as described in this document, whether Wards or the Supplier provides the maintenance service. - - ------------------------------------------------------------------------------------------------------------------- STATUS REPORTING AND MEETINGS - - ------------------------------------------------------------------------------------------------------------------- Prepare weekly status report X - - ------------------------------------------------------------------------------------------------------------------- Conduct weekly status meetings X - - ------------------------------------------------------------------------------------------------------------------- Review and edit weekly status report and attend weekly meeting X - - ------------------------------------------------------------------------------------------------------------------- Prepare monthly service level / performance reports X - - ------------------------------------------------------------------------------------------------------------------- Analyze results of monthly reports and historical trends X X - - ------------------------------------------------------------------------------------------------------------------- Identify areas for improvement X X - - ------------------------------------------------------------------------------------------------------------------- Prepare management briefing for service level results X X - - ------------------------------------------------------------------------------------------------------------------- Conduct Wards monthly management review meeting X - - -------------------------------------------------------------------------------------------------------------------
16
- - ------------------------------------------------------------------------------------------------------------------- TANDEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Attend monthly management review X X - - ------------------------------------------------------------------------------------------------------------------- Plan the implementation of action items resulting from, & agreed to during, X mgmt review meeting - - ------------------------------------------------------------------------------------------------------------------- Implement action items resulting from, & agreed to during, mgmt review meeting. X - - ------------------------------------------------------------------------------------------------------------------- Audit/request service level/performance and activity reports as needed X - - ------------------------------------------------------------------------------------------------------------------- Approve new or changes to service level/performance reports as needed. X - - ------------------------------------------------------------------------------------------------------------------- Participate in a Ward's daily operational status meeting to report on X X operational, environmental and batch job completion. - - ------------------------------------------------------------------------------------------------------------------- HUMAN RESOURCES - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- Ensure adequate training & review of all personnel performing Supplier X activities. - - ------------------------------------------------------------------------------------------------------------------- Implement corrective actions as needed X - - ------------------------------------------------------------------------------------------------------------------- SYSTEM SOFTWARE MAINTENANCE - - ------------------------------------------------------------------------------------------------------------------- Install and maintain the system software environment. X - - ------------------------------------------------------------------------------------------------------------------- CAPACITY PLANNING - - ------------------------------------------------------------------------------------------------------------------- Monitor system use and capacity, and resolve problems/exceptions X - - ------------------------------------------------------------------------------------------------------------------- Forecast resource requirements X X - - ------------------------------------------------------------------------------------------------------------------- Ensure appropriate capacity to meet resource projections X - - ------------------------------------------------------------------------------------------------------------------- Analyze workload capacity X - - ------------------------------------------------------------------------------------------------------------------- Prepare and produce resource planning reports X - - ------------------------------------------------------------------------------------------------------------------- Analyze and report resource trends X - - ------------------------------------------------------------------------------------------------------------------- Make recommendations regarding resource consumption and trends X - - ------------------------------------------------------------------------------------------------------------------- Report usage and resource capacity to Supplier on a periodic basis X - - ------------------------------------------------------------------------------------------------------------------- PERFORMANCE TUNING - - ------------------------------------------------------------------------------------------------------------------- Conduct system performance tuning X - - ------------------------------------------------------------------------------------------------------------------- Conduct application performance tuning X - - ------------------------------------------------------------------------------------------------------------------- Provide performance reporting X - - ------------------------------------------------------------------------------------------------------------------- Provide technical support for applications tuning efforts X - - ------------------------------------------------------------------------------------------------------------------- Conduct application and hardware benchmarks, if required X - - ------------------------------------------------------------------------------------------------------------------- Conduct system performance reviews X - - ------------------------------------------------------------------------------------------------------------------- Measure and analyze system performance X - - ------------------------------------------------------------------------------------------------------------------- Review system performance and request adjustments where deemed necessary X - - ------------------------------------------------------------------------------------------------------------------- DISK MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- Monitor and control storage performance and resolve exceptions X - - ------------------------------------------------------------------------------------------------------------------- Assign and initialize volumes X - - ------------------------------------------------------------------------------------------------------------------- Provide disk utilization forecasts X - - ------------------------------------------------------------------------------------------------------------------- Determine file and volume placement X X - - ------------------------------------------------------------------------------------------------------------------- Set and maintain storage resource efficiency X - - ------------------------------------------------------------------------------------------------------------------- Maintain established storage standards X - - ------------------------------------------------------------------------------------------------------------------- Maintain space requirements according to Wards demand X - - -------------------------------------------------------------------------------------------------------------------
17
- - ------------------------------------------------------------------------------------------------------------------- TANDEM MANAGEMENT - - ------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------- Initiate requests for storage resource increases and decreases X - - ------------------------------------------------------------------------------------------------------------------- Perform data migration management X - - ------------------------------------------------------------------------------------------------------------------- PHYSICAL SECURITY ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------- Implement security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Provide administrative and technical support for physical security X - - ------------------------------------------------------------------------------------------------------------------- Monitor and respond to alarm system X - - ------------------------------------------------------------------------------------------------------------------- Provide emergency response and notification (Fire etc.) X - - ------------------------------------------------------------------------------------------------------------------- DATA SECURITY ADMINISTRATION - - ------------------------------------------------------------------------------------------------------------------- Define security policies X - - ------------------------------------------------------------------------------------------------------------------- Define security standards and guidelines X - - ------------------------------------------------------------------------------------------------------------------- Provide passwords and logon ids to security officer X - - ------------------------------------------------------------------------------------------------------------------- Administer security databases (user privileges) X - - ------------------------------------------------------------------------------------------------------------------- Implement security audit recommendations X - - ------------------------------------------------------------------------------------------------------------------- Enforce security standards X - - ------------------------------------------------------------------------------------------------------------------- The Supplier will create, document and maintain security schemas, profiles and X procedures for all Tandem system resources as directed by Wards security policy. - - ------------------------------------------------------------------------------------------------------------------- SECURITY SOFTWARE MAINTENANCE - - ------------------------------------------------------------------------------------------------------------------- Software update and implementation X - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- Participate and approve results of changes to security software X X - - ------------------------------------------------------------------------------------------------------------------- Administer login Ids and reset passwords for data access - - ------------------------------------------------------------------------------------------------------------------- Classify Information security level X - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------------------------------- CMA SYSTEM NETWORK MAINTENANCE - - ------------------------------------------------------------------------------------------------------------------- Provide network configuration change requirements X - - ------------------------------------------------------------------------------------------------------------------- Verify change coordination with other platforms X X - - ------------------------------------------------------------------------------------------------------------------- Complete CMA network generation process X - - ------------------------------------------------------------------------------------------------------------------- Install network modifications for Tandem and VTAM defines X - - ------------------------------------------------------------------------------------------------------------------- Implement updated Pathway environments for new network X - - ------------------------------------------------------------------------------------------------------------------- PATHWAY TABLES MAINTENANCE - - ------------------------------------------------------------------------------------------------------------------- Provide Pathway table change requirements X - - ------------------------------------------------------------------------------------------------------------------- Verify change coordination with other parties X X - - ------------------------------------------------------------------------------------------------------------------- Apply/verify required table changes via screen or programmatic entry X - - ------------------------------------------------------------------------------------------------------------------- APPLICATION SUPPORT - - ------------------------------------------------------------------------------------------------------------------- Provide Network Database creation, update, and install functions as required X to implement full Tandem system network control for production. - - ------------------------------------------------------------------------------------------------------------------- Create and maintain upgrades for automation procedures used for network X control, CMA database management, pathway environment database management and statistics gathering, as are currently implemented by Wards. - - -------------------------------------------------------------------------------------------------------------------
18
TANDEM MANAGEMENT - - ----------------------------------------------------------------------------------------------------------------------- RESPONSIBILITY DESCRIPTION WARDS SUPPLIER - - ------------------------------------------------------------------------------------------------------------------------ Act as assisting party in activities required for testing and management of development systems for Wards Test Tandem system. [X] - - ------------------------------------------------------------------------------------------------------------------------ Research, advise, and manipulate flat files in support of Wards database administration and applications development groups as directed by Wards. [X] - - ------------------------------------------------------------------------------------------------------------------------ Provide assistance required to complete code testing, program management, system integration and production implementation for Tandem system Year 2000 project support. [X] - - ------------------------------------------------------------------------------------------------------------------------
GLOSSARY OF TERMINOLOGY APPLICATION SUPPORT Describes all tasks associated with the operations and systems support of Wards Developed Software. See Configuration Management Application(CMA) definition as example. WARDS DEVELOPED SOFTWARE Describes any software application developed by Wards personnel, or third party as a stand alone application, client or server application, system device driver, adjunct or peripheral device driver, or application enhancement capable of operating in the Wards Tandem computing environment. WARDS PURCHASED SOFTWARE Describes any software application not developed by Wards personnel capable of operating in the Wards network computing environment. WARDS SUPPORTED SOFTWARE Combination of both Wards Developed Software and Wards Purchased Software. WARDS USER COMMUNITY All users of Wards IT services including but not limited to Wards employees, subcontractors, and Wards stores. CONSOLE MANAGEMENT The act of entering Operating System or sub-system commands at a system terminal, including any switch, key, dial or button located on a system unit. CONFIGURATION MANAGEMENT Utility used to configure and maintain a virtual APPLICATION(CMA) application port to a physical machine port in DE-INSTALLATION support of PRI applications. Removal of a device from the Wards computing environment. This includes returning the device to the Lessor. HARDWARE Describes any stand-alone or network attached Computing Platform, Printer, Plotter, Peripheral, Adjunct device in the Wards network computing environment. LESSOR The hardware supplier of choice for Wards leased Computing Platform devices. MEDIA Any removable and transportable data storage medium used to backup, retain, and restore data, including but not limited to: reel tape, cartridge tape(3490,TK50,TK70,DAT,4mm,8mm), or Compact Disc. NETBATCH Tandem batch utility. NETWORK DATABASE Database used by Configuration Management Application(CMA). PEAK RETAIL PERIOD Wards largest revenue period defined as November 20 - December 31 of any same year. PERIPHERAL Describes any accessory device used in conjunction with other hardware or software devices. 19 PLOTTER Describes both individual and networked (shared) plotters in the Wards computing environment. PRINTER Describes both individual and networked (shared) printers in the Wards computing environment. PROBLEM Problem, deficiency, or delay as reported by a member of the Wards user community. RESOLVED PROBLEM CALL Supplier has taken action to correct a problem or deficiency to the satisfaction of the Wards user who reported the problem. SUPPLIER The company providing the contracted services as defined in this document. BATCH REPORTS [_] Check System Secondary Placements [_] Check Collections Graphic Report [_] Check Activity Report [_] Daily Flash Sales Report [_] Quarterly Purge/Reload of Check/Account Files w/functional report [_] Monthly Management Status Report [_] ORRM(Original Receipted Refund Match) Dups Report [_] ORRM Delete Function/Report [_] ORRM Over Limit Report [_] ORRM Audit Report [_] ORRM Exception Report 20 EXHIBIT C CHARGES MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM:....................... $60,000 A. SCOPE: 1. Tandem support , disaster recovery and account management services as set forth in Exhibit B. --------- 2. Current Tandem hardware configuration as set forth on attached schedule. B. PASS-THROUGH EXPENSES - Tandem Third Party Software licenses and maintenance costs incurred by Supplier should be invoiced to Wards as Pass-Through Expenses at cost. - All telecommunications lines charges necessary for connectivity between Wards corporate complex, Signature and Supplier's data center. C. OUT-OF-SCOPE During the Service Agreement Term, services requested by Wards that are not within the scope of the Tandem Services as set forth in Exhibit B should be --------- invoiced to Wards at cost plus 20%. D. TERMINATION CHARGES - In the event of termination for any reason, Wards shall repurchase the Tandem equipment acquired by Supplier at the unamortized principal balance set forth in the attached schedule. 21 TANDEM ONE-TIME AMORTIZATION ---------------------------- SCHEDULE --------
Beginning Unamortized Principal Monthly Interest Principal Principal Month Balance Payment Expense Reduction Balance - - ------------ ------------- ------------- ------------- ------------- -------------- 1 $350,000.00 $10,967.73 $2,333.33 $ 8,634.39 $341,365.61 2 $341,365.61 $10,967.73 $2,275.77 $ 8,691.96 $332,673.65 3 $332,673.65 $10,967.73 $2,217.82 $ 8,749.90 $323,923.74 4 $323,923.74 $10,967.73 $2,159.49 $ 8,808.24 $315,115.51 5 $315,115.51 $10,967.73 $2,100.77 $ 8,866.96 $306,248.55 6 $306,248.55 $10,967.73 $2,041.66 $ 8,926.07 $297,322.48 7 $297,322.48 $10,967.73 $1,982.15 $ 8,985.58 $288,336.90 8 $288,336.90 $10,967.73 $1,922.25 $ 9,045.48 $279,291.42 9 $279,291.42 $10,967.73 $1,861.94 $ 9,105.79 $270,185.63 10 $270,185.63 $10,967.73 $1,801.24 $ 9,166.49 $261,019.14 11 $261,019.14 $10,967.73 $1,740.13 $ 9,227.60 $251,791.54 12 $251,791.54 $10,967.73 $1,678.61 $ 9,289.12 $242,502.43 13 $242,502.43 $10,967.73 $1,616.68 $ 9,351.05 $233,151.38 14 $233,151.38 $10,967.73 $1,554.34 $ 9,413.39 $223,738.00 15 $223,738.00 $10,967.73 $1,491.59 $ 9,476.14 $214,261.85 16 $214,261.85 $10,967.73 $1,428.41 $ 9,539.32 $204,722.54 17 $204,722.54 $10,967.73 $1,364.82 $ 9,602.91 $195,119.63 18 $195,119.63 $10,967.73 $1,300.80 $ 9,666.93 $185,452.70 19 $185,452.70 $10,967.73 $1,236.35 $ 9,731.38 $175,721.32 20 $175,721.32 $10,967.73 $1,171.48 $ 9,796.25 $165,925.07 21 $165,925.07 $10,967.73 $1,106.17 $ 9,861.56 $156,063.51 22 $156,063.51 $10,967.73 $1,040.42 $ 9,927.30 $146,136.20 23 $146,136.20 $10,967.73 $ 974.24 $ 9,993.49 $136,142.72 24 $136,142.72 $10,967.73 $ 907.62 $10,060.11 $126,082.61 25 $126,082.61 $10,967.73 $ 840.55 $10,127.18 $115,955.43 26 $115,955.43 $10,967.73 $ 773.04 $10,194.69 $105,760.74 27 $105,760.74 $10,967.73 $ 705.07 $10,262.66 $ 95,498.08 28 $ 95,498.08 $10,967.73 $ 636.65 $10,331.07 $ 85,167.01 29 $ 85,167.01 $10,967.73 $ 567.78 $10,399.95 $ 74,767.06
22 30 $ 74,767.06 $10,967.73 $ 498.45 $10,469.28 $ 64,297.78 31 $ 64,297.78 $10,967.73 $ 428.65 $10,539.08 $ 53,758.70 32 $ 53,758.70 $10,967.73 $ 358.39 $10,609.34 $ 43,149.37 33 $ 43,149.37 $10,967.73 $ 287.66 $10,680.07 $ 32,469.30 34 $ 32,469.30 $10,967.73 $ 216.46 $10,751.27 $ 21,718.03 35 $ 21,718.03 $10,967.73 $ 144.79 $10,822.94 $ 10,895.09 36 $ 10,895.09 $10,967.73 $ 72.63 $10,895.09 ($0.00)
TANDEM CONFIGURATION CPU - - --- 1 K2006 Tandem Himalaya w/6 Processors w/256 MB Memory each Guardian D43 or greater (3 CPU cabinets - 3 I/O cabinets) I/O CONTROLLERS - - --------------- 12 MFC (MULTI FUNCTION CONTROLLERS 3681) (Multi Function controllers used for Disk, Terminals and additional 5515 desk top printer DISK DRIVES - - ----------- 16 4260 8 mirrored drives - 4.0 GB each. CARTRIDGE DRIVES 1 5196 Cartridge Drive PRINTER 1 3601 To support a 600 LPM 5516 Printer COMMUNICATION CONTROLLERS - - ------------------------- 14 3604 Bit Sync Controller (4 RS232 Ports) 1 3605 Bit/Byte/Async Controller (4 RS232 Ports) 1 3606 Async Controller (16 ports each) 23 3 3615 Ethernet Adapter 4 3616 Token Ring Controller 24 EXHIBIT D SERVICE LEVEL AGREEMENT SERVICE LEVEL AGREEMENT ----------------------- FOR TANDEM SERVICES 25 TABLE OF CONTENTS
Page ---- I. GENERAL......................................................................... 27 A. General................................................................... 27 B. Definitions............................................................... 27 C. Measurement............................................................... 28 D. Effective Date for Service Levels......................................... 28 E. Revisions................................................................. 28 F. Single Point of Contact................................................... 38 II. SERVICE LEVELS A. Definitions............................................................... 29 B. Service Level Measures.................................................... 29 C. Service Levels............................................................ 35 III. SERVICE LEVEL CREDITS........................................................... 38 A. Credits................................................................... 38 B. Method of Calculation..................................................... 38 C. Frequency Factor.......................................................... 38 D. Excused Performance Problem............................................... 39 E. Time Limit................................................................ 39 IV. SERVICE LEVEL TERMINATION EVENTS................................................ 40 A. Definition................................................................ 40 B. Repeated Service Level Failures........................................... 40 C. Repeated Critical Service Level Failures.................................. 41 D. Catastrophic Level of Service............................................. 41 E. Qualification............................................................. 41
SERVICE LEVEL AGREEMENT FOR TANDEM SERVICES I. GENERAL A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT. This Service Level Agreement is entered into under the Master Agreement for Information Technology Services between Acxiom Corporation ("Supplier") and Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and pertains to Service Agreement No. 7: Tandem Services entered into by Wards and Supplier. Any inconsistency between this Agreement, the Service Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of the Master Agreement. B. DEFINITIONS In this Service Level Agreement ("SLA"), the terms listed below shall have the indicated meanings. Other terms may be defined in other sections of this SLA. Terms used in this SLA without definition have the meanings ascribed to them in the Master Agreement or Service Agreement. 1. Service Level Measure - For any Service identified in this SLA, --------------------- the method specified in this SLA for quantitatively calculating Supplier's actual performance. The results of these calculations are compared with Service Levels to evaluate Supplier's compliance with Service Levels. 2. Service Levels - For any Service identified in this SLA, the -------------- required quantitative level or degree of performance by Supplier specified in this SLA as the "Service Level." The Service Levels are the minimally acceptable levels of service for the Services. Any failure to meet a Service Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 3. Increased Impact Level - For any Service identified in this SLA, ---------------------- the required quantitative level or degree of performance by Supplier specified in this SLA as the "Increased Impact Level." Any failure to meet an Increased Impact Level is unacceptable and may constitute, based upon the facts and circumstances, a material breach of Supplier's obligations under the Service Agreement. 4. Critical Service Levels - Service Levels associated with those ----------------------- Services that are most important to the conduct of Wards' operations, which are the subject of this Service Agreement. 5. Service Level Credits - The amounts which Wards shall have the --------------------- option, but not the obligation, to recover as liquidated damages, in lieu of any other monetary remedies Wards may have, each time Supplier fails to meet the Service Levels for any reason other than those specified in Section III.D of this SLA. Service Level Credits are calculated in the manner described in Section III of this SLA. 6. Service Level Termination Event - An occurrence or series of ------------------------------- occurrences of deficient performance by Supplier in performing the Services specified in this SLA as a "Service Level Termination Event." The occurrence of a Service Level Termination Event constitutes, based upon the facts and circumstances, a material breach of Supplier's performance obligations under this Service Agreement and gives Wards the right to terminate this Service Agreement for cause. C. MEASUREMENT Unless otherwise stated in this SLA, each Service Level Measure shall be calculated on a complete calendar month basis. Performance results shall be measured and reported based on actual results with any exceptions for Excused Performance Problems reported separately. D. EFFECTIVE DATE FOR SERVICE LEVELS The Service Levels provided for in this SLA shall be applicable beginning effective on the Service Level Agreement Commencement Date. E. REVISIONS 1. From time to time during the Term, the Parties agree to negotiate in good faith to add, delete, or modify then-existing Service Level Measures, Service Levels, and Increased Impact Levels to reflect changes in Wards' business requirements or objectives. All such changes shall be adopted in the form of a signed written amendment to this SLA. 2. In the event that any applicable system or function is replaced during the Term by a comparable system or function, the Service Level Measure, Service Level, and Increased Impact Level for such replacement system or function shall, to the extent reasonably practicable (i) be defined during the first 30 days of such replacement, and (ii) must be at least equivalent to the then- existing Service Level Measure, Service Level, and Increased Impact Level for the replaced system or function (assuming the replacement system is capable of delivering the same Service Levels as the replaced system). 3. At all times during the Term, Supplier shall provide the Services in a manner that meets or exceeds the then-existing Service Levels. The remedies for failure to do so shall include the remedies defined in this SLA, the Service Agreement, and the Master Agreement. F. SINGLE POINT OF CONTACT Regardless of whether any failure by Supplier to meet a Service Level is attributable to Supplier or an Excused Performance Problem, Supplier shall provide a single point of contact to address resolution of such failure and shall act promptly to address the problem causing the failure. Unless otherwise agreed by 28 Wards, the Supplier Project Executive or his or her designee shall be the Supplier's single point of contact. II. SERVICE LEVELS A. DEFINITIONS Certain technical definitions are included in the Glossary of Terminology that is part of Exhibit B of the Service Agreement. B. SERVICE LEVEL MEASURES SERVICE SPECIFICATIONS FOR OPERATIONS MANAGEMENT DATA BACKUP, ARCHIVING, AND RESTORATION --------------------------------------- Objective: To ensure proper safeguards are being taken by the Supplier to protect critical Wards data with consistent, reliable, and documented process(es) for management of data backups, data archives, and off-site data rotation across the Wards environments under the Supplier's span of control. DEFINITION: The Suppliers processes for Data Backup and Archiving of critical data as designated by Wards within the Wards Tandem environment. Ensuring the Suppliers processes have identified and are backing up or archiving these critical files. METHOD: The Supplier will document and maintain the location of critical Wards data and the process used to backup and restore this data if required. The Supplier will provide appropriate tools and processes for managing and measuring compliance with established Data Backup and Archiving guidelines within their control. SERVICE LEVEL:
Values Metrics ------------------------------------------------------------------------------------- Service Level - 99.9% of all designated critical data is being backed up and stored as required as per the procedures manual. ------------------------------------------------------------------------------------- Increased Impact - Less than 99.2% of all designated critical data is being backed up and stored as required as per the procedures manual. -------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards User Community, Wards Disaster Recovery Plan RESPONSIBILITY: Supplier PERIOD: Monthly REPORT: See Master Agreement Schedule D, Reporting 29 ACTION: See Master Agreement Schedule D II, Action Type-I DISASTER RECOVERY PLAN ---------------------- OBJECTIVE: To provide Tandem disaster recovery services for the Wards Disaster Recovery Plan, which is a non-contractual document. The target is to provide on-going Tandem system services to Wards within 48 hours of a declared disaster, including system processes as well as all Wards critical Tandem applications DEFINITION: Supplier declares a disaster when Supplier services to Wards are interrupted due to significant equipment, computer or network related failure as specified in the Wards Disaster Recovery Plan. METHOD: A declared disaster will be announced by the Supplier Contract Manager as provided in the Wards Disaster Recovery Plan. SERVICE LEVEL:
Values Metrics ------------------------------------------------------------------------------------------------ Service Level Complete restoration of Tandem system and applications to Wards in compliance with the Wards Disaster Recovery Plan ------------------------------------------------------------------------------------------------ Increased Impact Complete restoration of Tandem system and applications to Wards not more than 12 hours of the time period specified by the Wards Disaster Recovery Plan ------------------------------------------------------------------------------------------------
IMPACT: High AFFECTED AREA: Wards RESPONSIBILITY: Supplier PERIOD: monthly REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D II, Action Type-I DISASTER RECOVERY TEST ---------------------- OBJECTIVE: Supplier will demonstrate its ability to restore Ward's Tandem systems and applications in accordance with the Wards Disaster Recovery Plan in the event of a disaster. Supplier will be responsible for the 30 successful execution of the Supplier provided disaster recovery plan for Ward's Tandem system and applications processing. DEFINITION: Disaster recovery testing is the process by which Supplier ensures that the services being provided to Wards can be restored in a swift and accurate manner following a disaster situation in accordance with the Wards Disaster Recovery plan, which is a non-contractual document. This service level is valid as long as Wards participates in the disaster recovery planning, and testing process as defined in the Procedures Manual and as mutually agreed to by Supplier and Wards. METHOD: Supplier will test the Tandem platform once a year. Supplier will provide a full report of the success of each test to a designated Wards representative within one week of the completion of a test. SERVICE LEVEL: Values Metric -------------------------------------------------------------- Service Level For each scheduled test, critical services specified by Wards are tested according to Wards requirements -------------------------------------------------------------- Increased Impact For each scheduled test, critical services specified by Wards are not tested according to requirements -------------------------------------------------------------- IMPACT: Medium AFFECTED AREA: Disaster Recovery Plan RESPONSIBILITY: Supplier PERIOD: Full disaster recovery tests will be conducted by Supplier at Wards' request with selected Wards entities recovering their operations in accordance with the Wards Disaster Recovery Plan. A full report of the success of each test will be submitted to a designated Wards representative within one week of the completion of a test. RESOURCE RANGE: REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D- II, Action Type-II 31 ONLINE AVAILABILITY ------------------- OBJECTIVE: Monitoring availability and performance according to defined targets. Starting and stopping defined online services according to specified service availability schedules. Initiating Problem Management procedures to rectify any performance or availability failures. DEFINITION: Check collection authorization, data collect and check collection applications are scheduled to be available from 06:00 to 23:59, except for Thanksgiving Day, Christmas Day and Easter Day. METHOD: Monitoring all online services to ensure their performance and availability remains within stated service levels. The Supplier will provide console or other appropriate management processes to control the Wards Tandem environments within their control. SERVICE LEVEL: Values Metric -------------------------------------------------------------- Service Level - 99.9% of all Online Services have been maintained to Wards schedules. -------------------------------------------------------------- Increased Impact - Less than 99.4% of all Online Services have been maintained to Wards schedules. -------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Employees, applications, distribution and stores. RESPONSIBILITY: Supplier PERIOD: Monthly REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D, Corrective Action for Service Level Metrics, Action Type-I 32 SERVICE SPECIFICATIONS FOR SYSTEM MANAGEMENT - - -------------------------------------------- SOFTWARE UPGRADES ----------------- OBJECTIVE: To maintain Wards Tandem system software at a current release, unless otherwise stipulated by Wards. DEFINITION: Installing or upgrading versions of the Tandem system software as listed in Exhibit G. METHOD: Supplier will be required to provide software inventory reports indicating each product's release level per Tandem system at Wards request. SERVICE LEVEL: ------------------------------------------------------------ Values Metric ------------------------------------------------------------ Service Level - All Tandem system software maintained within 4 months of most current release, or as mutually agreed upon by Wards and Supplier. PTFs to correct a known problem will be installed within 48 hours, or as mutually agreed upon by Wards and Supplier. ------------------------------------------------------------ Increased Impact - All Tandem system software maintained at more than 6 months of most current release, or as mutually agreed upon by Wards and Supplier. ------------------------------------------------------------ IMPACT: Medium AFFECTED AREA: Wards User Community RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 7x24x365. RESOURCE RANGE: For all Wards Tandem systems, present and future, which are under the Supplier's management. REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D- II, Action Type - II REQUEST TIME TO COMPLETE ------------------------ OBJECTIVE: To insure that pre-defined Tandem system environment modification requests are completed in an acceptable amount of time. DEFINITION: Tandem system environment modification requests are those Tandem system management functions performed by the Supplier in comprehensive support of the Tandem system processing environment. 33 METHOD: The Supplier provided change management system or Supplier provided help desk problem tracking system will be used to calculate time to complete. SERVICE LEVEL: ----------------------------------------------------------- Values Metric ----------------------------------------------------------- Service Level - 95% of requests completed by agreed upon target dates. ----------------------------------------------------------- Increased Impact - Less than 90% of requests completed by agreed upon target dates. ----------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards User Community RESPONSIBILITY: Supplier PERIOD: Monthly HOURS OF OPERATION: 06:00 - 23:59 RESOURCE RANGE: For all Wards Tandem systems, present and future, which are under the Supplier's management. REPORT: See Master Agreement Schedule D, ReportingACTION: See Master Agreement Schedule D- II, Action Type - I RESPONSE TIME ------------- OBJECTIVE: Supplier will provide acceptable response times for end users. DEFINITION: Measured as internal port-to-port response time. Application Service Level Increased Impact - - -------------------------------------------------------------------------------- LU- Big Ticket Sub- seconds More than 1.5 seconds - - -------------------------------------------------------------------------------- Credit and Check on Sub seconds Greater than 1.5 seconds Authorization - - -------------------------------------------------------------------------------- METHOD: Data Capture: The Supplier will use Supplier provided manual records, job logs, systems logs, and any other tools available to determine the response time Measurement Interval: At least once per period or by exception (i.e. missing a threshold). Supplier will provide monthly summary reports to Wards Management for review. 34 SERVICE LEVEL: ---------------------------------------------------------------- Description Data Point ---------------------------------------------------------------- Service Level 98% of Tandem system transactions are completed in less than service level response time. ---------------------------------------------------------------- Increased Impact Less than 97% of Tandem system transactions are completed in less than the increased impact response time. ---------------------------------------------------------------- IMPACT: High AFFECTED AREA: Wards Offices and Employees RESPONSIBILITY: Service Performance: Supplier provides all services related to this Service Level. Compliance Management: Supplier provides calculation, reporting and analysis for this Service Level PERIOD: Monthly HOURS OF OPERATION: 06:00 - 23:59 RESOURCE RANGE: This service level is valid, provided the transaction rates do not exceed benchmarked transactions per day: REPORT: See Master Agreement Schedule D, Reporting ACTION: See Master Agreement Schedule D - II, Type-I C. SERVICE LEVELS ------------------- The Service Levels are identified in the following table(s). Each Service Level is assigned a Severity Weight in the following table(s), which is used in the calculation of the Service Level Credits. The Severity Weights are expressed as percentages, totaling 100% for all Service Levels, and approximate the relative severity of the impact on Wards operations of failures to meet the respective Service Levels. The parties acknowledge that these percentages are approximations of probable severity and relative importance and do not limit Wards' right to contend that one or more failures to meet one or more of the Service Levels may constitute a material breach of the Agreement. Upon 30 days advance notice to Supplier, Wards may adjust the Severity Weights of the respective Service Levels as Wards deems appropriate so long as the total of such percentages does not exceed 100%. 35
- - ---------------------------------------------------------------------------------------------------------------------------- SERVICE DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED LEVEL MEASUREMENT WEIGHT IMPACT LEVEL STANDARD ID - - ---------------------------------------------------------------------------------------------------------------------------- DATA BACKUP, 5 99.9% of all Less than 99.2% of ARCHIVING AND designated all designated RESTORATION critical data critical data is is being being backed up backed up and stored as and stored as required as per required as the procedures per the manual. procedures manual. - - ---------------------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY Complete Complete PLAN restoration of restoration of Tandem Tandem system and system and applications to applications Wards not more to Wards in than 12 hours of compliance with the time period the Wards specified by the Disaster Wards Disaster Recovery Plan Recovery Plan - - ---------------------------------------------------------------------------------------------------------------------------- DISASTER RECOVERY For each For each scheduled TEST scheduled test, test, critical critical services specified services by Wards are not specified by tested according Wards are to requirements tested according to Wards requirements - - ---------------------------------------------------------------------------------------------------------------------------- ONLINE AVAILABILITY 80 99.9% of all Less than 99.4% of Online Services all Online have been Services have been maintained to maintained to Wards schedules. Wards - - ----------------------------------------------------------------------------------------------------------------------------
36 - - ---------------------------------------------------------------------------------------------------------------------------- schedules. - - ---------------------------------------------------------------------------------------------------------------------------- SOFTWARE UPGRADES All Tandem All Tandem system system software software maintained maintained at more within 4 months than 6 months of of most current most current release, or as release, or as mutually agreed mutually agreed upon by Wards upon by Wards and and Supplier. Supplier. PTFs to correct a known problem will be installed within 48 hours, or as mutually agreed upon by Wards and Supplier. - - ---------------------------------------------------------------------------------------------------------------------------- REQUEST TIME TO 95% COMPLETE BY LESS THAN 90% COMPLETE TARGET DATE COMPLETE BY TARGET DATE - - ---------------------------------------------------------------------------------------------------------------------------- RESPONSE TIME 15 98% of Tandem Less than 97% of system Tandem system transactions transactions are are completed completed in less in less than than the increased service level impact response response time. time. - - ----------------------------------------------------------------------------------------------------------------------------
The following Service Levels are designated as Critical Service Levels: ----------------------------------------------------------------------- SERVICE APPLICATION DESCRIPTION LEVEL STANDARD ----------------------------------------------------------------------- 37 -------------------------------------------------------------------------- ID -------------------------------------------------------------------------- ONLINE AVAILABILITY -------------------------------------------------------------------------- RESPONSE TIME -------------------------------------------------------------------------- III. SERVICE LEVEL CREDITS A. CREDITS In each case of a failure to satisfy a Service Level Supplier will, within five (5) days from the identification of the deviation from the applicable Service Level, provide to Wards a plan of activities which will allow Supplier to satisfy the applicable Service Level at the earliest date practicable. In addition, Wards shall be entitled to recover a Service Level Credit for such Service Level calculated in the manner described below, provided, however, that the aggregate amount of such Service Level Credits for any given month will not exceed twenty percent (20%) of Supplier's monthly charges under this Service Agreement for the applicable month (excluding Pass-Through Expenses, if any). If a single event directly causes the failure to achieve more than one Service Level, then only one Service Credit will apply. In such event, Wards will select the Service Level that will be used for the calculation of the Service Credit. B. METHOD OF CALCULATION If Supplier fails to meet or exceed a Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any). If Supplier's performance fails to meet an Increased Impact Level for any Service Level, the Severity Weight corresponding to that Service Level, expressed as a percentage, will be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) (this calculation being in lieu of, and not in addition to, the credit calculation for the corresponding Service Level failure). To calculate the total Service Level Credit due to Wards for the applicable month, the amounts calculated for each Service Level or Increased Impact Level as described above will be totaled and such amount shall be available as a credit to Wards against Supplier's invoice for the applicable month. C. FREQUENCY FACTOR In any case where Supplier fails to achieve the same Service Level (including failure to achieve the designated Increased Impact Level for that Service Level) in two consecutive months or in any four months in any 12-month period, the applicable Severity Weight shall be doubled and such percentage will be multiplied times an amount equal to ten percent (10%) of Supplier's total charges for the applicable month (excluding Pass-Through Expenses and Special Charges, if any) and for any subsequent months in which Supplier fails to achieve such Service Level or Increased Impact Level; provided, however, that in no case will Supplier be liable for total Service Credits which exceed ten percent (10%) of the applicable monthly invoice month (excluding Pass-Through Expenses and Special Charges, if any). 38 The Service Credits will revert to the method of calculation provided in Section III.A. above in the following circumstances: 1. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is different from the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation provided in Section III.A. following four consecutive months of meeting or exceeding the Service Level. 2. In the instance where the frequency factor has been triggered by consecutive months of failing to achieve the same Service Level and the failure in the second month is caused by a root problem that is the same as the root problem that was the cause of the failure in the first month, the calculation will revert to the method of calculation provided in Section III.A. following ten consecutive months of meeting or exceeding the Service Level. D. EXCUSED PERFORMANCE PROBLEM Supplier shall not be liable to pay Wards Service Level Credits for any failure to meet a Service Level to the extent that such a failure is directly attributable to (i) a Force Majeure Event; (ii) breaches of this Agreement by Wards, provided that Supplier has provided Wards with reasonable notice of such breach immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such breach; (iii) acts or omissions of Wards (or third parties acting on behalf of Wards under a written agreement, provided that Supplier has provided Wards with reasonable notice of such act or omission immediately after becoming aware of it and determining that such breach will adversely impact Supplier's performance of Services and Supplier has used all Commercially Reasonable Efforts to perform notwithstanding such act or omission; (iv) the first manifestation of an extraordinary latent error or defect in Equipment used by Supplier in providing the Services (and any related repeated instances pending the applicable Supplier's correction of the defect) if such defect was (1) unknown to Supplier and (2) not disclosed in any information distributed by the third party licensor, manufacturer, or distributor and (3) not preventable or discoverable through normal testing or maintenance procedures. The foregoing are referred to herein collectively as an "Excused Performance Problem." Supplier shall be liable to grant Wards Service Level Credits for any failure to meet a Service Level attributable to any cause other than causes expressly included in the categories listed above. E. TIME LIMIT If Supplier does not notify Wards of any Excused Performance Problem (as described in Section III.D above) within ninety (90) days of the date Supplier provides Performance Reports covering the time period during which the Excused Performance Problem is alleged to have occurred, then Supplier shall be deemed to have waived the claim of an Excused Performance Problem. 39 IV. SERVICE LEVEL TERMINATION EVENT A. DEFINITION 1. Measurement Event - For purposes of this section, a "Measurement ----------------- Event" will be the monthly calculation of Supplier's actual performance for each Service Level or Critical Service Level. The total possible Measurement Events during any specific period of time is the product of the number of months in that time period times the number of Service Levels or Critical Service Levels, as applicable. 2. Failure Event - For purposes of this section a "Failure Event" ------------- shall be a specific Measurement Event for which Supplier fails to achieve the relevant Critical Service Level(s) or Service Level(s); provided, however, that any such failure caused by an event described in Section III.D of this SLA shall not be counted as a Failure Event. Any single event, act or omission that causes multiple Service Levels to be missed will be counted as one Failure Event. B. REPEATED SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the Maximum ------- Failure Events specified in the following table:
- - ---------------------------------------------------------------------------------------------------------------------- MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT EVENTS (SERVICE LEVELS) IN MEASUREMENT PERIOD SERVICE LEVEL MEASUREMENT PERIOD - - ---------------------------------------------------------------------------------------------------------------------- Service Level Failure Event Rolling Six Months 8 19 - - ---------------------------------------------------------------------------------------------------------------------- Service Level Failure Events Rolling Twelve Months 12 38 - - ---------------------------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 6 19 failure - - ---------------------------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 8 38 Failure Events - - ----------------------------------------------------------------------------------------------------------------------
40 C. REPEATED CRITICAL SERVICE LEVEL FAILURES Certain repeated failures by Supplier to achieve the required Critical Service Levels will constitute a Service Level Termination Event. The Service Level Measure for determining when such a Service Level Termination Event has occurred will be the number of Failure Events occurring during the relevant Measurement Period. A Service Level Termination Event will have occurred if Supplier exceeds the ------- Maximum Failure Events specified in the following table:
- - -------------------------------------------------------------------------------------------------------------------- SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT EVENTS (CRITICAL SERVICE LEVELS) IN MEASUREMENT PERIOD - - -------------------------------------------------------------------------------------------------------------------- Service Level Failure Events Rolling Six Months 3 12 - - -------------------------------------------------------------------------------------------------------------------- Service Level Failure Events Rolling Twelve Months 6 24 - - -------------------------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Six Months 2 12 Failure Events - - -------------------------------------------------------------------------------------------------------------------- Increased Impact Level Rolling Twelve Months 4 24 Failure Events - - --------------------------------------------------------------------------------------------------------------------
D. CATASTROPHIC LEVEL OF SERVICE Recovery of the Tandem Service beyond twenty-four hours of the scheduled time to recover those Services under the Wards Disaster Recovery Plan. E. QUALIFICATION Nothing in this Section IV is intended to imply that any lesser number or different combination of occurrences of deficient performance by Supplier may not also constitute a material breach of Supplier's obligations warranting termination of the Service Agreement by Wards for cause. 41 EXHIBIT E TRANSFERRED EQUIPMENT NONE 42 EXHIBIT F WARDS FACILITIES AND EQUIPMENT WARDS FACILITIES DESIGNATED FOR USE BY SUPPLIER AT WARDS CORPORATE HEADQUARTERS AS DESCRIBED IN EXHIBIT F TO SERVICE AGREEMENT NO. 2 (DATA CENTER SERVICES). 43 EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE PROD: Tandem Himalaya K2000 Guardian System Software as defined for System #034398: 1 R0179D46 C++ RTL V2 1 R0246D45 SQL/MP COMP AGENT 1 R0248D45 XDR STREAMS 1 R0281D44 NMCOBOL DUMMY RTL 1 R1002D40 LDST - LABELLED DUMP SUPPORT TEMPLATES 1 R1013D45 SERPENT (SOURCE ITAR) 1 R1041D20 SNMP TRAP MULTIPLEXOR 1 R1064D40 NFS SUBSYSTEM PTRACE FORMATTING MODULE 1 R1070D45 OSS ENCRYPTION ROUTINES (STUBS FOR EXPORT) 1 R2076D46 TMF-3 UTILITY PROGRAMS 1 R2079D40 FINDER - LOOKS FOR ASCII STRINGS IN EDIT FILES 1 R5800D46 NONSTOP C BASE - MULTITHREADED NONSTOP C LIBRARY 1 R5810D42 TSQLRUN - SQL LICENSE 1 R5812D42 TS/MP LICENSE - LICENSING SW FOR NONSTOP TS/MP 1 R5813D42 PATHWAY/TS LICENSE - LICENSING SW FOR PATHWAY/TS 1 R5816D44 MIGSCF - MIGRATE PUP AND COUP COMMAND FILES TO SCF 1 R5819D45 OSS PTHREADS 1 R5838D45 NSKCOM - INTERFACE TO USER-CONFIG. NSK FUNCTION 1 R5895D46 C++ STANDARD LIBRARY 1 R6017D44 NMLINKER - NATIVE MODE LINKER 1 R6030C32 DSM/SCM - HOST/PLANNER COMPONENTS 1 R6031C32 DSM/SCM - TARGET COMPONENTS 1 R6037D45 MEASURE STUBS 1 R6166D20 XLLINK - AXCEL LINKER 1 R6533D45 STDSEC - STANDARD SECURITY PRODUCT (SOURCE ITAR) 1 R6543D40 XLTRACE 1 R6553D45 FUP - FILE UTILITY PROGRAM 1 R6570D30 NLCP - NATIONAL LANGUAGE CHARACTER PROCESSING 1 R6572D40 ICONV TABLE - ICONV CHARACTER MAPPING TABLES 1 R6954D20 SNAX/CREATOR PROCESS 1 R6957D30 CONSOLES - RMI & MIOP 1 R6965D40 SEEVIEW 1 R7861D42 TSQLPRL - SQL PARALLEL LICENSE 1 R7862D20 SNMP MIB-II SUBAGENT 1 R7898D45 SRL MANAGEMENT 1 R7923D40 STD FUNCTIONS RTL 1 R7928D40 TS/MP SERVERCLASS PROCS 1 R7932D40 SOCKET LIBRARY STUB 1 R7934D44 TS/MP ROUTMON 44 1 R7956D40 OSSFSLIB II - OSS FILE SYSTEM LIBRARY #2 1 R8121D31 M3681 MFC SOFTWARE 1 R8160D42 OSS SUBJECT API 1 R8163D40 TSQLDEV - SQL DEVELOPMENT ENVIRONMENT 1 R8302D46 TMF-3 STUB - TMF-3 LIBRARY STUB 1 R8304D45 NMCGEN - NATIVE MODE CODE GENERATOR 1 R8343D42 PATHWAY/TS - (TCP SCUP AND SCOBOL) 1 R8344D44 TS/MP PATHMON - PATHMON/PATHCOM 1 R8345D44 TS/MP PATHSEND 1 R8363D41 CONGRUENCY MANAGER 1 R8374D30 NSK XIO 1 R8375D42 QIOLIB - QIO LIBRARY 1 R8405D31 K2K CPU MDP FW - HIMALAYA K2000 CPU MDP FIRMWARE 1 R8431D45 NATIVE CRE/RTL - COMMON RUNTIME ENVIRONMENT (*SI) 1 R8432D44 NATIVE C RTL (SOURCE ITAR) 1 R8449D20 FASTPLW - SPOOLER PRINT PROCESS FOR LASERWRITERS 1 R8468D44 SMSYSLIB 1 R8473D46 TOOLS.H++ LIBRARY 1 R8488D40 SSG - SEEVIEW SERVER GATEWAY 1 R8496D40 HOST ROSOURCES SA - SNMP HOST RESOURCES MIB SUBAGT 1 R8497D40 IMMU-API 1 R8606D46 TMF-3 LIB 1 R8607D46 TMF-3 MAIN 1 R8608D46 TMF-3 TMP 1 R8609D46 TMF-3 RC 1 R8629D43 OSS L&T UTILS - OSS LANGUAGES & TOOLS UTILITIES 1 R8651D30 HIMALAYA LOBUG - LOW-LEVEL DEBUGGER FOR HIM SYS 1 R8652D46 TMF-3 COM 1 R8669D46 AUDIT FIXUP 1 R8671D42 QIOMON - QIO MANAGER PROCESS 1 R8672D40 SMEMSCF - SCF PRODUCT MODULE FORM SMEM 1 R8694D46 TMF-3 SERVE 1 R8695D46 TMF-3 DR 1 R8696D46 TMF-3 CAT 1 R8697D46 TMF-3 AR-ROUTINE 1 R8698D46 TMF-3 MON2 1 R8949D46 SECURITY EVENT EXIT 1 R8952D40 TRACE - TRACING FUNCTIONS FOR SUBSYSTEMS 1 R8995D40 OPENSCSI IOP 1 R9003D45 EXTDECS (EXTERNAL DECLARATIONS) 1 R9023D42 SCUTIL - SYSTEM CONFIGURATION UTILITY 1 R9050D45 NONSTOP KERNEL (SOURCE ITAR PRE D30) 1 R9051D10 ENVOY 1 R9053D46 DP2 - ENHANCED DISC PROCESS 1 R9055D46 FILSYS - FILE SYSTEM 1 R9057D40 EXPAND 45 1 R9058D10 AXCESS - CHARON/CHARINT/CUP 1 R9060D11 X25AM - X.25 AXCESS METHOD 1 R9064D41 SNAX/XF - TANDEM SNA PROTOCOL 1 R9074D46 UTIL - OPERATING SYSTEM UTILITIES 1 R9086D45 MEASURE - EXAMINING SYSTEM PERFORMANCE STATISTICS 1 R9088D20 ENVOYACP/XF - ENVOYACP/XF 1 R9095D44 TSQL - TSQL COMPILER 1 R9101D41 SPOOL - SPOOLER 1 R9113D30 MBCS STUBS 1 R9117D40 EXPAND MGR 1 R9152D30 ENFORM 1 R9157D30 GUARDIAN I/O - I/O SUBSYSTEM FOR GUARDIAN 90 1 R9159D30 T16 XIO INTERFACE - FOR NEW I/O SUB SYSTEM 1 R9175D20 MLSRV-SMB FILE SERVER FOR MULTILAN 1 R9189D40 NETBATCH PLUS 1 R9191D46 TSQLCI - TSQL USER CONVERSATIONAL INTERFACE 1 R9193D44 TSQLEXE - TSQL EXECUTOR 1 R9194D46 TSQLCAT - TSQL CATALOG MANAGER 1 R9195D46 TSQLUTIL - TSQL UTILITIES 1 R9196D45 TSQLFIL - TSQL FILE SYSTEM 1 R9197D46 TSQLMSG - TSQL MISCELLANEOUS 1 R9198D44 SQLCI2 - TSQL CONVERSATIONAL INTERFACE 2 1 R9205D46 TACL - TANDEM ADVANCED COMMAND LANGUAGE 1 R9216D30 DSMS/DSNM - DISTRIB SYS NETWORK MGMT CORE & SUBSYS 1 R9219D40 IOPRM - I/O PROCESS REQUEST MANAGER 1 R9227D45 C++ RUN-TIME LIBRARY 1 R9228D40 FILSYS LIBRARIES 1 R9229D44 NATIVE RT KERNEL - KERNEL-LEVEL RUNTIME FUNCTIONS 1 R9248D44 PTAL - PORTABLE TAL COMPILER 1 R9250D40 TAL - TANDEM APPLICATION LANGUAGE 1 R9267D46 COBOL85 RTL - TANDEM COBOL85 RUN TIME LIBRARY ONLY 1 R9268D37 XTRAVER - RELEASE IDENTIFIER 1 R9276D30 AXCEL - THE ACCELERATOR 1 R9280D40 LANGRTL - TANDEM LANG. COMMON RUN TIME LIBRARY 1 R9289D40 TMDS SCSI SUBSYSTEM 1 R9292D30 APE - ACCELERATED PROGRAM EXAMINER 1 R9298D40 SWID - SOFTWAY FILE IDENTIFICATION UTILITY 1 R9337D40 ATP6100 - 6100 ASYNCHRONOUS TERMINAL PROTOCOL 1 R9338D30 CP6100 - 6100 COMMUNICATIONS PROTOCOL 1 R9339D20 CSSCSM 1 R9347D22 TMDSCDSL - COMM DIAGNOSTIC SERVER LIBRARY 1 R9375D40 TLAM I/O PROCESS 1 R9388D20 CHARON I/O DIAGNOSTIC LIBRARY 1 R9394D10 CMI/CMP 1 R9497D31 TMDS TAPE SUBSYSTEM 1 R9498D30 TMDS DISK SUBSYSTEM 46 1 R9499D31 TMDS - TANDEM MAINT & DIAGNOSTIC SYSTEM 1 R9500D40 CRUNCHD 1 R9543D45 DSAP/DCOM - DISK MAINTENANCE UTILITIES 1 R9549D30 C RTL - C RUN-TIME LIBRARY (SOURCE ITAR) 1 R9550D40 SOCKET LIBRARY 1 R9551D40 TCPIP PROCESS 1 R9552D46 FTP CLIENT AND SERVER 1 R9553D40 TELSERV 1 R9558D40 TELNET CLIENT-T16 1 R9561D40 I18NLIB -I18N METHODS LIBRARY (SOURCE ITAR) 1 R9566D40 ONC RPC 1 R9576D23 SNMP AGENT 1 R9600D40 GPLIB - GENERAL PURPOSE LIBRARY 1 R9606D20 TEDIT - TANDEM BLOCK MODE EDITOR 1 R9617D42 VPROC - TANDEM VERSION PROC. LIST TOOL 1 R9620D46 FASTSORT - SORT FOR NONSTOP SYSTEM 1 R9621D30 BINDER - TANDEM OBJECT MODULE LINKAGE EDITOR 1 R9622D30 CROSSREF - TANDEM SOFTWARE CROSSREFERENCE TOOL 1 R9624D40 IOEDIT - GPLIB 1 R9626D42 NOFT 1 R9627D40 OSSFSLIB-OSS FILE SYSTEM LIBC.A OBJECTS (*SI) 1 R9631D40 EMS - EMS BASE 1 R9632D31 EMS - EMS DISTRIBUTION SUPPORT 1 R9633D40 DSM TEMPLATE SERVICES 1 R9635D20 DNS - DISTRIBUTED NAME SERVICE 1 R9640D30 VIEWPOINT 1 R9661D40 MC RUN TIME LIBRARY (SOURCE ITAR) 1 R9663D31 DISK/TAPE BOOT (WAS PART OF T9023) 1 R9664D40 FMTR - FORMATTER 1 R9665D21 SWARC - SOFTWAY ADV RECOVERABLE COMPRESSION 1 R9673D40 INSPECT 1 R9752D40 SPI - SUBSYSTEMS PROGRAMMATIC INTERFACE 1 R9753D40 I/O DRIVERS 1 R9756D40 VISUAL INSPECT SERVER (NSK) 1 R9766D31 TMDS CPU COMMON 1 R9770D31 TMDS MDS COMMON 1 R9789D40 HYA STD MILLICODE-HIMALAYA STANDARD MILLICODE 1 R9793D30 HYA IOS MICROCODE - HIMALAYA IOS MICROCODE 1 Y0238D40 PTR/SNMP FORMAT MOD 1 Y1015D40 TNT SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1016D40 AMT SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1017D40 ATP SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1018D40 CDF SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1019D40 CP6 SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1020D40 CSM SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1021D40 ENV SUBSYSTEM PTRACE FORMATTING MODULE 47 1 Y1022D40 EXF SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1023D40 EXP SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1024D40 GDS SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1025D40 IPX SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1026D40 LAM SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1027D40 MHS SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1028D40 NNM SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1029D40 OAS SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1030D40 OS4 SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1031D40 OSA SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1032D40 OSF SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1033D40 PRM SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1034D40 QIO SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1035D40 SCP SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1036D40 SCS SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1037D41 SNAX/XF PTRACE PRD MOD 971201 1 Y1038D40 TCI SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1039D40 TLK SUBSYSTEM PTRACE FORMATTING MODULE 1 Y1040D40 X25 SUBSYSTEM PTRACE FORMATTING MODULE 1 Y6015D41 INSTALLATION AIDS 1 Y6021D20 DNS - DOMAIN NAME SERVER 1 Y6022D10 TFTP - TRIVIAL FILE TRANSFER PROTOCOL 1 Y6024D30 SMTP - T/MAIL GATEWAY 1 Y6027D30 MEDIA CATALOG MANAGER 1 Y6028D30 MEDIACOM/MEDIASRV 1 Y6029C31 DSM/SCM - CNFGINFO TOOL 1 Y6041C30 M3126 - DISK CONTROLLER DOWNLOADABLE MICROCODE 1 Y6046C30 P3126 - PROMCODE FOR V90 (CYC) 1 Y6047C20 TCP/IP CONFIG - CONFIGURATION FILES 1 Y6243D40 TCP/IP - SCF MODULE 1 Y6245D30 TELNET SCF PRODUCT MODULE 1 Y6264D40 SNAX/APC - SCF MODULE 1 Y6523D41 TFDS - TANDEM FAILURE DATA SYSTEM 1 Y6539D40 PUP - PERIPHERAL UTILITY PROGRAM 1 Y6556C30 M3218/P3218-PROM/DWNLOAD 5200/NFF CONTROLLER 1 Y6578C30 P3128 - BOOTSTRAP CODE 1 Y6579C30 M3128 - DOWNLOAD CODE 1 Y6587C31 P3602 - PROM CODE FOR 3602 CONTROLLERS 1 Y6588C30 P3603 - PROM CODE FOR 3603 CONTROLLERS 1 Y6591D40 GDSX - SCF PRODUCT MODULE 1 Y6916D41 SNAX/XF - SCF PRODUCT MODULE 1 Y6939D40 SNAX/CRE-2 SCF PRD MOD 1 Y6942D40 GPA - GUARDIAN PERFORMANCE ANALYZER 1 Y6944D40 SNAX/CDF - SCF PRODUCT MODULE 1 Y6946D42 OSI/MHS - SCF PRODUCT MODULE 1 Y6950C20 M3214/P3214 - MICROCODE FOR MUIR/SHASTA TAPE DRIVE 1 Y6956D10 DM-IOPS 48 1 Y6958D30 LABELED TAPE 1 Y6983D41 TANDEM OSI/APLMGR SCF PRD MOD 1 Y6984D41 TANDEM OSI/FTAM SCF PRD MOD 1 Y8103D40 ONS - OPEN NOTIFICATION SERVICES 1 Y8122C20 CLXSCP - CLX SCP MDP FIRMWARE 1 Y8123C20 PMM MDP - CLX PSMON MDP FIRMWARE 1 Y8127D30 SWCI - SWITCH COMMAND INTERFACE 1 Y8135D30 MFC FIRMWARE - CLX FIRMWARE 1 Y8136D20 TMDSDMFC - TMDS DIAG FOR CLX MFC DATA COMM 1 Y8137D31 PWR - CLX AUTO POWER ON 1 Y8303D31 FIR FIXIT - FIXES BAD FIRS 1 Y8312D40 M3223 - OPEN SCSI PHASE 1 1 Y8368D30 DEFAULT DSM/TC MGR - DEFAULT MEDIA CATALOG MGR 1 Y8370D34 TMDS INVNTRY DIALOUT - SYSHEALTH DIALOUT FOR INV 1 Y8384D40 OCM - OPERATIONS CONSOLE PROCESS 1 Y8416D21 CAM/DFA - CAM DEVELOPMENT FACILITY 1 Y8448D20 CSSSNAX - CSS SNAX ADCCP LINE HOLDER 1 Y8474D20 MULTI EVENT VIEWER (MEV) HOST 1 Y8481D44 CSG - CLIENT SERVER GATEWAY 1 Y8602D31 TCP/IP UTILITIES 1 Y8603D20 SNMP AGENT SCF PRODUCT MODULE 1 Y8623D40 OSSDSM - OSS DSM MODULES 1 Y8644D40 EDDB - EVENT DETAIL DATABASE 1 Y8647D20 P3220/M3320 - 3220 CNTRLR FIRMWRE CODE 1 Y8654D21 IMG MDP - IMAGE CLX CPU MDP USED IN FRMWRD-UPDATE 1 Y8682D30 IPX-SCF SCF PRODUCT MODULE 1 Y8685D30 TAPECOM 1 Y8923D30 NONSTOP TM/MP TIFSERVE 1 Y8929D20 M3216 - TAPE CONTROLLER FIRMWARE 1 Y8975D43 OMF - OBJECT MONITORING FACILITY 1 Y8976D21 TANDEMTALK SCF PRODUCT MODULE 1 Y8980D40 DNI/DDL - DSM NMVT INTERFACE DDL 1 Y9033D30 IXF - INFORMATION EXCHANGE FACILITY - HOST 1 Y9071D20 VIEWSYS - SYSTEM RESOURCE MONITORING UTILITY 1 Y9082D40 SCF - SUBSYSTEM CONTROL FACILITY 1 Y9100D40 DDL - TANDEM DATA DICTIONARY LANGUAGE 1 Y9112D40 COMMON KERNEL DEFS - COMMON KERNEL DEFINITIONS 1 Y9138D20 SRVBYTE - H/W SERVER FOR 3602/3603 CONTROLLERS 1 Y9144D30 TMDSCOMM - DIAG FOR H/W RUNNING ENVOY 1 Y9147D30 CSL - COMM SUBSYSTEM LIBRARY 1 Y9190D30 NETBATCH 1 Y9208D46 DISK UTIL - DISK UTILITIES 1 Y9226D40 INSPECT SUBSYSTEM 1 Y9230D46 RLSEDOC - TANDEM RELEASE DOCUMENTATION 1 Y9264C10 INFOWAY - INFO EXCHANGE BETWEEN TANDEM AND CUST 49 1 Y9265C32 SYSWAY - COMMUNICATION COMPONENT OF INFOWAY 1 Y9266C31 TRANSWAY - INFOWAY TRANSFER TO GATEWAY 1 Y9279C20 CHARMAPS - COMMON KERNEL CHARACTER MAPS 1 Y9296D31 NOS - SCF MODULE 1 Y9299D10 IC - INVENTORY COLLECTOR 1 Y9301D21 CSSTOOL - CSS PROGRAMMER'S DEVELOPMENT TOOLS 1 Y9302B20 CSSTOOL - COMMUNICATIONS SUBSYSTEMS TOOLS 1 Y9304C20 CSSCIU 1 Y9307C20 CSSASYNC - CSS ASYNCHRONOUS DRIVER 1 Y9311C20 CSSLAPB - EXPAND PROTOCOL 1 Y9312D20 CSSADCCP - ADVANCED DATACOMM CONTROL PROCEDURES 1 Y9317D10 X25LAPB - X.25 PROTOCOL 1 Y9322C30 CSSPRINT - SAGE PRINTER CLIP MODULE 1 Y9323D10 X25AM - SCF PRODUCT MODULE 1 Y9324D40 MLMAN - SCF PRODUCT MODULE 1 Y9325D10 AM3270 - SCF PRODUCT MODULE 1 Y9326D10 TR3271 - SCF PRODUCT MODULE 1 Y9327D30 OSI/AS - SCF PRODUCT MODULE 1 Y9328D30 OSI/TS - SCF PRODUCT MODULE 1 Y9329D40 SNAX/CM - SNAX CONNECTION MANAGEMENT 1 Y9353D20 ZCDGDDL 1 Y9358D20 TMDSCSS - TMDS DIAG FOR 6100/6105/6106 CONTROLLERS 1 Y9360D30 DIAG6204 - 6204 CONTROLLER DIAGNOSTIC 1 Y9362D31 TMDSLAN - LANS ON-LINE DIAGNOSTIC 1 Y9376D40 MLMUX - DOWNLOADABLE CONTROLLER CODE 1 Y9377D30 MLAD - PC BUS BOX CODE (GATEWAY CODE) 1 Y9378D11 LANBOOT - CONTROLLER BOOT CODE 1 Y9379D40 TLAM MANAGER 1 Y9380D30 MLRES - LAN DYNAMIC RESOURCE MANAGEMENT 1 Y9385D40 PTRACE - GENERIC TRACE PROG FOR SEVERAL COMM PROD. 1 Y9395D45 SCP - SUBSYSTEM CONTROL PROCESS FOR NSM 1 Y9396D40 COMMON SPI DEFINITIONS 1 Y9487D20 TMDSTPI-TMDS TANDEM PARALLEL INTERFACE FOR CYCLONE 1 Y9494D31 TMDSIPB - TANDEM MAINT/DIAG. SYSTEM FOR IPB STATUS 1 Y9495D31 TMDS GUARDIAN I/O SUBSYSTEM 1 Y9496D21 TMDS OPTICAL DISK SUBSYSTEM 1 Y9517D43 VHS - VIRTUAL HOMETERM SYSTEM 1 Y9519D20 ARCHUTIL - ARCHIVE UTILITIES 1 Y9545C30 M3219/P3219 - MICROCODE 1 Y9568D30 TMDS LIBRARY 1 Y9569D31 TMDS AUTO 1 Y9578D40 FILE SYSTEM ERRORS 1 Y9586C20 CMDP - I/O REGULATOR FIRMWARE 1 Y9594D30 TABLEPM - SCF TABLE-DRIVEN PM 1 Y9598C20 M3211/P3211 (CYCLONE/TURBO MICROCODE (TNGSING)) 50 1 Y9599C31 CMITOOL - CMI-TO-SCF COMMAND FILE CONVERSION TOOL 1 Y9601D20 EDIT 1 Y9605D10 TFORM - TANDEM FORMATTER 1 Y9607D20 TGAL 1 Y9612C30 INSTALL - TANDEM SOFTWARE INSTALLATION PROGRAM 1 Y9634D30 EMS - FILTERING SUPPORT 1 Y9657D20 M3129 DISK CONTROLLER DOWNLOAD CODE 1 Y9658D20 P3129 - DISK CONTROLLER BOOTSTRAP CODE 1 Y9666C30 SWEDS - ELECTRONIC SW DOWNLOAD 1 Y9671D20 EMS ANALYZER-EVENT MANAGEMENT SERVICE ANALYZER 1 Y9674D30 PDTSHARE - PDT COMMON CODE 1 Y9679D10 ZENVSCF - ENVOY BINARY TABLE FOR SCF 1 Y9683D43 NSX-HOST - NETWORK STATISTICS EXTENDED 1 Y9701D32 SYSHEALTH CODE 1 Y9702D32 SYSHEALTH DATA 1 Y9703D31 SYSUI 1 Y9768D31 TMDS CPU TYPES 4 & 6 1 Y9776D31 TMDS MDS TYPES 4 & 6 1 Y9785D31 HYA CPU DIAG - HIMALAYA CPU DIAGNOSTICS 1 Y9820C20 3125 PROM CODE 1 Y9821C30 M3125 - DOWNLOADABLE MICROCODE 1 Y9849D20 B3129 - B3129 BACK-END CODE 1 Y9884C30 M3215 - NAPA CONTROLLER MICROCODE 1 Y9893D30 AUTOREALLOCATE - AUTO DISK SECTOR REALLOCATION FA 1 Y9896C30 PROFILE - GUARDIAN RLSE MIGRATION PERF. EST. TOOL 1 Y9978D21 HYA I/O MDP FW - HIMALAYA I/O MDP FIRMWARE 1 Y9996D31 REMCP - STD. REMOTE CONSOLE PROCESS FOR VLX/CLX 51 EXHIBIT H WARDS SOFTWARE . Disaster Recovery: Tandem Himalaya K20000 Guardian System Software as defined for System #034398. . Development: Tandem Himalaya K2000 Guardian System Software as defined for System #031697. . Appl: Wards Check Collection system software as in use on system \MWH, designed by Banctec Payment Systems, and maintained by Primary Resource, Inc. . Appl: Wards Data Collect system software as in use on system \MWH, designed and maintained by Primary Resource, Inc. . Appl: Wards POS Credit Authorization system software as in use on system \MWH, designed by Banctec Payment Systems and Primary Resource, Inc. and maintained by Primary Resource, Inc. . Appl: Wards Verifone/ZON terminal software as in use on MW/Thrifty POS ZON devices utilizing \MWH POS credit authorization via dial-in; designed and maintained by Banctec Payment Systems. . Tool-Appl: Primary Resource, Inc. `CMCOMO' communications management network control process as implemented on Wards \MWH Tandem system for full network systems functionality. . Tool-Appl: Primary Resource, Inc. `CMA' network definition generation process as implemented on Wards ADCU PCs for full network implementation. . Tool-Appl: Primary Resource, Inc. `PRIINFO' high-speed file detail statistic report process as used on Wards \MWH Tandem system for file management. . Tool-Appl: Primary Resource, Inc. `VIEWPROC' cpu/process utilization display monitor, as implemented on Wards VIEWPT and ADCU PCs. . Tool-Appl: Primary Resource, Inc. `REPORTVIEW' Tandem spooler perusal process, as implemented on Wards ADCU PCs and DEV PCs. . Tool-Appl: Cail/TCG, Inc. CTT/W32 Tandem 6530 terminal emulator as implemented on ADCU PCs at Wards offices and remote support locations, including file transfer and async multi-terminal operation. . Tool-Appl: Lotus Development Corp. Lotus Notes as in use for Wards E-mail and scheduling operations. . Appl: Microsoft Corp. MS/Windows95 PC Operating System. . Tool-Appl: Microsoft Corp. MS/Office97Pro. . Tool-Appl: Connect Direct Network Data Mover. 52 EXHIBIT I SUPPLIER SOFTWARE NONE 53 EX-10.(IV)(D)(6) 4 INCORPORATED RETIREMENT SECURITY PLAN 10.(iv)(D)(6) MONTGOMERY WARD & CO., INCORPORATED RETIREMENT SECURITY PLAN (AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1998) TABLE OF CONTENTS
Page ---- PREAMBLES...................................................................................................... 1 ARTICLE I Background Information............................................................................... 4 1.1 Purpose of Plan.......................................................................... 4 1.2 Application of Restatement and Determination of Retirement Benefits...................... 4 1.3 Other Effective Dates.................................................................... 5 ARTICLE II Definitions......................................................................................... 6 2.1 "Accrued Benefit"........................................................................ 6 2.2 "Actuarial Equivalent" or "Equivalent Actuarial Value"................................... 7 2.3 "Actuary"................................................................................ 10 2.4 "Administrative Director"................................................................ 10 2.5 "Affiliate".............................................................................. 10 2.6 "Average Weekly Hours"................................................................... 10 2.7 "Beneficiary"............................................................................ 10 2.8 "Board".................................................................................. 10 2.9 "Break in Service"....................................................................... 10 2.10 "Cash Balance Account"................................................................... 11 2.11 "Code"................................................................................... 11 2.12 "Committee".............................................................................. 11 2.13 "Company"................................................................................ 11 2.14 "Continuous Service"..................................................................... 11 2.15 "Credited Service"....................................................................... 11 2.16 "Daily Pay Rate"......................................................................... 13 2.17 "Direct Rollover"........................................................................ 13 2.18 "Disability Participant"................................................................. 13 2.19 "Disability Plan"........................................................................ 13 2.20 "Disability Retirement Benefit".......................................................... 13 2.21 "Distributee"............................................................................ 13 2.22 "Effective Date"......................................................................... 13 2.23 "Eligible Location Shutdown Participant"................................................. 13 2.24 "Eligible Retirement Plan"............................................................... 14 2.25 "Eligible Rollover Distribution"......................................................... 14 2.26 "Employee" or "Associate"................................................................ 14 2.27 "ERISA".................................................................................. 15 2.28 "Highly Compensated Associate"........................................................... 15 2.29 "Hours of Service"....................................................................... 15 2.30 "Immediate Cash Balance Account Annuity"................................................. 15 2.31 "Interest Credit(s)"..................................................................... 15 2.32 "Investment Manager"..................................................................... 15 2.33 "IRS".................................................................................... 15 2.34 "Jefferson Stores Plan".................................................................. 16 2.35 "Labor Department"....................................................................... 16
i 2.36 "Lechmere".............................................................................. 16 2.37 "Lechmere Cash Balance Account"......................................................... 16 2.38 "Lechmere Immediate Cash Balance Account Annuity"....................................... 16 2.39 "Lechmere Interest Credits"............................................................. 16 2.40 "Lechmere Plan"......................................................................... 16 2.41 "Optional Retirement Benefit"........................................................... 16 2.42 "Participant"........................................................................... 16 2.43 "Participating Company"................................................................. 16 2.44 "PBGC".................................................................................. 17 2.45 "Plan".................................................................................. 17 2.46 "Prior Plans"........................................................................... 17 2.47 "Regulations"........................................................................... 17 2.48 "Required Contributions"................................................................ 17 2.49 "Retirement" or "Retire"................................................................ 17 2.50 "Retirement Benefit".................................................................... 17 2.51 "Retirement Security Plan".............................................................. 17 2.52 "Savings Plan".......................................................................... 18 2.53 "Signature"............................................................................. 18 2.54 "Service"............................................................................... 18 2.55 "Surviving Spouse"...................................................................... 19 2.56 "Total Earnings"........................................................................ 19 2.57 "Transferred Contribution Account"...................................................... 20 2.58 "Trust"................................................................................. 20 2.59 "Trust Agreement"....................................................................... 20 2.60 "Trust Fund"............................................................................ 20 2.61 "Trustees".............................................................................. 20 2.62 "Vest", "Vested" or "Vesting"........................................................... 20 2.63 "Ward".................................................................................. 21 2.64 "Weekly Pay Rate"....................................................................... 21 2.65 "Year".................................................................................. 21 2.66 "Year of Credited Service".............................................................. 21 2.67 "Year of Service"....................................................................... 22 ARTICLE III Effective Date.................................................................................... 22 ARTICLE IV Eligibility........................................................................................ 22 ARTICLE V Participation....................................................................................... 24 5.1 Enrollment.............................................................................. 24 5.2 Suspension of Participation............................................................. 24 5.3 Break in Service........................................................................ 25 5.4 Qualified Military Service.............................................................. 25 ARTICLE VI Contributions...................................................................................... 25 6.1 Cessation of a Participant's Contributions.............................................. 25 6.2 Company Contributions................................................................... 25 6.3 Actuarial Assumptions................................................................... 26
ii ARTICLE VII Cash Balance Account and Lechmere Cash Balance Account............................................ 26 7.1 Cash Balance Account - In General....................................................... 26 7.2 Annual Cash Balance Contribution........................................................ 27 7.3 Location Shutdown Contribution.......................................................... 28 7.4 Interest Credits........................................................................ 28 7.5 Immediate Cash Balance Account Annuity.................................................. 29 7.6 Lechmere Cash Balance Account - In General.............................................. 30 7.7 Lechmere Interest Credits............................................................... 30 7.8 Lechmere Immediate Cash Balance Account Annuity......................................... 30 ARTICLE VIII Retirement Dates................................................................................. 31 8.1 Normal Retirement Date.................................................................. 31 8.2 Early Retirement Date................................................................... 31 8.3 Postponed Retirement Date............................................................... 32 8.4 Disability Retirement Date.............................................................. 32 ARTICLE IX Amount of Retirement Benefit or Disability Retirement Benefit...................................... 32 9.1 Retirement Benefit Payable upon Retirement at Normal Retirement Date.................... 32 9.2 Retirement Benefit Payable upon Retirement at Early Retirement Date..................... 33 9.3 Retirement Benefit Payable upon Retirement at Postponed Retirement Date................. 33 9.4 Disability Retirement Benefit Payable at Disability Retirement Date..................... 34 9.5 Offset of Retirement Benefit............................................................ 35 9.6 Cessation of Benefit Payments Following Reemployment After Retirement................... 36 9.7 Retirement Benefit Payable upon Retirement Following Reemployment after Termination of Service................................................................ 36 9.8 Maximum Amount of Retirement Benefit.................................................... 37 ARTICLE X Eligibility for Retirement Benefit.................................................................. 39 10.1 Eligibility for Retirement Benefit at Normal Retirement Date............................ 39 10.2 Eligibility for Retirement Benefit at Early Retirement Date............................. 39 10.3 Eligibility for Retirement Benefit at Postponed Retirement Date......................... 40 10.4 Disability Plan Benefits................................................................ 40 ARTICLE XI Methods of Payment................................................................................. 40 11.1 Qualified Joint and Survivor Benefit.................................................... 40 11.2 Optional Methods of Payment............................................................. 41 11.3 Election of Optional Method of Payment.................................................. 43 11.4 Rules Regarding Distribution of Benefits................................................ 44 11.5 Written Explanations of Survivor Benefit................................................ 46 11.6 Cash Out................................................................................ 48 11.7 Direct Rollover......................................................................... 49 11.8 Disability Retirement Benefit........................................................... 49 ARTICLE XII Death Benefits.................................................................................... 49 12.1 Pre-Retirement Death Benefit............................................................ 50 12.2 Death Benefits Attributable to Cash Balance Account and Lechmere Cash Balance Account... 50 12.3 Designation of Beneficiary.............................................................. 52
iii ARTICLE XIII Termination of Service........................................................................... 53 13.1 Termination of Service by Non-Vested Participant........................................ 53 13.2 Termination of Service by Vested Participant............................................ 53 13.3 Termination of Service without a Break in Service....................................... 54 13.4 Termination of Service Following Reemployment........................................... 54 ARTICLE XIV Alienation of Benefits............................................................................ 54 14.1 Non-Assignability....................................................................... 54 14.2 Judgment Offset......................................................................... 56 ARTICLE XV Administration..................................................................................... 57 15.1 In General.............................................................................. 57 15.2 Appointment of Trustees................................................................. 57 15.3 Appointment of Administrative Director.................................................. 57 15.4 Specific Responsibilities and Authority of the Committee................................ 58 15.5 Rules of Procedure...................................................................... 59 15.6 Trust Fund.............................................................................. 59 15.7 Claims Procedure........................................................................ 61 15.8 Payment of Expenses..................................................................... 62 15.9 Notices, etc............................................................................ 62 15.10 Filing of Information................................................................... 63 15.11 Claims Against Trust Fund............................................................... 63 15.12 Agent for Service of Process............................................................ 64 ARTICLE XVI Termination of Participating Company's Participation.............................................. 64 16.1 Right to Terminate...................................................................... 64 16.2 Effect of Termination and Payment of Distributable Reserve.............................. 65 16.3 Transfer of Assets to Successor Plan.................................................... 65 ARTICLE XVII Amendment and Termination........................................................................ 66 17.1 Power to Amend.......................................................................... 66 17.2 Retroactive Amendments.................................................................. 67 17.3 Notices of Amendments................................................................... 67 17.4 Effect of Termination................................................................... 67 17.5 Distribution of Assets If No ERISA Termination.......................................... 67 17.6 Distribution of Assets Upon Termination................................................. 68 17.7 Distribution of Assets Upon Termination Where Assets Not Sufficient..................... 69 17.8 Effect of Partial Termination........................................................... 69 ARTICLE XVIII Limitations in the Event of Early Discontinuance................................................ 70 18.1 Application............................................................................. 70 18.2 Restriction of Benefits................................................................. 70 18.3 Payment of Benefits..................................................................... 71 18.4 Additional Reserves..................................................................... 71 ARTICLE XIX Miscellaneous..................................................................................... 72 19.1 In General.............................................................................. 72
iv 19.2 Coordination of Payment of Benefits with Other Plans.................................... 72 19.3 Incapacity.............................................................................. 72 19.4 Inability to Locate Benefit Recipient................................................... 73 19.5 Benefit Provided by Insurance........................................................... 73 19.6 Credit for Prior Employment............................................................. 73 19.7 Construction............................................................................ 73 ARTICLE XX Top Heavy Provisions............................................................................... 73 20.1 In General.............................................................................. 74 20.2 Definitions............................................................................. 74 20.3 Vesting................................................................................. 74 20.4 Distributions to Participants........................................................... 75 20.5 Top Heavy Plan Years.................................................................... 76 20.6 Duplication of Benefits................................................................. 76 ARTICLE XXI Transfer of Amounts Attributable to Contributions Under the Jefferson Stores Plan................. 77 21.1 Transfer of Accrued Benefit............................................................. 77 21.2 Transfer Held in Trust.................................................................. 77 21.3 Payment of Benefits..................................................................... 77 ARTICLE XXII Transfer of Amounts Attributable to Contributions Under the Lechmere Plan........................ 78 22.1 Transfer of Accrued Benefit............................................................. 78 22.2 Transfer Held in Trust.................................................................. 78 22.3 Payment of Benefits..................................................................... 78
v
Page Addendum A.................................................................................................... 79 Addendum B.................................................................................................... 81
vi PREAMBLES --------- WHEREAS, the Retirement Security Plan first became effective on February 1, 1957, and was thereafter from time to time amended; and WHEREAS, effective January 1, 1975, Ward amended and restated the Retirement Security Plan to provide greater retirement security for eligible associates of Ward and Participating Companies; and WHEREAS, the Profit-Sharing Plan was merged into the Retirement Security Plan effective as of January 1, 1975; and WHEREAS, effective as of January 1, 1976, Ward amended the Retirement Security Plan to satisfy the requirements of ERISA; and WHEREAS, effective January 1, 1979, the Retirement Security Plan was amended and restated to reflect certain corporate reorganization changes, assure continued compliance with ERISA and the final regulations issued thereunder, satisfy the requirements of the 1978 amendments to the Age Discrimination in Employment Act of 1967 and include administrative and clarifying amendments; and WHEREAS, Ward further amended and restated the Retirement Security Plan for service on or after January 1, 1981, as a separate and distinct retirement benefit plan for management, administrative and supervisory associates, and to establish distinct and separately funded retirement benefit plans for timecard associates and for represented associates, with three separate trust accounts commingled for investment purposes; and WHEREAS, Ward amended and restated the Plan, effective April 1, 1983, so that amounts attributable to associate contributions made to the Plan after December 31, 1980, and the Profit-Sharing Plan Balances hereunder shall be transferred to the Savings Plan, adopted by Ward effective April 1, 1983, for the benefit of eligible associates, to eliminate associate contributions under the Plan, to require eligible associates to authorize salary reduction or payroll deduction contributions to the Savings Plan in order to be eligible for continued benefit accruals under the Plan, and to offset and reduce the benefits provided under the Plan by the benefits, if any, that are or could be provided by the Savings Plan funds attributable to the transferred associate contributions and the required salary reduction or payroll reduction contributions authorized by associates under the Savings Plan; and WHEREAS, Ward further amended the Plan, effective January 1, 1984, to provide a guaranteed minimum pension benefit for associates, to satisfy the requirements of the Tax Equity and Fiscal Responsibility Act of 1982, to comply with certain requirements regarding actuarial computations, and to make other technical changes; and WHEREAS, Ward further amended the Plan effective January 1, 1985, to merge the Retirement Plan for Employees of Jefferson Stores, Inc., into the Plan, to transfer amounts attributable to contributions under the Jefferson Stores Plan to the Plan for the benefit of eligible associates, to satisfy the requirements of the Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984, and to make other technical changes; and WHEREAS, Ward amended and restated the Plan, effective January 1, 1989, to merge the: (a) Montgomery Ward & Co., Incorporated Management Retirement Security Plan; (b) Montgomery Ward & Co., Incorporated Timecard Retirement Security Plan and (c) Montgomery Ward & Co., Incorporated Represented Retirement Security Plan, to satisfy the requirements of the Tax Reform Act of 1986 and to make other technical changes; and WHEREAS, Ward amended and restated the Plan, effective January 1, 1994, to merge the Lechmere Plan into the Plan, effective as of August 1, 1994, to transfer amounts attributable to contributions under the Lechmere Plan to the Plan for the benefit of eligible associates, to satisfy the requirements of recent changes to the Code, and to make other technical changes; and WHEREAS, Ward amended the Plan, effective October 1, 1995, to provide for participation in the Plan by eligible employees of Montgomery Ward (Hong Kong) Limited, as described in Addendum A; and 2 WHEREAS, Ward amended the Plan, effective January 1, 1996, to provide for a Disability Retirement Benefit, to provide for participation in the Plan and service credit for certain employees of Signature who were previously employed with Amoco Oil Company, its affiliates or Emanacom Data Services, Inc., and to make other technical changes as requested by the Internal Revenue Service; and WHEREAS, Ward amended the Plan, effective April 1, 1997, to provide for participation in the Plan by eligible employees of Montgomery Ward & Co., Incorporated - Japan Branch, as described in Addendum B; and WHEREAS, Ward amended the Plan effective July 1, 1997, to: (a) freeze benefit accruals under the career average pay formula under the Plan as of July 1, 1997 (other than for Participants employed by Signature or Lechmere); (b) replace the career average pay formula with a Cash Balance Account to be credited with matching contributions based on a Participant's Basic Contributions to the Savings Plan (other than for Participants employed by Signature or Lechmere); and (c) provide for lump sum distribution of Cash Balance Accounts upon termination of employment; and WHEREAS, Ward amended the Plan effective September 17, 1997, to provide for a Location Shutdown Contribution for certain eligible Associates; and WHEREAS, Ward amended the Plan generally effective January 1, 1998, to modify certain provisions with respect to the Disability Retirement Benefit, to address the eligibility of certain Associates employed at the Romeoville, Illinois Distribution Center and to increase the cash out amount to $5,000 pursuant to the Taxpayer Relief Act of 1997; and WHEREAS, Ward desires to amend and restate the Plan generally effective January 1, 1998, to incorporate the amendments to the Plan since the last restatement, to make certain changes necessary or desirable as a result of the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997 and to make such other changes as the Committee shall deem necessary or desirable. 3 NOW, THEREFORE, the Plan is hereby amended and restated to read as follows: ARTICLE I Background Information ---------------------- I.1 Purpose of Plan. The purpose of this Plan is to provide --------------- retirement benefits for eligible Associates of the Company and to thereby encourage such Associates to make and continue careers with the Company. The Plan, as amended and restated herein, and the Trust are intended to qualify as a plan and trust which continue to meet the requirements of Sections 401(a) and 501(a) of the Code. I.2 Application of Restatement and Determination of Retirement ---------------------------------------------------------- Benefits. This restatement applies to Associates who are in the Service of the - - -------- Company on any date after the Effective Date. Any benefits payable to a Participant who retired or terminated service prior to January 1, 1981, without resuming service thereafter, or whose normal retirement date occurred on or before January 1, 1981, and the benefits payable to any Associate who was in the Service of the Company on December 31, 1980, but who has not enrolled in the Plan thereafter, will be paid from the Trust, but will be governed solely by the terms of the Retirement Security Plan. The total benefits payable from the Trust for any Participant enrolled in the Plan on any date after December 31, 1980, will be calculated in three parts or such lesser number of parts as may be applicable to the Participant: (a) the Participant's benefits determined as of December 31, 1980, under the Retirement Security Plan; provided that, in making such determination, Service after December 31, 1980, shall apply only for purposes of Vesting under the Retirement Security Plan, (b) the Participant's Supplemental Retirement Benefit determined as of the date of the Participant's Retirement or termination of Service under the Retirement Security Plan, and (c) the Participant's benefits determined under the Plan with respect to participation after December 31, 1980. Notwithstanding the foregoing, in the event of the death of any Participant who was enrolled in the Retirement Security Plan on December 31, 1980, and who became a Participant in the Plan on January 1, 1981, (a) if such Participant's Surviving Spouse is eligible to receive a Pre-Retirement Death Benefit, such Surviving Spouse shall be entitled to elect, in accordance with procedures 4 established by the Committee, to receive in one lump sum the amounts attributable to associate contributions made prior to January 1, 1981, to the Retirement Security Plan, plus interest (determined in accordance with the Code and Regulations), and the amount of the Pre-Retirement Death Benefit payable to such Surviving Spouse shall be reduced by the Equivalent Actuarial Value of the lump sum payment if such election is made, and (b) the Retirement Benefit, and form in which benefits, if any, will be paid, shall be determined solely under the terms of the Plan as in effect on the date of the Participant's termination of employment or retirement, unless such person is thereafter reemployed and again becomes a Participant. Benefits for all other Participants shall be determined under the terms of the Plan as in effect on the date of the Participant's termination of employment or retirement, unless such person is thereafter reemployed and again becomes a Participant. I.3 Other Effective Dates. The Plan, as set forth herein, constitutes a --------------------- restatement of the Plan and although this restatement is generally effective January 1, 1998, prior amendments to conform with applicable laws, as well as the inclusion of certain amendments since the last restatement, necessitates different effective dates for certain Plan provisions. Accordingly, notwithstanding the general effective date of this restatement, certain Plan sections herein have special effective dates as described therein, including, but not limited to, the following Plan sections which have special effective dates as indicated below: Sections Effective Date -------- -------------- January 1, 1984 and October 1, Designated portions of 9.5 1984 Designated portions of 2.15 January 1, 1989 8.1 and 9.7 January 1, 1987 2.14, 2.15, 2.17, 2.18 and 11.7 January 1, 1993 Sections 7.6 - 7.8 July 1, 1994 Designated portions of 2.2 August 1, 1994 5.4 December 12, 1994 2.2(b) January 1, 1995 Addendum A October 1, 1995 5 Designated portions of 2.2, the third and fourth sentences and the last paragraph of 2.14, 2.16-2.18, the last paragraph of 2.64, the last three sentences of Article IV, the last sentence of 5.1, 8.4, 9.4, the last sentence of 9.7, the last sentence of 10.4, 11.5 and 11.8 January 1, 1996 2.58 (elimination of the family aggregation rules) and 2.29 January 1, 1997 Addendum B April 1, 1997 2.2(f), 2.9, 2.13, 2.26, 2.28, 2.29, 2.60, 7.2, 7.4, 9.1, 9.3, the first sentence of 9.5, 9.7, the first paragraph of 11.2, 11.2(e), 11.5(c), 12.1, 12.2, the last two sentences of 12.3, 13.2-13.4, 15.4(c), 17.1(a) July 1, 1997 2.5, 2.16, 2.23, 2.64, 2.66, 7.1 and 7.3 September 17, 1997 Designated portions of 2.2 January 1, 1998 Designated portions of 9.5 June 1, 1998 Designated portions of 9.4(b) August 1, 1998 9.8 (elimination of the combined plan limit rules) January 1, 2000 ARTICLE II Definitions ----------- The following terms shall have the following meanings: II.1 "Accrued Benefit" means the amount of annual Retirement Benefit determined under Articles IX and X payable as a straight life annuity beginning at a Participant's Normal Retirement Date or, if applicable, the Participant's Postponed Retirement Date as determined in accordance with Article IX. The Accrued Benefit payable at Normal Retirement Date shall not be less than the Accrued Benefit of such 6 Participant determined on the date preceding the Effective Date under the terms of the Plan or the terms of the Lechmere Plan determined on June 30, 1994. II.2 "Actuarial Equivalent" or "Equivalent Actuarial Value" means, unless otherwise specified in the Plan, a benefit of equivalent value when computed on the basis of the actuarial tables and interest rates as set forth below; provided, however, that the interest rate used to determine whether the Equivalent Actuarial Value of a Retirement Benefit exceeds $3,500 (or, for periods beginning on or after January 1, 1998, $5,000) for purposes of the Plan or to determine the Equivalent Actuarial Value of a lump sum option provided under Section 11.6 shall not be greater than: (a) Effective January 1, 1996, for distributions during a Plan Year the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the September preceding the first day of such Plan Year ("30-Year Treasury Rate"). (b) The rate set forth in subparagraphs (i) and (ii) below may be referred to as the PBGC Rate. (i) the applicable interest rate if the accrued benefit (using such rate) is not in excess of $25,000; or (ii) 120% of the applicable interest rate if the accrued benefit exceeds $25,000 (as determined under subparagraph (i) above). In no event shall the present value determined under subparagraph (ii) be less than $25,000. For purposes of subparagraphs (i) and (ii) above and Subsection (c) below, the applicable interest rate shall mean the interest rate or rates which would be used as of the first day of the calendar year in which the distribution commences by the PBGC for purposes of determining the present value of the Participant's benefits under the Plan if the Plan had terminated on the date distribution commences with insufficient assets to provide benefits guaranteed by the PBGC on that date ("PBGC Rate"). 7 (c) Subject to the other provisions of this Section 2.2, for purposes of distributions prior to January 1, 1995 of the Retirement Benefit other than that portion attributable to the Lechmere Frozen Benefit, as defined in Section 9.1(d), and the Lechmere Immediate Cash Balance Annuity, "Actuarial Equivalent" or "Equivalent Actuarial Value" means the sex-neutral option factors listed below: Annuity Form Mortality Interest Rate ------------ --------- ------------- Qualified Joint 1971 GAT 7.5% and Survivor (60% male/40% female) Annuity 100%, 75% or 50% 1971 GAT 7.5% Contingent Annuity (60% male/40% female) 10 Year Certain 1971 GAT 7.5% and Life Annuity (60% male/40% female) Level Income 1971 GAT 7.5% Annuity (60% male/40% female) Lump Sum Option 1983 GAM Applicable (males) Interest Rate (d) Subject to the other provisions of this Section 2.2, for purposes of distributions prior to January 1, 1995 of the Lechmere Frozen Benefit, as defined in Section 9.1(d), and the Lechmere Immediate Cash Balance Annuity, "Actuarial Equivalent" or "Equivalent Actuarial Value" means the sex-neutral option factors listed below:
Annuity Form Mortality Interest Rate ------------ --------- ------------- 100%, 75% or 50% 1983 GAM 7.5% Contingent Annuity (males) 10 Year Certain 1983 GAM 7.5% and Life Annuity (males) Level Income 1983 GAM 7.5% Annuity (males)
8 Lump Sum Option 1983 GAM PBGC Rate (males) (e) Subject to the other provisions of this Section 2.2, for distributions after December 31, 1995, "Actuarial Equivalent" of "Equivalent Actuarial Value" means the sex-neutral option factors listed below: Annuity Form Mortality Interest Rate ------------ --------- ------------- 100%, 75% or 50% 1983 GAM 7.5% Contingent Annuity (50% male/50% female) 10 Year Certain 1983 GAM 7.5% and Life Annuity (50% male/50% female) Level Income 1983 GAM 7.5% Annuity (50% male/50% female) Lump Sum Option 1983 GAM 30-Year Treasury (50% male/50% female) Rate (f) The lump sum value of a Participant's Cash Balance Account (as defined in Section 2.10 of the Plan) as of a determination date shall be an amount equal to the greater of: (i) the accumulated balance in such Cash Balance Account as of such determination date, and (ii) the present value of that portion of a Participant's Accrued Benefit attributable to the Participant's Cash Balance Account calculated using the 1983 GAM (50% male/50% female) and the 30-Year Treasury Rate as set forth in Subsection (a). The lump sum value of the Lechmere Cash Balance Account (as defined in Section 2.38 of the Plan) as of a determination date shall be an amount equal to the greater of: (i) the accumulated balance in such Lechmere Cash Balance Account as of such determination date, and (ii) the present value of the portion of a Participant's Accrued Benefit attributable to the Lechmere Cash Balance Account calculated using the 1983 GAM (50% male/50% female) and the 30-Year Treasury Rate as set forth in Subsection (a). For purposes of converting the Cash Balance Account and the Lechmere Cash Balance Account, if any, to an annuity form of payment, the 1983 9 GAM (50% male/50% female) mortality table and the 30-Year Treasury Rate as set forth in Subsection (a) shall be used. (g) In no event shall the amount of any benefit or annuity determined hereunder exceed the maximum benefit under Section 415 of the Code. II.3 "Actuary" means the enrolled actuary, within the meaning of ERISA, engaged by the Committee. II.4 "Administrative Director" means the Administrative Director of the Plan appointed by the Committee in accordance with Section 15.3 hereof. II.5 "Affiliate" means any corporation controlling, controlled by, or under common control with (within the meaning of Section 414(b), (c), (m) or (o) of the Code and the applicable Regulations), the Company or such successor, directly or indirectly through one or more intermediaries. II.6 "Average Weekly Hours" means the most recent 12 months actual hours paid divided by 52 weeks, or, if the Eligible Location Shutdown Participant has less than one year of Continuous Service, the Eligible Location Shutdown Participant's actual hours paid since the start of the period of Continuous Service divided by the number of weeks paid. II.7 "Beneficiary" means the person or persons designated by a Participant or the Beneficiary of a Participant to receive the amount, if any, payable under the Plan in the event of the death of such Participant or Beneficiary, as the case may be. II.8 "Board" means the Board of Directors of Ward. II.9 "Break in Service" means the Year during which or immediately after which an Associate terminates Service and does not perform Service during at least 12 weeks. Notwithstanding the preceding sentence, any Associate who actually performs at least 500 Hours of Service during any Year shall not be considered as having incurred a Break in Service. Solely for purposes of determining whether a Break in Service has occurred, an individual shall be credited with the Hours of Service which such individual would 10 have completed but for a maternity or paternity absence, as determined by the Committee in accordance with the Code and Regulations; provided, however, that the total Hours of Service so credited shall not exceed 501 hours and that the individual timely provide the Committee with such information as it shall require. Hours of Service credited for a maternity or paternity absence shall be credited entirely (a) in the Plan Year in which the absence began if such Hours of Service are necessary to prevent a Break in Service in such year, or (b) in the following Plan Year. For purposes of this Section 2.9, maternity or paternity absence shall mean an absence from work by reason of the individual's pregnancy, the birth of the individual's child or the placement of a child with the individual in connection with adoption of the child by such individual, or for purposes of caring for a child for the period immediately following such birth or placement. II.10 "Cash Balance Account" means the notional amount described in Section 7.1. II.11 "Code" means the Internal Revenue Code of 1986, as amended, and any successor provisions thereto. II.12 "Committee" means the Benefit Plans Committee of Ward. II.13 "Company" means Ward and any Participating Company or any of them. II.14 "Continuous Service" means a Participant's consecutive months and years of service with the Company, as shown on his personnel records, in accordance with the Company policy relating to continuous service. Service with a Participating Company prior to its designation as a Participating Company shall be included in Continuous Service if, but only if, and to the extent determined by the Board at the time of such designation. In case of reemployment of a former Employee, or the return to work of an Employee whose Continuous Service was broken, Continuous Service shall be computed from the date of reemployment or return to work, or as otherwise determined by the Committee. II.15 "Credited Service" means an Associate's Service as a Participant, excluding any authorized leave of absence, military leave, layoff or suspension in accordance with Subsections 2.56(a)-(d) hereof. Credited Service shall not include any period of Service during which a Participant fails to make any 11 contributions required prior to the Effective Date for participation in the Plan or fails to authorize Required Contributions to be made under the Savings Plan on or after the Effective Date. Effective January 1, 1989, Credited Service shall include any period of disability leave of absence provided that the Associate was a Participant immediately prior to such leave or became eligible while on such leave, and further provided that (a) the Participant is receiving long term disability benefits from a plan sponsored by the Company, or a Disability Retirement Benefit from this Plan and (b) the number of years of Credited Service credited pursuant to this Section 2.15 does not exceed the number of years of Credited Service prior to the disability. Effective January 1, 1994, credit under the Plan for the period of disability leave of absence during which the Participant is receiving long term disability benefits from a plan sponsored by the Company shall be limited to (a) the duration of the disability leave of absence; (b) the period prior to the Participant's Normal Retirement Date; (c) one year if the Participant has less than 10 years of Continuous Service, or (d) two years if the Participant has 10 or more years of Continuous Service prior to such disability leave of absence, whichever is less. Associates who were in Service of the Company as of January 1, 1988, and completed at least one Hour of Service in 1988, and made investable basic contributions as defined in the Savings Plan other than Associates employed by Signature, accrued benefits for those contributions retroactive to their enrollment date in the Savings Plan. With respect to each Participant who was an associate of Jefferson Stores, Inc., Credited Service shall not include any period of Service prior to July 1, 1983. For purposes of determining the Associate's eligibility under the Plan under Article IV, for purposes of determining the Associate's eligibility for a Retirement Benefit under Article X or for purposes of determining both the Associate's eligibility under the Plan and eligibility for a Retirement Benefit, Credited Service shall include any service an Associate was credited with as an employee of any organization which operated any trade or business, or any separate unit of a trade or business substantially acquired by the Company, but only to the extent so provided by appropriate action of the Committee. 12 II.16 "Daily Pay Rate" means the Weekly Pay Rate divided by five. II.17 "Direct Rollover" shall mean a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. II.18 "Disability Participant" means each Associate or former Associate who is entitled to receive Disability Retirement Benefit payments hereunder in accordance with an election made pursuant to Section 5.1 hereof . II.19 "Disability Plan" means the Montgomery Ward & Co., Incorporated Long Term Disability Plan, as amended (except as otherwise stated herein), through the date of the Disability Participant's election to receive a Disability Retirement Benefit under this Plan pursuant to Section 5.1 hereof. II.20 "Disability Retirement Benefit" means a Disability Participant's monthly annuity benefit determined in accordance with Sections 9.4(a) and (b) hereof upon the Disability Participant's election pursuant to Section 5.1 hereof and payable in accordance with Section 11.8 hereof. II.21 "Distributee" shall mean an Associate or former Associate. In addition, the Associate's or former Associate's surviving Spouse and the Associate's or former Associate's Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former Spouse. II.22 "Effective Date" means the date of effectiveness of this amendment and restatement, as provided in Article III hereof. II.23 "Eligible Location Shutdown Participant" means each Associate (other than each part-time or temporary Associate who is neither eligible to participate in the Plan nor has two years of Continuous Service) who (a) was not employed by Signature; (b) was not covered by a collective bargaining agreement; (c) was not bonus eligible (not a grade 15 or higher); (d) terminated employment with the Company on or after September 17, 1997, as a result of a closure of a facility announced on or after September 1, 1997, as determined by the Committee and (e) entered into any release and waiver agreement as requested by the 13 Company. Notwithstanding anything herein to the contrary, to be an Eligible Location Shutdown Participant an Associate must also remain employed with the Company until the date of the Associate's permanent lay-off by the Company because of the closure of the facility. II.24 "Eligible Retirement Plan" means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. II.25 "Eligible Rollover Distribution" shall mean any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). II.26 "Employee" or "Associate" means any individual who is employed by the Company, as determined by the Committee, excluding (a) any associate who is included in a unit of associates covered by a negotiated collective bargaining agreement which does not provide for the associate's membership in the Plan, (b) any associate of Electric Ave. & More or any division of the Company which the Committee has determined to treat as though it is an Affiliate which is not a Participating Company and (c) any non-resident alien. 14 II.27 "ERISA" means the Employee Retirement Income Security Act of 1974, as from time to time amended. II.28 "Highly Compensated Associate" means, effective January 1, 1997, an Associate who, (a) was a five percent owner at any time during the Plan Year or the preceding Plan Year, or (b) for the preceding Plan Year (i) had compensation (as defined under Section 415(c)(3) of the Code) from the Company in excess of $80,000 (as adjusted for increases in the cost of living in accordance with Section 414(q)(1) of the Code), or (ii) if the Committee in its sole discretion elects the application of this Subsection (ii) for the preceding Plan Year, was in the group consisting of the top 20% of employees when ranked on the basis of compensation (as defined in Section 415(c)(3) of the Code) paid during such Plan Year. II.29 "Hours of Service" means each hour during which an Associate performs Service (or is treated as performing Service under Section 2.54) and for which he is paid, or entitled to payment for the performance of duties for the Company (including back pay irrespective of mitigation of damages). In addition, Hours of Service shall also include up to 501 hours of non-working time during any single continuous period of absence which does not otherwise constitute Service, but for which an Associate is directly or indirectly paid or entitled to payment. The determination of Hours of Service to be credited hereunder shall be made by the Committee in accordance with the Regulations, including Section 2530.200b-2(b) and (c) of the Labor Department Regulations. II.30 "Immediate Cash Balance Account Annuity" means an annuity as described in Section 7.5. II.31 "Interest Credit(s)" means the interest amount credited to the Cash Balance Account of a Participant pursuant to the provisions of Section 7.4. II.32 "Investment Manager" means an Investment Manager, as that term is defined in ERISA, appointed by the Trustees. II.33 "IRS" means the United States Internal Revenue Service. 15 II.34 "Jefferson Stores Plan" means the Retirement Plan for Employees of Jefferson Stores, Inc., amended effective as of January 1, 1984. II.35 "Labor Department" means the United States Department of Labor. II.36 "Lechmere" means Lechmere, Inc. II.37 "Lechmere Cash Balance Account" means the notational amount described in Section 7.6 and maintained for Participants who previously participated in the Lechmere Plan. II.38 "Lechmere Immediate Cash Balance Account Annuity" means an annuity as described in Section 7.8 with respect to a Participant who was a participant in the Lechmere Plan. II.39 "Lechmere Interest Credits" means the interest amount credited to the Lechmere Cash Balance Account of a Participant pursuant to the provisions of Section 7.7 with respect to each Participant who was a participant in the Lechmere Plan. II.40 "Lechmere Plan" means the Lechmere, Inc. Personal Retirement Account Plan, amended and restated effective January 1, 1992. II.41 "Optional Retirement Benefit" means an alternative form of Retirement Benefit provided for in Section 11.2 hereof, which a Participant may elect to receive upon Retirement and which is the Actuarial Equivalent of a Retirement Benefit. II.42 "Participant" means each Associate or former Associate who is enrolled for participation in the Plan or is entitled to receive or receiving benefit payments hereunder. II.43 "Participating Company" means any company which is an Affiliate, designated by the Board as such, the board of directors or equivalent governing body of which shall adopt the Plan by appropriate action and the Associates of which shall be eligible to participate in the Plan in the manner and to the extent determined by the Board so long as that company remains so designated. Any such company so designated and which adopts the Plan shall be deemed thereby to appoint Ward, the Committee, the Administrative Director and the Trustees its exclusive agents to exercise on its behalf all of the powers conferred hereby or 16 by the Trust Agreement upon the Company, the Committee, the Administrative Director and the Trustees, respectively, and shall make its allocable contributions to the Plan. The authority of the Company, the Committee, the Administrative Director and the Trustees, respectively, to act as such agent shall continue until the Plan has terminated as to such company and the relevant Trust Fund assets have been distributed by the Trustees as provided in Article XVI hereof. II.44 "PBGC" means the Pension Benefit Guaranty Corporation. II.45 "Plan" means the Montgomery Ward & Co., Incorporated Retirement Security Plan, as herein set forth, and as from time to time in effect. II.46 "Prior Plans" means the Management Retirement Security Plan, the Timecard Retirement Security Plan and the Represented Retirement Security Plan, each as in effect on December 31, 1988. II.47 "Regulations" means the applicable proposed, temporary or final regulations issued under the Code or ERISA by the IRS, the PBGC, the Labor Department or any other governmental authority and any temporary rulings and questions and answers promulgated by such authorities pending the issuance of such regulations. II.48 "Required Contributions" means contributions authorized by Participants to be made to the Savings Plan pursuant to Section 4.1 thereof. II.49 "Retirement" or "Retire" means or refers to such time as a Participant is eligible to receive currently and elects to receive currently a Retirement Benefit or an Optional Retirement Benefit upon or after the Participant's termination of Service. II.50 "Retirement Benefit" means a single life annuity determined upon a Participant's Retirement in accordance with the relevant Section of Article IX hereof, payable in accordance with the relevant Section of Article XI hereof. II.51 "Retirement Security Plan" means the Montgomery Ward & Co., Incorporated Retirement Security Plan, as amended through December 31, 1980. 17 II.52 "Savings Plan" means the Montgomery Ward & Co., Incorporated Savings Plan and for periods prior to July 1, 1997, the Montgomery Ward & Co., Incorporated Savings and Profit Sharing Plan, as amended from time to time. II.53 "Signature" means Signature Financial/Marketing, Inc. II.54 "Service" means employment with the Company or with any Affiliate, excluding service performed by an individual prior to January 1, 1976, if such periods would have been disregarded under the break in service rules then in effect under the Retirement Security Plan or prior to January 1, 1985, if such periods would have been disregarded under the break in service rules then in effect under the Plan, and excluding Service which is disregarded under the Break in Service rules of the Plan, the Prior Plans, the Jefferson Stores Plan or the Lechmere Plan. Service shall include the following: (a) any authorized leave of absence under rules determined by the Committee, which are uniformly applicable to all Associates similarly situated and in accordance with the Regulations (including Sections 2530.200b-2(b) and (c) of the Labor Department Regulations and Sections 825.214 through 825.216 of the Family and Medical Leave Act of 1993 ("FMLA") Regulations); provided the Associate returns to active Service within the period authorized for such leave; (b) service in any of the United States Armed Forces, if and to the extent required by the Military Selective Service Act, as amended, the FMLA, the Uniformed Services Employment and Reemployment Rights Act of 1994 or any other federal law or as otherwise recognized by the Committee; (c) any period of layoff not in excess of 12 months during which the Associate retains reemployment rights and provided that the Associate reports to work within three working days after recall; and (d) any period of suspension of participation, as provided for in Section 5.2 hereof. 18 II.55 "Surviving Spouse" means the survivor of a deceased Participant to whom such deceased Participant was legally married, as determined by the Committee on the earlier of, (a) the date of the Participant's Retirement, or (b) for at least one year on the date of such Participant's death. II.56 "Total Earnings" means the total of an Associate's compensation, including salary, wages, overtime premium, commissions, holiday pay, vacation pay, bonuses, cash incentives other than from contests and salary continuance paid or payable by the Company and any Affiliates for Service during a calendar year prior to the earlier of the Associate's date of termination of Service or the Associate's Normal Retirement Date or, if applicable, Early Retirement Date, but excluding (a) amounts paid under the 1970 Marcor Stock Price Plan, under any stock option plan or stock award plan and under any other plans maintained exclusively for management Associates of Ward or of Ward and Affiliates which the Committee determines to exclude from Total Earnings, (b) amounts contributed by the Associate's employer to the Trust pursuant to the provisions of the Plan or paid or contributed to any group insurance plan or other employee benefit plan established or maintained by the Associate's employer or in which the Associate's employer participates, other than amounts contributed on behalf of a Participant under Section 4.1 of the Savings Plan, (c) amounts paid to the Associate from Jefferson Stores, Inc. while he was a participant under the Jefferson Stores Plan and (d) amounts paid during any period during which a Participant fails to make any contributions required prior to the Effective Date for participation in the Plan or fails to authorize Required Contributions to be made under the Savings Plan. Total Earnings shall exclude amounts paid in a calendar year in excess of $150,000 (adjusted for cost of living in accordance with Section 401(a)(17) of the Code). In the case of a Participant for whom long term disability benefits are being paid under the Disability Plan pursuant to the provisions of said plan, the Participant's Total Earnings for the period during which such benefits are being accrued by this Plan shall be deemed to continue at the same rate as the Participant's Total Earnings immediately prior to such disability. 19 II.57 "Transferred Contribution Account" means the account, established and maintained as part of a Participant's account under the Savings Plan to reflect amounts transferred with respect to a Member's Benefit derived from Associate Contributions, pursuant to Section 6.2 of the Savings Plan. II.58 "Trust" means the Trust established by Ward as a part of the Plan. II.59 "Trust Agreement" means the agreement with the Trustees establishing the Trust. II.60 "Trust Fund" means all the assets held by the Trustees pursuant to the Trust Agreement. II.61 "Trustees" means the trustees under the Trust Agreement appointed by the Committee in accordance with Section 15.2 hereof. II.62 "Vest", "Vested" or "Vesting" means the acquisition by a Participant, an Eligible Location Shutdown Participant or the Participant's or the Eligible Location Shutdown Participant's Beneficiary of a nonforfeitable right to a Retirement Benefit, except in the event of the Participant's death prior to the time prescribed for payment of such Retirement Benefit. For purposes of the Plan, Vesting occurs after five Years of Service (three Years of Service for benefits accrued pursuant to Section 7.2 and any interest accrued on such Cash Balance Contribution under Section 7.4, and immediately for benefits accrued pursuant to Section 7.3 and any interest accrued on such Location Shutdown Contribution under Section 7.4 ) with the fifth year (third year for benefits accrued pursuant to Section 7.2) being the completion of five months of service or upon Normal Retirement Date pursuant to the provisions hereof, whichever occurs first. In determining whether a Participant is Vested, the Years of Service prior to any Break in Service shall be disregarded if he was not then Vested and the number of consecutive years in which he incurred a Break in Service equals or exceeds the greater of five or the aggregate number of the Participant's Years of Service prior to such Break in Service (excluding any Years of Service prior to January 1, 1976, which were disregarded under the break in service rules then in effect under the Retirement Security Plan, and excluding any Years of Service which are disregarded under the Break in Service rules of the Plan, the Prior Plans, the Jefferson Stores Plan or the Lechmere Plan). 20 II.63 "Ward" means the present Illinois corporation by the name of Montgomery Ward & Co., Incorporated and any successor to all or substantially all of its business and assets. II.64 "Weekly Pay Rate" means (a) for management and administrative/supervisory Eligible Location Shutdown Participants, the Eligible Location Shutdown Participant's annual base salary on the date of the announcement of the closure of the applicable facility (or for Eligible Location Shutdown Participants who are on an authorized leave of absence as approved by the Committee on the date of the announcement of the closure of the applicable facility, the Eligible Location Shutdown Participant's annual base salary on the date immediately preceding the first day of such leave of absence) divided by 52 and (b) for wage Eligible Location Shutdown Participants, the Eligible Location Shutdown Participant's hourly base rate of pay/draw rate on the date of the announcement of the closure of the applicable facility (or for Eligible Location Shutdown Participants who are on an authorized leave of absence as approved by the Committee on the date of the announcement of the closure of the applicable facility, the Eligible Location Shutdown Participant's hourly base rate of pay/draw rate on the date immediately preceding the first day of such leave of absence) multiplied by Average Weekly Hours. II.65 "Year" means the 12 consecutive month period beginning on the date an Associate's Service commenced or recommenced after a Break in Service (determined under the rules of the Plan, the Prior Plans, the Jefferson Stores Plan or the Lechmere Plan), as determined by the Committee, or an anniversary date thereof. Effective January 1, 1994, if the Associate does not complete 1,000 Hours of Service during the first 12 consecutive month period, the determining period shall be any 12 consecutive month period beginning with the first day of the calendar year beginning on or after the date of employment. II.66 "Year of Credited Service" means a Year of Service for which an Associate receives Credited Service. Partial Years of Credited Service shall be taken into account on the basis of 1/12 Year's credit for each month of Service. 21 II.67 "Year of Service" means a Year in which an Associate performs Service and completes 1,000 Hours of Service. Any Associate who actually performs 1,000 Hours of Service during any Year shall be considered as having performed a Year of Service. For purposes of determining Years of Service under Article IV and under Section 2.62 regarding Vesting of benefits, each Participant who was employed by Amoco Oil Company or its affiliates on December 31, 1995, and who became an Associate of Signature, on January 1, 1996, in connection with the Stock Purchase Agreement by and between Amoco Oil Company, Amoco Oil Holding Company, Montgomery Ward & Co., Incorporated and Signature Financial/Marketing, Inc., dated December 29, 1995, shall have all years of service with Amoco Oil Company or its affiliates treated as Years of Service with the Company. Also, for purposes of determining Years of Service under Article IV and under Section 2.62 regarding Vesting of benefits, each Participant who was an employee of Emanacom Data Services, Inc. on July 16, 1996, and who became an Associate of Signature on July 16, 1996, shall have all years of service with Emanacom Data Services, Inc. treated as Years of Service with the Company. ARTICLE III Effective Date -------------- The Effective Date of this amendment and restatement shall be January 1, 1998. ARTICLE IV Eligibility ----------- 22 Each Associate who, immediately prior to the Effective Date, was a Participant shall continue to be a Participant on and after the Effective Date. Each other Associate who was in Service immediately prior to the Effective Date, but who was not then a Participant of the Plan shall be eligible for participation in the Plan on the later of the Effective Date or the first day of the month following the date on which he satisfies the requirements for participation in the Plan as in effect on December 31, 1993; provided, however, that any such Associate who does not submit an enrollment form on the earliest date prescribed by the Committee must satisfy the requirements for participation under this amendment and restatement before again being eligible for participation in the Plan. Each other Associate who was or is employed by the Company shall become eligible to participate in the Plan on the first day of the month following the later of (a) the date on which he attains age 21; or (b) the date on which he completes one Year of Service. Notwithstanding the foregoing, each participant of the Lechmere Plan on June 30, 1994 shall become a Participant on July 1, 1994. Each Associate or former Associate who became "Totally Disabled" (as such term was defined by the Disability Plan as in effect at such time) on or before October 1, 1990, is entitled to receive the full Disability Benefit (as that term is defined in the Disability Plan); and elects to receive a Disability Retirement Benefit under this Plan shall be eligible to participate in this Plan as a Disability Participant. Notwithstanding the foregoing, each participant in the Amoco Employee Savings Plan ("Amoco Plan") on December 31, 1995, and each participant in the Amoco Oil Company Retirement Plan ("Amoco Oil Plan") on December 31, 1995, who became an Associate of Signature on January 1, 1996 (or, with respect to a participant in the Amoco Plan or the Amoco Oil Plan on December 31, 1995, who on January 1, 1996, was on medical, military, personal, educational or family leave status from Amoco Oil Company or its affiliates, who became an Associate of Signature on any date prior to January 1,1997), shall become a Participant in the Plan as of the first day of the first month following the date he becomes an Associate of Signature even if such Associate shall have had less than one Year of Service, in which case such Associate shall be granted one Year of Service credit for purposes of eligibility and shall be deemed to be age 21 for eligibility purposes, unless such 23 Associate is a Highly Compensated Associate. Notwithstanding the foregoing, each employee of Emanacom Data Services, Inc. on July 16, 1996, who became an Associate of Signature on July 16, 1996, shall become a Participant in the Plan as of the first day of the first month following July 16, 1996. Notwithstanding the foregoing, each Associate who is employed by the Company at the Montgomery Ward & Co., Incorporated Romeoville Distribution Center on September 2, 1997, shall be eligible to participate in the Plan as of such date. ARTICLE V Participation ------------- V.1 Enrollment. Each Associate who becomes eligible to become a ---------- Participant under the Savings Plan shall become a Participant on the first day of the month following the Associate's submission of an enrollment form prescribed by the Committee. The Committee shall take any necessary or appropriate action to enroll each Associate who becomes eligible to become a Participant pursuant to this Section 5.1 and, if it is determined that an eligible Associate has not been enrolled in the Plan due to error, such Associate may be retroactively enrolled if the Committee receives notice of the error within a reasonable period of time following such error. Each Associate or former Associate who is eligible to become a Disability Participant under the Plan and elects to receive a Disability Retirement Benefit shall become a Disability Participant on a date determined by the Administrative Director, but no later than 90 days following the Associate's or former Associate's submission of an election, in such form as may be prescribed by the Committee, to receive a Disability Retirement Benefit under this Plan. V.2 Suspension of Participation. No Participant may continue --------------------------- participation in the Plan in the event the Participant ceases to be an Associate or is transferred from the Company to an Affiliate which is not designated a Participating Company or who is on a leave of absence, except, to the extent provided in this Plan, for those Associates receiving long term disability benefits from a plan sponsored by the Company. A Participant who becomes ineligible to participate in the Plan because of the application of the preceding 24 sentence shall be suspended from further participation during the period of such ineligibility without forfeiting any benefits accrued prior to the date such Participant became ineligible to participate, unless the Committee shall determine, in accordance with rules established by the Committee which are uniformly applicable to all Associates similarly situated, that such Participant shall be deemed to have terminated the Participant's employment for purposes of participation in the Plan pursuant to Article XIII hereof. Such action shall not be applicable to any Participant who is transferred to an Affiliate. Credited Service shall exclude any such period of suspension, as provided in Section 2.15 hereof, but Service for purposes of Vesting and eligibility shall include such period. Notwithstanding any of the provisions of the Plan to the contrary, each Participant shall be entitled to the benefits provided under Sections 21.3 and 22.3, if applicable. V.3 Break in Service. If a Participant's employment terminates and he ---------------- is later rehired, he shall again be eligible to participate in the Plan as of the date of rehire. V.4 Qualified Military Service. Notwithstanding any provision of the -------------------------- Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. ARTICLE VI Contributions ------------- VI.1 Cessation of a Participant's Contributions. No Participant shall ------------------------------------------ be required or permitted to contribute to the Plan on or after April 1, 1983. VI.2 Company Contributions. Subject to the provisions of Articles XVI --------------------- and XVII hereof, Ward and each Participating Company shall contribute to the Trust, not less frequently than quarterly during each Plan Year, the amounts recommended by the Actuary to the Committee as necessary to maintain the Plan on a sound actuarial basis, consistent with the requirements of ERISA and the Code. The Committee shall arrange 25 for such funding standard accounts as are required by ERISA in accordance with the recommendations of the Actuary. VI.3 Actuarial Assumptions. The Committee shall adopt and may change --------------------- from time to time, in accordance with the provisions of ERISA and the Code, such actuarial assumptions and methods as are recommended by the Actuary for the purpose of actuarial valuations of the Plan. The Actuary shall make an annual actuarial valuation of the Plan and shall estimate the contributions required under Section 6.2 hereof on the basis thereof. At least once a year, the Actuary shall make an actuarial study of the mortality and other actuarial assumptions, service and compensation experience of the Participants in the Plan, the investment experience and any other relevant experience gains and losses under the Plan, including such calculations as may be necessary to determine whether the Plan is adequately funded, and shall report the results of its study to the Committee. Prior to termination of the Plan, forfeitures of benefits arising from termination of Service, death or any other reason under the Plan shall not be applied to increase the benefits that any Participants would otherwise be entitled to receive under the Plan, but may be anticipated in estimating costs under the Plan and shall be applied to reduce the Company's contributions under the Plan. ARTICLE VII Cash Balance Account and Lechmere Cash Balance Account ------------------------------------------------------ VII.1 Cash Balance Account - In General. A notional account --------------------------------- (hereinafter referred to as the "Cash Balance Account") shall be established and maintained for each Associate who is a Participant in the Plan on or after July 1, 1997. Such Participant's Cash Balance Account shall be credited with an Annual Cash Balance Contribution in accordance with Section 7.2 and Interest Credits in accordance with Section 7.4. On or after July 1, 1997, a Cash Balance Account shall also be established and maintained for each Eligible Location Shutdown Participant who is not otherwise a Participant in the Plan. An Eligible Location 26 Shutdown Participant's Cash Balance Account may be credited with a one-time Location Shutdown Contribution in accordance with Section 7.3 and Interest Credits in accordance with Section 7.4. VII.2 Annual Cash Balance Contribution. -------------------------------- (a) For the period from July 1, 1997, through December 31, 1997, and for each calendar year commencing thereafter, an Annual Cash Balance Contribution shall be credited to the Cash Balance Account of each Participant who is not employed by either Signature or Lechmere equal to a percentage of the Participant's Required Contributions for such period determined in accordance with the following schedule: Participant's Age Percent of Required As of each January 1 Contributions -------------------- ------------- Under age 40 70% 40-44 80% 45-49 90% 50-54 105% 55-59 120% 60 and over 135% For purposes of this Section 7.2, a Participant's age on January 1 will be his age on his next birthday if such birthday is on or before June 30, or the Participant's age on his last birthday if his next birthday is on or after July 1. (b) Notwithstanding anything herein to the contrary, during the period of a disability leave of absence, a Participant shall receive the maximum contribution provided under Subsection (a) above based on the Participant's Age, as defined in Subsection (a) above, and Total Earnings even if the Participant fails to make any Required Contributions; provided that the Associate: (i) was a Participant for at least one year prior to such leave, (ii) became eligible while on such leave or (iii) first became eligible and became a Participant within one year prior to such leave and participated in the Plan from the date first eligible to the date of such leave; and further provided that the Participant 27 is receiving long term disability benefits from a plan sponsored by the Company. Contributions under the Plan for the period of disability leave of absence during which the Participant is receiving long term disability benefits from a plan sponsored by the Company shall be limited to the lesser of: (i) the duration of the disability leave of absence, (ii) the period prior to the Participant's Normal Retirement Date, (iii) one year if the Participant has less than 10 years of Continuous Service or (iv) two years if the Participant has 10 or more years of Continuous Service prior to such disability leave of absence. (c) Notwithstanding anything herein to the contrary, if necessary to satisfy Section 410(b) of the Code, the Annual Cash Balance Contribution of any Highly Compensated Associate may be reduced to the extent required to satisfy Section 410(b) of the Code. In making this reduction, the Annual Cash Balance Contribution of the Highly Compensated Associates with the highest most valuable accrual rates as defined in Section 1.401(a)(4)-3(d) of the Regulations shall be reduced to a point where Section 410(b) of the Code is satisfied. VII.3 Location Shutdown Contribution. ------------------------------ (a) Each Eligible Location Shutdown Participant shall be credited with a one-time Location Shutdown Contribution in an amount equal to the amount described in Subsection (b) below, but in no event less than the amount described in Subsection (c) below. The one-time Location Shutdown Contribution shall be credited to the Cash Balance Account of each Eligible Location Shutdown Participant in the month in which the individual becomes an Eligible Location Shutdown Participant. Partial years of Continuous Service will not be counted for purposes of this Location Shutdown Contribution and Continuous Service only through the date of the closure of the Eligible Location Shutdown Participant's facility which closure is announced on or after September 1, 1997, as determined by the Committee shall be counted for purposes of Subsection (b). 28 (b) The Cash Balance Account of each Eligible Location Shutdown Participant shall be credited with an amount equal to the Eligible Location Shutdown Participant's Daily Pay Rate multiplied by the number of years of Continuous Service multiplied by the number set forth in the following chart: Type of Associate Applicable Number ----------------- ----------------- Management and Administrative/Supervisory 5.0 Wage 2.5 (c) Notwithstanding anything herein to the contrary, in no event shall any Eligible Location Shutdown Participant be credited with a Location Shutdown Contribution which is less than the Eligible Location Shutdown Participant's Daily Pay Rate multiplied by 10. VII.4 Interest Credits. Interest Credits equal to the rate of ---------------- interest specified in this Section 7.4 multiplied by the amount of the Participant's Cash Balance Account as of the first day of each month shall be added to each Participant's Cash Balance Account as of the last day of each month. The rate of interest used to determine the Interest Credits for a calendar year shall be the 30-Year Treasury Rate as set forth in Section 2.2(a). A former Participant who terminated employment prior to July 1, 1997, or who otherwise has no Cash Balance Account is not eligible for Interest Credits hereunder. However, if such a Participant returns to work as an Associate eligible to participate in the Plan under Article IV, a Cash Balance Account will be established pursuant to Section 7.1. Such account will be eligible for the Interest Credits as provided herein. VII.5 Immediate Cash Balance Account Annuity. The amount of annual -------------------------------------- retirement income payable with respect to the Cash Balance Account of a Participant is equal to the Immediate Cash Balance Account Annuity. The Immediate Cash Balance Account Annuity is the annual amount of retirement income 29 payable as a Single Life Benefit as defined in Section 11.2(a). The annual amount of retirement income is determined as: (a) the Participant's Cash Balance Account divided by; (b) the immediate annuity factor for one dollar of annual benefit under the Single Life Benefit form of payment defined in Section 11.2(a), based on the Participant's age as of the Retirement Date. The immediate annuity factor shall be based on the actuarial assumptions described in Section 2.2. VII.6 Lechmere Cash Balance Account - In General. A notional account ------------------------------------------ (hereinafter referred to as the "Lechmere Cash Balance Account") shall be established and maintained for each Participant who was a participant in the Lechmere Plan. The initial Lechmere Cash Balance Account for each Participant shall equal such Participant's Lechmere Cash Balance Account under the Lechmere Plan as of June 30, 1994. Such Participant's Lechmere Cash Balance Account shall be credited with Lechmere Interest Credits in accordance with Section 7.7. VII.7 Lechmere Interest Credits. Lechmere Interest Credits equal to ------------------------- the rate of interest specified in this Section 7.7 multiplied by the amount of the Participant's Lechmere Cash Balance Account as of the first day of each calendar year shall be added to each Participant's Lechmere Cash Balance Account as of the last day of the calendar year. For any calendar year in which a distribution is made from the Plan on behalf of a Participant, interest shall be credited on the amount of the Participant's Lechmere Cash Balance Account as of the first day of such year for the period from the first day of such year to the date of benefit distribution. The rate of interest used to determine the Lechmere Interest Credit for a calendar year, shall be the 12-month average rate for six month Treasury Bills as of December 31 of the prior calendar year. In no event will the annual Lechmere Interest Credit be less than 5.75% or more than 10%. VII.8 Lechmere Immediate Cash Balance Account Annuity. The amount of ----------------------------------------------- annual retirement income payable with respect to the Lechmere Cash Balance Account of a Participant is equal to the Lechmere 30 Immediate Cash Balance Account Annuity. The Lechmere Immediate Cash Balance Account Annuity is the annual amount of retirement income payable as a Single Life Benefit as defined in Section 11.2(a). The annual amount of retirement income is determined as: (a) The Participant's Lechmere Cash Balance Account divided by; (b) The immediate annuity factor for one dollar of annual benefit under the Single Life Benefit form of payment defined in Section 11.2(a), based on the Participant's age as of the Retirement Date. The immediate annuity factor shall be based on the actuarial assumptions described in Section 2.2. ARTICLE VIII Retirement Dates ---------------- VIII.1 Normal Retirement Date. A Participant's Normal Retirement Date ---------------------- shall be the first day of any month following the Participant's 65th birthday. Benefits accrued to a Participant under the Plan shall be nonforfeitable upon the attainment of age 65. Any Participant who, for at least two years before the Participant's Normal Retirement Date, is employed in an executive or other policy-making position and who, as of the Participant's Normal Retirement Date, is entitled to an aggregate anticipated annual retirement benefit, including benefits not provided under the Plan, of $44,000 or more, when expressed as a Single Life Benefit as defined in Subsection 11.2(a) hereof, all as determined by the Committee under uniform rules and in accordance with applicable law and Regulations, shall retire on the Participant's Normal Retirement Date, unless the Participant's employment thereafter has been approved by the Board or unless a state or federal law requires that such Participant be permitted to continue employment beyond his Normal Retirement Date. VIII.2 Early Retirement Date. A Participant's Early Retirement Date may --------------------- be the first day of any month following the Participant's termination of Service prior to the Participant's Normal Retirement Date, provided such Participant (a) has attained age 55, (b) has completed five Years of Service (except that this 31 requirement shall not apply to an Associate of the Company or an Affiliate on December 31, 1968), and (c) has prior to such date elected to Retire on such date pursuant to rules adopted by the Committee in accordance with the Regulations. VIII.3 Postponed Retirement Date. A Participant's Postponed Retirement ------------------------- Date shall be the first day of any month following termination of Service after Normal Retirement Date, pursuant to Section 8.1 hereof. VIII.4 Disability Retirement Date. A Disability Participant's -------------------------- Disability Retirement Date shall be the date on which the Disability Participant became a Disability Participant pursuant to Section 5.1 hereof. ARTICLE IX Amount of Retirement Benefit or Disability Retirement Benefit ------------------------------------------------------------- IX.1 Retirement Benefit Payable upon Retirement at Normal Retirement --------------------------------------------------------------- Date. Subject to the provisions of this Article IX, in the event of the Retirement of a Participant on his Normal Retirement Date, the amount of the Retirement Benefit shall be the sum of (a), (b), (c), (d), (e) and (f) below: (a) the Participant's Retirement Benefit determined as of December 31, 1993; and (b) 1.5% of the Participant's Total Earnings while a Participant during each year of Credited Service after January 1, 1994, and prior to July 1, 1997; and (c) 1.5% of the Participant's Total Earnings while a Participant during each year of Credited Service after July 1, 1997, during which the Participant was employed by either Signature or Lechmere; and (d) the Participant's Lechmere Plan frozen benefit as of June 30, 1994, excluding the benefit attributable to the Participant's Lechmere Immediate Cash Balance Annuity ("Lechmere Frozen Benefit"); and (e) the Participant's Immediate Cash Balance Annuity; and (f) the Participant's Lechmere Immediate Cash Balance Account Annuity, if any. 32 The Retirement Benefit will be accrued each calendar year on the basis of any accrual provided under Article VII and, if applicable, the Participant's Credited Service and Total Earnings during such calendar year. In no event shall a Participant's Retirement Benefit decrease after any date which could have been the Participant's Early Retirement Date. The minimum Retirement Benefit payable upon Retirement at Normal Retirement Date, including any benefit payable with respect to a Participant's credited service under the Retirement Security Plan prior to January 1, 1981, and any benefit payable under the Plan on or after such date, shall be $1,200 after an aggregate of 20 Years of Service during which the Participant received either Credited Service or credited service under the Retirement Security Plan, the Prior Plans or the Plan, with an additional $60 for each of the first five such Years of Service in excess of 20 and an additional $125 for each such Year of Service in excess of 25, but in no event shall such minimum benefit exceed $2,125, ending with Credited Service as of December 31, 1988. IX.2 Retirement Benefit Payable upon Retirement at Early Retirement -------------------------------------------------------------- Date. In the event of a Participant's Retirement on an Early Retirement Date, - - ---- the amount of the Retirement Benefit payable, including the annual minimum, shall be the amount provided for in Section 9.1 hereof, provided that, in the event the Participant's Early Retirement Date occurs prior to the first day of the month following the Participant's 63rd birthday, the portion of the Retirement Benefit derived from Sections 9.1(a) and 9.1(b) shall be reduced by 5/12 of one percent for each month by which the Participant's Early Retirement Date precedes such first day and provided that in the event the Participant's Early Retirement Date occurs prior to the first day of the month following the Participant's 65th birthday, the portion of the Retirement Benefit derived from Section 9.1(c) hereof shall be reduced by 5/9 of one percent for each of the first 60 months by which the Participant's Early Retirement precedes such first day and 5/18 of one percent for each of the next 60 months. IX.3 Retirement Benefit Payable upon Retirement at Postponed Retirement ------------------------------------------------------------------ Date. In the event of a Participant's Retirement on a Postponed Retirement Date, - - ---- the amount of the Retirement Benefit payable, 33 including the annual minimum, shall be the same amount which the Participant was entitled to receive on the Participant's Normal Retirement Date, as provided in Section 9.1 hereof, with additional credit for Service and any accrual provided under Article VII after such date. IX.4 Disability Retirement Benefit Payable at Disability Retirement -------------------------------------------------------------- Date. - - ---- (a) A Disability Participant who makes an election to receive the Disability Retirement Benefit under this Plan shall receive a monthly annuity in an amount, determined as of the Disability Participant's Disability Retirement Date, equal to 60% of the Disability Participant's Covered Earnings (as defined by the Disability Plan as in effect on the Disability Participant's Retirement Date); provided that such amount shall not exceed $6,000 prior to reduction for any other benefits payable as described in Subsection (b) below. (b) The monthly amount of the Disability Retirement Benefit shall be reduced by the amount payable from the following sources determined as of the Disability Participant's Disability Retirement Date: (i) any applicable worker's compensation or occupational diseases law; (ii) the Social Security Act (including any portion attributable to dependents); and (iii) any state disability benefit law or no-fault insurance in lieu thereof; provided that the amount of any benefit referred to in clause (ii) above shall not be taken into account to the extent it is attributable to any cost-of-living increase two years or more after commencement of the benefits to the Disability Participant under the Disability Plan; and effective August 1, 1998, provided further that the monthly amount of the Disability Retirement Benefit shall be increased after the Disability Participant's Disability Retirement Date by the amount of any decrease in the amount payable pursuant to the Social Security Act. Reduction shall be made whether or not a Disability Participant applied for and actually received any such other benefit to which he is or may be entitled. The amount of the benefits payable referred to in paragraphs (i), (ii) and (iii) of this Subsection (b) and such reduction shall be determined by the Committee, in its sole discretion. (c) An Associate who becomes a Disability Participant on or before September 30, 1998, shall be entitled to the lump sum benefit described in this Subsection (c). The amount of the 34 lump sum benefit shall be equal to the present value, determined as of July 1, 1996, of the Disability Retirement Benefit payable to the Disability Participant under this Plan, multiplied by 12-1/2%. For the purpose of determining the amount of the lump sum benefit under this Subsection (c), the present value of the Disability Participant's Disability Retirement Benefit shall be determined using the interest rate and mortality assumptions used under the Plan to determine Actuarial Equivalent and by assuming that the Disability Participant will continue to receive such monthly annuity benefit until the earlier of the Disability Participant's death or attainment of age 65. IX.5 Offset of Retirement Benefit. Notwithstanding any other provisions ---------------------------- of the Plan, the amount of the Retirement Benefit payable, including the minimum Retirement Benefit, to any Participant shall be reduced by the current annuity rate of a legal reserve life insurance company chosen by the Committee of that portion of the annuity which could be purchased on June 30, 1997 (or for Participants employed by Lechmere after June 30, 1997, the last date of such Participant's employment with Lechmere; and effective June 1, 1998, the later of the last day of such Participant's employment with Lechmere and June 1, 1998), for the Participant under the Savings Plan with (a) the amount, if any, in the Participant's Transferred Contribution Account on June 30, 1997, plus the amount, if any, which accrues to the Participant's Transferred Contribution Account after June 30, 1997, and on or before June 1, 1998, while such Participant is employed by Lechmere; and (b) the amount, if any, in the Participant's Account on June 30, 1997, attributable to Required Contributions, as determined by the Committee, plus the amount, if any, in the Participant's Account attributable to Required Contributions, as determined by the Committee made after June 30, 1997, and on or before June 1, 1998, while such Participant is employed by Lechmere. Notwithstanding anything provided herein, effective January 1, 1984, the Retirement Benefit of Associates of Montgomery Ward Insurance Company and its subsidiaries shall not be offset by benefits provided under the Savings Plan and effective October 1, 1984, the Retirement Benefit of Associates of Signature and its subsidiaries shall not be offset by the benefits provided under the Savings Plan except as set forth herein. In addition, effective as of 35 such dates, Associates of the aforesaid companies will accrue benefits under the Plan although they have not authorized payroll deduction contributions under the Savings Plan. The Retirement Benefit payable to Associates of Montgomery Ward Insurance Company and its subsidiaries (or Associates of Signature) shall be reduced by the current annuity rate of a legal reserve life insurance company chosen by the Committee of that portion of the annuity that could be purchased with the Transferred Contributions and their Required Contributions made prior to January 1, 1984 (or October 1, 1984), under the Savings Plan. Notwithstanding anything provided herein to the contrary, the reduction described in this Section 9.5 with respect to the amount, if any, of Participant's Transferred Contribution Account and the amount, if any, of the Participant's Account attributable to Required Contributions shall be determined by the Committee if not determined sooner pursuant to this Section 9.5 as of June 1, 1998. IX.6 Cessation of Benefit Payments Following Reemployment After ---------------------------------------------------------- Retirement. Upon reemployment of a former Associate who previously Retired - - ---------- hereunder, all benefit payments being made to the Associate which are permitted to be suspended under Regulations shall cease. IX.7 Retirement Benefit Payable upon Retirement Following Reemployment ----------------------------------------------------------------- after Termination of Service. If a Participant who incurs a Break in Service is - - ---------------------------- for any reason reemployed by the Company, then to the extent that the Participant's Cash Balance Account, and/or Lechmere Cash Balance Account, if any, has been converted to an annuity, the Participant's Cash Balance Account and/or Lechmere Cash Balance Account, if any, will be restored and Interest Credits or Lechmere Interest Credits shall accrue from the date of the Participant's original termination of employment through the date of the Participant's subsequent Retirement. Upon the Participant's subsequent Retirement, the Participant's Retirement Benefit shall be based on any accrual provided under Article VII credited to the Participant's Account and, if applicable, the Participant's Credited Service after the Participant's reemployment plus the Retirement Benefit (after applying the offset of the actuarial equivalent of any Retirement Benefit paid to the Participant) previously accrued as of the Participant's separation from Service. 36 IX.8 Maximum Amount of Retirement Benefit. ------------------------------------ (a) The provisions of this Section shall govern the benefits to which it is applicable notwithstanding any other provision of the Plan to the contrary. The benefits to which this Section is applicable are: (i) any annuity payable to a Participant for life as a part of a Qualified Joint and Survivor Benefit or as a part of an Optional Retirement Benefit elected by the Participant under Section 11.2 hereof and having the effect of a qualified joint and survivor annuity within the meaning of Section 417(b) of the Code (excluding in either case any post-Retirement Surviving Spouse benefit); (ii) any Single Life Benefit elected by a Participant under Subsection 11.2(a) hereof; and (iii) any other Optional Retirement Benefit elected by a Participant under Section 11.2 hereof (including both the annuity payable to the Participant and any other annuity or benefit payable thereunder). This Section shall not limit the amount of any Supplemental Retirement Benefit, if any, which is payable by reason of the prior maintenance of the Profit-Sharing Plan, which benefit represents benefits under a "defined contribution plan", as that term is defined in ERISA. (b) The benefits to which this Section is applicable may not exceed the limitations set forth in Section 415 of the Code, which are incorporated by reference herein. For these purposes, the "limitation year" means the Plan Year. For periods beginning before January 1, 2000, if a Participant also participates in any defined contribution plan (as defined in Sections 414(i) and 415(k) of the Code) maintained by the Company or any Affiliate, in the event that in any Plan Year prior to January 1, 2000, the sum of the Participant's defined benefit fraction (as defined in Section 415(e)(2) of the Code) and the Participant's defined contribution fraction (as defined in Section 415(e)(3) of the Code) would otherwise exceed one, then the benefit payable under this Plan shall be reduced so that the sum of such fractions in respect of that Member will not exceed one. If the above reduction does not ensure that the limitation set forth in this Section is not exceeded, then the annual additions (as defined in Section 415(c)(2) of the Code) to any defined contribution plan maintained by the 37 Company or any Affiliate in which the Participant participates, shall be reduced in accordance with the provisions of that plan, but only to the extent necessary to ensure that such limitation is not exceeded. If a Participant also participates in another defined benefit plan (as defined in Sections 414(j) and 415(k) of the Code) maintained by the Company or any Affiliate, in the event that in any Plan Year such Participant's aggregated accrued benefit under such plans exceeds the applicable limits under Section 415 of the Code, the benefit payable under such other plan shall be reduced to the extent necessary to comply with such limits. (c) For purposes of this Section, the benefits to which this Section is applicable shall be determined without regard to any amounts transferred from the Jefferson Stores Plan and the Lechmere Plan pursuant to Sections 21.1 and 22.2, respectively. (d) In the case of any Associate who was a Participant under the Retirement Security Plan prior to October 3, 1973, the benefits to which this Section is applicable may not exceed the greater of (i) the limitations contained in Subsection 9.8(b) hereof, adjusted as described therein, or (ii) either (A) the Actuarial Equivalent of a Single Life Benefit, as described in Section 11.2 hereof, equal to 100% of the Participant's Total Earnings on October 2, 1973, or, if earlier, the date of his termination of Service, or (B) the Actuarial Equivalent of the benefits which would have been provided under the Retirement Security Plan as in effect on October 2, 1973, without taking into account any increases in the Associate's Total Earnings after such date. (e) The Committee shall, to the extent required by ERISA and in accordance with Regulations, apply the limitations contained in this Section, after giving due consideration to the wishes of the Participant, by taking into account the Supplemental Retirement Benefit, if any, and the benefits payable and the contributions made under any other plans maintained by Ward or any Affiliate which are qualified under Section 401(a) of the Code. For periods beginning before January 1, 2000, if such other plan is a defined contribution plan, then the sum of the defined benefit plan 38 fraction and the defined contribution plan fraction (each as described in Section 415(e) of the Code) shall not exceed one. (f) Notwithstanding the foregoing provisions of this Section, the maximum limitation on Retirement Benefits, with respect to any person who was a Participant prior to December 31, 1982, and whose Retirement Benefit (determined without regard to any changes in the Plan after July 1, 1982, and without regard to cost-of-living adjustments, if any, occurring after July 1, 1982) as of December 31, 1982, exceeds the limitations set forth in Section 9.8(b), shall be such Participant's Retirement Benefit as of December 31, 1982; provided that, such Participant's Retirement Benefit did not exceed the maximum limitation thereon as of December 31, 1982. (g) Notwithstanding the foregoing provisions of this Section, the maximum limitation on Retirement Benefits, with respect to any person who was a Participant on or prior to December 31, 1994, and whose Retirement Benefit as of December 31, 1994, exceeds the limitations set forth in Section 9.8(b), shall not be less than such Participant's Retirement Benefit as of December 31, 1994; provided that, such Participant's Retirement Benefit did not exceed the maximum limitation thereon as of December 31, 1994. ARTICLE X Eligibility for Retirement Benefit ---------------------------------- X.1 Eligibility for Retirement Benefit at Normal Retirement Date. ------------------------------------------------------------ Except as otherwise provided in Article IX hereof and Section 11.4, a Participant who Retires on the Participant's Normal Retirement Date shall be eligible for the Retirement Benefit provided for in Section 9.1 hereof or a benefit of Equivalent Actuarial Value thereto as provided for herein payable from and after the Participant's Normal Retirement Date. X.2 Eligibility for Retirement Benefit at Early Retirement Date. Except ----------------------------------------------------------- as otherwise provided in Article IX hereof, a Participant who Retires on an Early Retirement Date shall be eligible for the Retirement 39 Benefit provided for in Section 9.2 hereof or a benefit of Equivalent Actuarial Value thereto as provided for herein payable from and after the Participant's Early Retirement Date. A Participant who has attained age 55 and terminates Service prior to the Participant's Normal Retirement Date with five Years of Service shall be eligible for the Retirement Benefit provided for in Section 9.1(c) or a benefit of Equivalent Actuarial Value. Notwithstanding any other provisions of the Plan, no distribution of any amounts attributable to contributions paid on behalf of a Participant while he was a five percent owner shall be made to a Participant who is or has been a five percent owner prior to such Participant's attaining age 59 1/2, for any reason other than such Participant's death or disability. For purposes of this Section 10.2, a five percent owner shall mean a five percent owner of such Participant's employer as defined in Section 416(i)(1)(B)(i) of the Code. X.3 Eligibility for Retirement Benefit at Postponed Retirement Date. --------------------------------------------------------------- Except as otherwise provided in Article IX hereof and Section 11.4, a Participant who Retires on a Postponed Retirement Date shall be eligible for the Retirement Benefit provided for in Section 9.3 hereof or a benefit of Equivalent Actuarial Value thereto as provided for herein payable from and after the Participant's Postponed Retirement Date. X.4 Disability Plan Benefits. During any period when benefits would ------------------------ otherwise be payable under the Disability Plan, no benefits shall be paid under this plan unless a Participant ceases to receive benefits under the Disability Plan. During a period that a Disability Retirement Benefit would otherwise be payable under this Plan, no Retirement Benefit will be payable under this Plan unless the Participant ceases to receive the Disability Retirement Benefit under this Plan. ARTICLE XI Methods of Payment ------------------ XI.1 Qualified Joint and Survivor Benefit. If a Participant is legally ------------------------------------ married, as determined by the Committee, on the date of the Participant's Retirement, the Equivalent Actuarial Value of any Retirement Benefit, to which such Participant is entitled under the Plan shall, except as otherwise provided in this Section 40 or in Section 11.2 hereof, be payable in the form of a Qualified Joint and Survivor Benefit. The term "Qualified Joint and Survivor Benefit" means a benefit providing an annuity for the life of the Participant, ending with the payment due on the first day of the month in which the Participant's death occurs, and, if the Participant dies leaving a Surviving Spouse, a survivor annuity for the life of such Surviving Spouse, commencing on the first day of the month following the date of the Participant's death and ending with the payment due on the first day of the month in which such Surviving Spouse's death occurs. The survivor annuity payable to the Surviving Spouse shall be in an amount equal to one-half of the annuity payable for the life of the Participant under the Participant's Qualified Joint and Survivor Benefit. If a Participant is not legally married, as determined by the Committee, on the date of the Participant's Retirement, the Participant's Retirement Benefit shall, except as otherwise provided in Section 11.2 hereof, be payable to the Participant in the form provided for in Subsection 11.2(a) hereof. XI.2 Optional Methods of Payment. In lieu of the Qualified Joint and --------------------------- Survivor Benefit, a Participant may elect, subject to Sections 11.3 and 11.4 hereof, to receive the Actuarial Equivalent of the Retirement Benefit to which the Participant is entitled under the Plan in accordance with any one of the following options; provided, however, that a Participant who elects to receive a distribution from the Plan prior to his Normal or Early Retirement Date may elect only the optional method of payment described in Section 11.2(e): (a) Single Life Benefit. An annuity for the Participant's life, ending with the payment due on the first day of the month in which the Participant's death occurs, with no monthly annuity payable to a beneficiary. (b) Contingent Annuitant Benefit. An annuity for life and an annuity for 100%, 75% or 50% of such amount after the Participant's death on or after the Participant's Normal Retirement Date or Early Retirement Date, if applicable, to the Participant's Beneficiary for the life of the Beneficiary (the "Contingent Annuitant Benefit" or "Joint and Survivor Benefit"). In no event shall 41 the effect of the selection of a Contingent Annuitant Benefit in which the Beneficiary is not the Participant's spouse cause the benefit payable to the Participant to be reduced to a level less than 50% of the benefit to which the Participant would have been entitled if the Participant had not elected the Contingent Annuitant Benefit. The conditions governing the Contingent Annuitant Benefit shall be: (i) the effective date of the Contingent Annuitant Benefit (the "Option Effective Date") shall be the Participant's Retirement Date. (ii) the election shall be made in writing, dated the day the election is made, on the prescribed form and shall specify the 100%, 75% or 50% Contingent Annuitant Benefit and the name, social security number, sex and date of birth of the Participant's Beneficiary. (iii) retirement income under the Contingent Annuitant Benefit shall commence effective the first day of the month following Retirement. (iv) the Contingent Annuitant Benefit shall become inoperative in the event the Participant cancels the benefit prior to the Option Effective Date or if either the Participant or the Beneficiary should die prior to the Option Effective Date. On the Option Effective Date, the Contingent Annuitant Benefit shall become noncancellable and the Beneficiary selection binding, and, if either the Participant or the Beneficiary should die after the Option Effective Date, the benefit shall nevertheless continue to be operative. (c) Level Income Benefit. Benefit from the Plan up to the earliest -------------------- date age 62 that the Participant will be entitled to receive a retirement benefit from social security and a smaller benefit, or no benefit if so actuarially determined, from the Plan commencing after such date (the "Level Income Benefit"). If the Participant dies prior to age 62 or if benefits continue after age 62, the Annuity ceases with the payment due on the first date of the month in which the Participant's death occurs. The Plan benefits payable both before and after the retirement benefit from social security as estimated for age 62 commencement becomes payable, in combination, are to have the Equivalent Actuarial Value of the reduced amount of Retirement Benefit provided for in Section 9.2 hereof commencing on the Early Retirement Date. 42 (d 10 Years Certain and Continuous Benefit. An annuity for --------------------------------------- life with the provision that, if the Participant should die before having received 120 monthly payments, the Participant's Beneficiary shall receive the balance of such payments (the "10 Years Certain and Continuous Benefit"). The conditions governing the 10 Years Certain and Continuous Benefit shall be the same as those governing the Contingent Annuitant Benefit, except that the election form need not specify the social security number, sex and date of birth of the Participant's Beneficiary and the Participant may change the Participant's Beneficiary at any time before or after the Option Effective Date upon written notice to the Committee. (e Lump Sum Benefit. For Participants who were participating ---------------- in the Lechmere Plan as of June 30, 1994, to the extent that the Equivalent Actuarial Value of a Participant's Accrued Benefit from the Lechmere Plan determined as of June 30, 1994, is less than or equal to $7,000, the Participant or the Participant's Surviving Spouse may elect to receive such Accrued Benefit in one lump sum payment; or to the extent that a Participants' Accrued Benefit age 55 or older is $50.00 or less, the Participant may elect to receive the Equivalent Actuarial Value of such Accrued Benefit in one lump sum payment. In addition, a Participant to the extent of the Equivalent Actuarial Value of the Participant's Accrued Benefit accrued pursuant to the provisions of Sections 9.1(e) and (f), may elect to receive that portion of such Accrued Benefit, in one lump sum payment. In addition, for periods beginning on or after January 1, 1998, to the extent that the Equivalent Actuarial Value of a Participant's Accrued Benefit accrued pursuant to the provisions of Section 9.1(a), (b) and (c) is less than or equal to $5,000, the Participant's or the Participant's Surviving Spouse may elect to receive such Accrued Benefit in one lump sum payment. XI.3 Election of Optional Method of Payment. Except as otherwise -------------------------------------- provided in Sections 11.2 and 11.5 hereof, any election or revocation of an election under this Article shall be made by the Participant at any time prior to the date that benefit payments to the Participant commence pursuant to the provisions of the 43 Plan. If a Participant has elected a Contingent Annuitant Benefit or 10 Years Certain and Continuous Benefit in accordance with Section 11.2 and dies prior to the date payment of the Participant's Retirement Benefit commences without leaving a surviving Spouse, then such form of benefit shall become payable to the Participant's Beneficiary in the same amount, if any, that would have been payable to such Beneficiary if the payments thereunder had commenced to the Participant on the last day of the month coincident with or preceding the date of the Participant's death. If such a Participant dies prior to the date payment of the Participant's Retirement Benefit commences, leaving a Surviving Spouse and without having made a valid election under Section 12.2(b), then the election under Section 11.2, if any, shall be null and void, and the Surviving Spouse shall receive the Pre-Retirement Death Benefit in accordance with Section 12.1(a). XI.4 Rules Regarding Distribution of Benefits. ---------------------------------------- (a Notwithstanding any other provision of the Plan, for periods beginning before January 1, 1999, unless otherwise provided by law, any benefit payable to a Participant shall commence no later than the April 1st of the calendar year following the calendar year in which such Participant attains age 70 1/2; provided, however, if a Participant attained age 70 1/2 prior to January 1, 1988, except as otherwise provided in Subsection 11.4(e), any benefit payable to such Participant shall commence no later than the April 1st of the calendar year following the later of (i) the calendar year in which the Participant attains age 70 1/2 or (ii) the calendar year in which the Participant retires. Such benefit shall be paid, in accordance with the Regulations, over a period not extending beyond the life expectancy of such Participant and the Participant's Beneficiary. Life expectancy for purposes of this Section shall not be recalculated annually in accordance with the Regulations. Any additional Retirement Benefit accrued beyond the Retirement Benefit commencement date shall be paid in a lump sum. Notwithstanding the preceding provisions, for periods beginning on or after January 1, 1999, with respect to Participants who are not five percent owners as defined in Section 416(i) of the Code at any time during the Plan Year ending with or 44 within the calendar year in which such owner attains age 70 1/2, commencement of distributions shall be made after the Participant retires. Once distributions have begun to a five percent owner pursuant to this Subsection (a), they must continue even if the Member ceases to be a five percent owner in a subsequent year. To the extent required under the Code, the Participant's Accrued Benefit shall be actuarially increased to take into account any period after age 70 1/2 in which the Participant does not receive benefits under the Plan pursuant to this Subsection (a). The period for which an actuarial increase may be necessary begins on the April 1 following the calendar year in which the Participant attains age 70 1/2 (January 1, 1997 in the case of a Participant who attained age 70 1/2 prior to 1996), and ends on the date on which benefits commence in an amount sufficient to satisfy Section 401(a)(9) of the Code ("Actuarial Period"). An actuarial increase to the Participant's Accrued Benefit pursuant to this Subsection (a) shall be provided to the extent required under the Code only if, and to the extent, that the Participant's Accrued Benefit has not increased during the Actuarial Period in an amount equivalent to the actuarial increase required under the Code. The calculation of any actuarial increase required under this Subsection (a) shall reflect a reduction in the Accrued Benefit to take into account the actuarial equivalent of any distributions on or after the beginning of the Actuarial Period. Any actuarial increase required pursuant to the preceding provisions is not in addition to any actuarial increase required for that same period under Section 411 of the Code. (b) If distribution of a Participant's benefit has commenced prior to a Participant's death, and such Participant dies before the Participant's entire benefit is distributed to the Participant, distribution of the remaining portion of the Participant's benefit to the Participant's Beneficiary shall be made at least as rapidly as under the method of distribution in effect on the date of the Participant's death. 45 (c) If a Participant dies before distribution of the Participant's benefit has commenced, distributions to any Beneficiary shall be made on or before the December 31st of the calendar year which contains the fifth anniversary of the date of such Participant's death; provided, however, that any distribution to a Beneficiary designated under Section 12.2 may be made over the life of such Beneficiary or a period not extending beyond the life expectancy of such Beneficiary. Such distribution shall commence not later than the December 31st of the calendar year immediately following the calendar year in which the Participant died, or, in the event such Beneficiary is the Participant's Surviving Spouse, not later than the date of which such Participant would have attained age 70 1/2, if later (or, in either case, on any later date prescribed by Regulations). If such Participant's Surviving Spouse dies after such Participant's death but before distributions to such Surviving Spouse commence, this Section 11.4(c) shall be applied to require payment of any further benefits as if such Surviving Spouse were the Participant. (d) Pursuant to Regulations, any benefits paid to a child shall be treated as if paid to a Participant's Surviving Spouse if such amount will become payable to such Surviving Spouse on the child's attaining majority, or other designated event permitted by Regulations. (e) If a Participant who is five percent owner attained age 70 1/2 before January 1, 1988, any benefit payable to such Participant shall commence no later than the April 1st of the calendar year following the later of (i) the calendar year in which the Participant attained age 70 1/2 or (ii) the earlier of (A) the calendar year within which the Participant becomes a five percent owner or (B) the calendar year in which the Participant retires. For purposes of this Subsection (e), a five percent owner shall mean a five percent owner of such Participant's employer as defined in Section 416(i) of the Code at any time during the Plan Year in which such owner attains age 66 1/2 or any subsequent Plan Year. XI.5 Written Explanations of Survivor Benefit. ---------------------------------------- 46 (a) The Committee shall furnish or cause to be furnished to each married Participant explanations of the Qualified Joint and Survivor Benefit and Pre-Retirement Death Benefit in Section 12.1(a) under procedures developed by the Committee in accordance with the Code and Regulations. Specifically, with respect to the election to waive a Qualified Joint and Survivor Benefit, the Committee shall furnish or cause to be furnished to the Participant the written explanation of the Qualified Joint and Survivor Benefit, as described in Subsection (b) below. If the Participant, after having received the written explanation described in Subsection (b) below, affirmatively elects in writing to receive the Participant's Retirement Benefit in one of the option forms described in Section 11.2 in lieu of a Qualified Joint and Survivor Benefit with the consent of the Participant's spouse, if necessary, such optional form of distribution may commence no less than seven days after the written explanation described in Subsection (b) below is provided to the Participant. A Participant is permitted to revoke an affirmative distribution election up until the date payment of the Participant's Retirement Benefit commences, or, if later, at any time prior to the expiration of the seven day period that begins the date after the explanation in Subsection (b) below is provided to the Participant. (b) Other than as described in Subsection (a) above, with regard to the election to waive a Qualified Joint and Survivor Benefit, the Committee shall furnish or cause to be furnished to the Participant no less than 30 days and no more than 90 days prior to the date payment of the Participant's Retirement Benefit commences written explanation of: (i) the terms and conditions of the Qualified Joint and Survivor Benefit; (ii) the Participant's right to make, and the effect of, an election to waive the Qualified Joint and Survivor Benefit; (iii) the right of the Participant's spouse to consent to any election to waive the Qualified Joint and Survivor Benefit; (iv) the right of the Participant to revoke such election, and the effect of such revocation; and 47 (v) the right of the Participant to consider whether to waive the Qualified Joint and Survivor Benefit for at least 30 days prior to the date payment of the Participant's Retirement Benefit commences. (c) A married Participant may elect in writing to waive the Qualified Joint and Survivor Benefit or for purposes of Section 12.2, designate a beneficiary other than the Participant's spouse. Such election or designation must be consented to by the Participant's spouse. If the Participant elects a 10 Years Certain and Continuous Benefit, the election or designation, and the spouse's consent thereto, must designate specific beneficiary(ies), including any class of beneficiaries or alternate beneficiaries, and, with respect to a Qualified Joint and Survivor Benefit, the form of benefits that the designated beneficiary(ies) shall receive, which designations may not be changed without spousal consent unless the spouse expressly permits designations by the Participant, without any further spousal consent. Such spouse's consent must acknowledge the effect of such election and be witnessed by a Plan representative or a notary public. Such consent shall not be required if it is established to the satisfaction of the Committee that the required consent cannot be obtained because there is no spouse, the spouse cannot be located, or other circumstances that may be prescribed by the Regulations. The election or designation made by the Participant and consented to by the Participant's spouse may be revoked by the Participant in writing without the consent of the spouse at any time prior to the distribution of the Participant's Retirement Benefit. Any election or designation must comply with the requirements of this Subsection (c). A former spouse's waiver shall not be binding on a new spouse. XI.6 Cash Out. Payments of any Retirement Benefit with an Equivalent -------- Actuarial Value of $3,500 or less (or for periods beginning on or after January 1, 1998, $5,000 or less) will be made in a lump cash sum in full settlement of the Plan's liability therefor, provided, however, that in the case of a married 48 Participant, no such lump-sum payment shall be made after benefits have commenced without the consent of the Participant and the Participant's spouse or, if the Participant has died, the Participant's Surviving Spouse. XI.7 Direct Rollover. Notwithstanding any provision of the Plan to the --------------- contrary, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. XI.8 Disability Retirement Benefit. A Participant's Disability ----------------------------- Retirement Benefit shall only be paid in the form of a monthly annuity benefit the amount of which is determined in accordance with Sections 9.4(a) and (b) payable commencing with the Participant's Disability Retirement Date and ending on the first day of the month in which the Disability Participant attains age 65, dies, begins to receive a Retirement Benefit under the terms of this Plan, whichever is the first to occur. The lump sum benefit, if any, to which a Disability Participant is entitled pursuant to Section 9.4(c) shall be paid within a reasonable period of time following the month in which the Associate or former Associate first became a Disability Participant. ARTICLE XII Death Benefits -------------- 49 XII.1 Pre-Retirement Death Benefit. A Vested Participant who is in ---------------------------- Service or who terminated Service but whose effective date of payment of Retirement Benefits has not yet occurred is entitled to a Pre-Retirement Death Benefit. The term "Pre-Retirement Death Benefit" means a benefit providing that, in the event of the Participant's death before the effective date of payment of the Participant's Vested Retirement Benefit, the Participant's Surviving Spouse, if any, shall be entitled to receive a survivor annuity equal to one-half of the annuity which would have been payable for the life of the Participant under a Qualified Joint and Survivor Benefit, if payments thereunder had commenced on the first day of the month following the later of (i) the Participant's death, or (ii) the Participant's attainment of age 55, determined under Section 9.1, excluding any immediate Cash Balance Account Annuity, and any Lechmere Immediate Cash Balance Account Annuity provided in Sections 9.1(e) and (f). Such Pre-Retirement Death Benefit shall become payable to the Surviving Spouse on the first day of the month coincident with or following the later of (i) the date of the Participant's death, or (ii) the day on which the Participant would have attained age 55 had he lived, but no later than the day the Participant would have attained age 70 1/2 had he lived. XII.2 Death Benefits Attributable to Cash Balance Account and Lechmere ---------------------------------------------------------------- Cash Balance Account. - - -------------------- (a) Except as otherwise provided in Subsections (b) and (c) below, the Beneficiary of a Participant who is either in Service or terminated Service but whose effective date of payment of Retirement Benefits has not yet occurred and who has not elected a lump sum amount pursuant to the provisions of Section 13.2(c)(ii) and has not received a lump sum distribution pursuant to Section 11.6 and dies shall receive an immediate distribution of a lump sum amount equal to the Participant's Vested Cash Balance Account and Lechmere Cash Balance Account in lieu of all of the benefits due such Beneficiary under the Plan, except for any benefit that may be payable to a Surviving Spouse in accordance with Section 12.1. (b) In lieu of the benefit provided in Subsection (a) above, unless the Beneficiary elects a lump sum amount as provided in Subsection (a) above pursuant to such rules as are adopted by the 50 Committee in accordance with Regulations, or unless the Beneficiary receives a lump sum distribution pursuant to Section 11.6, if the Participant's Surviving Spouse is the beneficiary and the Participant is either in Service or terminated Service but whose effective date of payment of Retirement Benefits has not yet occurred and has not elected a lump sum amount pursuant to the provisions of Section 13.2(c)(ii) and has not received a lump sum distribution pursuant to Section 11.6 and dies, the Beneficiary is entitled to a monthly Retirement Benefit based on the Actuarial Equivalent of the Participant's Lechmere Cash Balance Account and the Participant's Vested Cash Balance Account. The life annuity shall be payable to the Beneficiary for life beginning at any time after the Participant's death as elected in writing by the Beneficiary in accordance with the provisions of Section 11.4(c). The life annuity benefit hereunder shall be equal to either (i) or (ii) below, as applicable: (i) If the Beneficiary elects to commence payment of the life annuity immediately, the Beneficiary's death benefit shall be 100% of the Vested Immediate Cash Balance Account Annuity described in Section 7.4, and the Lechmere Immediate Cash Balance Account Annuity described in Section 7.7 determined as of such date, substituting the Beneficiary's age at such time for the Participant's age under Section 7.4(b) and 7.7(b), respectively. (ii) If the Beneficiary elects to defer payment of the life annuity, the Beneficiary will receive annual Interest Credits and Lechmere Interest Credits until the date the payments commence. The Beneficiary's death benefit shall be 100% of the Vested Immediate Cash Balance Account Annuity described in Section 7.4 and the Lechmere Cash Balance Account Annuity described in Section 7.7 determined as of the date elected by the Beneficiary substituting the Beneficiary's age at such time for the Participant's age under Section 7.4(b), and 7.3(b), respectively. (c) In lieu of the benefit provided in Subsection (a) above, the Beneficiary of a Participant who is either in Service or terminated Service but whose effective date of payment of Retirement Benefits has not yet occurred and who has not elected a lump sum amount pursuant to the provisions of Section 13.2(c)(ii) and has not received a lump sum distribution in accordance with Section 11.6 and dies may elect, pursuant to such rules as are adopted by the Committee in 51 accordance with Regulations, to receive a monthly Retirement Benefit based on the Actuarial Equivalent of the Participant's Lechmere Cash Balance Account in lieu of all of the benefits due such Beneficiary under the Plan with respect to the Lechmere Cash Balance Account. The life annuity benefit hereunder shall be calculated pursuant to either (b) (i) or (ii) above, as applicable, considering only the Lechmere Immediate Cash Balance Account Annuity. If the involuntary cash-out provisions of Section 11.6 are operative, a monthly death benefit which becomes due under this Section shall be paid in one lump sum amount to the Beneficiary in lieu of all other benefits due such Beneficiary under the Plan except for any benefit that may be payable to a surviving Spouse in accordance with Section 12.1. XII.3 Designation of Beneficiary. Each Participant shall file with the -------------------------- Committee a written designation of one or more persons as the Beneficiary who, subject to Section 11.5, shall be entitled to receive the amount, if any, payable to the Participant's Beneficiary upon the death of the Participant. The designation of a Beneficiary for purposes of the Contingent Annuitant Benefit or 10 Years Certain and Continuous Benefit shall be deemed to be a Beneficiary designation for all purposes under the Plan unless otherwise specified by the Participant. Each Beneficiary of a Participant may file with the Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable to such Beneficiary of the Beneficiary of the Participant upon the death of the Participant's Beneficiary. A Participant or the Beneficiary of a Participant may from time to time revoke or change his Beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. The last Beneficiary designation received by the Committee shall be controlling; provided that, no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the death of the Participant or the Beneficiary of the Participant, as the case may be, or be effective as of the date prior to the date of such receipt. If no Beneficiary designation is in effect at the time of a Participant's death or if no Beneficiary survives the Participant, payment of the amount, if any, payable upon the death of 52 the Participant shall be made to the Participant's estate. If no Beneficiary designation is in effect at the time of the death of the Beneficiary of a Participant or if no Beneficiary survives the Beneficiary of a Participant, payment of the amount, if any, payable upon the death of the Beneficiary of the Participant shall be made to the estate of the Beneficiary of the Participant. If the Committee is in doubt as to the right of any person to receive an amount payable pursuant to this Section, the Committee may direct the Trustees to retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Committee may direct the Trustees to pay such amount to any court of competent jurisdiction, which payment shall be a complete discharge of the liability under the Plan and of the Trust therefor. Notwithstanding anything herein to the contrary, for purposes of Section 12.3, if a Participant is married, the Participant's spouse shall automatically be the Participant's Beneficiary, unless the spouse has consented to another designation as provided in Section 11.5. Such consent must be made in accordance with procedures developed by the Committee in accordance with the Code and Regulations. ARTICLE XIII Termination of Service ---------------------- XIII.1 Termination of Service by Non-Vested Participant. If the Service ------------------------------------------------ of a Participant who is not and does not at the time thereof become Vested terminates, no Retirement Benefit shall be payable to the Participant under the Plan. XIII.2 Termination of Service by Vested Participant. If the Service of -------------------------------------------- a Participant who is Vested terminates prior to Retirement, such Participant may elect, subject to Sections 10.2 and 11.4, any of the following: (a) to receive the Participant's Vested Retirement Benefit commencing upon the Participant's Normal Retirement Date, including the annual minimum if the Service requirement therefor is satisfied, based on the Participant's Years of Credited Service, any accrual provided under 53 Article VII prior to the Participant's termination of Service and determined in accordance with Section 9.1 hereof; or (b) if such Participant is ineligible for benefits under the Disability Plan (or has voluntarily elected to forego receipt of benefits otherwise payable thereunder), such Participant may elect to receive the benefits provided for in Section 9.2 hereof, including the annual minimum if the Service requirement therefor is satisfied, based on the Participant's Years of Credited Service any accrual provided under Article VII prior to the Participant's termination of Service, commencing on the first day of the month following attainment of age 55 or the first day of any subsequent month prior to the Participant's Normal Retirement Date, where such Participant has prior to such date elected to receive such benefits on such date pursuant to rules adopted by the Committee in accordance with the Regulations; or (c) to receive on such date as the Participant shall elect pursuant to rules adopted by the Committee in accordance with Regulations, in lieu of all of the benefits due such Participant under the Plan: (i) the Equivalent Actuarial Value of that portion of the Participant's Retirement Benefit accrued pursuant to the provisions of Section 9.1(e) and (f), payable in the form of a Qualified Joint and Survivor Benefit if the Participant is legally married, as determined by the Committee, on the date of the Participant elects to receive a benefit pursuant to this Subsection; or (ii) an immediate lump sum amount equal to the Participant's Vested Cash Balance Account and Lechmere Cash Balance Account if the Participant is not legally married as determined by the Committee on the date the Participant elects to receive a benefit pursuant to this Subsection, or, if the Participant is legally married on the date the Participant elects to receive a benefit pursuant to the Subsection, with the written consent of the Participant's spouse within the 90-day period ending on the date payment pursuant to this provision is made in accordance with provisions developed by the Committee in accordance with the Code and Regulations (unless the Committee makes a written determination in accordance with the Code and Regulations that no such consent is required); and 54 (iii) a Retirement Benefit, attributable only to the Participant's Retirement Benefit accrued pursuant to the provisions of Sections 9.1(a), (b), (c) and (d), as provided under Subsection (a) or (b) above, as the Participant may elect. XIII.3 Termination of Service without a Break in Service. In the event ------------------------------------------------- the Service of a Participant terminates and he is reemployed, such Participant's enrollment in the Plan shall be reinstated as of the effective date of the Participant's re-enrollment. XIII.4 Termination of Service Following Reemployment. Notwithstanding --------------------------------------------- anything herein to the contrary, if the Service of a Participant who was reemployed following a termination of Service shall subsequently be terminated for any reason, the benefits payable to the Participant pursuant to the provisions of the Plan shall be reduced by the Equivalent Actuarial Value of all amounts theretofore paid to the Participant pursuant to the Plan. ARTICLE XIV Alienation of Benefits ---------------------- XIV.1 Non-Assignability. Except insofar as applicable law may ----------------- otherwise require or pursuant to the terms of a Qualified Domestic Relations Order, no amount payable at any time under the Plan and Trust shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any such amount, whether presently or hereafter payable, shall be void. The Plan and Trust shall not be liable for or subject to the debts or liabilities of any person entitled to any amounts payable under the Plan. If any person shall attempt to, or shall, alienate, sell, transfer, assign, pledge or otherwise encumber any amount payable under the Plan and Trust, or any part thereof, or if by reason of the Participant's bankruptcy or other event happening at such time such amount would not be enjoyed by the Participant, then the Committee, if it so elects, may direct that such amount be withheld and shall hold or apply it to or for the benefit of such person, the Participant's spouse, children or other dependents, or any of them, in such manner and proportion as the Committee may deem proper. For 55 purposes of the Plan, a Qualified Domestic Relations Order means any judgment, decree, or order (including approval of a property settlement agreement) which has been determined by the Committee in accordance with procedures established under the Plan, to constitute a qualified domestic relations order within the meaning of Section 414(p)(1) of the Code. XIV.2 Judgment Offset. Notwithstanding Section 14.1, effective with --------------- respect to judgments, orders and decrees issued, and settlement agreements entered into, on or after August 5, 1997, the Plan shall not be treated as failing to meet the requirements of the Section 14.1 solely by reason of any offset of a Participant's benefits against an amount that the Participant is ordered or required to pay to the Plan as a result of the Participant's breach of fiduciary duty to the Plan or commission of a criminal act against the Plan to the extent permitted under Section 401(a)(13)(C)-(D) of the Code. 56 ARTICLE XV Administration -------------- XV.1 In General. The Committee shall have authority and responsibility ---------- for the administration and interpretation of the Plan, and, for purposes of ERISA, shall be the "administrator" of the Plan and its "named fiduciary" with respect to matters for which it is responsible; provided that the Board shall have the sole authority to amend, suspend or terminate the Plan, except as otherwise provided in Subsection 15.4(c) hereof. The Committee shall consist of not less than three persons, who need not be directors of Ward, as from time to time appointed by the Board. Any Committee member may resign and the Board may remove any Committee member, with or without cause, at any time. To the maximum extent permitted by ERISA, every action and determination of the Committee in accordance with this Section shall be final and binding upon each Participant, Beneficiary, other Associate and every other person entitled to or claiming participation in the Plan or benefits from the Plan. No member of the Committee shall be entitled to act on or decide any matter relating solely to the Participant or to any of the Participant's rights or benefits under the Plan. XV.2 Appointment of Trustees. The Committee shall appoint the Trustees, ----------------------- and may remove any Trustees in accordance with the Trust Agreement. Upon acceptance of their appointments, the Trustees shall have exclusive authority to manage and control the Trust Fund, subject to the provisions of the Plan and the Trust Agreement and, for purposes of ERISA, shall be the "named fiduciary" of the Plan with respect to matters for which they are responsible; provided that, as provided in the Trust Agreement, the Trustees may appoint one or more Investment Managers and may delegate authority to the Investment Managers so appointed as provided therein and permitted by ERISA. XV.3 Appointment of Administrative Director. The Committee shall -------------------------------------- appoint an Administrative Director and may from time to time allocate or delegate to any subcommittee or member of the Committee, the Administrative Director and others, not necessarily Associates, such duties relative to compliance with the 57 reporting and disclosure obligations of ERISA and the administration and interpretation of the Plan as it deems necessary or appropriate including matters involving the exercise of discretion. The Administrative Director may from time to time delegate to others, not necessarily Associates, such of the Administrative Director's duties as the Administrative Director deems necessary or appropriate. The Committee may remove, with or without cause, at any time the Administrative Director and any person to whom duties are delegated by the Committee or the Administrative Director in accordance with this Section. XV.4 Specific Responsibilities and Authority of the Committee. In -------------------------------------------------------- furtherance of, and not by way of limitation on, the responsibilities and authority conferred on the Committee in Section 15.1 hereof, the Committee shall administer the Plan in accordance with its terms and provisions and shall have the following specific responsibilities and authorities: (a) to construe and interpret the Plan and determine all questions arising in its operation; (b) to develop and from time to time review a policy for funding the Plan recommended by the Actuary, which shall be consistent with the objectives of the Plan and the actuarial tables and interest rate assumptions from time to time recommended by the Actuary for the Plan in accordance with the Regulations and to advise the Trustees of such policy and of any changes therein from time to time; (c) to make such amendments in the Plan and the Trust Agreement as it deems necessary or appropriate; (d) to receive reports from the Trustees and from the Administrative Director on the discharge of their duties and authority with respect to the Plan, including in the case of the Administrative Director the preparation, distribution and maintenance of all documents necessary or appropriate for compliance with the reporting, disclosure and recordkeeping requirements contained 58 in ERISA, as well as such other records or data as may be necessary or appropriate for the proper administration of the Plan; (e) to employ the Actuary and such certified public accountants, legal counsel and other persons as may be required by ERISA or as it shall otherwise deem necessary or appropriate in connection with the operation of the Plan; (f) to adopt such rules and procedures as the Committee deems necessary or appropriate in order to fulfill its responsibilities with respect to the Plan; provided that such rules and procedures are uniformly and consistently applied to persons in similar circumstances; (g) to hold regular meetings designed to insure the discharge of its responsibilities hereunder, and to maintain an accurate written record of all such meetings; and (h) to furnish the Board with reports, including subjects reported upon to it by the Trustees and the Administrative Director. XV.5 Rules of Procedure. Subject to the by-laws of the Company and the ------------------ resolutions of the Board, the Committee shall establish its own rules of procedure and the time and place of its meetings. A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the act of a majority of the Committee members at a meeting at which a quorum is present shall be the act of the Committee. Any action which may be taken at a meeting of the Committee may be taken without a meeting if a consent, in writing, setting forth the action so taken, shall be signed by all of the members of the Committee. XV.6 Trust Fund. The Company has entered into the Trust Agreement with ---------- the Trustees providing for the administration and management of the Trust Fund. All benefits and other amounts payable hereunder shall be paid exclusively from the Trust Fund, and neither the Company, the Committee, any Trustee, the Administrative Director, nor any director, officer, Associate or agent of the Company assumes any responsibility or liability therefor. The Trust Fund may be commingled for investment purposes with like 59 separate trust funds of any other plans and trusts of Ward or any Affiliate which meet the requirements of Sections 401(a) and 501(a) of the Code. Each Participant, each Beneficiary or each other person who shall claim the right to any payment under the Plan shall look exclusively to the Trust Fund therefor and shall not have any right or claim therefor against the Company, the Committee, any Trustee, the Administrative Director or any director, officer, Associate or agent of the Company. Except as otherwise required by ERISA, neither the Company, the Committee, the Administrative Director, nor any director, officer, Associate or agent of the Company shall be required to inquire into or be responsible for any act or failure to act of any Trustee or any Participant. To the maximum extent permitted by ERISA and applicable state law, each member of the Committee, each Trustee, the Administrative Director and each director and officer of the Company, and each Associate who performs services on behalf of the Plan or the Trust, shall be indemnified and saved harmless by the Company out of its own assets (including the proceeds of any insurance policy the premiums of which are paid by the Company) from and against any and all losses, costs and expenses (including any amounts paid in settlement of a claim with the Committee's approval) to which any of them may be subjected by reason of any act done or omitted to be done in good faith in their official capacities with respect to the Plan or the Trust Agreement, including all expenses reasonably incurred in their defense. 60 XV.7 Claims Procedure. ---------------- (a) Any claim for benefits shall be submitted on a prescribed claim form to the claimant's local personnel department. If the claim is wholly or partially denied, written notice of the denial shall be furnished within 90 days after receipt of the claim; provided that, if special circumstances require an extension of time for processing the claim, an additional 90 days from the end of the initial period shall be allowed for processing the claim, in which event the claimant shall be furnished with a written notice of the extension prior to the termination of the initial 90- day period indicating the special circumstances requiring an extension. The written notice denying the claim shall set forth the reasons for the denial, including specific reference to pertinent provisions of the Plan on which the denial is based, a description of any additional information necessary to perfect the claim and information regarding review of the claim and its denial. (b) All disputed claims for benefits shall be submitted within 60 days after receipt by the claimant of the written notice of denial to, and decided within a reasonable period of time by, the Administrative Director or one member of the Committee designated by its Chairman. Written notice of the decision on each such claim shall be furnished to the claimant within 60 days after receipt by the Administrative Director of a request for review, unless special circumstances require an extension of time for processing, in which event an additional 60 days shall be allowed for review and the claimant shall be so notified in writing. If the claim is wholly or partially denied, such written notice shall set forth an explanation of the specific findings and conclusions on which such denial is based. A claimant may review all pertinent documents and may request a review by the Committee of such a decision denying the claim. Such a request shall be made in writing and filed with the Committee within 60 days after delivery to the claimant of written notice of the decision. Such written request for review shall contain all additional information which the claimant wishes the Committee to consider. The Committee may hold a hearing or conduct an independent investigation, 61 and the decision on review shall be made as soon as possible after the Committee's receipt of the request for review, but in no event later than the third regularly scheduled meeting of the Committee after the Committee's receipt of the request for review. Written notice of the decision on review shall be promptly furnished to the claimant and shall include specific reasons for the decision. For all purposes under the Plan, such decision on claims (where no review is requested) and decision on review (where review is requested) shall be final, binding and conclusive on all interested persons as to participation and benefits eligibility, the amount of benefits and as to any other matter of fact or interpretation relating to the Plan. In the case of a Participant covered by a collective bargaining agreement, a disputed claim for benefits shall be governed by the grievance and arbitration procedures established under such agreement; provided, however, that, if such agreement permits, the Committee will review such a claim before it is referred to formal grievance procedures. XV.8 Payment of Expenses. Except as otherwise provided in the Plan or the ------------------- Trust Agreement, all expenses and charges incurred in the administration and operation of the Plan and the Trust Agreement shall be paid out of the Trust Fund. No compensation shall be paid by the Plan to any member of the Committee, any Trustee or the Administrative Director if employed by the Company or any Affiliate, but said persons may be reimbursed for their reasonable expenses incurred in carrying out their duties, responsibilities and authority hereunder, and the compensation, or a properly allocable portion thereof, paid to other Associates who are involved in the administration of the Plan and all other properly allowable expenses shall, to the extent not paid by the Company, be treated as administrative expenses. No bond shall be required of the members of the Committee, the Trustees or the Administrative Director, except as otherwise required by law. XV.9 Notices, etc. Any notice, election, application, instruction, ------------ designation or other form of communication required to be given or submitted by any Participant, other Associate or Beneficiary shall be in such form as is prescribed from time to time by the Committee, sent by first class mail or delivered in person to the Administrative Director of the Plan, 8-3, Montgomery Ward & Co., Incorporated, Montgomery 62 Ward Plaza, Chicago, Illinois 60671, and shall be deemed to be duly given only upon actual receipt thereof by the Administrative Director. Any notice, statement, report and other communication from the Company, the Committee or the Administrative Director to any Participant, other Associate or Beneficiary required or permitted by the Plan shall be deemed to have been duly given when delivered to such person or mailed by first class mail to such person at the person's address last appearing on the records of the Company. Each person entitled to receive a payment under the Plan shall file in accordance herewith the person's complete mailing address and each change therein. A check or communication mailed to any person at such person's address on file with the Administrative Director shall be deemed to have been received by such person for all purposes of the Plan, and neither the Committee, the Administrative Director nor any Associate or agent of the Company shall be obliged to search for or ascertain the location of any such person except as required by ERISA. If the Administrative Director shall be in doubt as to whether payments are being received by the person entitled thereto, it may, by registered mail addressed to such person at the person's address last known to the Administrative Director, notify such person that all future payments will be withheld until such person submits to the Administrative Director the person's proper mailing address and such other information as the Administrative Director may reasonably request. XV.10 Filing of Information. Each Participant shall file with the --------------------- Committee such pertinent information concerning the Participant and the Participant's Beneficiary, and each Beneficiary shall file with the Committee such information concerning the Beneficiary, as the Committee or the Administrative Director may specify, and in such manner and form as the Committee or Administrative Director may specify or provide, and no Participant or Beneficiary shall have any right or be entitled to any benefits or further benefits under the Plan unless such information is filed by the Participant or Beneficiary or on behalf of the Participant or Beneficiary. XV.11 Claims Against Trust Fund. If the Committee receives notification ------------------------- from the Trustees of any trust fund established by the Company as a part of an employee benefit plan other than the Trust Fund that 63 such Trustees have a claim against the Trust Fund by reason of overpayment or otherwise, then the Committee may direct the Trustees to withhold further payments under the Plan, pay the amount of such claim to any court of competent jurisdiction or take any other action which the Committee shall deem appropriate. XV.12 Agent for Service of Process. The agent for the service of legal ---------------------------- process of the Plan shall be the Secretary of Ward. ARTICLE XVI Termination of Participating Company's Participation ---------------------------------------------------- XVI.1 Right to Terminate. Any Participating Company may terminate its ------------------ participation in the Plan by giving the Committee prior written notice specifying a termination date which shall be the last day of the month at least 60 days subsequent to the date such notice is received by the Committee. The Committee may terminate any Participating Company's participation in the Plan, as of any termination date specified by the Committee, for the failure of the Participating Company to make proper contributions or to comply with any other provision of the Plan. 64 XVI.2 Effect of Termination and Payment of Distributable Reserve. To the ---------------------------------------------------------- maximum extent permitted by ERISA, any rights of Participants no longer employed by the Participating Company, former Participants and their Beneficiaries, Surviving Spouses and other eligible survivors under the Plan shall be unaffected by a termination of the Plan as to any Participating Company. Subject to the provisions of Section 16.8, the benefits provided under the Plan with respect to each Participant in Service with such Participating Company as of the termination date will be paid or forfeited in accordance with the Plan as if such termination had not occurred except that the Committee may direct the Trustees to segregate such portion of the assets of the Trust (the "Distributable Reserve") as the Actuary shall determine to be properly allocable in accordance with ERISA to the active Associates of such Participating Company and direct the Trustees to apply the Distributable Reserve for the benefit of the Participants employed by the Participating Company as of the termination date in such manner as the Committee shall determine including, without limitation, payment to such Participants in lump cash sums, cash installments, or the purchase of immediate or deferred annuities, a transfer to a successor employee benefit plan which is qualified under Section 401(a) of the Code, or any combination thereof; provided, however, that in the event of any transfer of assets to a successor employee benefit plan the provisions of Section 16.3 will apply. Any such payments or transfers of the Distributable Reserve shall constitute a complete discharge of all liabilities under the Plan with respect to such Participating Company's participation in the Plan and any Participant then employed by such Participating Company. To the maximum extent permitted by ERISA, the termination of the Plan as to any Participating Company shall not in any way affect any other Participating Company's participation in the Plan. XVI.3 Transfer of Assets to Successor Plan. No transfer of the Plan's ------------------------------------ assets and liabilities to a successor employee benefit plan (whether by merger or consolidation with such successor plan or otherwise) shall be made unless each Participant would, if either the Plan or such successor plan then terminated, receive a benefit immediately after such transfer which (after taking account of any distributions or payments to them 65 as part of the same transaction) is equal to or greater than the benefit he would have been entitled to receive immediately before such transfer if the Plan had then been terminated. The Committee may also request appropriate indemnification from the employer or employers maintaining such successor plan before making such a transfer. ARTICLE XVII Amendment and Termination ------------------------- XVII.1 Power to Amend. -------------- (a) Subject to the provisions of Subsection 15.4(c) hereof, the Board reserves the right at any time to amend, suspend, discontinue or terminate the Plan, any accrual thereunder, the Trust or any contract issued by an insurance carrier forming a part of the Plan, in whole or in part and for any or no reason and without the consent of any Participating Company, Participant or Beneficiary; and the Committee may make such amendments in the Plan and the Trust as it deems necessary or appropriate. Each Participating Company by its adoption of the Plan shall be deemed to have delegated this authority to the Board and the Committee, respectively. (b) No amendment or modification shall be made which would (i) retroactively impair any right to any benefit under the Plan which any Participant or Beneficiary would otherwise have had at the date of such amendment by reason of the contributions theretofore made, except to such extent as may be necessary or appropriate to qualify or maintain the Plan, the Trust and any contract with an insurance carrier which may form a part of the Plan as a plan and trust meeting the requirements of Sections 401(a) and 501(a) of the Code or any other applicable section of law, including ERISA, as now in effect or hereafter amended or adopted and the Regulations or (ii) make it possible for any part of the funds of the Plan (other than such part as is required to pay taxes, if any, and administrative expenses as provided in Section 15.8 hereof) to be used for or diverted to any 66 purposes other than for the exclusive benefit of Participants and their Beneficiaries prior to the satisfaction of all liabilities with respect thereto. XVII.2 Retroactive Amendments. Subject to the provisions of Section 17.1 ---------------------- hereof, any amendment, modification, suspension or termination of any provisions of the Plan may be made retroactively if necessary or appropriate to qualify or maintain the Plan, the Trust and any contract with an insurance company which may form a part of the Plan as a plan and trust meeting the requirements of Sections 401(a) and 501(a) of the Code or any other applicable section of law, including ERISA, as now in effect or hereafter amended or adopted and the Regulations. XVII.3 Notices of Amendments. Notice of any amendment, modification, --------------------- suspension or termination of the Plan shall be given by the Board or the Committee, whichever adopts the amendment, to the other and to the Trustees and all Participating Companies and, where and to the extent required by law, to Participants and other interested parties. XVII.4 Effect of Termination. Upon termination of the Plan, no amount --------------------- shall thereafter be payable under the Plan to or in respect of any Participant except as provided in this Article, and, to the maximum extent permitted by ERISA, transfers or distributions of the assets of the Plan as provided in this Article shall constitute a complete discharge of all liabilities under the Plan. The Committee shall remain in existence, and all of the provisions of the Plan which in the opinion of the Committee are necessary for the execution of the Plan and the distribution or transfer of the assets of the Plan shall remain in force. All distributions and notifications referred to in this Article shall be in form and substance satisfactory to counsel for the Plan. XVII.5 Distribution of Assets If No ERISA Termination. If the Committee ---------------------------------------------- receives a determination from the PBGC that the termination of the Plan does not constitute a plan termination for purposes of Title IV of ERISA, then, upon receipt by the Committee of IRS approval of such termination, the assets of the Plan shall be applied for the benefit of Participants and Beneficiaries in such manner as the Committee shall 67 determine, provided that, in the event of any transfer of assets to a successor employee benefit plan, the provisions of Section 16.3 hereof will apply. XVII.6 Distribution of Assets Upon Termination. --------------------------------------- (a) If the termination of the Plan does not constitute a plan termination for purposes of Title IV of ERISA, then the rights of all Participants (including any person or persons whose benefits are paid from the Trust regardless of the plan under which the benefits are calculated) to their Retirement Benefits accrued to the date of such termination shall thereupon be nonforfeitable, but only to the extent that such Retirement Benefits have then been funded by contributions made prior to such termination and that funds are available to provide such Retirement Benefits upon the allocations hereinafter provided in this Section. (b) Upon receipt by the Committee of (i) all necessary PBGC regulatory approvals that the assets of the Plan are sufficient to discharge when due all obligations thereunder with respect to benefits which are guaranteed by the PBGC under Title IV of ERISA and (ii) IRS approval of such termination, the assets of the Plan which remain after reservation of an amount sufficient to apply all expenses of final administration shall be allocated, to the extent sufficient, in the following order of priority: (i) to provide for the benefits which are payable to or in respect of Participants who Retired or died, who could have Retired, or who, having terminated Service, either began receiving payments of such benefits or could have begun receiving such payments at least three years prior to the termination date, determined in each case on the basis of the provisions of the Plan at any time during the five-year period ending on the termination date when such benefits were or would have been the lowest and without regard to any increases in such benefits which accrued less than three years prior to the termination date; then (ii) to provide all other benefits under the Plan which are guaranteed by the PBGC under Title IV of ERISA or which would be guaranteed if Sections 4022(b)(5) and 4022(b)(6) were not applicable, but which have not been allocated under Clause (i) of this Section; then 68 (iii) to provide all other benefits which had become nonforfeitable under the Plan prior to the termination date but which have not been allocated under Clause (i) or (ii) of this Section; then (iv) to provide all other benefits which had accrued under the Plan prior to the termination date but which have not been allocated under Clause (i), (ii) or (iii) of this Section; then (v) any surplus assets of the Plan remaining after the payment of all expenses of final administration and after the satisfaction of all liabilities accrued to the termination date with respect to Participants and their Beneficiaries shall, upon receipt of the IRS approval therefor, revert ratably to each Participating Company in such manner and in such proportion as the Committee, upon the advice of the Actuary, shall determine. The foregoing allocations shall be made by the Committee in accordance with the determinations of the Actuary pursuant to the Regulations. If the balance remaining for allocation under any of the foregoing Clauses is insufficient to provide in full the allocations under such Clause, individual allocations shall be reduced pro rata (except that, under Clause (iii) only, such balance shall first be allocated to provide the benefits described therein determined on the basis of the provisions of the Plan which were in effect at the beginning of the five-year period ending on the termination date and then, if the balance remaining for allocation is sufficient, to provide the benefits described therein which result from each successive amendment to the Plan during such five-year period under the first such amendment as to which such balance is insufficient before reducing such allocation pro rata), and no allocations shall be made under subsequent clauses. The assets of the Plan allocated in accordance with Clauses (i), (ii), (iii) and (iv) of this Section shall be distributed in such manner as the Committee shall determine, including without limitation, lump-sum payments, cash installments, the purchase of immediate or deferred annuities or any combination of the foregoing. XVII.7 Distribution of Assets Upon Termination Where Assets Not -------------------------------------------------------- Sufficient. Notwithstanding the provisions of Section 17.6 hereof, if the PBGC - - ---------- notifies the Committee that it is unable to determine whether the assets of the Plan are sufficient or that such assets are insufficient to discharge when due all obligations thereunder with respect to benefits which are guaranteed by the PBGC under Title IV of ERISA, then the assets of the Plan shall be allocated and distributed only as a court having competent jurisdiction of the Plan or Trust or a trustee appointed by such court shall direct or permit or as otherwise provided in an agreement satisfactory to the Committee. XVII.8 Effect of Partial Termination. In the event that any governmental ----------------------------- authority, including without limitation the IRS and PBGC, determines that a partial termination, within the meaning of ERISA, of 69 the Plan has occurred as to any Participating Company, then (i) the rights of all Participants affected thereby to their Retirement Benefits accrued to the date of such partial termination shall thereupon be nonforfeitable, but only to the extent that such Retirement Benefits have then been funded by such portion of the assets of the Trust as are determined to be properly allocable to such Participants and that such portion of assets is available to provide such Retirement Benefits upon the allocations provided in Section 17.6 hereof, and (ii) the provisions of Sections 17.2, 17.3, 17.4, 17.6, and 17.7 hereof and Section 16.3 hereof which in the opinion of the Committee are necessary for the execution of the Plan and the allocation and distribution of the assets of the Plan shall apply. To the maximum extent permitted by ERISA, if any liability arises as a result of such partial termination, only the Participating Company as to which the partial termination of the Plan has occurred shall be liable to the PBGC for any insufficiency of assets. ARTICLE XVIII Limitations in the Event of Early Discontinuance ------------------------------------------------ XVIII.1 Application. In order to qualify the Plan and the Trust as a ----------- qualified plan and trust under the Code, the benefits to be provided to certain Participants will be subject to the limitations set forth in this Article XVIII. XVIII.2 Restriction of Benefits. ----------------------- (a) In the event the Plan is terminated, the benefit of any active or former Participant who was a Highly Compensated Associate (as defined in Section 414(q) of the Code) shall be limited to that benefit that is nondiscriminatory under Section 401(a)(4) of the Code. (b) The annual payments to a Participant described in (c) below are restricted to an amount equal to the payments that would be made on behalf of that Participant under a straight life annuity that is the Actuarial Equivalent of the Participant's Accrued Benefit under the Plan. The restrictions in this Section 18.2 do not apply, however, if: 70 (i) after payment to a Participant described in (c) below of all benefits described in (d) below, the value of Plan assets equals or exceeds 110% of the value of current liabilities (as defined in Section 412(1)(7) of the Code), or (ii) the value of the benefits described in (d) below for a Participant described in (c) below is less than one percent of the value of current liabilities, or (iii) the value of benefits described in (d) below for a Participant described in (c) below does not exceed the amount described in Section 411(a)(11)(A) of the Code. (c) The Participants whose benefits are restricted pursuant to this Article XVIII on distribution are the 25 Highly Compensated Associates and former Highly Compensated Associates (as defined in Section 414(q) of the Code) with the greatest compensation in the current or any prior year. Plan provisions defining or altering the group of Participants whose benefits are restricted under this Section 18.2 may be amended at any time without violating the requirements of Section 411(d)(6) of the Code. (d) For purposes of this Section 18.2, the term "benefit" includes loans in excess of the amounts set forth in Section 72(p)(2)(A) of the Code, any periodic income, any withdrawal values payable to a living Participant and any death benefits not provided for by insurance on the Participant's life. XVIII.3 Payment of Benefits. The limitations established under this ------------------- Article XVIII shall not restrict either the payment of any monthly benefit due prior to the termination of the Plan or the payment of benefits to a Participant's Beneficiary or Surviving Spouse under the Plan at any time, if such payment commenced prior to the date of such termination. If the foregoing limitations would otherwise become applicable the Committee may, if it so elects, nevertheless pay full benefits to or in respect of any Participant who executes an agreement with the Trustees, in form and in substance satisfactory to the Committee, which is adequately secured and which guarantees the repayment of any payment subject to such limitations. XVIII.4 Additional Reserves. Any additional reserves arising by the ------------------- application of the foregoing limitations shall be used and applied for the benefit of the other Participants and their Beneficiaries and 71 Surviving Spouses under the Plan; provided, however, that if sufficient funds are available to provide in full for the benefits accrued for all such other Participants and their Beneficiaries and Surviving Spouses under the Plan, then such additional reserves shall be used, to the extent available, to provide the benefits under the Plan of the Participants whose benefits would otherwise have been restricted by operation of this Article XVIII. ARTICLE XIX Miscellaneous ------------- XIX.1 In General. Any and all rights or benefits accruing to any person ---------- under the Plan shall be subject to all terms and conditions of the Plan and the Trust Agreement. The adoption and maintenance of the Plan shall not constitute a contract between the Company and any associate or be a consideration for, or an inducement or condition of, employment of any associate. Neither participation nor anything contained in the Plan shall give any associate the right to be retained in the employ of the Company, nor shall it interfere with the right of the Company to discharge any associate at any time. XIX.2 Coordination of Payment of Benefits with Other Plans. ---------------------------------------------------- Notwithstanding any other provision of this Plan, the payment of benefits to Participants and their Beneficiaries, Surviving Spouses and other eligible survivors under the Plan shall be paid as a part of and concomitantly with any benefits to which he is entitled in accordance with the terms of the Prior Plans. XIX.3 Incapacity. If the Committee shall find that any person to whom ---------- any amount is payable under the Plan is unable to care for such person's affairs because of illness or accident, is a minor or has died, then any payment due to the person or the person's estate (unless a prior claim therefor has been made by a duly appointed legal representative) may be paid to the spouse, a child, a relative, an institution maintaining or having custody of such person or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liabilities of the Plan and Trust Fund. 72 XIX.4 Inability to Locate Benefit Recipient. If the Committee cannot ------------------------------------- ascertain the whereabouts of any person to whom an amount is payable under the Plan, and if, after five years from the date such payment is due, a notice of such payment due is mailed to the last known address of such person as shown on the records of the Company and within three months after such mailing such person has not made a written claim therefor, the Committee, if it so elects and after receiving advice from counsel to the Plan, may assume that such person is deceased and direct that such payment be made in accordance with the applicable provisions of Article XI hereof. XIX.5 Benefit Provided by Insurance. If the payment of any benefit ----------------------------- under the Plan is provided as an annuity benefit under a contract with an insurance company, the payment of such benefit shall be subject to all the provisions of such contract. XIX.6 Credit for Prior Employment. Upon such terms and conditions as --------------------------- the Committee and the Internal Revenue Service may approve, credit may be given for service and benefits provided under the Plan to a Participant with respect to any period of the Participant's prior employment by an organization, and such credit and benefits may be provided for in whole or in part by funds transferred, directly or indirectly (including a rollover from an individual retirement account, or an individual retirement annuity as described in Section 408 of the Code), to the Trust Fund from an employee benefit plan of such organization which qualifies under Section 401(a) of the Code. XIX.7 Construction. To the maximum extent permitted by ERISA, the Plan ------------ shall be construed in accordance with the laws of the State of Illinois. As used herein, the masculine form shall, where appropriate, include the feminine and neuter genders. All Article and Section headings herein have been inserted for convenience only and shall not affect the meaning of the language contained herein. ARTICLE XX Top Heavy Provisions -------------------- 73 XX.1 In General. The Plan will be considered a Top Heavy Plan for any ---------- Plan Year if it is determined to be a Top Heavy Plan as of the last day of the preceding Plan Year. For purposes of determining whether the Plan is a Top Heavy Plan, uniform actuarial assumptions which reflect interest rate, as prescribed in Section 2.1, shall be used. The present value of a Participant's Retirement Benefit shall be determined as of the last valuation date used for computing Plan costs for minimum funding purposes which occurs within the Plan Year in which the determination is being made, and shall include amounts distributed to or on behalf of the Participants within the four preceding Plan Years. Notwithstanding any other provisions in the Plan, the provisions of this Article XX shall apply and supersede all other provisions of the Plan with respect to a Plan Year with respect to which the Plan is determined to be a Top Heavy Plan. XX.2 Definitions. For purposes of this Article XX and as otherwise used ----------- in this Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean any entity affiliated with the Company within the meaning of Section 414(b), 414(c) or 414(m) of the Code, except that for purposes of applying the provisions hereof with respect to the limitation on benefits, Section 415(h) of the Code shall apply. (b) "Aggregation Group" shall mean the group composed of each qualified retirement plan of the company or an Affiliate in which a Key Associate is a participant and each other qualified retirement plan of the Company or an Affiliate which enables a plan of the Company or an Affiliate in which a Key Associate is a participant to satisfy Sections 401(a)(4) and 410 of the Code with such plan being taken into account. (c) "Key Associate" shall mean a "Key Employee" as defined in Section 416(i)(1) and (5) of the Code and Regulations promulgated thereunder. (d) "Top Heavy Plan" shall mean a "Top Heavy Plan" as defined in Sections 416(g) of the Code and Regulations promulgated thereunder. XX.3 Vesting. ------- 74 (a) If a Plan is a Top Heavy Plan with respect to any Plan Year, a Participant's nonforfeitable right to the Participant's Retirement Benefit derived from the Company's contributions shall not be less than the amount determined in accordance with the following vesting schedule: Years of Service Percentage ---------------- ---------- Less than 3 0% 3 or more 100% (b) In the event the vesting schedule provided in Section 2.51 is amended, or changed on account of the Plan becoming or ceasing to be a Top Heavy Plan, any Participant who has completed at least five Years of Service for purposes of determining a Participant's nonforfeitable right to the Participant's Retirement Benefit derived from the Company's contributions under Sections 2.51 and 20.3 may elect to have the Participant's nonforfeitable percentage determined under the Plan without regard to such amendment or change by notifying the Committee in writing within the election period hereinafter described. The election period shall begin on the date such amendment is adopted or the date such change is effective, as the case may be, and shall end no earlier than the latest of the following dates: (i) the date which is 60 days after the day such amendment is adopted; (ii) the date which is 60 days after the day such amendment or change becomes effective; or (iii) the date which is 60 days after the day the Participant is given written notice of such amendment or change by the Committee. Any election made pursuant to this Section 20.3(b) shall be irrevocable. XX.4 Distributions to Participants. ----------------------------- (a) Subject to Section 20.5, for each Plan Year that the Plan is a Top Heavy Plan, the Retirement Benefit for each Participant who has completed a Year of Service and who is not a Key Associate shall not be less than such Participant's Average Compensation, multiplied by the lesser of 75 (i) two percent multiplied by the number of Years of Service with the Company or (ii) 20%. For purposes of the preceding sentence, Years of Service shall not include any Year of Service completed prior to the Plan Year beginning prior to January 1, 1984, or any Year of Service if the Plan was not a Top Heavy Plan for any Plan Year ending during such Year of Service. (b) For purposes of this Section 20.4, "Average Compensation" shall mean the average of a Participant's compensation (as described in Section 415 of the Code) for the period of 5 consecutive years (or, if the Participant does not have five consecutive years, the Participant's actual number of consecutive years) during which the Participant had the greatest aggregate compensation. Compensation earned during a Plan Year beginning before January 1, 1984, or during a Plan Year which begins after the last Plan Year in which the Plan was not a Top Heavy Plan shall be disregarded for purposes of determining Average Compensation. XX.5 Top Heavy Plan Years. -------------------- (a) For each Plan Year that the Plan is a Top Heavy Plan, 1.0 shall be substituted for 1.25 as the multiplicand of the dollar limitation in determining the denominator of the defined benefit plan fraction and of the defined contribution plan fraction for purposes of Section 415(e) of the Code. (b) If, after substituting 90% for 60% wherever the latter appears in Section 416(g) of the Code, the Plan is not determined to be a Top Heavy Plan, the provisions of paragraph (a) shall not be applicable if the Retirement Benefit for each Participant who is not a Key Associate is determined in accordance with Section 20.4(a), substituting "three percent" for "two percent" in Section 20.4(a) and increasing "20%" in Section 20.4(a) by 1 for each Plan Year described in the last sentence of Section 20.4(a), but not beyond "30%." XX.6 Duplication of Benefits. The Committee shall, to the extent ----------------------- permitted by the Code and in accordance with Regulations, apply the provisions of this Article XX by taking into account the benefits 76 payable and the contributions made under any other plans maintained by the Company or any of its subsidiaries or affiliated or associated entities which are qualified under Section 401(a) of the Code to prevent inappropriate omissions or duplication of minimum benefits or contributions. ARTICLE XXI Transfer of Amounts Attributable to Contributions Under the Jefferson Stores Plan ------------------------- XXI.1 Transfer of Accrued Benefit. Each Participant who was a --------------------------- participant of the Jefferson Stores Plan on December 31, 1984, had an amount equal to the Participant's accrued retirement benefit under the Jefferson Stores Plan, if any, transferred from the trust established as part of the Jefferson Stores Plan to the Trust. XXI.2 Transfer Held in Trust. The Committee shall establish and ---------------------- maintain or cause to be established and maintained, as part of the Trust, such accrued benefits which are allocable to the amounts transferred pursuant to Section 21.1, if any, and all relevant data pertaining thereto. All such transferred amounts shall be held by the Trustee for the exclusive benefit of such Participants in accordance with the terms of the Plan, to be commingled, managed, invested and reinvested with the other assets of the Plan. Upon such transfer, and except as otherwise provided in the Jefferson Stores Plan, the Trustees of the Jefferson Stores Plan shall have no further liability whatsoever with respect to such transferred amounts or the benefits which had been based thereon, and the Participant shall look solely to the Plan for any payment or other benefit in respect of the amount so transferred. XXI.3 Payment of Benefits. The accrued benefit attributable to any ------------------- amounts transferred from the Jefferson Stores Plan, if any, shall be nonforfeitable and shall be paid from the Trust Fund to the Participant or the Participant's Beneficiary or Surviving Spouse at the same time and in the same manner as any payment made in accordance with Articles XI, XII or XIII. 77 ARTICLE XXII Transfer of Amounts Attributable to Contributions Under the Lechmere Plan ------------------------------------- XXII.1 Transfer of Accrued Benefit. Each Participant who was a --------------------------- participant of the Lechmere Plan on June 30, 1994, had an amount equal to the Participant's accrued retirement benefit under the Lechmere Plan, if any, transferred from the trust established as part of the Lechmere Plan to the Trust. XXII.2 Transfer Held in Trust. The Committee shall establish and ---------------------- maintain or cause to be established and maintained, as part of the Trust, such accrued benefits which are allocable to the amounts transferred pursuant to Section 22.1, if any, and all relevant data pertaining thereto. All such transferred amounts shall be held by the Trustees for the exclusive benefit of such Participants in accordance with the terms of the Plan, to be commingled, managed, invested and reinvested with the other assets of the Plan. Upon such transfer, and except as otherwise provided in the Lechmere Plan, the Participant shall look solely to the Plan for any payment or other benefit in respect of the amount so transferred. XXII.3 Payment of Benefits. The accrued benefit attributable to any ------------------- amounts transferred from the Lechmere Plan, if any, shall be nonforfeitable and shall be paid from the Trust Fund to the Participant or the Participant's Beneficiary or Surviving Spouse at the same time and in the same manner as any payment made in accordance with Articles XI, XII or XIII. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias ------------------------------------ Its: VP Comp, Benefits and HR Strategy ------------------------------------ ATTEST: By: /s/ Jill M. Chapman ---------------------------------- Its: Benefits Director ---------------------------------- 78 Addendum A ---------- Montgomery Ward & Co., Incorporated ----------------------------------- Retirement Security Plan ------------------------ A-1 Purpose. The purpose of this Addendum A is to provide for ------- participation in the Plan by eligible employees of Montgomery Ward (Hong Kong) Limited. A-2 Use of Terms. Except where the context of this Addendum A expressly ------------ indicates to the contrary, terms used and defined in the Plan shall have the same meanings for purposes of this Addendum A. As used in this Addendum A, the term this "Addendum A", shall include only this Addendum A, and the references to the "Plan" shall include all provisions of the Plan but shall not include this Addendum A. A-3 Conflicts Between Plan and This Addendum A. This Addendum A, ------------------------------------------ together with the Plan, comprises the Plan with respect to Participants under this Addendum A. In case of any conflict between the provisions of the Plan and this Addendum A, the terms and the provisions of this Addendum A shall govern to the extent necessary to eliminate such conflict. A-4 Participants. Nonresident aliens employed by Montgomery Ward (Hong ------------ Kong) Limited shall be considered "Employees", "Associates", and "Hong Kong Associates" for purposes of the Plan and this Addendum A. Hong Kong Associates employed by Montgomery Ward (Hong Kong) Limited on October 1, 1995, who have completed one Year of Service by October 1, 1995, participate in the Plan as of October 1, 1995. Each other Hong Kong Associate who both attains age 21 and completes one Year of Service shall become a Participant under the Plan on the first day of the month following the month in which the Hong Kong Associate meets the eligibility requirements. A-5 Vesting. If a Hong Kong Associate completes five Years of Service, ------- such Hong Kong Associate shall be Vested (have a nonforfeitable right to a Retirement Benefit) in the Hong Kong Associate's Retirement Benefit. Each Hong Kong Associate employed by Montgomery Ward (Hong Kong) Limited on October 31, 1995, who has completed two years of service with Montgomery Ward (Hong Kong) Limited but has not yet completed five Years of Service shall be Vested (have a nonforfeitable right to a Retirement Benefit) in the Retirement Benefit to which the Associate would have been entitled if the Associate terminated employment with Montgomery Ward (Hong Kong) Limited on October 31, 1995. A-6 Final Monthly Salary. For purposes of this Addendum A, "Final -------------------- Monthly Salary" means annual base salary or pay preceding the date of termination of Service by a Hong Kong Associate, calculated in Hong Kong Dollars, divided by 14. A-7 Retirement Benefit. If a Participant who is a Hong Kong Associate ------------------ Retires on the Participant's Normal Retirement Date, the amount of the Retirement Benefit shall be the Actuarial Equivalent of a lump sum expressed in Hong Kong Dollars determined by multiplying the participant's Final Monthly Salary by the Participant's years of Service (calculated to the nearest month). Sections 9.1, 9.2, 9.3, 10.1, 10.2 and 10.3 of the Plan do not apply to Participants who are Hong Kong Associates. Except as otherwise provided in Article IX and Section 11.4 of the Plan, a Participant who is a Hong Kong Associate who Retires on the Participant's Normal Retirement Date shall be eligible for the Retirement Benefit defined in this paragraph A-7 or an Actuarial Equivalent benefit thereto as provided for herein. 79 A-8 Optional Methods of Payment. In lieu of the Qualified Joint and --------------------------- Survivor Benefit payable to a married Participant or the single life annuity payable to an unmarried Participant, a Participant who is a Hong Kong Associate may elect, subject to Sections 11.3 and 11.4 of the Plan, to receive the Actuarial Equivalent of the Retirement Benefit to which the Participant is entitled under the Plan in one lump sum payment in Hong Kong Dollars or in installments over five quarterly payments in Hong Kong Dollars. Any such election shall comply with the spousal consent requirements of Section 11.5 of the Plan. Section 11.2 of the Plan does not apply to Participants who are Hong Kong Associates. A-9 Termination of Service by a Vested Participant. If the Service of a ---------------------------------------------- Participant who is a Hong Kong Associate and who is Vested terminates prior to Retirement, such Participant may elect, subject to the spousal consent requirements of Section 11.5 of the Plan, a Retirement Benefit commencing on the first day of any month within nine months after the Participant's termination of Service and prior to the Participant's Normal Retirement Date or on the Participant's Normal Retirement Date. Section 13.2 of the Plan does not apply to Participants who are Hong Kong Associates. A-10 Death Benefits. In lieu of the Pre-Retirement Death Benefit -------------- described in Section 12.1, the spouse of a Participant who died while employed as a Hong Kong Associate or within the first nine months after the Participant's termination of Service may elect to receive (i) a lump sum amount equal to the lump sum amount which would have been payable to the Participant if the Participant had terminated Service on the earlier of the date of the Participant's death or the Participant's prior termination of Service or (ii) five quarterly installments equal to the quarterly installment amount which would have been payable to the Participant if the Participant had terminated Service on the earlier of the date of the Participant's death or the Participant's prior termination of Service. A-11 Actuarial Equivalent. For purposes of this Addendum, "Actuarial -------------------- Equivalent" shall mean the lesser of (i) Actuarial Equivalent as otherwise defined in the Plan and (ii) Actuarial Equivalent computed as otherwise defined in the Plan but using a five percent interest rate. 80 Addendum B ---------- Montgomery Ward & Co., Incorporated ----------------------------------- Retirement Security Plan ------------------------ B-1 Purpose. The purpose of this Addendum B is to provide for ------- participation in the Plan by eligible employees of Montgomery Ward & Co., Incorporated-Japan Branch B-2 Use of Terms. Except where the context of this Addendum B expressly ------------ indicates to the contrary, terms used and defined in the Plan shall have the same meanings for purposes of this Addendum B. As used in this Addendum B, the term this "Addendum B" shall include only this Addendum B, and the references to the "Plan" shall include all provisions of the Plan but shall not include this Addendum B. B-3 Conflicts Between Plan and This Addendum B. This Addendum B, together ------------------------------------------ with the Plan, comprises the Plan with respect to Participants under this Addendum B. In case of any conflict between the provisions of the Plan and this Addendum B, the terms and the provisions of this Addendum B shall govern to the extent necessary to eliminate such conflict. B-4 Participants. Nonresident aliens employed by Montgomery Ward & Co., ------------ Incorporated-Japan Branch shall be considered "Employees", "Associates", and "Japan Associates" for purposes of the Plan and this Addendum B. Japan Associates employed by Montgomery Ward & Co., Incorporated-Japan Branch on April 1, 1997, who have completed one Year of Service by April 1, 1997, participate in the Plan as of April 1, 1997. Each other Associate who both attains age 21 and completes one Year of Service shall become a Participant under the Plan on the first day of the month following the month in which such Associate meets the eligibility requirements. B-5 Vesting. If a Japan Associate completes two Years of Service, such ------- Associate shall be Vested (have a nonforfeitable right to a Retirement Benefit) in such Associate's Retirement Benefit. B-6 Final Monthly Salary. For purposes of this Addendum B, "Final Monthly -------------------- Salary" means annual base salary or pay preceding the date of termination of Service by a Japan Associate, divided by 15. B-7 Retirement Benefit. If a Participant who is a Japan Associate Retires ------------------ on the Participant's Normal Retirement Date, the amount of the Retirement Benefit shall be the Actuarial Equivalent of a lump sum expressed in the currency of Japan determined by multiplying the participant's Final Monthly Salary by the Participant's years of Service (calculated to the nearest month). Sections 9.1, 9.2, 9.3, 10.1, 10.2 and 10.3 of the Plan do not apply to Participants who are Japan Associates. Except as otherwise provided in Article IX and Section 11.4 of the Plan, a Participant who is a Japan Associate who Retires on the Participant's Normal Retirement Date shall be eligible for the Retirement Benefit defined in this paragraph B-7 or an Actuarial Equivalent benefit thereto as provided for herein. B-8 Optional Methods of Payment. In lieu of the Qualified Joint and --------------------------- Survivor Benefit payable to a married Participant or the single life annuity payable to an unmarried Participant, a Participant who is a Japan Associate may elect, subject to Sections 11.3 and 11.4 of the Plan, to receive the Actuarial Equivalent of the Retirement Benefit to which the Participant is entitled under the Plan in one lump sum payment in the currency of Japan, or in installments over five quarterly payments in the currency of Japan. Any such election shall comply with the spousal consent requirements of Section 11.5 of the Plan. Section 11.2 of the Plan does not apply to Participants who are Japan Associates. 81 B-9 Termination of Service by a Vested Participant. If the Service of a ---------------------------------------------- Participant who is a Japan Associate and who is Vested terminates prior to Retirement, such Participant may elect, subject to the spousal consent requirements of Section 11.5 of the Plan, a Retirement Benefit commencing on the first day of any month within nine months after the Participant's termination of Service and prior to the Participant's Normal Retirement Date or on the Participant's Normal Retirement Date. Section 13.2 of the Plan does not apply to Participants who are Japan Associates. B-10 Death Benefits. In lieu of the Pre-Retirement Death Benefit -------------- described in Section 12.1, the spouse of a Participant who died while employed as Japan Associate or within the first nine months after the Participant's termination of Service may elect to receive (i) a lump sum amount equal to the lump sum amount which would have been payable to the Participant if the Participant had terminated Service on the earlier of the date of the Participant's death or the Participant's prior termination of Service or (ii) five quarterly installments equal to the quarterly installment amount which would have been payable to the Participant if the Participant had terminated Service on the earlier of the date of the Participant's death or the Participant's prior termination of Service. B-11 Actuarial Equivalent. For purposes of this Addendum B, "Actuarial -------------------- Equivalent" shall mean the lesser of (i) Actuarial Equivalent as otherwise defined in the Plan and (ii) Actuarial Equivalent computed as otherwise defined in the Plan but using a five percent interest rate. 82 EX-10.(IV)(D)(7) 5 FIRST AMENDMENT TO-INCORPORATED RETIREMENT PLAN EXHIBIT 10.(iv)(D)(7) MONTGOMERY WARD & CO., INCORPORATED First Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation ("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security Plan ("Plan"); and WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans -------------- Committee of Ward ("Committee") has reserved the power to amend the Plan; and WHEREAS, the Committee desires to amend the Plan. NOW, THEREFORE, the Plan is amended effective November 25, 1998 in the following manner: 1. Section 11.2 Optional Methods of Payment is hereby amended by adding --------------------------- the following phrase to the end of the first paragraph thereof immediately following the phrase "only the optional method of payment described in Section 11.2(e)": "or Section 11.2(f)". 2. Section 11.2 Optional Methods of Payment is hereby amended by adding a --------------------------- new Subsection (f) Lump Sum Window Benefit to the end thereof to read in its ----------------------- entirety as follows: "(f) Lump Sum Window Benefit. A Participant who, on or prior to ----------------------- November 30, 1998, Retires or terminates Service after becoming fully Vested and who is not in Service on November 30, 1998 (or, if in Service on November 30, 1998 after Retirement, who has not had a cessation of benefit payments under Section 9.6 Cessation of Benefit Payments Following --------------------------------------- Reemployment After Retirement), may elect, on or prior to January 31, 1999, ----------------------------- to receive commencing in February, 1999, or as soon as practicable thereafter: (i) the Actuarial Equivalent of the Participant's Retirement Benefit payable in the form of an immediate Qualified Joint and Survivor Benefit, or, if the Participant is not legally married, as determined by the Committee, the Single Life Benefit described in Subsection 11.2(a) Single Life Benefit hereof; or ------------------- (ii) with the consent of the Participant's spouse at the time of Retirement, if any, to the extent required by and in accordance with Section 11.5 Written Explanations of Survivor Benefit hereof and ---------------------------------------- procedures established by the Committee, the Actuarial Equivalent of the Participant's Retirement Benefit (and any Disability Retirement Benefit) payable in the form of one lump sum." 3. Article XI Methods of Payment is hereby amended by adding a new ------------------ Section 11.9 Election to Change Method of Payment to the end thereof to read in ------------------------------------ its entirety as follows: "11.9 Election to Change Method of Payment. In lieu of receiving ------------------------------------ the Participant's Retirement Benefit (and any Disability Retirement Benefit) pursuant to the method of payment as previously elected (or as provided in Section 9.4), a Participant who on or prior to November 30, 1998 began receiving a Retirement Benefit (or Disability Retirement Benefit) and who is not in Service on November 30, 1998 (or, if in Service on November 30, 1998 after Retirement, who has not had a cessation of benefit payments under Section 9.6 Cessation of Benefit Payments Following --------------------------------------- Reemployment After Retirement), may elect, on or prior to January 31, 1999, ----------------------------- with the consent of the Participant's spouse at the time of Retirement, if any, to the extent required by and in accordance with Section 11.5 Written ------- Explanations of Survivor Benefit hereof and procedures established by the -------------------------------- Committee, to receive the Actuarial Equivalent of the Participant's remaining Retirement Benefit (and any remaining Disability Retirement Benefit) in one lump sum payable in February, 1999, or as soon as practicable thereafter." 4. Article XII Death Benefits is hereby amended by adding a new Section -------------- 12.4 Election to Change Method of Payment to the end thereof to read in its ------------------------------------ entirety as follows: "12.4 Election to Change Method of Payment. In lieu of receiving the ------------------------------------ Death Benefit to which a Surviving Spouse or Beneficiary is entitled, a Surviving Spouse or Beneficiary of a Participant who died on or prior to November 30, 1998 may elect, on or prior to January 31, 1999, to receive the Actuarial Equivalent of the remaining Death Benefit in one lump sum payable in February, 1999, or as soon as practicable thereafter." 5. Section 13.2 Termination of Service by Vested Participant is hereby -------------------------------------------- amended by adding a new Subsection (d) to the end thereof to read in its entirety as follows: "(d) if such Participant terminates Service on or prior to November 30, 1998, is not in Service on November 30, 1998 and has not begun receiving the Participant's Retirement Benefit by November 30, 1998, such Participant may, in accordance with the terms of Subsection 11.2(f), elect to receive the benefit provided under Subsection 11.2(f) Lump Sum Window --------------- Benefit." ------- 2 6. In all other respects, the Plan, as amended, shall continue in full force and effect. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias ------------------------------------- Its: VP Comp, Benefits and HR Strategy ------------------------------------ ATTEST: By: /s/ Jill M. Chapman ------------------------------ Its: Benefits Director ----------------------------- 3 EX-10.(IV)(D)(8) 6 SECOND AMENDMENT TO-INCORPORATED RETIREMENT PLAN 10.(iv)(D)(8) MONTGOMERY WARD & CO., INCORPORATED Second Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation ("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security Plan ("Plan"); and WHEREAS, pursuant to Section 17.1 Power to Amend, the Board of Directors of -------------- Ward ("Board") has reserved the right to amend, suspend, discontinue or terminate the Plan; and WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans -------------- Committee of Ward ("Committee") has reserved the power to amend the Plan; and WHEREAS, on December 10, 1998 the Board amended the Plan to freeze the accrued benefits for all Plan participants as of January 2, 1999 ("Freeze Amendment") contingent upon the bankruptcy court's approval of the Plan restructuring involving a freeze of benefits under the Plan as of January 2, 1999 and directed the Committee to document the Freeze Amendment; WHEREAS, the Committee desires to amend the Plan and to document the Freeze Amendment. NOW, THEREFORE, the Plan is amended contingent upon the bankruptcy court's approval of the Plan restructuring involving a termination of the Plan in February, 1999 and the Freeze Amendment is hereby documented in the following manner: 1. Contingent upon the bankruptcy court's approval of the Plan restructuring involving a termination of the Plan in February, 1999, Section 2.2 "Actuarial Equivalent" or "Equivalent Actuarial Value" is hereby amended by deleting the text of Subsection (a) thereof in its entirety and inserting the following in lieu thereof: "Effective April 1, 1999, the "30-Year Treasury Rate" is the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the month immediately preceding the month for which such rate is being determined. Notwithstanding the preceding sentence, for distributions occurring between April 1, 1999 and March 31, 2000, the 30- Year Treasury Rate shall be the rate as provided in the first sentence of this Subsection (a) unless the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the September preceding the first day of the Plan Year in which a distribution occurs ("September Rate") would produce a larger distribution, in which case the September Rate shall be the 30-Year Treasury Rate. For distributions occurring on or after January 1, 1996 and before March 31, 1999, the 30- Year Treasury Rate shall be the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the September preceding the first day of the Plan Year in which such distribution occurs." 2. Contingent upon the bankruptcy court's approval of the Plan restructuring involving a freeze of benefits under the Plan as of January 2, 1999, Addendum C is hereby added to the Plan to read in its entirety as follows: "Addendum C ---------- Montgomery Ward & Co., Incorporated ----------------------------------- Retirement Security Plan ------------------------ Frozen Benefit Accrual. Notwithstanding anything contained in the Plan ---------------------- to the contrary, (i) no further benefits shall accrue for any Participant in the Plan after January 2, 1999, except as may be required to satisfy the top heavy requirements of Section 416 of the Code; (ii) each Participant who is actively employed with the Company on January 2, 1999 is fully Vested as of January 2, 1999 and (iii) no person shall become a Participant in the Plan after January 2, 1999. Subject to the foregoing, any Participant in the Plan on January 2, 1999 shall remain a Participant under the terms and conditions of the Plan as it may be amended from time to time." 3. In all other respects, the Plan, as amended, shall continue in full force and effect. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias ---------------------------------------- Its: VP Comp, Benefits and HR Strategy --------------------------------------- ATTEST: By: /s/ Jill M. Chapman ----------------------------- Its: Benefits Director ---------------------------- 2 EX-10.(IV)(D)(9) 7 THIRD AMENDMENT TO-INCORPORATED RETIREMENT PLAN EXHIBIT 10.(iv)(D)(9) MONTGOMERY WARD & CO., INCORPORATED Third Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation ("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security Plan ("Plan"); and WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans -------------- Committee of Ward ("Committee") has reserved the power to amend the Plan; and WHEREAS, the Committee desires to amend the Plan. NOW, THEREFORE, the Plan is amended effective January 1, 1999 in the following manner: 1. Section 11.2 Optional Methods of Payment is hereby amended by adding a --------------------------- new sentence to the end of Subsection (e) Lump Sum Benefit to read as follows: ---------------- "In addition, a Participant who is in Service on or after December 1, 1998 (other than a Participant who was in Service on November 30, 1998 after Retirement and who did not have a cessation of benefit payments under Section 9.6 Cessation of Benefit Payments Following Reemployment After ---------------------------------------------------------- Retirement) may elect to receive: ---------- (i) the Actuarial Equivalent of the Participant's Retirement Benefit payable in the form of an immediate Qualified Joint and Survivor Benefit, or, if the Participant is not legally married, as determined by the Committee, the Single Life Benefit described in Subsection 11.2(a) Single ------ Life Benefit hereof; or ------------ (ii) with the consent of the Participant's spouse at the time of Retirement, if any, to the extent required by and in accordance with Section 11.5 Written Explanations of Survivor Benefit hereof and procedures ---------------------------------------- established by the Committee, the Actuarial Equivalent of the Participant's Retirement Benefit (and any Disability Retirement Benefit) payable in the form of one lump sum." 2. In all other respects, the Plan, as amended, shall continue in full force and effect. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias ---------------------------------------- Its: VP Comp, Benefits and HR Strategy --------------------------------------- ATTEST: By: /s/ Jill M. Chapman --------------------------- Its: Benefits Director -------------------------- EX-10.(IV)(D)(10) 8 FOURTH AMENDMENT TO-INCORPORATED RETIREMENT PLAN EXHIBIT 10.(iv)(D)(10) MONTGOMERY WARD & CO., INCORPORATED Fourth Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation ("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security Plan ("Plan"); and WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans -------------- Committee of Ward ("Committee") has reserved the power to amend the Plan; and WHEREAS, the Committee desires to amend the Plan. NOW, THEREFORE, the Plan is amended effective January 29, 1999 in the following manner: 1. Subsection 11.2 (f) Lump Sum Window Benefit, Section 11.9 Election to ----------------------- ----------- Change Method of Payment and Section 12.4 Election to Change Method of Payment - - ------------------------ ------------------------------------ are amended by deleting the reference to "January 31, 1999" wherever it appears in said sections and by substituting therefor "February 20, 1999." 2. In all other respects, the Plan, as amended, shall continue in full force and effect. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias -------------------------------------- Its: VP Comp, Benefits and HR Strategy ------------------------------------- ATTEST: By: /s/ Jill M. Chapman -------------------------- Its: Benefits Director ------------------------- EX-10.(IV)(D)(11) 9 FIFTH AMENDMENT TO-INCORPORATED RETIREMENT PLAN 10.(iv)(D)(11) MONTGOMERY WARD & CO., INCORPORATED Fifth Amendment to the Montgomery Ward & Co., Incorporated Retirement Security Plan WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation ("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security Plan ("Plan"); WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans -------------- Committee of Ward ("Committee") has reserved the power to amend the Plan; WHEREAS, on December 10, 1998 the Board amended the Plan to freeze the accrued benefits for all Plan participants as of January 2, 1999 ("Freeze Amendment") contingent upon the bankruptcy court's approval of the Plan restructuring involving a freeze of benefits under the Plan as of January 2, 1999 and the Committee documented the Freeze Amendment by execution of the Second Amendment, which was also contingent on such bankruptcy court approval; and WHEREAS, the bankruptcy court has not approved the Plan restructuring and freeze of benefits as of January 2, 1999 and it is now anticipated that the bankruptcy court will be requested to approve a Plan restructuring involving a freeze of benefits under the Plan as of March 6, 1999. NOW, THEREFORE, the Second Amendment is hereby rescinded and the Plan is hereby amended, contingent upon the bankruptcy court's approval of a Plan restructuring involving a freeze of benefits under the Plan as of March 6, 1999, in the following manner: 1. Section 2.2 "Actuarial Equivalent" or "Equivalent Actuarial Value" is hereby amended by deleting the text of Subsection (a) thereof in its entirety and inserting the following in lieu thereof: "Effective April 1, 1999, the "30-Year Treasury Rate" is the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the month immediately preceding the month for which such rate is being determined. Notwithstanding the preceding sentence, for distributions occurring between April 1, 1999 and March 31, 2000, the 30- Year Treasury Rate shall be the rate as provided in the first sentence of this Subsection (a) unless the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the September preceding the first day of the Plan Year in which a distribution occurs ("September Rate") would produce a larger distribution, in which case the September Rate shall be the 30-Year Treasury Rate. For distributions occurring on or after January 1, 1996 and before March 31, 1999, the 30- Year Treasury Rate shall be the annual interest rate on 30-Year Treasury securities specified by the Commissioner of the IRS for the September preceding the first day of the Plan Year in which such distribution occurs." 2. Addendum C is hereby added to the Plan to read in its entirety as follows: "Addendum C ---------- Montgomery Ward & Co., Incorporated ----------------------------------- Retirement Security Plan ------------------------ Frozen Benefit Accrual. Notwithstanding anything contained in the Plan ---------------------- to the contrary, (i) no further benefits shall accrue for any Participant in the Plan after March 6, 1999, except benefits that accrue to a Participant as an Eligible Location Shutdown Participant as a result of a closure of a facility announced on or before March 6, 1999 and except as may be required to satisfy the top heavy requirements of Section 416 of the Code; (ii) each Participant who is actively employed with the Company on March 6, 1999 is fully Vested as of March 6, 1999 and (iii) no person shall become a Participant in the Plan after March 6, 1999, except as an Eligible Location Shutdown Participant as a result of a closure of a facility announced on or before March 6, 1999. Subject to the foregoing, any Participant in the Plan on March 6, 1999 shall remain a Participant under the terms and conditions of the Plan as it may be amended from time to time." 3. In all other respects, the Plan, as amended, shall continue in full force and effect. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias -------------------------------------- Its: VP Comp, Benefits and HR Strategy ------------------------------------- ATTEST: By: /s/ Jill M. Chapman ------------------------------ Its: Benefits Director ----------------------------- 2 EX-10.(IV)(H)(3) 10 INCORPORATED SAVINGS PLAN AS AMENDED & RESTATED 10. (iv)(H)(3) MONTGOMERY WARD & CO., INCORPORATED SAVINGS PLAN (AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1998) Montgomery Ward & Co., Incorporated Savings Plan TABLE OF CONTENTS -----------------
Section Page - - ------- ---- 1 Purpose............................................................. 1 2 Definitions......................................................... 3 3 Membership.......................................................... 13 4 Required Basic Contributions........................................ 17 5 Pre-Tax Supplemental Contributions and After-Tax Supplemental Contributions............................ 18 6 Company Contributions............................................... 23 7 Transfer of Amounts Attributable to Members' Contributions and Profit-Sharing Plan Balances Under the Retirement Security Plan.................................. 32 8 Transfer of Amounts Attributable to Members' Account Balance Under the Lechmere Plan............................. 34 9 Investment of Contributions......................................... 36 10 Valuations and Maintenance of Members' Accounts..................... 38 11 Eligibility for Benefits............................................ 41 12 Method of Payment of Benefits....................................... 49 13 Maximum Amount of Allocation........................................ 54 14 Designation of Beneficiaries........................................ 55 15 Loans to Members.................................................... 56 16 Administration of the Plan.......................................... 59 17 Termination of Employer Participation............................... 66 18 Amendment or Termination of the Plan and Trust...................... 68 19 General Limitations and Provisions.................................. 70 20 Top Heavy Provisions................................................ 74
SECTION 1 PURPOSE 1.1 The purpose of the Plan is to encourage Associates to make and continue careers with the Company by providing Eligible Associates with a convenient way to save on a regular and long-term basis, all as set forth herein, and in the Trust adopted as a part of this Plan. This Plan is an amendment and restatement of the Montgomery Ward & Co., Incorporated Savings Plan, as amended. The benefits provided under this Plan are supplemented by the transfer to the Trust of amounts attributable to Associate contributions under this Plan made after December 31, 1980 and before April 1, 1983, by amounts attributable to the Profit-Sharing Plan Balances under certain defined benefit pension plans maintained by the Company for the benefit of eligible Associates, and by the transfer to the Trust of account balances under the Lechmere Plan. This Plan, and the Trust established thereunder, are intended to qualify as a plan and trust which meet the requirements of Sections 401(a), 401(k), 401(m) and 501(a), respectively, of the Internal Revenue Code of 1986, as now in effect or hereafter amended, or any other applicable provisions of law including, without limitation, the Employee Retirement Income Security Act of 1974, as now in effect or hereafter amended. The rights of any person who terminated employment or who retired on or before the effective date of a particular amendment, including his eligibility for benefits and the time and form in which benefits, if any, will be paid, shall be determined solely under the terms of the Plan as in effect on the date of his termination of employment or retirement, unless such person is thereafter reemployed and again becomes a Member. 1.2 Although this restatement is generally effective January 1, 1998, the inclusion of amendments to conform with applicable laws and other changes to the Plan necessitates different effective dates for certain Plan provisions. Accordingly, notwithstanding the general effective date of this restatement, certain Plan sections herein have special effective dates as described therein, including, but not limited to, the following Plan sections which have special effective dates:
Sections Effective Date -------- -------------- 2.22 July 1, 1997 2.23 January 1, 1997 2.24(last sentence only) January 1, 1996 2.36 July 1, 1997 2.37 July 1, 1997 2.45 January 1, 1996 2.50 July 1, 1997 2.52 July 1, 1997 2.60(last two sentence only) January 1, 1996 3.1(b)(second sentence only) July 1, 1997 3.1(d) January 1, 1996 3.1(e) July 1, 1997 4.1(last sentence only) July 1, 1997 5.1(a)(second sentence only) July 1, 1997 5.1(b)(i) and (v) January 1, 1997 5.1(b)(iv) July 1, 1997 6.1(a) and (b) July 1, 1997 6.3(a) and (c) January 1, 1997 6.3(b) July 1, 1997 6.4(last sentence only) February 3, 1997 7 June 30, 1994 9.2 July 1, 1997 9.3 July 1, 1997 10.6 January 1, 1996 11.2 July 1, 1997 11.2(last ten sentences only) July 1, 1994 11.6(c) July 1, 1997 11.6(e) July 1, 1997 11.6(g) July 1, 1997 12.1(d) January 1, 1993 12.3(second sentence only) January 1, 1996 15.6(second sentence only) December 12, 1994 18.1(first sentence only) July 1, 1997 19.6(b) August 5, 1997 19.10 December 12, 1994
-2- SECTION 2 DEFINITIONS When used herein the following terms shall have the following meanings: 2.1 "Account" means the account established and maintained in respect of a Member pursuant to Section 3.7. 2.2 "Administrative Director" means the Administrative Director of the Plan appointed by the Committee in accordance with Section 16.3 hereof. 2.3 "Affiliate" means any corporation which is a member of a controlled group of corporations, as determined in accordance with Section 414(b) of the Code, which includes the Company; any trade or business (whether or not incorporated) which, as defined in Section 414(c) of the Code is under common control with the Company, any organization (whether or not incorporated) which is a member of an affiliated service group as defined in Section 414(m) of the Code, which includes the Company, and any other entity required to be aggregated with the Company pursuant to Regulations under Section 414(o) of the Code. For purposes of Section 13, Section 414(b) and (c) of the Code shall be applied as modified by Section 415(h) of the Code. 2.4 "After-Tax Supplemental Contribution" and "After-Tax Supplemental Contribution Account" mean those Member contributions made on or before June 30, 1994 pursuant to Section 5.1(c) and that portion of the Member's Account to which such contributions are credited. 2.5 "Basic Contribution" and "Basic Contribution Account" mean those Member contributions made pursuant to Section 4.1 and that portion of the Member's Account to which such contributions are credited. For purposes of Sections 9.2, 9.3, 9.4, 9.5, 11.6(c) and 12, the Basic Contributions made while an Associate of Signature shall be treated as either After-Tax Supplemental Contributions or Pre-Tax Supplemental Contributions, as appropriate. 2.6 "Beneficiary" means the beneficiary or beneficiaries designated by a Member pursuant to Section 14 to receive the amount, if any, payable under the Plan upon the death of such Member. -3- 2.7 "Benefit Derived from Associate Contributions" means the Benefit Derived from Associate Contributions as determined by enrolled actuaries under the Retirement Security Plan as of March 31, 1983. 2.8 "Board of Directors" means the Board of Directors of Ward. 2.9 "Break in Service" means the year during which or immediately after which an Associate terminates Service and does not perform Service during at least 12 weeks. Notwithstanding the preceding sentence, any Associate who actually performs at least 500 Hours of Service during any Plan Year, as determined by the Committee in accordance with the Regulations, shall not be considered as having incurred a Break in Service. Solely for purposes of determining whether a Break in Service has occurred, an individual shall be credited with the Hours of Service which such individual would have completed but for a maternity or paternity absence, as determined by the Committee in accordance with this Section 2.10 and the Code and Regulations, provided, however, that the total Hours of Service so credited shall not exceed 501 hours and that the individual timely provide the Committee with such information as it shall require. Hours of Service credited for a maternity or paternity absence shall be credited entirely (a) in the Plan Year in which the absence began if such Hours of Service are necessary to prevent a Break in Service in such year, or (b) in the following Plan Year. For purposes of this Section 2.9, maternity or paternity absence shall mean an absence from work by reason of the individual's pregnancy, the birth of the individual's child or the placement of a child with the individual in connection with adoption of the child by such individual, or for purposes of caring for a child for the period immediately following such birth or placement. 2.10 "Code" means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered. 2.11 "Committee" means the Benefit Plans Committee provided for in Section 16. For purposes of ERISA, the members of the Benefit Plans Committee shall be the named fiduciaries (with respect to the -4- matters for which they are hereby made responsible under the Plan) of the Plan, and shall be the administrator of the Plan. 2.12 "Company" means Montgomery Ward & Co., Incorporated and each other Participating Company, or any of them. 2.13 "Compensation" means for each Plan Year, an Associate's first $150,000 (adjusted for cost of living to the extent permitted by the Code and Regulations) of compensation, including salary, wages, overtime premium, commissions, holiday pay, vacation pay, bonuses, cash incentives other than from contests, and salary continuance, paid or payable to or on behalf of, or otherwise includable in the gross income of an Associate for Service while an Associate and a Member during that Plan Year, as determined by the Committee. Compensation shall not include amounts contributed to the Trust Fund pursuant to the Plan or paid or contributed to any group insurance plan or other employee benefit plan, if any, established or maintained by the employer of an individual, and excludable from his or her gross income, other than amounts contributed on behalf of a Member under Section 5.1 of the Plan. 2.14 "Direct Rollover" means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 2.15 "Distributee" means an Associate or former Associate. In addition, the Associate's or former Associate's surviving Spouse or former Spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the Spouse or former Spouse. 2.16 "Effective Date" means January 1, 1998, the general effective date of this amendment and restatement. 2.17 "Electric Ave." means Electric Ave. and More. 2.18 "Eligible Retirement Plan" means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan -5- described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. 2.19 "Eligible Rollover Distribution" means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). 2.20 "Employee", "Associate", "Eligible Employee" or "Eligible Associate" means any individual who is employed by the Company, as determined by the Committee, excluding (a) any associate who is included in a unit of associates covered by a negotiated collective bargaining agreement which does not provide for his membership in the Plan, (b) any associate who actively participates in any other tax-qualified pension or profit-sharing plan maintained by the Company (other than the Jefferson Stores Plan and the Retirement Security Plan), (c) any associate of a division of the Company which the Committee has determined to treat as though it is an Affiliate which is not a Participating Company and (d) any nonresident alien. Notwithstanding the foregoing, associates who are on the Company payroll and who work at Montgomery Ward (Hong Kong) Limited shall be eligible to become a Member. A director of the Company is not eligible to become a Member unless he is also an Associate. 2.21 "ERISA" means the Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended. -6- 2.22 "Full-Time" means an Associate who is classified as working 30 hours or more per week on a continuing basis. 2.23 "Highly Compensated Associate" means effective January 1, 1997 an Associate or Member who (a) was a five percent owner at any time during the Plan Year or the preceding Plan Year, or (b) for the preceding Plan Year (i) had compensation (as defined under Section 415(c)(3) of the Code) from the Company in excess of $80,000 (as adjusted for increases in the cost of living in accordance with Section 414(q)(1) of the Code), or (ii) if the Committee in its sole discretion elects the application of this Subsection (ii) for the preceding Plan Year, was in the group consisting of the top 20% of employees when ranked on the basis of compensation (as defined under Section 415(c)(3) of the Code) paid in the preceding Plan Year. 2.24 "Hours of Service" means any hour during which an Associate performs Service (or is treated as performing Service under Section 2.47) and for which he is paid, or entitled to payment for the performance of duties for the Company (including back pay irrespective of mitigation of damages). In addition, Hours of Service shall also include up to 501 hours of non-working time during any single continuous period of absence which does not otherwise constitute Service, but for which an Associate is directly or indirectly paid or entitled to payment. The determination of Hours of Service to be credited hereunder shall be made by the Committee in accordance with the Regulations, including Sections 2530.200b-2(b) and (c) of the Labor Department Regulations and Sections 825.214 through 825.216 of the Family and Medical Leave Act ("FMLA") Regulations. For purposes of determining the Associate's membership under Section 3, for purposes of determining the Associate's nonforfeitable interest in amounts under Section 11 or for purposes of determining both the Associate's eligibility for membership and nonforfeitable interest in amounts, an Associate shall be entitled to be credited with Hours of Service to which the Associate was credited as an employee of any organization which operated any trade or business, or any separate unit of a trade or business, substantially acquired by the Company, but only to the extent so provided by appropriate action of the Committee. -7- 2.25 "Investment Fund" means the Funds provided for in Section 9 or any of them. 2.26 "Investment Manager" means an Investment Manager, as that term is defined in ERISA, appointed by the Trustees in accordance with Section 16.2 hereof. 2.27 "IRS" means the United States Internal Revenue Service. 2.28 "Jefferson Stores Plan" means the Retirement Plan for Employees of Jefferson Stores, Inc., as amended effective January 1, 1984. 2.29 "Labor Department" means the United States Department of Labor. 2.30 "Lechmere" means Lechmere, Inc. 2.31 "Lechmere Plan" means the Lechmere, Inc. Supplemental Retirement and Savings Plan, as amended and restated as of February 28, 1994. 2.32 "Lechmere Account" means the account, if any, established and maintained as part of a Member's Account to reflect amounts transferred with respect to a Member's Account Balance under the Lechmere Plan pursuant to Section 8.2. 2.33 "Matching Contribution" and "Matching Contribution Account" mean those contributions made pursuant to Section 6.1 and that portion of a Member's Account to which such contributions are credited. 2.34 "Member" means any Associate who is enrolled in the membership of the Plan as provided in Section 3. 2.35 "Participating Company" means any company which is an Affiliate, designated by the Board of Directors as such, the board of directors or equivalent governing body of which shall adopt the Plan by appropriate action and the Associates of which shall be eligible to participate in the Plan in the manner and to the extent determined by the Board of Directors so long as that company remains so designated. Any such company so designated and which adopts the Plan shall be deemed thereby to appoint Ward, the Committee, the Administrative Director and the Trustees its exclusive agents to exercise on its behalf all of the powers -8- conferred hereby or by the Trust upon the Company, the Committee, the Administrative Director and the Trustees, respectively, and shall make its allocable contributions to the Plan. The authority of Ward, the Committee, the Administrative Director and the Trustees, respectively, to act as such agent shall continue until the Plan has terminated as to such company and the relevant Trust Fund assets have been distributed by the Trustees as provided in Section 18.4 hereof. 2.36 "Part-Time" means an Associate who is classified as working less than 30 hours per week on a continuing basis. 2.37 "Plan" means the Montgomery Ward & Co., Incorporated Savings Plan, as the same may be amended from time to time. 2.38 "Plan Year" means the calendar year. 2.39 "Pre-Tax Supplemental Contribution" and "Pre-Tax Supplemental Contribution Account" mean those Member contributions made pursuant to Section 5.1(a) and that portion of the Member's Account to which such contributions are credited. 2.40 "Profit Sharing Contribution" and "Profit Sharing Contribution Account" mean those contributions made pursuant to Section 6.2 and that portion of the Member's Account to which such contributions are credited. 2.41 "Profit-Sharing Plan Balance" means the fair market value of the amounts credited to a Member's account under the Retirement Security Plan which were transferred to the Retirement Security Plan and attributable to a Member's service under the Montgomery Ward & Co., Incorporated Profit-Sharing Plan as of December 31, 1974, reduced by any portion thereof withdrawn prior to the Effective Date, plus interest on such net amount compounded annually at the rate of six percent per annum from December 31, 1974 to the date such amount was transferred to the Trust from the Retirement Security Plan pursuant to Section 7. -9- 2.42 "Profit-Sharing Plan Balance Account" means the account, if any, established and maintained as a part of a Member's Account to reflect amounts transferred with respect to a Member's Profit-Sharing Plan Balance pursuant to Section 7. 2.43 "Regulations" means the applicable regulations issued under the Code, ERISA or other applicable law, by the IRS, the Labor Department or any other governmental authority and any proposed or temporary regulations or rules promulgated by such authorities pending the issuance of such regulations. 2.44 "Retirement Security Plan" means the Montgomery Ward & Co., Incorporated Retirement Security Plan, effective January 1, 1998, and as amended from time to time. 2.45 "Rollover Contribution" and "Rollover Contribution Account" means those contributions made pursuant to Section 10.6 and that portion of the Member's Account to which such contributions are credited. 2.46 "Salary Reduction Account" means the salary reduction account, if any, established and maintained as part of a Member's Account to reflect salary reduction contributions contributed to the Plan prior to January 1, 1989. 2.47 "Service" means employment with the Company or with any Affiliate. Service shall also include the following: (a) Any authorized leave of absence under rules determined by the Committee, which are uniformly applicable to all associates similarly situated and in accordance with the Regulations (including Sections 2530.200b-2(b) and (c) of the Labor Department Regulations and Sections 825.214 through 825.216 of the FMLA Regulations; provided the associate returns to active Service within the period authorized for such leave; (b) Service in any of the United States Armed Forces, if and to the extent required -10- by the Military Selective Service Act, as amended, the FMLA, the Uniformed Services Employment and Reemployment Rights Act of 1994 or any other federal law, or as otherwise recognized by the Committee; (c) Any period of layoff not in excess of 90 days during which the associate retains reemployment rights and provided that the associate reports to work after recall and within the 90 day period; (d) Any period of suspension of participation, as provided for in Section 5.2 hereof; and (e) Any period of a Member's prior employment by any organization upon such terms and conditions as the Committee may approve and subject to any required IRS approval. 2.48 "Signature" means Signature Financial/Marketing, Inc., the subsidiaries of Signature Financial/Marketing, Inc. which are Participating Employers, and the subsidiaries of the subsidiaries of Signature Financial/Marketing, Inc. which are Participating Employers. 2.49 "Spouse" means the legal spouse of a Member as determined in accordance with applicable state law. 2.50 "Supplemental Matching Contribution" and "Supplemental Matching Contribution Account" mean those contributions made for periods beginning on or after July 1, 1997, pursuant to Section 6.1, if any, and that portion of a Member's Account to which such contributions are credited. 2.51 "Surviving Spouse" means the survivor of a deceased former Member to whom such deceased former Member had been legally married (as determined by the Committee) on the earlier of (a) the time payments commenced under the Plan or (b) for at least one year at the date of the Member's death. 2.52 "Temporary" means an Associate who is employed for a period of less than 90 days. 2.53 "Transferred Contribution Account" means the account, established and maintained as part of a Member's Account, to reflect amounts transferred with respect to a Member's Benefit Derived from Associate Contributions, pursuant to Section 7. -11- 2.54 "Trust" or "Trust Fund" means the trust established by the Company as a part of the Plan. 2.55 "Trustees" means the trustees of the Trust. 2.56 "Unit" means the unit measuring the value of a Member's proportionate interest in the Investment Funds. 2.57 "Valuation Date" means the last day of each Plan Year and the last day of any month or months in a Plan Year as the Committee in its discretion may from time to time determine or any other day as the Committee in its discretion may from time to time determine. 2.58 "Ward" means Montgomery Ward & Co., Incorporated, an Illinois corporation, and any successor to all or substantially all of its business and assets. 2.59 "Year" means the 12 consecutive month period beginning on the date an Associate's Service commenced or recommenced after a Break in Service, as determined by the Committee, or an anniversary date thereof. 2.60 "Year of Service" means a Year in which an Associate performs 1,000 Hours of Service. For purposes of determining Years of Service under Sections 3 and 11, each Member who was employed by Amoco Oil Company or its affiliates on December 31, 1995 and who became an Associate of Signature, on January 1, 1996 in connection with the Stock Purchase Agreement By and Between Amoco Oil Company, Amoco Oil Holding Company, Montgomery Ward & Co., Incorporated and Signature Financial/Marketing, Inc., dated December 29, 1995 shall have all years of service with Amoco Oil Company or its affiliates treated as Years of Service with the Company. Also, for purposes of determining Years of Service under Sections 3 and 11, each Member who was an employee of Emanacom Data Services Inc. on July 16, 1996 and who became an Associate of Signature on July 16, 1996 shall have all years of service with Emanacom Data Services Inc. treated as Years of Service with the Company. -12- SECTION 3 MEMBERSHIP 3.1 (a) Subject to the following provisions of this Section 3, each Associate who was a Member of the Plan immediately prior to the Effective Date shall continue to be a Member on and after the Effective Date. Each other Eligible Associate in Service immediately prior to the Effective Date, but who was not a Member of the Plan, shall be eligible for membership in the Plan on the later of the Effective Date or the first day of the month following the date on which he satisfies the requirements for membership in the Plan as set forth in Section 3.1(b). (b) Each Associate who commences Service on or after the Effective Date shall be eligible to participate in the Plan (other than with respect to contributions made under Sections 7 and 8 of the Plan), subject to the following provisions of this Section 3 and provided he is then an Eligible Associate, on the first day of the month following the later of (i) the date on which he attains age 21, or (ii) the date on which he completes one Year of Service. An Eligible Associate who is not employed by either Electric Ave., Signature or Lechmere shall become eligible to receive Supplemental Matching Contributions as provided in Section 6.1 beginning with the first full pay period which occurs in the month following the later of (i) the date on which the Eligible Associate attains age 21, or (ii) the date on which he completes one Year of Service. If an individual becomes an Eligible Associate after the later of the dates specified in (i) and (ii) above and after completing one Year of Service, he shall be eligible to participate in the Plan as of the first day of the month following the date on which he becomes an Eligible Associate. Notwithstanding the above, with respect to transfers made under Sections 7 and 8 of the Plan, the individual with respect to which such transfers are made shall be treated as a Member with respect to such transfers. (c) Notwithstanding the foregoing, each participant in the Lechmere Plan on July 1, 1994 shall become a Member in the Plan as of July 1, 1994. -13- (d) Notwithstanding the foregoing, each participant in the Amoco Employee Savings Plan ("Amoco Plan") on December 31, 1995 and each participant in the Amoco Oil Company Retirement Plan ("Amoco Oil Plan") on December 31, 1995 who became an Associate of Signature on January 1, 1996 (or, with respect to a participant in the Amoco Plan or the Amoco Oil Plan on December 31, 1995 who on January 1, 1996 was on medical, military, personal, educational or family leave status from Amoco Oil Company or its affiliates, who became an Associate of Signature on any date prior to January 1, 1997), shall be eligible to become a Member in the Plan as of the first day of the first month following the date he becomes an Associate of Signature even if such Associate shall have had less than one Year of Service, in which case such Associate shall be granted one Year of Service credit for purposes of eligibility and shall be deemed to be age 21 for purposes of Section 3, unless such Associate is a Highly Compensated Associate. Notwithstanding the foregoing, each employee of Emanacom Data Services Inc. on July 16, 1996 who became an Associate of Signature on July 16, 1996 shall become a Member in the Plan as of the first day of the first month following July 16, 1996. (e) Notwithstanding the foregoing, with respect to periods beginning on or after July 1, 1997, each Full-Time Associate who is not a Temporary Associate, who is not employed by either Electric Ave., Signature or Lechmere and who has attained the age of 21 shall be eligible to participate in the Plan solely with respect to Sections 4 and 5, in the manner described therein, as of the first day of the fourth calendar month following commencement of such Associate's employment with the Company. Solely with respect to contributions made to the Plan on behalf of an Associate who has not yet met the eligibility requirements of Section 3.1(b) pursuant to Sections 4, 5 and 10.6, (which relates to rollover contributions), such an Associate shall be treated as a Member with respect to such contributions. -14- (f) Notwithstanding the foregoing, each Associate who is employed by the Company at Montgomery Ward & Co., Incorporated Romeoville, Illinois Distribution Center on September 2, 1997, shall be eligible to participate in the Plan as of such date. 3.2 An Eligible Associate shall be enrolled in the membership of the Plan as of the first day of the month coincident with or next following the date on which he becomes eligible for membership and duly files the written enrollment form prescribed by the Committee. 3.3 An Eligible Associate shall duly file the prescribed written enrollment form, in accordance with procedures adopted by the Committee. The written enrollment form shall include an election to reduce the Member's Compensation, specifying the amount of his contributions under Sections 4.1 and 5.1, and authorizing any necessary payroll deductions, an investment direction, a beneficiary designation, and an agreement to be bound by all the terms and conditions of the Plan and Trust and any agreement with any other funding agency, including an insurance company, constituting a part of the Plan and Trust Fund. If a Member does not elect to reduce his Compensation in his application, he shall, notwithstanding any provisions of the Plan to the contrary, be entitled solely to the benefits provided under Sections 7.3 and 8.4, if applicable. 3.4 The Committee shall notify each Associate when he becomes eligible for membership, shall furnish an enrollment application form, and shall take any other necessary or appropriate action to enroll each Associate eligible to be enrolled under Section 3. If it is determined that an Eligible Associate has not been enrolled in the membership of the Plan due to error, such Associate may be retroactively enrolled. The Account of an Associate who is retroactively enrolled shall upon such enrollment, consist solely of the aggregate amount of contributions which would have been allocated to his Account had he been enrolled when first eligible, which shall be paid within the time and upon the conditions prescribed by the Committee under rules of uniform applicability to all such Associates. -15- 3.5 The membership of a Member shall cease upon payment to the Member of the entire balance in his Account or upon the Member's death prior to such payment. 3.6 If a Member who terminates Service and incurs a Break in Service shall again become an Associate, he shall become eligible for membership in the Plan as of the first day of the month coincident with or next following the date he again became an Eligible Associate. 3.7 The Committee shall establish and maintain or cause to be established and maintained in respect to each Member an Account showing his interest under the Plan and in the Trust Fund (including separate accounts showing his respective interests, if any, in each of the Investment Funds) with respect to (a) pre-tax contributions made under Section 4.1, (b) after-tax contributions made under Section 4.1, (c) contributions made under Sections 5.1(a) and 5.1(c), (d) contributions made under Sections 6.1 and 6.2, (e) all amounts transferred to the Plan pursuant to Sections 7 and 8 and (f) all amounts contributed to the Plan prior to the Effective Date and all other relevant data pertaining thereto. Each Member shall be furnished with a written statement of his Account at least annually and upon any distribution to him. In maintaining the Accounts under the Plan or causing them to be maintained, the Committee can conclusively rely on the valuations of the Trust Fund in accordance with the Plan and the terms of the Trust. 3.8 The establishment and maintenance of, or allocations and credits to, the Account of any Member shall not vest in any Member any right, title or interest in and to any Plan assets or benefits except at the time or times and upon the terms and conditions and to the extent expressly set forth in the Plan and in accordance with the terms of the Trust. -16- SECTION 4 REQUIRED BASIC CONTRIBUTIONS 4.1 Each Member other than a Member working at Electric Ave. is required to contribute an amount equal to three percent of his Compensation. Commencing on or after January 1, 1989, these required Basic Contributions shall be made on an after-tax basis. Prior to January 1, 1989, required Basic Contributions were made on a salary-reduction basis. No Member working at Electric Ave. is permitted to make Basic Contributions. Notwithstanding the foregoing, with respect to periods beginning on or after July 1, 1997, each Full-Time Associate who is not a Temporary Associate, who is not employed by Electric Ave., Signature or Lechmere and who has not yet met the eligibility requirements of Section 3.1(b) may contribute an amount equal to not less than nor more than three percent of his Compensation on an after-tax basis. -17- SECTION 5 PRE-TAX SUPPLEMENTAL CONTRIBUTIONS AND AFTER-TAX SUPPLEMENTAL CONTRIBUTIONS 5.1 (a) A Member may elect to reduce his Compensation by an amount not less than one percent and not more than 10% of such Compensation for such Plan Year in any whole percentage in accordance with procedures adopted by the Committee, which procedures may include limitations on the elections of Highly Compensated Associates, and the Employer shall contribute such amount to the Plan on behalf of the Member as a Pre-Tax Supplemental Contribution. Notwithstanding the foregoing, with respect to periods beginning on or after July 1, 1997, each Full-Time Associate who is not a Temporary Associate, who is not employed by either Electric Ave., Signature or Lechmere and who has not yet met the eligibility requirements of Section 3.1(b) and who has made Basic Contributions as provided in Section 4.1, may elect to reduce his Compensation by an amount not less than one percent and not more than 10% of such Compensation for such Plan Year in any whole percentage in accordance with procedures adopted by the Committee, which procedures may include limitations on the elections of Highly Compensated Associates, and the Employer shall contribute such amount to the Plan on behalf of the Associate as a Pre-Tax Supplemental Contribution. Notwithstanding the foregoing, the Committee may amend or revoke a Member's election to reduce his Compensation if such revocation or amendment is necessary to ensure that a Member's contributions for any Plan Year will not exceed the limitations of Section 415 of the Code, to ensure that the discrimination tests of Section 401(k) of the Code are met for such Plan Year, to ensure that no more than $7,000, as adjusted for increases in the cost of living in accordance with Section 402(g)(5) of the Code, is deferred by any Member for any calendar year, or, to ensure that the Company contributions for the Plan Year do not exceed the amount deductible by the Company with respect to such year for federal income tax purposes under section 404(a)(3)(A) of the Code. In the event that the aggregate amount of Pre-Tax Supplemental Contributions for a Member exceeds the limitation of Section 402(g)(5) of the Code, the amount of such excess ("excess deferrals"), increased -18- by any income and decreased by any losses attributable thereto, shall be refunded to the Member no later than the April 15th of the calendar year following the calendar year for which the Pre-Tax Supplemental Contributions were made. If a Member also participates, in any calendar year, in any other plans subject to the limitations set forth in Section 402(g) of the Code and has made excess deferrals under this Plan when combined with the other plans subject to such limits, to the extent the Member, in writing submitted to the Committee no later than the March 1 of the Plan Year following the Plan Year for which the Pre- Tax Supplemental Contributions were made, designates any Pre-Tax Supplemental Contributions under this Plan as excess deferrals, the amount of such designated excess, increased by any income and decreased by any losses attributable thereto, shall be refunded to the Member no later than the April 15th of the calendar year following the calendar year for which the Pre-Tax Supplemental Contributions were made. (b)(i) Effective January 1, 1997, notwithstanding any other provision of this Section 5.1, the actual deferral percentage for the Plan Year for Highly Compensated Associates who are eligible to participate in the Plan shall not exceed the greater of the following actual deferral percentage tests: (A) the actual deferral percentage for the preceding Plan Year of those Eligible Associates who are not Highly Compensated Associates multiplied by 1.25; or (B) the actual deferral percentage for the preceding Plan Year of those Eligible Associates who are not Highly Compensated Associates multiplied by two, provided that the actual deferral percentage for Highly Compensated Associates does not exceed the actual deferral percentage in the preceding Plan Year for such other Eligible Associates who are not Highly Compensated by more than two percent. For purposes of this Section 5.1, the "actual deferral percentage" for the applicable Plan Year means, for each specified group of Associates, the average of the actual deferral ratios (calculated separately for each Associate in such group) of (A) the amount of contributions made to the Member's Pre-Tax Supplemental Contribution Account for the applicable Plan Year, to (B) the amount of the Member's compensation (as defined in Section 414(s) of the Code) for the applicable Plan Year. For purposes of this Section 5.1, the "applicable Plan Year" with respect to Highly Compensated Associates is the current Plan Year and the "applicable Plan Year" with respect to Eligible Associates who are not Highly Compensated Associates is the preceding Plan Year. The Committee may elect to apply the current Plan Year as the "applicable Plan Year" with respect to Eligible Associates who are not Highly Compensated Associates; however, any such election may not be changed except as provided by the Secretary of the Treasury. An Eligible Associate's actual deferral percentage shall be zero if no Pre-Tax Supplemental Contribution is made on his behalf for such applicable Plan Year. In calculating the actual deferral percentage for a Plan Year, Pre-Tax Supplemental Contributions shall be taken into account only if they are allocated to a Member's Account within such applicable Plan Year. -19- (ii) The Committee shall determine as of the end of the Plan Year, and at such time or times in its discretion, whether one of the actual deferral percentage tests specified in Subsection 5.1(b)(i) is satisfied for such Plan Year and shall maintain records sufficient to demonstrate satisfaction of such actual deferral percentage tests. This determination shall be made after first determining the treatment of excess deferrals within the meaning of Section 402(g) of the Code under Section 5.1(a). In the event that neither of such actual deferral percentage tests is satisfied, the Committee shall, to the extent permissible under the Code and the Regulations, and to the extent any such recharacterization would not cause a violation of Section 6.3(a), if the Member so elects, recharacterize such excess contributions as After-Tax Supplemental Contributions, in the manner described in Subsection 5.1(b)(iii) or, to the extent such recharacterization is not possible or the Member does not so elect, refund the excess contributions in the manner described in Subsection 5.1(b)(iv). For purposes of this Section 5.1, "excess contributions" means, with respect to any Plan Year, the excess of the aggregate amount of Pre-Tax Supplemental Contributions (and any earnings and losses allocable thereto) made to the Pre-Tax Supplemental Contribution Accounts of Highly Compensated Associates for such Plan Year, over the maximum amount of such contributions that could be made to the Pre-Tax Supplemental Contribution Accounts of such Members without violating the requirements of Subsection 5.1(b)(i), determined by reducing Pre-Tax Supplemental Contributions made on behalf of Highly Compensated Associates in order of the actual deferral percentages beginning with the highest of such percentages. (iii) To the extent provided in Subsection 5.1(b)(ii), in accordance with the Code and the Regulations, if a Highly Compensated Associate so elects in writing no later than the March 1 following the Plan Year for which such excess contributions were made, the Committee may recharacterize excess contributions of such Member for a Plan Year as After-Tax Supplemental Contributions in order to satisfy the requirements of Subsection 5.1(b)(i), in which event the amount of excess contributions so recharacterized shall, to the extent permitted by the Code and the Regulations, be treated as having been refunded to the Member and then contributed by the Member to the Member's After-Tax Supplemental Contribution Account. Any excess contributions not so recharacterized shall be distributed before the end of the Plan Year immediately following the Plan Year for which such excess contributions were made. (iv) If a Highly Compensated Associate does not elect recharacterization under Section 5.1(b)(iii), or, if required in order to comply with the provisions of Subsection 5.1(b)(i) and the Code, the Committee shall refund excess contributions for a Plan Year to the affected Highly Compensated Associate. The distribution of such excess contributions shall be made to Highly Compensated Associates to the extent practicable before the 15th day of the third month immediately following the Plan Year for which such excess contributions were made, but in no event later than the end of the Plan Year following such Plan Year. Any such distribution shall be made to each Highly Compensated Associate on the basis of the respective portions of such amounts attributable to each such Highly Compensated Associate. Notwithstanding the foregoing, for purposes of determining whether the Plan satisfies the actual deferral percentage test, the Plan may be treated as comprising separate plans as described in Sections 1.410(b)-6(b)(3) and 1.410(b)-7(c)(3) of the Regulations. -20- (v) Effective January 1, 1997, excess contributions are allocated to the Highly Compensated Associate with the largest amounts of Pre-Tax Supplemental Contributions taken into account in calculating the actual deferral percentage test for the year in which the excess arose, beginning with the Highly Compensated Associates with the largest amount of Pre-Tax Supplemental Contributions and continuing in descending order until all the excess contributions have been allocated. For purposes of the preceding sentence, the "largest amount" is determined after distribution of any excess contributions. (vi) For purposes of determining whether the Plan satisfies the actual deferral percentage test, all salary reduction contributions that are made under two or more plans that are aggregated for purposes of Section 401(a)(4) or 410(b) of the Code (other than Section 401(b)(2)(A)(ii) of the Code) shall be treated as made under a single plan and, if two or more plans are permissively aggregated for purposes of Section 401(k) of the Code, the aggregated plans must also satisfy Section 401(a)(4) or 410(b) of the Code as though they were a single plan; provided, however, that plans may be aggregated to satisfy the actual deferral percentage test only if they have the same plan year. In calculating the actual deferral percentage, a Highly Compensated Associate's actual deferral ratio shall be determined by treating all cash or deferred arrangements of the Company or any Affiliate under which the Highly Compensated Associate is eligible to participate (other than those which may not be permissively aggregated) as a single arrangement. Notwithstanding the foregoing, for purposes of determining whether the Plan satisfies the actual deferral percentage test, the Plan may be treated as comprising separate plans as described in Sections 1.410(b)-6(b)(3) and 1.410(b)-7(c)(3) of the Regulations. (c) On or before June 30, 1994, subject to Subsections 5.1(d) and 6.3(a), a Member could have elected to make After-Tax Supplemental Contributions to the Plan of an amount of up to 10% of his Compensation in any whole percentage through payroll deductions, in accordance with procedures adopted by the Committee. Effective July 1, 1994, After-Tax Supplemental Contributions may not be made to the Plan. (d) The aggregate percentage of the Pre-Tax Supplemental Contribution made on behalf of a Member and such Member's After-Tax Supplemental Contribution must not exceed 10% of the Member's Compensation. 5.2 A Member may temporarily suspend the reduction of his Compensation and any payroll deduction contributions elected under Section 5.1, as of the first day of any month without terminating his membership in the Plan, by giving at least 30 days' prior written notice thereof to the Committee. A Member may resume reduction of his Compensation and any payroll deduction contributions under Section 5.1 as the -21- first day of any month following the date of such suspension and must give the Committee prior written notice of any subsequent election under Section 5.1, specifying the first day of the month in which his Compensation is to be reduced and any deduction to be made from his paycheck. A Member may not temporarily suspend the reduction of his Compensation and any payroll deduction contributions more often than once in any Plan Year. -22- SECTION 6 COMPANY CONTRIBUTIONS 6.1 (a) Effective July 1, 1997, the Company shall make no Matching Contributions with respect to a Member's Basic Contribution unless such Member is employed by either Signature or Lechmere, in which case the Company shall make a Matching Contribution equal to 25% of the amount of the Basic Contributions made by the Member pursuant to Section 4.1. No contributions shall be made by the Company to Members employed by either Signature or Lechmere with respect to any such Member's contributions pursuant to Section 5. (b) Effective July 1, 1997, the Company shall contribute in respect of each pay period on behalf of each of the Eligible Associates who are Members and who are not employed by either Electric Ave., Signature or Lechmere with respect to Supplemental Matching Contributions, a certain percentage, as specified in the chart below, of the amount of the Pre-Tax Supplemental Contributions made by such Member pursuant to Section 5.1(a) (with no such Member's Pre-Tax Supplemental Contributions in excess of three percent of such Member's Compensation counted for this purpose) as Supplemental Matching Contributions. Supplemental Matching Contribution on First Three Percent of Pre-Tax Supplemental Contributions ----------------------------------
Percent of Eligible Pre-Tax Supplemental Member's Age as of each January 1 Contributions Matched --------------------------------- --------------------- Under 40 years 5% 40-44 years 10% 45-49 years 15% 50-54 years 30% 55-59 years 40% 60 years and over 50%
For purposes of determining a Member's Supplemental Matching Contribution, a Member's age on January 1 will be his age on his next birthday if such birthday is on or before June 30, or his age on his last birthday if his next birthday is on or after July 1. -23- 6.2 (a) In addition to contributions under Sections 4.1 and 5.1, the Company may make Profit Sharing Contributions, as determined by the Board of Directors in its sole discretion. Any such Profit Sharing Contributions may not exceed the maximum amount permitted for deductions under the Code. The Board of Directors may designate all or a portion of the Profit Sharing Contributions as Electric Ave. Profit Sharing Contributions or as allocable among Members employed by particular Participating Companies or divisions. (b) All Profit Sharing Contributions under Section 6.2(a), other than Electric Ave. Profit Sharing Contributions, shall be allocated among the Eligible Associates who are Members in Service of the applicable Participating Company or division as of the last day of the Plan Year other than those Members working at Electric Ave. (and if necessary for the Plan to meet the requirements of Section 410(b) of the Code, such additional Members with the highest number of Hours of Service other than those Members working at Electric Ave. with the number of Members as required to meet the requirements of Section 410(b) of the Code, whether or not in Service as of the last day of the Plan Year) in the proportion that the Basic Contributions made on behalf of or by each such Member pursuant to Section 4.1 bears to the total of the contributions made pursuant to Section 4.1 for such Plan Year on behalf of or by all such Members in Service of the applicable Participating Company or division as of the last day of the Plan Year other than those Members working at Electric Ave. All Electric Ave. Profit Sharing Contributions under Section 6.2(a) shall be allocated among the Eligible Associates who are Members working at Electric Ave. and in Service as of the last day of the Plan Year (and if necessary for the Plan to meet the requirements of Section 410(b) of the Code, such additional Members working at Electric Ave. and with the highest number of Hours of Service with the number of Members as required to meet the requirements of Section 410(b) of the Code, whether or not in Service as of the last day of the Plan Year) in the proportion that the Pre-Tax Supplemental Contributions made on behalf of or by each such Member working at Electric Ave. pursuant to -24- Section 5.1 up to three percent of such Member's Compensation bears to the total of the Pre-Tax Supplemental Contributions (with no Member's Pre-Tax Supplemental Contributions in excess of three percent of such Member's Compensation counted for this purpose) made on behalf of or by all such Members working at Electric Ave. in Service as of the last day of the Plan Year pursuant to Section 5.1 for such Plan Year. 6.3 (a) Effective January 1, 1997, notwithstanding any other provision of this Section 6, the average contribution percentage for the Plan Year for Highly Compensated Associates shall not exceed the greater of the following average contribution percentage tests: (i) the average contribution percentage for the preceding Plan Year of those Eligible Associates who are not Highly Compensated Associates multiplied by 1.25; or (ii) the average contribution percentage for the preceding Plan Year of those Eligible Associates who are not Highly Compensated Associates multiplied by two, provided that the average contribution percentage for Highly Compensated Associates does not exceed the average contribution percentage in the preceding Plan Year for such other Eligible Associates who are not Highly Compensated by more than two percent. For purposes of this Section 6.3, the "average contribution percentage" for the applicable Plan Year means, for each specified group of Associates, the average of the actual contribution ratios (calculated separately for each Associate in such group) of (i) the sum of (A) Matching Contributions and Profit Sharing Contributions described in Sections 6.1 and 6.2, respectively credited to his Employer Contribution Account for the applicable Plan Year, (B) after- tax Basic Contributions credited to his Basic Contribution Account for the applicable Plan Year, (C) After-Tax Supplemental Contributions credited to his After-Tax Supplemental Contribution Account for the applicable Plan Year and (D) if the Committee so elects in accordance with and to the extent permitted by the Regulations, Pre-Tax Supplemental Contributions credited to his Pre-Tax Supplemental for the applicable Plan Year, to (ii) the amount of the Member's compensation (as defined in Section 414(s) of the Code) for the -25- applicable Plan Year. For purposes of this Section 6.3, the "applicable Plan Year with respect to Highly Compensated Associates is the current Plan Year and the "applicable Plan Year" with respect to Eligible Associates who are not Highly Compensated Associates is the preceding Plan Year. The Committee may elect to apply the current Plan Year as the "applicable Plan Year" with respect to Eligible Associates who are not Highly Compensated Associates; however, any such election may not be changed except as provided by the Secretary of the Treasury. An Eligible Associate's average contribution percentage shall be zero if no contributions are made on his behalf for such applicable Plan Year. In calculating the average contribution percentage for a Plan Year, contributions shall be taken into account only if they are allocated to a Member's Account within such applicable Plan Year. For this purpose, contributions are considered allocated as of a date within an applicable Plan Year if the allocation is not contingent on participation or performance of services after such date and the contributions are actually paid to the Trust no later than 12 months after the close of the applicable Plan Year to which the contributions relate. (b) For purposes of determining whether the Plan satisfies the average contribution percentage test, all employee and employer matching contributions that are made under two or more plans that are aggregated for purposes of Section 401(a) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii) of the Code) shall be treated as made under a single plan and, if two or more such plans are permissively aggregated for purposes of Section 401(m) of the Code, the aggregated plans must also satisfy Sections 401(a)(4) and 410(b) of the Code as though they were a single plan; provided, however, that plans may be aggregated to satisfy the average contribution percentage test only if they have the same plan year. For purposes of calculating the average contribution percentage, the actual contribution ratio of a Highly Compensated Associate shall be determined by treating all plans of the Company and may Affiliate under which the Highly Compensated Associate participates as a single plan. Notwithstanding the foregoing, for purposes of determining whether the -26- Plan satisfies the average contribution percentage test, the Plan may be treated as comprising separate plans as described in sections 1.410(b)- 6(b)(3) and 1.410(b)-7(c)(3) of the Regulations. (c) The Committee shall determine as of the end of the Plan Year, and at such time or times in its discretion, whether one of the average contribution percentage tests specified in Subsection 6.3(a) is satisfied for such Plan Year. This determination shall be made after first determining the treatment of excess deferrals within the meaning of Section 402(g) of the Code under Section 5.1(a) and then determining the treatment of excess contributions under Section 5.1(b). In the event that neither of the average contribution percentage tests is satisfied, the Committee shall refund or forfeit the excess contributions in the manner described in Subsection 6.3(e). For purposes of this Section 6.3, "excess aggregate contributions" means, with respect to any Plan Year and with respect to any Member, the excess of the aggregate amount of contributions (and any earnings and losses allocable thereto) made to (i) the Matching Contribution Account, (ii) the Profit Sharing Contribution Account, (iii) the after-tax Basic Contribution Account, (iv) After-Tax Supplemental Contribution Account and (v) the Pre-Tax Supplemental Contribution Account (if the Regulations permit and the Committee elects to take into account Pre-Tax Supplemental Contributions when calculating the average contribution percentage) of Highly Compensated Associates for such Plan Year, over the maximum amount of such contributions that could be made to the Matching Contribution Account, Profit Sharing Contribution Account, after-tax Basic Contribution Account, After-Tax Supplemental Contribution Account and Pre-Tax Supplemental Contribution Account of such Members without violating the requirements of Subsection 6.3. Effective January 1, 1997, excess aggregate contributions are allocated to the Highly Compensated Associates with the largest amounts of aggregate contributions taken into account in calculating the actual contribution percentage test for the year in which the excess arose, beginning with the Highly Compensated Associates with the largest amounts of excess aggregate contributions and continuing in descending order until all the -27- excess aggregate contributions have been allocated. For purposes of the preceding sentence the "largest amount" is determined after distribution of any excess aggregate contributions. (d) If the Committee is required to refund excess aggregate contributions for any Highly Compensated Associate for a Plan Year in order to satisfy the requirements of Subsection 6.3(a), then the refund of such excess aggregate contributions shall be made with respect to such Highly Compensated Associates to the extent practicable before the 15th day of the third month immediately following the Plan Year for which such excess aggregate contributions were made, but in no event later than the end of the Plan Year following such Plan Year. For each of such Associates, the amounts so refunded shall be made in the following order of priority (i) by distributing amounts contributed to the After-Tax Supplemental Contribution Account, and earnings thereon; (ii) by distributing amounts contributed to the Pre-Tax Supplemental Account (to the extent such amounts are included in the average contribution percentage), and earnings thereon; (iii) by distributing amounts contributed to the after-tax Basic Contribution Account, and earnings thereon and Matching Contributions related thereto; (iv) by distributing amounts contributed to the Matching Contribution Account, and earnings thereon; and (v) by distributing amounts contributed to the Profit Sharing Contribution Account and earnings thereon. (e) Notwithstanding any other provision of the Plan, the sum of the actual deferral percentage determined in accordance with Subsection 5.1(b)(i) of those Highly Compensated Associates and the average contribution percentage determined in accordance with Section 6.3(a) of those Highly Compensated Associates shall not exceed the Aggregate Limit (as defined below). The actual deferral percentage and the average contribution percentage of the Highly Compensated Associates are determined after any corrections required to meet the actual deferral percentage and average contribution percentage tests are made. -28- (f) For purposes of Section 6.3(d) above, "Aggregate Limit" for a Plan Year means the greater of: (i) the sum of (A) 1.25 times the greater of the actual deferral percentage of those non-Highly Compensated Associates eligible to participate in the Plan ("eligible NHCAs") for the preceding Plan Year or the average contribution percentage of the eligible NHCAs for the preceding Plan Year, and (B) two percentage points plus the lesser of the actual deferral percentage of the eligible NHCAs for the preceding Plan Year or the average contribution percentage of the eligible NHCAs for the preceding Plan Year (in no event, however, may this amount exceed twice the lesser of the actual deferral percentage of the eligible NHCAs for the preceding Plan Year or the average contribution percentage of the eligible NHCAs for the preceding Plan Year); or (ii) the sum of (A) 125% of the lesser of the actual deferral percentage of the eligible NHCAs for the preceding Plan Year or the average contribution percentage of the eligible NHCAs for the preceding Plan Year, and (B) two percentage points plus the greater of the actual deferral percentage of the eligible NHCAs for the preceding Plan Year or the average contribution percentage of the eligible NHCAs for the preceding Plan Year. In no event, however, may this amount exceed twice the greater of the actual deferral percentage of the eligible NHCAs for the preceding Plan Year or the average contribution percentage of the eligible NHCAs for the preceding Plan Year. (g) The Committee shall determine as of the end of the Plan Year, and at such time or times in its discretion, whether the Aggregate Limit has been exceeded. In the event that the Aggregate Limit is exceeded, the average contribution percentage of the eligible Highly Compensated Associates shall be reduced in the same manner as described in Sections 6.3(c)-(d). 6.4 The Company's contributions under Sections 5.1, 6.1 and 6.2, and any Member's contributions under Sections 4.1 and 5.1, if any, shall be paid directly to the Trustee under the Trust during the month in respect of which they are made, or during the month next following, as the Committee may determine, provided that the total amount of the Company's contributions under the Plan for any taxable year -29- shall be paid in full on or before such date as the federal income tax laws applicable to such payment require the payment to be made in order to permit deduction of such payment for such taxable year. Notwithstanding anything herein to the contrary, effective February 3, 1997, any Pre-Tax Supplemental Contributions (or any other pre-tax contributions) shall be made as soon as such amounts can reasonably be segregated from the general assets of the Company and each Participating Company, provided that in no event shall such contributions be made later than the 15th business day of the month immediately following the month in which such amounts would otherwise have been payable to the Member in cash. 6.5 The Company's contributions made for a taxable year pursuant to Sections 5.1, 6.1 and 6.2, if any, and any Member's contributions under Sections 4.1 and 5.1, shall be paid directly by the Company to the Trustee in cash, or, at the option of the Company, in whole or in part in other property acceptable to the Trustee. 6.6 Amounts forfeited pursuant to Section 11 shall be used to reduce the Company's contribution obligations pursuant to this Section 6. Amounts shall be deemed forfeited pursuant to Section 11 as determined by the Committee upon the earlier of the commencement of a distribution of the Member's nonforfeitable interest in the Member's Account or the Member's incurrence of five consecutive one-year Breaks in Service. -30- 6.7 If Basic Contributions for any Member for a Plan Year exceed the compensation limitations of Section 401(a)(17) of the Code, such excess contributions shall reduce the Member's obligation to make Basic Contributions in the following year. -31- SECTION 7 TRANSFER OF AMOUNTS ATTRIBUTABLE TO MEMBERS' CONTRIBUTIONS AND PROFIT- SHARING PLAN BALANCES UNDER THE RETIREMENT SECURITY PLAN 7.1 The Committee shall establish and maintain or cause to be established and maintained, as part of a Member's Account, a Transferred Contribution Account and a Profit-Sharing Plan Balance Account, showing the Member's interest under the Plan and in the Trust Fund allocable to the amounts transferred from the trust established as part of the Retirement Security Plan and attributable to the Member's Benefit Derived from Associate Contributions and Profit Sharing Plan Balance, if any, as determined by the Committee in its sole discretion, and all relevant data pertaining thereto. The amount transferred with respect to a Member's Benefit Derived from Associate Contributions shall be credited by the Committee to the Member's Transferred Contribution Account. The amount transferred with respect to a Member's Profit-Sharing Plan Balance shall be credited by the Committee to the Member's Profit-Sharing Plan Balance Account. All such transferred amounts shall be held by the Trustee for the exclusive benefit of such Member in accordance with the terms of the Plan, to be commingled, managed, invested and reinvested with the other assets of the Plan. Upon such transfer, the trustees of the Retirement Security Plan shall have no further liability whatsoever with respect to the respective transferred amounts or the benefits which had been based thereon, and the Member shall look solely to the Plan for any payment or other benefit in respect of the amount so transferred. 7.2 Except to the extent otherwise determined by the Committee with respect to payments from a Member's Account, adjustments, charges or allocations to the Member's Transferred Contribution Account and Profit-Sharing Plan Balance Account shall be made by adding thereto, or deducting therefrom, as the case may be, such proportion of any adjustments, charges or allocations as the amount therein as of the last preceding Valuation Date bears to the total amount in the Member's Account as of such preceding Valuation Date. In making such adjustments, charges or allocations the Committee can conclusively rely on the valuations of the Trust Fund by the Trustee and in accordance with the Plan and the terms of the Trust. -32- 7.3 Except as otherwise provided in Section 11.5, any amount credited to a Member's Transferred Contribution Account and Profit-Sharing Plan Balance Account, if any, shall be paid from the Trust Fund to the Member or his Beneficiary or Surviving Spouse at the same time and in the same manner as any payment made in accordance with Section 12. -33- SECTION 8 TRANSFER OF AMOUNTS ATTRIBUTABLE TO MEMBERS' ACCOUNT BALANCE UNDER THE LECHMERE PLAN 8.1 Each Member who was a member of the Lechmere Plan on June 30, 1994 shall have an amount equal to his account balance under the Lechmere Plan, if any, transferred from the trust established as part of the Lechmere Plan to the Trust. 8.2 The Committee shall establish and maintain or cause to be established and maintained, as part of the Account of a Member, a Lechmere Account, which shall provide for a separate accounting in the name of each such Member which shall reflect all contributions of such Member during his participation in the Lechmere Plan, all amounts contributed by a participating employer of the Lechmere Plan on his behalf, earnings on all such contributions, any distributions, withdrawals and any expenses charged against such contributions (the "Lechmere Account"). The separate accounting in the name of each Member who was a participant in the Lechmere Plan shall include a separate accounting for pre-tax contributions, after-tax contributions, rollover contributions and matching contributions made on behalf of such Member under the Lechmere Plan. The amount transferred to the Trust pursuant to Section 8.1 with respect to a Member's account balance under the Lechmere Plan shall be credited by the Committee to the Member's Lechmere Account. All such transferred amounts shall be held by the Trustee for the exclusive benefit of such Member in accordance with the terms of the plan, to be commingled, managed, invested and reinvested with the other assets of the Plan. Upon such transfer, the Member shall look solely to the Plan for any payment or other benefit in respect of the amount so transferred. 8.3 Except to the extent otherwise determined by the Committee with respect to payments from a Member's Account, adjustments, charges or allocations to the Member's Lechmere Account shall be made by adding thereto, or deducting therefrom, as the case may be, such proportion of any adjustments, charges or allocations as the amount therein as of the last preceding Valuation Date bears to the total amount in the Member's Account as of such preceding Valuation Date. In making such adjustments or charges, the -34- Committee can conclusively rely on the valuations of the Trust Fund by the Trustee and in accordance with the Plan and the terms of the Trust. 8.4 Except as otherwise provided in Section 11.5, any amount credited to a Member's Lechmere Account, if any, shall be paid from the Trust Fund to the Member or his Beneficiary or Surviving Spouse at the same time and in the same manner as any payment made in accordance with Section 12. -35- SECTION 9 INVESTMENT OF CONTRIBUTIONS 9.1 All amounts of money, securities or other property received under the Plan, including any amounts transferred to the Plan under Sections 7 and 8, shall be delivered to the Trustee under the Trust, to be managed, invested, reinvested and distributed for the exclusive benefit of the Members and their Beneficiaries in accordance with the Plan, the Trust and any agreement with an insurance company or other financial institution constituting a part of the Plan and Trust. The Trustee shall cause to be established and maintained six funds or such other number of funds as the Committee shall determine, to be designated respectively as Fund A, Fund B, Fund C, Fund D, Fund E, and Fund F, or as otherwise designated by the Committee, for the investment of all such amounts. 9.2 Effective for periods beginning on or after July 1, 1997, a Member may, by making a telephonic investment direction, specify the percentage (in multiples of five percent or such other percentage as the Committee may determine) of such Member's Account to which the member is permitted investment direction as described below that shall be invested in one or more of the Funds designated by the Committee pursuant to the uniform and nondiscriminatory procedures established by the Committee. Unless an effective investment direction is received, all amounts with respect to which the Member is permitted investment direction as described below shall be invested in Fund A. For periods beginning on or after May 1, 1998, Members may direct the investment of all amounts in the Member's Account. For periods beginning on or after July 1, 1997 and ending before May 1, 1998 Members employed by Lechmere or Signature could direct the investment of all amounts in the Member's Account, other than amounts in the Member's Basic Contribution Account and Transferred Contribution Account. For periods beginning before July 1, 1997 all amounts in a Member's Basic Contribution Account and Transferred Contribution Account were invested in such percentages as the Committee specified, in any of the Funds. 9.3 Effective July 1, 1997, a Member may change an investment direction as to his Account once in each calendar month, by providing a telephonic notice of such change in investment direction (or by such other -36- method as the Committee may permit). With respect to future contributions, such telephonic notice shall be processed in due course and will be effective as soon as administratively feasible. With respect to a change in the investment of a Member's existing Account balances, such change will be processed in due course and will be effective as soon as administratively feasible. 9.4 The Plan is intended to constitute a plan described in Section 404(c) of ERISA and Title 29 of the Code of Federal Regulations Section 2550.404c-1. -37- SECTION 10 VALUATIONS AND MAINTENANCE OF MEMBERS' ACCOUNTS 10.1 As of each Valuation Date, the Trust Fund shall be valued pursuant to the terms of the Trust to reflect the effect of income received and accrued, realized and unrealized profits and losses, and all other transactions of the preceding period, but such valuation shall not include any contributions received by the Trustee during such month. Such valuation shall be conclusive and binding upon all persons having an interest in the Trust Fund. 10.2 All contributions made on behalf of, or allocated to, a Member shall be credited to his Account. The value of a Member's Account may be determined by aggregating the value of his separate interests, if any, in each Fund. 10.3 (a) For the first month for which contributions are received in an Investment Fund under the Plan, a Unit in each Investment Fund shall be valued at one dollar and there shall be credited to each Member as of the Valuation Date in such month one Unit in each Fund for each dollar of the contributions made by him or on his behalf and received by the Trustee during such month which is invested in such Investment Fund in accordance with the Plan. As of each subsequent Valuation Date, the value of a Unit in each Investment Fund shall be determined by dividing (i) the sum of the cash and the fair market value of any other property, as determined by the Trustee in accordance with Section 10.1, then held in such Investment Fund, by (ii) the total number of outstanding Units for such Investment Fund immediately prior to such Valuation Date. (b) As soon as practicable after the end of each month following the first month during which contributions are received by the Trustee, there shall be credited to each Member a number of Units (or fractions thereof) in each such Investment Fund calculated by dividing (i) the portion of the contributions made by him or on his behalf and received by the Trustee for such month which is invested in such Investment Fund in accordance with the Plan, by (ii) the value of a Unit in such Investment Fund as of the Valuation Date in such month. A Member's Account at any time shall reflect all Units credited -38- thereto as provided in the foregoing provisions of Section 10 less all Units the value of which has been previously withdrawn by him from such Account. 10.4 The expenses of administering the Plan, including (a) the fees and expenses of any Associate and of the Trustee for the performance of their duties under the Plan and Trust, (b) the expenses incurred by the members of the Committee in the performance of their duties under the Plan (including reasonable compensation for any legal counsel, certified public accountants, consultants, and agents and cost of services rendered in respect of the Plan), and (c) all other proper charges and disbursements of the Trustee or the members of the Committee (including settlements of claims or legal actions approved by counsel to the Plan) may be paid out of the Trust Fund, and allocated to and deducted from the Accounts of Members by the Committee in accordance with the provisions of Section 10.3 above, if the Company does not pay such expenses directly. 10.5 Brokerage fees, transfer taxes and other expenses incident to the purchase or sale of securities by the Trustee shall be deemed to be part of the cost of such securities, or deducted in computing the proceeds therefrom, as the case may be. Taxes, if any, of any and all kinds whatsoever, which are levied or assessed on any assets held or income received by the Trustee shall be allocated to and deducted from the Accounts of Members by the Committee in accordance with the provisions of Section 10.3 above. 10.6 Notwithstanding anything herein to the contrary, the Committee, in its sole discretion in connection with the Company's acquisition of businesses, may authorize an Associate to transfer to the Trust, to be held as part of the Associate's Rollover Contribution Account, cash received by the Associate in one or more distributions together constituting, under the Code, an Eligible Rollover Distribution from or under another qualified trust or qualified plan. The Committee may, in its sole discretion, develop procedures for accepting Eligible Rollover Distributions to the Plan. The interest of an Associate with respect to a Rollover Contribution to the Trust, together with earnings thereon, shall be fully vested, and the assets attributable thereto shall be held, invested and distributed pursuant to the terms of the Plan governing the Associate's After-Tax Supplemental -39- Contribution Account; provided, however, that the interest of an Associate with respect to Rollover Contributions shall be segregated for accounting and reporting purposes. -40- SECTION 11 ELIGIBILITY FOR BENEFITS 11.1 At all times, each Eligible Associate who became a Member before July 1, 1994 shall have a nonforfeitable interest in all amounts credited to his Account. 11.2 (a) Each Eligible Associate who becomes a Member of the Plan after June 30, 1994 shall have a nonforfeitable interest in amounts credited to his Matching Contribution Account, Profit Sharing Contribution Account, and, with respect to periods beginning on or after July 1, 1997, his Supplemental Matching Contribution Account if applicable, in accordance with the following schedule: Years of Vested Service Percentage ------- ----------- less than 3 0% 3 or more 100% (b) Notwithstanding the foregoing, a Member who is employed by the Company on his (i) normal retirement date, as determined under the Retirement Security Plan, (ii) death, or (iii) disability, shall have a nonforfeitable interest in this Matching Contribution Account, Profit Sharing Contribution Account and, with respect to periods beginning on or after July 1, 1997, his Supplemental Matching Contribution Account, if applicable, as of such normal retirement date, death or disability. Furthermore, an Associate who terminates in his third year of employment shall have a nonforfeitable interest in his Matching Contribution Account, Profit Sharing Contribution Account, and, with respect to periods beginning on or after July 1, 1997, his Supplemental Matching Contribution Account, if applicable, if he performs two Years of Service and at least five months of Service in his third (final) year of employment. If a Member has received a distribution of less than 100% of the Member's Account and is subsequently rehired before incurring five consecutive one year Breaks in Service, he may repay the amount of the distribution to the Trust before the earlier of five years after the first day the Associate is rehired, or the close of the first period of five consecutive one year Breaks in Service commencing after the distribution. If upon termination of a Member's Service the balance of his nonforfeitable Account -41- is zero, the Member shall be deemed to have received a distribution of such nonforfeitable Account upon termination of his Service. If a Member is deemed to have received a distribution, he may notify the Committee of his return to Service and his desire to have his account reinstated before the close of the first period of five consecutive one year Breaks in Service commencing after the deemed distribution ("Committee Notification"). Upon such repayment or Committee Notification, the Member shall be credited on the vesting schedule with all previous Years of Service, and the Member's Account will be credited with the amount of his Account which was not vested at the time of the termination of his Service. No additional Years of Service shall be credited, however, until the Member shall have completed 1,000 Hours of Service in any Plan Year ending after re-employment by the Company. The amount credited to the Account of a rehired Associate upon repayment of a distribution or Committee Notification will be restored from the following sources, to the extent necessary, in the order listed: (i) Forfeitures for the Plan Year; (ii) Company contributions; (iii) Trust earnings or gains. In the event that the amount derived from the foregoing sources shall not be sufficient to restore the amount credited to the Member's Account upon repayment or Committee Notification, the Company shall be obligated to make an additional contribution to the Trust to the extent required. A Member who has received a distribution or is deemed to have received a distribution of his vested interest and either elects not to make repayment of such amount or elects not to perform Committee Notification and who has incurred five consecutive one year Breaks in Service, shall not be entitled to an increase in the Member's pre-Break in Service credit based upon any post-Break in Service credit, but in determining the Member's post-Break in Service credit all of his pre-Break in Service and post-Break in Service credit shall be aggregated. If a termination of a Member's Service shall occur prior -42- to the vesting of any of the Member's interest in his Account and if he is subsequently rehired, his pre-Break in Service and post-Break in Service credit will be aggregated if the period of his absence does not exceed the greater of five consecutive one year Breaks in Service or his Years of Service with the Company. If the Member's period of absence does exceed the greater of five consecutive one year Breaks in Service or his Years of Service with the Company, his pre-Break in Service credit shall not be considered in determining his vested interest. (c) Notwithstanding anything herein to the contrary, if the Plan's vesting schedule is amended, or if the Plan is amended in any way that directly or indirectly affects the computation of the Member's nonforfeitable percentage or if the Plan is deemed amended by an automatic change to or from a top-heavy vesting schedule, each Member with at least three Years of Service with the Company may elect, within a reasonable period after the adoption of the amendment or change, to have such Member's vested interest in such Matching Contribution Account, Profit Sharing Contribution Account and with respect to periods beginning on or after July 1, 1997, his supplemental Matching Contribution Account, if applicable, computed under the Plan without regard to such amendment or change. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment becomes effective; or (iii) 60 days after the Member is issued written notice of the amendment by the Company or Plan Administrator. 11.3 Notwithstanding the foregoing, the nonforfeitable interest of a Member who was employed by the Company on or before July 1, 1994 in amounts credited to his Matching Contribution Account and Profit Sharing Contribution Account shall not be less than his vested percentage determined as of June 30, 1994. In addition, notwithstanding the foregoing, a Member who was a participant in the Lechmere Plan shall have a nonforfeitable interest in the portion of his Lechmere Account attributable to matching contributions under the -43- Lechmere Plan in accordance with the following schedule to the extent that the following schedule results in a greater nonforfeitable interest in such contributions: Years Vested of Service Percentage ---------- ---------- Less than 1 0% 1 but less than 2 20% 2 but less than 3 40% 3 or more 100% 11.4 Subject to Section 12.2, after termination of a Member's Service payment of the Member's vested Account shall be made by one of the methods of distribution described and at the time specified in Section 12 below. 11.5 If a former Member dies before payment of the full value of his vested Account from the Trust Fund, an amount equal to the value of the unpaid portion thereof shall be paid to his Beneficiary from the Trust Fund. Such payment shall be made by one of the methods of distribution described and at the time specified in Section 12 below. 11.6 (a) A Member may, while in Service, withdraw out of the Trust Fund amounts permitted by the Committee, pursuant to Subsections (b), (c) or (f) below, under rules uniformly applicable to all Members similarly situated, by giving prior notice to the Committee and the Participating Company that employs him, and in the case of each such withdrawal, which shall be not less than 30 days following the date such notice is given to the Committee, as of which the withdrawal is to be made, and explaining the reason for such withdrawal. (b) Profit Sharing Plan Balance Account. Subject to Subsection (a) above, the Committee may permit a Member to withdraw all or part of the amount credited to his Profit-Sharing Plan Balance Account for any reason listed in Subsection (d) below or for any of the following reasons: (i) the Member's entrance into the United States Armed Forces; (ii) to purchase a place of residence for the Member; -44- (iii) to provide for the college expenses for the Member's children; (iv) death in the Member's immediate family; or (v) extreme financial hardship of any nature, as determined solely by the Committee. (c) After-Tax Supplemental Contribution Account, Pre-Tax ---------------------------------------------------- Supplemental Contribution Account, Matching Contribution Account, Basic ----------------------------------------------------------------------- Contribution Account and Profit-Sharing Plan Balance Account. Subject ------------------------------------------------------------ to Subsection (a) above, upon a showing of immediate and heavy financial hardship caused by unusual expenses beyond the control of a Member, the Committee may permit a Member to withdraw amounts credited to his: (i) After-Tax Supplemental Contribution Account; (ii) Pre-Tax Supplemental Contribution Account (exclusive of earnings thereon credited on or after January 1, 1989); and (iii) for periods beginning on or after July 1, 1997, and for Members other than Members employed by Electric Ave., Signature or Lechmere: (A) the vested portion of his Matching Contribution Account, including the vested portion of his Supplemental Matching Contribution Account; (B) amounts credited to his Basic Contribution Account (exclusive of earnings credited on pre-tax Basic Contributions on or after January 1, 1989); and (C) his Profit-Sharing Plan Balance Account. The amount of any such withdrawal may not exceed the amount required to meet the immediate and heavy financial need created by such hardship (including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution) and not reasonably available from other resources of the Member, including amounts available for withdrawal under Subsections (b) above and (f) below and amounts available for loan under Section 15 of this Plan or any other plan maintained by a Participating Company. To the extent administratively feasible, such withdrawals shall be charged against the Member's Account, to the extent applicable, in the following order: -45- (i) first, against the Member's Profit-Sharing Plan Balance Account, if any; (ii) second, against the Member's pre-1987 after-tax Basic Contributions and After-Tax Supplemental Contributions, if any; (iii) third, against the Member's post-1986 after-tax Basic Contributions and After-Tax Supplemental Contributions and any earnings thereon, if any; (iv) fourth, against the earnings on the Member's pre-1987 after-tax Basic Contributions and After-Tax Supplemental Contributions, if any; (v) fifth, against the Member's pre-tax Basic Contributions and Pre-Tax Supplemental Contribution Account, if any; and (vi) sixth, against the vested portion of the Member's Matching Contribution Account, if any. The amount available for withdrawal under this Subsection (c) shall be limited by the amounts reflected in the positions of the Member's Account set forth in the preceding sentence. (d) For purposes of Subsection (c) above, hardship withdrawals shall be available only if the withdrawal is made on account of an immediate and heavy hardship of the Member resulting from: (i) uninsured medical expenses described in Section 213(d) of the Code incurred by the Member, his spouse or any dependent of the Member (as defined in Section 152 of the Code), (ii) the purchase (excluding mortgage payments) of a principal residence of the Member, (iii) payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the Member or his Spouse, children or dependents, (iv) the need to prevent the eviction of the Member from his principal residence or foreclosure on the mortgage of the Member's principal residence, (v) death in Member's immediate family; "immediate family" means Spouse, Children, or Parents of Member; or (vi) such other events as may be prescribed by Regulations or other procedures under the Code and adopted by the Committee. (e) Any Member who makes a hardship withdrawal of amounts credited to his pre-tax Basic Contributions and Pre-Tax Supplemental Contribution Account pursuant to Subsection (d) of this -46- Section 11.6 shall not be permitted to make pre-tax Basic Contributions or Pre-Tax Supplemental Contributions under the Plan after the expiration of the 12-month period immediately following the date on which such hardship withdrawal is received. (f) Lechmere Account. Subject to Subsection (a) above, the ---------------- Committee may permit a Member to withdraw all or part of the balance in his Lechmere Account for any of the reasons listed in Subsection (d) above or for any of the following reasons: (i) the Member's attainment of age 59-1/2; or (ii) the permanent disability of the Member. Notwithstanding the foregoing, any Member who has after-tax contributions and rollover contributions in his Lechmere Account, may withdraw the portion of his Lechmere Account attributable to such after-tax contributions and rollover contributions in accordance with Subsection (a). (g) After Tax Supplemental Contribution Account, Basic -------------------------------------------------- Contribution Account and Profit-Sharing Plan Balance Account. Subject ------------------------------------------------------------ to Subsection (a) above, upon a showing of need as described below, the Committee may permit a Member, other than a Member employed by either Electric Ave., Signature or Lechmere, to withdraw not more frequently than once during each Plan Year amounts credited to his After-Tax Supplemental Contribution Account; for periods beginning on or after July 1, 1997, amounts credited to his Basic Contribution Account attributable to after-tax Contributions; and amounts credited to his Profit-Sharing Plan Balance Account attributable to after-tax Contributions; provided, however, that the minimum withdrawal that may be made by a Member is $500.00. For purposes of this Subsection (g), withdrawals will be permitted only if the withdrawal is needed to pay for: (i) adoption fees associated with the Member's adoption of a child under the age of 18; (ii) child care expenses for the Member's children; -47- (iii) adult care expenses for the Member or the Member's spouse, child, parent or sibling; (iv) expenses related to the purchase or repair of the Member's automobile, or payments to prevent the repossession of the Member's automobile; (v) expenses related to home repairs or improvements undertaken by the Member; (vi) payments by the Member to prevent eviction or foreclosure on any residence, including, but not limited to, mortgage, rent or tax payments; (vii) legal expenses for the Member or the Member's spouse, child or parent; (viii) primary or secondary school tuition expenses for the Member's children; and (ix) any financial hardship as determined by the Administrative Director. (h) No Other Withdrawals Permitted. A Member may not withdraw ------------------------------ any amounts from his Account except as provided in this Section 11.6 or in 11.7. 11.7 Notwithstanding any of the provisions of this Plan, including Section 11.6 above, any Member who remains in Service after his normal retirement date, as determined under the Retirement Security Plan, may elect, no later than 60 days after his normal retirement date, to receive in one lump sum, the value of his Profit-Sharing Plan Balance Account. -48- SECTION 12 METHOD OF PAYMENT OF BENEFITS 12.1 (a) Any benefit payable under the Plan shall be paid in one of the following methods of distribution, as the Member (or in the case of the Member's death, the Member's Beneficiary) may elect: (i) the purchase therewith and delivery to the Member (or Beneficiary) by the Trustee of a single premium immediate or deferred annuity (fixed or variable) contract issued by such insurance company and containing such provisions as the Committee shall designate, which contract shall (A) provide for monthly payments continuing, in the case of a Member, for the life of the Member or the joint lives of the Member and his Beneficiary or for a period not in excess of the life expectancy, as determined under the Regulations, of such Member, or the joint life expectancy, as determined under the Regulations, of such Member and his Beneficiary, if any, and, in the case of a Beneficiary, for the life of such Beneficiary or for a period not in excess of the life expectancy, as determined under the Regulations, of such Beneficiary, (B) contain, if the Committee so determines, provisions which prevent the cash surrender thereof and which make the payments due thereunder nonassignable, (C) provide that the actuarial value of any payments to a contingent annuitant other than the spouse of the Member shall not exceed one-half of the actuarial value of the monthly payments which the Member would otherwise have received without optional modification; (ii) one lump sum payment thereof from the Trust Fund; or (iii) in any combination of (i) or (ii) above; provided that, the entire Basic Account Balance must be paid by either (i) or (ii), and all other Account Balances must be paid by either method (i) or (ii). (iv) notwithstanding the foregoing, if the total value of the Member's Account Balances is $3,500, or less (or for periods beginning on or after January 1, 1998, $5,000 or less), or such other amount prescribed in the Regulations, payment shall be made to the Member in one lump-sum. (b) Notwithstanding the foregoing, any Member who was a Participant in the Lechmere Plan (or Beneficiary thereof) may elect, by completing such form as required by the Committee, to have his benefit payable under the Plan in a series of substantially equal monthly or annual installments. If such Member (or Beneficiary thereof) elects the form of distribution under this Section 12.1(b), the period over which payments are to be made shall not exceed the life expectancy, as determined under the Regulations, of the Member, or the joint life expectancy, as determined under the Regulations, of the Member and his Beneficiary, if any, and, in the case of a Beneficiary, for the life of such Beneficiary or -49- for a period not in excess of the life expectancy, as determined under the Regulations, of such Beneficiary. (c) The Committee, in its sole discretion, may direct the Trustee to make one or more advances from the Trust Fund to a terminated Member, Beneficiary or Member's estate prior to the date upon which a final distribution would otherwise be made from the Trust Fund in accordance with the Plan. Such advances shall be based upon the Committee's estimate of the benefit amount which would be payable, and shall reduce the amount which becomes payable as of the date of such final distribution. In any case where installment payments are to be paid or are being paid to a Beneficiary, any balance of unpaid installments upon or after said Beneficiary's death shall be payable to the estate of such Beneficiary. (d) Notwithstanding any provision of the Plan to the contrary, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. 12.2 (a Notwithstanding any other provision of the Plan, for periods beginning before January 1, 1999, any benefit payable to a Member shall commence no later than the April 1st of the calendar year following the calendar year in which such Member attains age 70 1/2; provided, however, if a Member attained age 70 1/2 prior to January 1, 1988, except as otherwise provided in Subsection 12.2(e), any benefit payable to such Member shall commence no later than the April 1st of the calendar year following the later of (i) the calendar year in which the Participant attains age 70 1/2 or (ii) the calendar year in which the Member retires. Notwithstanding the preceding provisions, for periods beginning on or after January 1, 1999, any benefit payable to a Member who is not a five percent owner (as described in Subsection (e)) shall commence no later than April 1st of the calendar year following the calendar year in which the Member retires. Any benefit payable hereunder shall be paid, in accordance with the Regulations, over a period not extending beyond the life expectancy of such Member or the joint life -50- expectancies of such Member and his Beneficiary. Life expectancy for purposes of this Section shall not be recalculated annually in accordance with the Regulations. (b) If distribution of a Member's benefit has commenced prior to a Member's death, and such Member dies before his entire benefit is distributed to him, distribution of the remaining portion of the Member's benefit to the Member's Beneficiary shall be made at least as rapidly as under the method of distribution in effect on the date of the Member's death. (c) If a Member dies before distribution of his benefit has commenced, distributions to any Beneficiary shall be made on or before the December 31st of the calendar year which contains the fifth anniversary of the date of such Member's death; provided, however, that any distribution to a Beneficiary may be made over the life of the Beneficiary or a period not extending beyond the life expectancy of the Beneficiary. Such distribution shall commence not later than the December 31 of the calendar year immediately following the calendar year in which the Member died, or, in the event such Beneficiary is the Member's Surviving Spouse, not later than the date on which such Member would have attained age 70 1/2, if later (or, in either case, on any later date prescribed by Regulations). If such Member's Surviving Spouse dies after such Member's death but before distributions to such Surviving Spouse commence, this Subsection (c) shall be applied to require payment of any further benefits as if such Surviving Spouse were the Member. (d) Pursuant to Regulations, any benefits paid to a child shall be treated as if paid to a Member's Surviving Spouse if such amount will become payable to such Surviving Spouse on the child's attaining majority, or other designated event permitted by Regulations. (e) If a Member who is a five percent owner attained age 70 1/2 before January 1, 1988, any benefit payable to such Member shall commence no later than the April 1st of the calendar year following the later of (i) the calendar year in which the Member attains age 70 1/2 or (ii) the earlier of (A) the calendar year within which the Member becomes a five percent owner or (B) the calendar year in -51- which the Member retires. For purposes of this Subsection (e), a five percent owner shall mean a five percent owner of such Member's employer as defined in Section 416(i) of the Code at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70 1/2. Once distributions have begun to a five percent owner pursuant to this Subsection (e), they must continue even if the Member ceases to be a five percent owner in a subsequent year. 12.3 Subject to Section 12.1(a)(iv) and the third sentence of this Section 12.3, after a Member's termination of Service, the Member must make an election before payments will commence pursuant to the provisions of the Plan; provided, however, if the payee is the Member, the Member's spouse must consent, in writing, to such election or any revocation or change therein (unless the Committee makes a written determination in accordance with the Code and Regulations that no such consent is required). If a distribution is one to which the qualified joint and survivor and qualified preretirement survivor annuity rules do not apply and the Committee informs the Member that the Member has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution or a particular distribution option, and the Member, after receiving such notice, affirmatively elects a distribution, the Committee may authorize the commencement of such distribution to begin as soon as administratively feasible in accordance with such administrative practices as determined by the Committee. In no event shall payment commence later than 60 days after the close of the Plan Year during which the later of the Member's attainment of age 65 or the termination of the Member's Service occurs, unless specifically authorized by the Member. In the case of a Beneficiary, all benefits shall be paid in one lump cash sum unless other optional methods of distribution which may be permissible under the Code and Regulations are made available to the Member or his Beneficiary by the Committee. 12.4 In any case where distribution of any benefit amount from the Trust Fund is to be deferred, the Committee shall, upon the written request of the former Member, direct the Trustee to invest such benefit amount in the same manner as the normal Accounts maintained for Members pursuant to the Plan, from which account -52- such payment shall be made. Any benefit amount so deferred pursuant to the foregoing sentence shall be held in the normal Accounts maintained for Members pursuant to the Plan. -53- SECTION 13 MAXIMUM AMOUNT OF ALLOCATION 13.1 The provisions of this Section 13 shall govern notwithstanding any other provisions of the Plan. 13.2 Except as otherwise provided in Section 13.3, Annual Additions to a Member's Account in respect of any Plan Year may not exceed the limitations set forth in Section 415 of the Code, which are incorporated herein by reference. For this purpose, the term "Annual Additions" shall have the meaning set forth in Section 415(c)(2) of the Code, as modified elsewhere in the Code and Regulations. For purposes of this Section 13.2, a Member's contributions shall be determined without regard to any amounts transferred to the Plan pursuant to Sections 7 and 8. 13.3 In the event that the amounts which would otherwise be allocated to a Member's Account must be reduced by reason of Section 13.2, the amounts shall be allocated at the end of the next succeeding Plan Year first, to the extent permissible under Section 13.2 after taking account of contributions made for such succeeding Plan Year, to the Member's Account, and any unallocated portion of such amount shall be allocated to the Accounts of other Members as the Committee in its sole and uncontrolled discretion, based on nondiscriminatory standards, shall determine. 13.4 The Committee shall, to the extent required by ERISA and in accordance with the Regulations in order to maintain the tax-qualified status of the Plan, apply the limitations contained in this Section 13 (after giving due consideration to the wishes of the Member) by taking into account the benefits payable and the contributions made under any other plans maintained by the Company or any Affiliate which are qualified under Section 401(a) of the Code, and if such other plan is a defined benefit plan, for periods beginning on or before December 13, 1999, the sum of the defined benefit plan fraction and the defined contribution plan fraction (as described in Section 415(e) of the Code, including Subsection (6) thereof) shall not exceed one. -54- SECTION 14 DESIGNATION OF BENEFICIARIES 14.1 Each Member shall file with the Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon his death. A Member may from time to time revoke or change his beneficiary designation without the consent of any prior Beneficiary by filing a new designation with the Committee. Notwithstanding the foregoing, if the Member is married, his spouse must consent, in writing, to such designation or any revocation or change therein (unless the Committee makes a written determination in accordance with the Code and Regulations that no such consent is required). The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Member's death, and in no event shall it be effective as of a date prior to such receipt. 14.2 If no such beneficiary designation is in effect at the time of a Member's death, or if no designated Beneficiary survives the Member, the payment of the amount, if any, payable under the Plan upon his death shall be made to the Member's Surviving Spouse, if any, or if the Member has no Surviving Spouse, then to his children, parents, brothers, and sisters, or other relatives as the Committee shall determine. If the Committee is in doubt as to the right of any person to receive such amount, the Committee may direct the Trustee to retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Committee may direct the Trustee to pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Trust therefor. -55- SECTION 15 LOANS TO MEMBERS 15.1 A Member may borrow from his interest in the Trust Fund once each Plan Year, subject to the following provisions of this Section 15.1 and to such additional standards as the Committee may adopt pursuant thereto, by making prior written application to the Committee on a form provided for that purpose by the Committee. Such application (hereinafter referred to as a "completed application") shall (a) specify the terms pursuant to which the loan is requested to be made, including the requested effective date, which shall be the last day of a month and no less than 15 days following the date the completed application is given to the Committee, (b) designate the extent, if any, that the loan will be made from fixed income or equity fund, in which the Member has an interest, (c) authorize the repayment of the loan through payroll deductions, (d) provide such information and documentation as the Committee shall require, and (e) include a note, duly executed by the Member, granting a security interest in his entire interest in the Trust Fund to secure the loan. 15.2 The Committee shall establish standards in accordance with ERISA and the Code, which shall be uniformly applicable to all Members similarly situated and shall govern the Committee's approval or disapproval of completed applications. The terms for each loan shall be set solely in accordance with such standards. Such standards shall prescribe the annual rate of interest to be charged on each loan to a Member under the Plan, which shall be determined by reference to the prevailing interest rates charged by commercial lenders under similar circumstances. Such standards may also prescribe a maximum percentage of a Member's pay which may be subjected to payroll deductions for loan repayment under varying circumstances, minimum and maximum repayment periods, a maximum and minimum loan amount, and other relevant factors. Each time a Member takes such a loan, he shall not be permitted to take a subsequent loan under the Plan until the first loan has been repaid in full. The maximum amount available for loan under the Plan shall not exceed the lesser of: (a) $50,000, or (b) 50% of the Member's Account as of the Valuation Date immediately following the date on which the Committee receives the completed application. -56- 15.3 The Committee shall, in accordance with its established standards, review and approve or disapprove a completed application as soon as practicable after its receipt thereof, and shall promptly notify the applying Member of such approval or disapproval. Notwithstanding the foregoing, the Committee may defer its review of a completed application, or defer payment of the proceeds of an approved loan, if the proceeds of the loan would otherwise be paid during the period commencing on December 1st and ending on the following January 31st. In addition, in the event the Trustee, in its sole discretion, determines that it is not reasonably and prudently able, in the interests of Members, to liquidate the necessary amount from any of the fixed income or equity funds to comply with all the designations in Members' completed applications in accordance with this Section 15.3, the Trustee shall notify the Committee, and the amount to be paid to each Member whose completed application designated that a loan be made from such fixed income or equity fund shall be reduced in proportion to the ratio which the aggregate amount that the Trustee has advised the Committee may prudently be liquidated bears to the aggregate amount which all such Members designated to be paid from such fixed income or equity fund. 15.4 Subject to Section 15.3, the Committee, upon approval of a completed application, shall cancel all or any part of the Member's interest in the fixed income or equity funds in the aggregate amount, if any, necessary to make payment of the loan from each such Investment Fund to the extent designated in the completed application and shall direct the Trustee to transfer cash to the Member in such aggregate amount from each such Investment Fund. The Committee shall maintain sufficient records regarding such amounts to permit an accurate crediting of repayments of the loan. 15.5 The unpaid balance owed by a Member on a loan under the Plan shall not reduce the amount credited to his or her Account. However, from the time of payment of the proceeds of the loan to the Member such Account shall he deemed invested, to the extent of such unpaid balance, in such loan until the complete repayment thereof or distribution from such Account. -57- 15.6 Each loan to a Member under the Plan shall be repaid in level amounts through regular payroll deductions; provided, however, that a Member shall be permitted to prepay a loan without penalty. Effective as of December 12, 1994, loan repayments by a Member who is performing service in the uniformed services (as defined in Chapter 43 of title 38, United States Code) will be suspended under the Plan as permitted under Section 414(u) of the Code. Except as otherwise permitted by the Code and the Regulations, each loan shall have a repayment period not to exceed five years, unless the loan is used to acquire any dwelling unit which within a reasonable period of time is to be used as the principal residence of the Member. Principal residence status shall be determined by the Committee at the time the loan is made. Repayments of principal and interest on a loan made to a Member under the Plan shall be made to the fixed income or equity fund in the same proportion as that in which each such Investment Fund was liquidated in order to make payment of the loan proceeds to the Member; provided, however, that, if a Member has elected, pursuant to Section 9.2 to have all or any portion of his interest in the fixed income or equity fund transferred to such other Investment Fund, then the aforementioned purchase proportion on repayment shall be adjusted pro rata by the Committee to reflect such transfer. 15.7 Repayment of all loans under the Plan shall be secured by the Member's entire interest in the Trust Fund. If at any time prior to the full repayment of a loan to a Member under the Plan the Member should cease to be a Member by reason of his retirement, death or otherwise, or the Plan should terminate, the unpaid balance owed by the Member on the loan shall be due and payable immediately, and, to the extent not repaid, the amount of the distribution otherwise payable to the Member (or, in the case of his death, to his designated Beneficiary) shall be reduced by the amount owed on the loan at the time of such distribution. Such reduction shall constitute a complete discharge of all liability to the Plan for the loan. -58- SECTION 16 ADMINISTRATION OF THE PLAN 16.1 The Committee shall have authority and responsibility for the administration and interpretation of the Plan, and, for purposes of ERISA, shall be the "administrator" of the Plan and its "named fiduciary" with respect to matters for which it is responsible; provided that the Board of Directors shall have the sole authority to amend, suspend or terminate the Plan, except as otherwise provided in Subsection 16.4(c) hereof. The Committee shall consist of not less than three persons, who need not be directors of Ward, as from time to time appointed by the Board of Directors. Any Committee member may resign and the Board of Directors may remove any Committee member, with or without cause, at any time. To the maximum extent permitted by ERISA, every action and determination of the Committee in accordance with this Section shall be final and binding upon each Member, Beneficiary, other Associate and every other person entitled to or claiming participation in the Plan or benefits from the Plan. No member of the Committee shall be entitled to act on or decide any matter relating solely to himself or to any of his rights or benefits under the Plan. 16.2 The Committee shall appoint the Trustees, and may remove any Trustees in accordance with the Trust Agreement. Upon acceptance of their appointments, the Trustees shall have exclusive authority to manage and control the Trust Fund, subject to the provisions of the Plan and the Trust Agreement and, for purposes of ERISA, shall be the "named fiduciary" of the Plan with respect to matters for which they are responsible; provided that, as provided in the Trust Agreement, the Trustees may appoint one or more Investment Managers and may delegate authority to the Investment Managers so appointed as provided therein and permitted by ERISA. 16.3 The Committee shall appoint an Administrative Director and may from time to time allocate or delegate to any subcommittee or member of the Committee, the Administrative Director and others, not necessarily Associates, such duties relative to compliance with the reporting and disclosure obligations of ERISA and the administration and interpretation of the Plan as it deems necessary or appropriate including matters involving the exercise of discretion. The Administrative Director may from time to time delegate to others not -59- necessarily Associates, such of his duties as he deems necessary or appropriate. The Committee may remove, with or without cause, at any time the Administrative Director and any person to whom duties are delegated by the Committee or the Administrative Director in accordance with this Section. 16.4 In furtherance of, and not by way of limitation on, the responsibilities and authority conferred on the Committee in Section 16.1 hereof, the Committee shall administer the Plan in accordance with its terms and provisions and shall have the following specific responsibilities and authorities: (a) to construe and interpret the Plan and determine all questions arising in its operation; (b) to develop and from time to time review a policy for funding the Plan which shall be consistent with the objectives of the Plan in accordance with the Regulations and to advise the Trustees of such policy and of any changes therein from time to time; (c) to make such amendments in the Plan and the Trust Agreement as it deems necessary or appropriate; (d) to receive reports from the Trustees and from the Administrative Director on the discharge of their duties and authority with respect to the Plan, including in the case of the Administrative Director the preparation, distribution and maintenance of all documents necessary or appropriate for compliance with the reporting, disclosure and recordkeeping requirements contained in ERISA, as well as such other records or data as may be necessary or appropriate for the proper administration of the plan; (e) to employ such certified public accountants, legal counsel and other persons as may be required by ERISA or as it shall otherwise deem necessary or appropriate in connection with the operation of the Plan; (f) to adopt such rules and procedures as the Committee deems necessary or appropriate in order to fulfill its responsibilities with respect to the Plan; provided that such rules and procedures are uniformly and consistently applied to persons in similar circumstances; -60- (g) to hold regular meetings designed to insure the discharge of its responsibilities hereunder, and to maintain an accurate written record of all such meetings; and (h) to furnish the Board of Directors with reports, including subjects reported upon to it by the Trustees and the Administrative Director. 16.5 Subject to the by-laws of the Company and the resolutions of the Board of Directors, the Committee shall establish its own rules of procedure and the time and place of its meetings. A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the act of a majority of the Committee members at a meeting at which a quorum is present shall be the act of the Committee. Any action which may be taken at a meeting of the Committee may be taken without a meeting if a consent, in writing, setting forth the action so taken, shall be signed by all of the members of the Committee. 16.6 The Company has entered into the Trust Agreement with the Trustees providing for the administration and management of the Trust Fund. All benefits and other amounts payable hereunder shall be paid exclusively from the Trust Fund, and neither the Company, the Committee, any Trustee, the Administrative Director, nor any director, officer, Associate or agent of the Company assumes any responsibility or liability therefor. The Trust Fund may be commingled for investment purposes with like separate trust funds of any other plans and trusts of Ward or any Affiliate which meet the requirements of Sections 401(a) and 501(a) of the Code. Each Member, each Beneficiary or each other person who shall claim the right to any payment under the Plan shall look exclusively to the Trust Fund therefor and shall not have any right or claim therefor against the Company, the Committee, any Trustee, the Administrative Director or any director, officer, Associate or agent of the Company. Except as otherwise required by ERISA, neither the Company, the Committee, the Administrative Director, nor any director, officer, Associate or agent of the Company shall be required to inquire into or be responsible for any act or failure to act of any Trustee or any Member. To the maximum extent permitted by ERISA and applicable state law, each member of the Committee, each Trustee, the Administrative Director and each director and officer of the Company, and each Associate who performs service on behalf of the -61- Plan or the Trust, shall be indemnified and saved harmless by the Company out of its own assets (including the proceeds of any insurance policy the premiums of which are paid by the Company) from and against any and all losses, costs and expenses (including any amounts paid in settlement of a claim with the Committee's approval) to which any of them may be subjected by reason of any act done or omitted to be done in good faith in their official capacities with respect to the Plan or the Trust Agreement, including all expenses reasonably incurred in their defense. 16.7 (a) Any claim for benefits shall be submitted on a prescribed claim form to the claimant's local personnel department. If the claim is wholly or partially denied, written notice of the denial shall be furnished within 90 days after receipt of the claim; provided that, if special circumstances require an extension of time for processing the claim, an additional 90 days from the end of the initial period shall be allowed for processing the claim, in which event the claimant shall be furnished with a written notice of the extension prior to the termination of the initial 90-day period indicating the special circumstances requiring an extension. The written notice denying the claim shall set forth the reasons for the denial, including specific reference to pertinent provisions of the Plan on which the denial is based, a description of any additional information necessary to perfect the claim and information regarding review of the claim and its denial. (b) All disputed claims for benefits shall be submitted within 60 days after receipt by the claimant of the written notice of denial to, and decided within a reasonable period of time by, the Administrative Director or one member of the Committee designated by its Chairman. Written notice of the decision on each such claim shall be furnished to the claimant within 60 days after receipt by the Administrative Director of a request for review, unless special circumstances require an extension of time for processing, in which event an additional 60 days shall be allowed for review and the claimant shall be so notified in writing. If the claim is wholly or partially denied, such written notice shall set forth an explanation of the specific findings and conclusions on which such denial is based. A claimant may -62- review all pertinent documents and may request a review by the Committee of such a decision denying the claim. Such a request shall be made in writing and filed with the Committee within 60 days after delivery to the claimant of written notice of the decision. Such written request for review shall contain all additional information which the claimant wishes the Committee to consider. The Committee may hold a hearing or conduct an independent investigation, and the decision on review shall be made as soon as possible after the Committee's receipt of the request for review, but in no event later than the third regularly scheduled meeting of the Committee after the Committee's receipt of the request for review. Written notice of the decision on review shall be promptly furnished to the claimant and shall include specific reasons for the decision. For all purposes under the Plan, such decision on claims (where no review is requested) and decision on review (where review is requested) shall be final, binding and conclusive on all interested persons as to participation and benefits eligibility, the amount of benefits and as to any other matter of fact or interpretation relating to the Plan. In the case of a Member covered by a collective bargaining agreement, a disputed claim for benefits shall be governed by the grievance and arbitration procedures established under such agreement; provided, however, that, if such agreement permits, the Committee will review such a claim before it is referred to formal grievance procedures. 16.8 Except as otherwise provided in the Plan or the Trust Agreement, all expenses and charges incurred in the administration and operation of the Plan and the Trust Agreement shall be paid out of the Trust Fund. No compensation shall be paid by the Plan to any member of the Committee, any Trustee or the Administrative Director if employed by the Company or any Affiliate, but said persons may be reimbursed for their reasonable expenses incurred in carrying out their duties, responsibilities and authority hereunder, and the compensation, or a properly allocable portion thereof, paid to other Associates who are involved in the administration of the Plan and all other properly allowable expenses shall, to the extent not paid by the Company, be treated as administrative expenses. No bond shall be required of the members of the Committee, the Trustees or the Administrative Director, except as otherwise required by law. -63- 16.9 Any notice, election, application, instruction, designation or other form of communication required to be given or submitted by any Member, other Associate or Beneficiary shall be in such form as is prescribed from time to time by the Committee, sent by first class mail or delivered in person to the Administrative Director of the Plan, Montgomery Ward & Co., Incorporated, Montgomery Ward Plaza, Chicago, Illinois 60671, and shall be deemed to be duly given only upon actual receipt thereof by the Administrative Director. Any notice, statement, report and other communication from the Company, the Committee or the Administrative Director to any Member, other Associate or Beneficiary required or permitted by the Plan shall be deemed to have been duly given when delivered to such person or mailed by first class mail to such person at his address last appearing on the records of the Company. Each person entitled to receive a payment under the Plan shall file in accordance herewith his complete mailing address and each change therein. A check or communication mailed to any person at his address on file with the Administrative Director shall be deemed to have been received by such person for all purposes of the Plan, and neither the Committee, the Administrative Director nor any Associate or agent of the Company shall be obliged to search for or ascertain the location of any such person except as required by ERISA. If the Administrative Director shall be in doubt as to whether payments are being received by the person entitled thereto, it may, by registered mail addressed to such person at his address last known to the Administrative Director, notify such person that all future payments will be withheld until such person submits to the Administrative Director his proper mailing address and such other information as the Administrative Director may reasonably request. 16.10 Each Member shall file with the Committee such pertinent information concerning himself and his Beneficiary, and each Beneficiary shall file with the Committee such information concerning himself, as the Committee or the Administrative Director may specify, and in such manner and form as the Committee or Administrative Director may specify or provide, and no Member or Beneficiary shall have any right or be entitled to any benefits or further benefits under the Plan unless such information is filed by him or on his behalf. -64- 16.11 If the Committee receives notification from the Trustee of any trust fund established by the Company as a part of an employee benefit plan other than the Trust Fund that such Trustees have a claim against the Trust Fund by reason of overpayment or otherwise, then the Committee may, subject to the restrictions provided in Section 19.6, direct the Trustees to withhold further payments under the Plan, pay the amount of such claim to any court of competent jurisdiction or take any other action which the Committee shall deem appropriate. 16.12 The Agent for the service of legal process of the Plan shall be the Secretary of Ward. -65- SECTION 17 TERMINATION OF EMPLOYER PARTICIPATION 17.1 Any Participating Company may terminate its participation in the Plan by giving the Committee prior written notice specifying a termination date which shall be the last day of a month at least 60 days subsequent to the date such notice is received by the Committee. The Committee may terminate any Participating Company's participation in the Plan, as of any termination date specified by the Committee, for the failure of the Participating Company to make proper contributions or to comply with any other provision of the Plan and shall terminate a Participating Company's participation upon complete and final discontinuance of the contributions. In the event of any such termination, the Committee shall promptly notify the IRS and request such determination as counsel to the Plan may recommend and as the Committee may deem desirable. 17.2 Upon termination of the Plan as to any Participating Company, such Participating Company shall not make any further contributions under the Plan and no amount shall thereafter be payable under the Plan to or in respect of any Members then employed by such Participating Company except as provided in this Section 17. To the maximum extent permitted by ERISA, any rights of Members no longer employed by such Participating Company and of former Members and their Beneficiaries and Surviving Spouses under the Plan shall be unaffected by such termination and any transfers, distributions or other dispositions of the assets of the Plan as provided in this Section 17 shall constitute a complete discharge of all liabilities under the Plan with respect to such Participating Company's participation in the Plan and any Member then employed by such Participating Company. Upon receipt by the Committee of IRS approval of such termination, the full current value of such amount shall be paid from the Trust Fund in the manner described in Section 18.4 or transferred to a successor employee benefit plan which is qualified under Section 401(a) of the Code; provided, however, that in the event of any transfer of assets to a successor employee benefit plan the provisions of Section 17.3 will apply. No advances against such payments shall be made prior to such receipt of approval, but after such receipt the -66- Committee, in its sole discretion, may direct the Trustee to make one or more advances in accordance with Section 12.1. All determinations, approvals and notifications referred to above shall be in form and substance and from a source satisfactory to counsel for the Plan. To the maximum extent permitted by ERISA, the termination of the Plan as to any Participating Company shall not in any way affect any other Participating Company's participation in the Plan. 17.3 No transfer of the Plan's assets and liabilities to a successor employee benefit plan (whether by merger or consolidation with such successor plan or otherwise) shall be made unless each Member would, if either the Plan or such successor plan then terminated, receive a benefit immediately after such transfer which (after taking account of any distributions or payments to them as part of the same transaction) is equal to or greater than the benefit he would have been entitled to receive immediately before such transfer if the Plan had then been terminated. The Committee may also request appropriate indemnification from the employer or employers maintaining such successor plan before making such a transfer. -67- SECTION 18 AMENDMENT OR TERMINATION OF THE PLAN AND TRUST 18.1 Subject to the provisions of Section 16.4(c), the Board of Directors reserves the right at any time to amend, suspend, discontinue or terminate the Plan, any contributions thereunder, the Trust, in whole or in part and for any or no reason and without the consent of any Participating Company, Member, Beneficiary or Surviving Spouse; and the Committee may adopt amendments as it deems necessary or appropriate. Each Participating Company by its adoption of the Plan shall be deemed to have delegated this authority to the Board of Directors and the Committee. The Plan shall automatically be terminated upon complete and final discontinuance of contributions thereunder. 18.2 Subject to the provisions of Section 18.1, any amendment, modification, suspension or termination of any provisions of the Plan may be made retroactively if necessary or appropriate to qualify or maintain the Plan and Trust as a plan and trust meeting the requirements of Sections 401(a), 401(k), 401(m) and 501(a) of the Code or any other applicable section of law (including ERISA) and the Regulations issued thereunder. 18.3 Notice of any amendment, modification, suspension or termination of the Plan shall be given by the Board of Directors or the Committee, whichever adopts the amendment to the other and to the Trustees and all Participating Companies and, where and to the extent required by law, to Members and other interested parties. 18.4 Upon termination of the Plan, the Company shall not make any further contributions under the Plan and no amount shall thereafter be payable under the Plan in respect of any Member except as provided in this Section 18. To the maximum extent permitted by ERISA transfers, distributions or other dispositions of the assets of the Plan as provided in this Section 18 shall constitute a complete discharge of all liabilities under the Plan. The Committee shall remain in existence and all of the provisions of the Plan which in the opinion of the Committee are necessary for the execution of the Plan and the administration and distribution, transfer or other disposition of the assets of the Plan in accordance with this Section 18.4 shall remain in force. After (a) payment -68- of or provision for all expenses and charges referred to in Sections 10.4 and 10.5 and appropriate adjustment of all Accounts for such expenses and charges in the manner described in Section 10.3, and (b) adjustment for profits and losses of the Trust to such termination date in the manner described in Section 10.3 the amount in each Account shall be held, administered, and distributed, transferred or otherwise disposed of in accordance with the following provisions of this Section 18.4. Upon receipt by the Committee of IRS approval of such termination, the assets of the Plan shall be applied for the benefit of Members, former Members, Beneficiaries and Surviving Spouses, to the extent of the amounts held under the Plan for their benefit, in such manner as the Committee shall determine. All determinations, approvals and notifications referred to above shall be in form and substance and from a source satisfactory to counsel. 18.5 No transfer of the Plan's assets and liabilities to a successor employee benefit plan (whether by merger or consolidation with such successor plan or otherwise) shall be made unless each Member would, if either the Plan or such successor plan then terminated, receive a benefit immediately after such transfer which (after taking account of any distributions or payments to them as part of the same transaction) is equal to or greater than the benefit he would have been entitled to receive immediately before such transfer if the Plan had then been terminated. The Committee may also request appropriate indemnification from the employer or employers maintaining such successor plan before making such a transfer. 18.6 In no event shall any part of the funds of the Plan (other than such part as is required to pay taxes, if any, and expenses as provided in Section 10.4) be used for or diverted to any purposes other than for the exclusive benefit of Members and their Beneficiaries and Surviving Spouses under the Plan. -69- SECTION 19 GENERAL LIMITATIONS AND PROVISIONS 19.1 Each Member, former Member, Beneficiary and Surviving Spouse shall assume all risk in connection with any decrease in the value of the assets of the Trust and the Members' Accounts or special accounts and neither the Participating Companies nor the Committee shall be liable or responsible therefor. 19.2 The Trust shall be the sole source of benefits under the Plan and, except as otherwise required by ERISA, the Company, the Committee and the Administrative Director assume no liability or responsibility for payment of such benefits, and each Member, Surviving Spouse, Beneficiary or other person who shall claim the right to any payment under the Plan shall be entitled to look only to the Trust for such payment and shall not have any right, claim or demand therefor against the Company, the Committee or the Administrative Director or any member thereof, or any associate or director of the Company. 19.3 Nothing contained in the Plan shall give any associate the right to be retained in the employment of the Company or any of its subsidiaries or affiliated or associated corporations or affect the right of any such employer to dismiss any associate. The adoption and maintenance of the Plan shall not constitute a contract between the Company and any associate or consideration for, or an inducement to or condition of, the employment of any associate. 19.4 Notwithstanding any other provision of this Plan, the payment of benefits to Members and their Beneficiaries, Surviving Spouses and other eligible survivors under the Plan may be paid as a part of and concomitantly with any benefits to which he is entitled under the Retirement Security Plan. 19.5 If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due him or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so elects, be paid to his spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise -70- entitled to payment. Any such payment shall be a complete discharge of the liability of the Plan and the Trust therefor. 19.6 (a) Except insofar as may otherwise be required by law or pursuant to the terms of a Qualified Domestic Relations Order, no amount payable at any time under the Plan and the Trust shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any person and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void. If any person shall attempt to, or shall, alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any amount payable under the Plan and Trust, or any part thereof, or if by reason of his bankruptcy or other event happening at any such time such amount would be made subject to his debts or liabilities or would otherwise not be enjoyed by him, then the Committee, if it so elects, may direct that such amount be withheld and that the same or any part thereof be paid or applied to or for the benefit of such person, his spouse, children or other dependents, or any of them, in such manner and proportion as the Committee may deem proper. For purposes of the Plan, a "Qualified Domestic Relations Order" means any judgment, decree or order (including approval of a settlement agreement) which has been determined by the Committee in accordance with procedures established under the Plan, to contribute a qualified domestic relations order within the meaning of Section 414(p)(1) of the Code. (b) Notwithstanding the preceding Subsection (a) effective with respect to judgments, orders and decrees issued, and settlement agreements entered into, on or after August 5, 1997, the Plan shall not be treated as failing to meet the requirements of the preceding Subsection (a) solely by reason of any offset of a Member's benefits against an amount that the Member is ordered or required to pay to the Plan as a result of the Member's breach of fiduciary duty to the Plan or commission of a criminal act against the Plan to the extent permitted under Section 401(a)(13)(C)- (D) of the Code. -71- 19.7 If the Committee cannot ascertain the whereabouts of any person to whom a payment is due under the Plan, and if, after five years from the date such payment is due, a notice of such payment due is mailed to the last known address of such person, as shown on the records of the Committee or the Company, and within three months after such mailing such person has not made written claim therefor, the Committee, if it so elects, after receiving advice from counsel to the Plan, may direct that such payment and all remaining payments otherwise due to such person be cancelled on the records of the Plan and the amount thereof applied to reduce the contributions of the Company, and upon such cancellation, the Plan and the Trust shall have no further liability therefor except that, in the event such person later notifies the Committee of his whereabouts and requests the payment or payments due to him under the Plan, the amount so applied shall be paid to him as provided in Section 12. 19.8 Any and all rights or benefits accruing to any persons under the Plan shall be subject to the terms of the trust agreement which Ward shall enter into with the Trustees providing for the administration of the Trust Fund. 19.9 Upon such terms and conditions as the Committee may approve, and subject to any required IRS approval, benefits may be provided under the Plan to a Member with respect to any period of his prior employment by any organization, and such benefits may be provided for, in whole or in part, by funds transferred, directly or indirectly (including a rollover from an individual retirement account, or an individual retirement annuity as described in Section 408 of the Code), to the Trust from an employee benefit plan of such organization which qualified under Section 401(a) of the Code. 19.10 Effective as of December 12, 1994, notwithstanding any provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. 19.11 Whenever used in the Plan the masculine gender includes the feminine. -72- 19.12 The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions of the Plan. 19.13 The Plan and all rights thereunder shall be governed by and construed in accordance with ERISA and the laws of the State of Illinois. -73- SECTION 20 TOP HEAVY PROVISIONS 20.1 The Plan will be considered a Top Heavy Plan for any Plan Year if it is determined to be a Top Heavy Plan as of the last day of the preceding Plan Year. Notwithstanding any other provisions in the Plan, the provisions of this Section 20 shall apply and supersede all other provisions in the Plan with respect to a Plan Year with respect to which the Plan is determined to be a Top Heavy Plan. 20.2 For purposes of this Section 20 and as otherwise used in this Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean any entity affiliated with the Company within the meaning of Section 414(b), 414(c), 414(m) or 414(o) of the Code, except that for purposes of applying the provisions hereof with respect to the limitation on contributions, Section 415(h) of the Code shall apply. (b) "Aggregation Group" shall mean the group composed of each qualified retirement plan of the Company or an Affiliate in which a Key Associate is a participant and each other qualified retirement plan of the Company or an Affiliate which enables a plan of the Company or an Affiliate in which a Key Associate is a participant to satisfy Sections 401(a)(4) or 410(b) of the Code. In addition, the Company may choose to treat any other qualified retirement plan as a member of the Aggregation Group if such Aggregation Group will continue to satisfy Sections 401(a)(4) and 410(b) of the Code with such plan being taken into account. (c) "Key Associate" shall mean a "Key Employee" as defined in Section 416(i)(1) and (5) of the Code and Regulations promulgated thereunder. (d) "Top Heavy Plan" shall mean a "Top Heavy Plan" as defined in Section 416(g) of the Code and Regulations promulgated thereunder. 20.3 Subject to Section 20.4, for each Plan Year that the Plan is a Top Heavy Plan, the Company's contribution (including contributions attributable to salary reduction) allocable to the Account of each Member who is in Service at the end of the Plan Year and who is not a Key Associate, shall not be less than the lesser of -74- (a) three percent of such Member's compensation (as described in Section 415 of the Code), or (b) the percentage at which contributions for such Plan Year are made and allocated on behalf of the Key Associate for whom such percentage is the highest. For the purpose of determining the appropriate percentage under Subsection (b), all defined contribution plans required to be included in an Aggregation Group shall be treated as one plan. Subsection (b) shall not be applicable if the Plan is required to be included in an Aggregation Group which enables a defined benefit plan also required to be included in said Aggregation Group to satisfy Sections 401(a)(4) or 410(b) of the Code. 20.4 (a) For each Plan Year that the Plan is a Top Heavy Plan, one shall be substituted for 125% as the multiplicand of the dollar limitation in determining the denominator of the defined benefit plan fraction and of the defined contribution plan fraction for purposes of Section 415(e) of the Code. (b) If, after substituting 90% for 60% wherever the latter appears in Section 416(g) of the Code, the Plan is not determined to be a Top Heavy Plan, the provisions of Subsection (a) hereof shall not be applicable if the minimum contribution by the Company allocable to the Account of any Member who is not a Key Associate as specified in Section 20.3 is determined by substituting "four percent" for "three percent". -75- 20.5 The Committee shall, to the extent permitted by the Code and in accordance with Regulations, apply the provisions of this Section 20 by taking into account the benefits payable and the contributions made under any other plans maintained by the Company or any of its subsidiaries or affiliated or associated entities which are qualified under Section 401(a) of the Code to prevent inappropriate omissions or duplication of minimum benefits or contributions. MONTGOMERY WARD & CO., INCORPORATED By: /s/ Philip Dobias ----------------------------------- Its: VP Comp, Benefits and HR Strategy ----------------------------------- ATTEST: By: /s/ Jill S. Chapman -------------------------- Its: Benefits Director -------------------------- -76- EX-10.(X)(D) 11 SUPPLEMENTAL EMPLOYMENT AGREEMENT 10.(x)(D) SUPPLEMENTAL EMPLOYMENT AGREEMENT --------------------------------- THIS SUPPLEMENTAL AGREEMENT IS ADDED TO THE EMPLOYMENT AGREEMENT OF TOM GRIMES DATED FEBRUARY 3, 1997 As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997 necessitated the re-approval by the Court of all Senior Executive Employment Agreements. This letter affirms this Supplemental Employment Agreement with you. The terms of your original agreement as a member of the Senior Executive Team at Montgomery Ward remain the same (including your G.E. Guarantee of your base and bonus payments) except that decisions concerning equity considerations will be deferred until Montgomery Ward emerges from bankruptcy with a confirmed Plan of Reorganization. The following provisions are added to and modify your existing Employment Agreement: EQUITY CONSIDERATION - - -------------------- Due to Chapter 11 filing, the specifics of long term equity awards to individual participants are not possible to announce at this time. However, upon the company's emergence from bankruptcy, you will be eligible for participation in any equity plans at a level consistent with your Executive Committee peers, provided that you are actively employed by Montgomery Ward at such time and have a satisfactory performance evaluation. EMERGENCE PLAN - - -------------- In lieu of equity participation during the Chapter 11 process, you will participate in a special Emergence Bonus Plan (copy attached) that has a target range of $250,000 to $625,000 that is payable upon Montgomery Ward's emergence from bankruptcy with a confirmed Plan of Reorganization. BENEFITS & PERQUISITES - - ---------------------- In addition to all normal company benefit plans, you will participate in the following Executive Benefits Plan: . Annual Physical Examination . Executive Accident Insurance . Executive Medical Coverage . Executive Vacation TERMINATION PLAN - - ---------------- The term of this employment agreement is for October 1, 1997 until October 1, 2000. If your employment is terminated by Montgomery Ward for any reason other than "Cause" as defined below or your voluntary resignation, you will receive a lump sum payment equal to the greater of your base salary for the remainder of the agreement period; or, your base salary for a twenty-four month period. In addition, you will receive Executive Outplacement Services and continue to participate in Executive Benefits Plans which includes the Health Care Plan along with "Benefits and Perquisites" described above for the twenty- four month period following your separation. If this agreement is not renewed at the end of its term, you will receive within thirty (30) days following the end of this agreement a lump sum payment equal to twenty-four months base salary, as well as the outplacement and Executive Benefits. "Cause" shall mean (i) your willful failure to substantially perform your duties hereunder, (ii) your willful failure to follow a written, lawful order or written directive for the Board of Directors or Chief Executive Officer of the company, or (iii) your conviction of any kind of felony or any misdemeanor involving moral turpitude. For purposes of this paragraph, no act, or failure to act, on your part will be considered "willful" unless such act, or failure to act by you was not in good faith and was without reasonable belief that your action or omission was in the best interest of the Company. For purposes of this agreement, any diminution of your job title, executive committee membership, base salary, target bonus, other compensation or benefits, or a reduction in your job responsibilities, or a relocation of your job location of greater than 50 miles from the present location without your prior written approval during the terms of this agreement, will allow you to elect the terms of this section as if you were terminated without "Cause". However, such election must be done in writing to the Chairman & CEO within sixty (60) days of the triggering event. CHANGE OF CONTROL - - ----------------- After a Change of Control Event as defined below, and for a period of three years after such date, if you are separated from the Company under provisions in the Termination Plan above (including any of the diminutions, reductions or relocation provisions under which you may elect to leave the Company), the lump sum severance payment will be three years base salary, plus three times your target bonus amount. In addition, your Executive Benefits will be extended to three years from your separation date. A "Change of Control" shall mean: (i) any sale, lease, license, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and for assets of the Company or Holding (without regard to Signature); (ii) the possession by any person or entity (other than Holding, General Electric Capital Corporation or an affiliate of either of them) of beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of either (A) a number of securities carrying a greater voting power than General Electric Capital Corporation and its affiliates taken together or (B) over 50% of the then outstanding voting securities of the Company (entitled to vote generally in the election of directors) ("Outstanding Company Voting Securities"); or (iii) merger, consolidation or reorganization ("Business Combination") unless following such Business Combination all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from the Business Combination in substantially the same proportions as their ownership immediately prior to the Business Combination of the Outstanding Company Voting Securities; provided that a Change of Control shall not be construed to include any transaction that occurs solely as a result of transfer of equity to holders of claims against the Company or Holding or any affiliate on account of such claims in connection with the consummation of a plan of reorganization for the Company or Holding or any affiliate in connection with the proceedings under Chapter 11 of the United States Bankruptcy Code pending at the date of hereof. Except as provided in the following sentence, payments pursuant to this employment agreement ("Payments") shall not exceed the largest sum ("Parachute Limitation") which will not result, directly or indirectly, in the treatment of any amount paid or payable by the Company or any successor to you (whether or not pursuant to this employment agreement, and including the Payments) as an Excess Parachute Payment. Notwithstanding the preceding sentence, you shall receive the full amount of the Payments without regard to the Parachute Limitation if you would realize a greater aftertax amount receiving the full amount of the Payments without regard to the Parachute Limitation than you would realize by receiving the Payments limited to the Parachute Limitation as provided in the preceding sentence. All computations and determinations required by the preceding paragraph shall be made by your accountant, acting in good faith. The computations and determinations made any time by your accountant shall affect only those Payments not yet made pursuant to this employment agreement. For purposes of this employment agreement, the term "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" has under section 280G of the Internal Revenue Code of 1986, as amended and the regulations thereunder. PAYMENT GUARANTEE - - ----------------- In the event of your separation from Montgomery Ward for reasons other than "Cause" or voluntary resignation, to the extent that you are eligible to receive a guaranteed payment from General Electric Capital Corporation of base salary and/or bonus amounts due to non-payment under your previous compensation agreement with Montgomery Ward, then the obligation of the Company under this agreement shall be reduced dollar for dollar of any amount representing base salary or bonus amounts which would become payable by General Electric Capital Corporation under that compensation guarantee. NON-COMPETE - - ----------- In the event that you voluntarily leave Montgomery Ward, you will be bound by a non-compete agreement that provides that you will not be directly employed by nor perform work as director, officer, independent contractor, partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc., Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a period of one (1) year following your termination date. This Agreement will be subject to the Laws of Illinois where applicable. /s/ Tom Grimes -------------------------- November 6, 1997 -------------------------- Date /s/ Robert A. Kasenter -------------------------- EX-10.(XIV)(B) 12 AMENDMENT TO EMPLOYMENT AGREEMENT 10.(xiv)(B) AMENDMENT --------- THIS AMENDMENT IS ADDED TO THE EMPLOYMENT AGREEMENT OF SPENCER H. HEINE DATED APRIL 13, 1997 As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997 necessitated the re-approval by the Court of all Senior Executive Employment Agreements. This letter re-affirms our April 13, 1997 Employment Agreement with you and adds this Amendment as a part of your Employment Agreement going forward. The terms of your agreement as a member of the Senior Executive Team at Montgomery Ward remain the same except that decisions concerning equity considerations will be deferred until Montgomery Ward emerges from bankruptcy with a confirmed Plan of Reorganization and the following provisions are added to and modify your existing April 13, 1997 Employment Agreement: EQUITY CONSIDERATION - - -------------------- Due to Chapter 11 filing, the specifics of long term equity awards to individual participants are not possible to announce at this time. However, upon the company's emergence from bankruptcy, you will be eligible for participation in any equity plans at a level consistent with your Executive Committee peers, provided that you are actively employed by Montgomery Ward at such time and have a satisfactory performance evaluation. EMERGENCE PLAN - - -------------- In lieu of equity participation during the Chapter 11 process, you will participate in a special Emergence Bonus Plan (copy attached) that has a target range of $200,000 to $500,000 that is payable upon Montgomery Ward's emergence from bankruptcy with a confirmed Plan of Reorganization. BENEFITS & PERQUISITES - - ---------------------- In addition to all normal company benefit plans, you will participate in the following Executive Benefits Plan: . Annual Physical Examination . Executive Accident Insurance . Executive Medical Coverage . Executive Vacation TERMINATION PLAN - - ---------------- The term of this employment agreement is for October 1, 1997 until October 1, 2000. If your employment is terminated by Montgomery Ward for any reason other than "Cause" as defined below or your voluntary resignation, you will receive a lump sum payment equal to the greater of your base salary for the remainder of the agreement period; or, your base salary for a twenty-four month period. In addition, you will receive Executive Outplacement Services and continue to participate in Executive Benefits Plans which includes the Health Care Plan along with "Benefits and Perquisites" described above for the twenty- four month period following your separation. If this agreement is not renewed at the end of its term, you will receive within thirty (30) days following the end of this agreement a lump sum payment equal to twenty-four months base salary, as well as the outplacement and Executive Benefits. "Cause" shall mean (i) your willful failure to substantially perform your duties hereunder, (ii) your willful failure to follow a written, lawful order or written directive for the Board of Directors or Chief Executive Officer of the company, or (iii) your conviction of any kind of felony or any misdemeanor involving moral turpitude. For purposes of this paragraph, no act, or failure to act, on your part will be considered "willful" unless such act, or failure to act by you was not in good faith and was without reasonable belief that your action or omission was in the best interest of the Company. For purposes of this agreement, any diminution of your job title, executive committee membership, base salary, target bonus, other compensation or benefits, or a reduction in your job responsibilities, or a relocation of your job location of greater than 50 miles from the present location without your prior written approval during the terms of this agreement, will allow you to elect the terms of this section as if you were terminated without "Cause". However, such election must be done in writing to the Chairman & CEO within sixty (60) days of the triggering event. CHANGE OF CONTROL - - ----------------- After a Change of Control Event as defined below, and for a period of three years after such date, if you are separated from the Company under provisions in the Termination Plan above (including any of the diminutions, reductions or relocation provisions under which you may elect to leave the Company), the lump sum severance payment will be three years base salary, plus three times your target bonus amount. In addition, your Executive Benefits will be extended to three years from your separation date. A "Change of Control" shall mean: (i) any sale, lease, license, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and for assets of the Company or Holding (without regard to Signature); (ii) the possession by any person or entity (other than Holding, General Electric Capital Corporation or an affiliate of either of them) of beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of either (A) a number of securities carrying a greater voting power than General Electric Capital Corporation and its affiliates taken together or (B) over 50% of the then outstanding voting securities of the Company (entitled to vote generally in the election of directors) ("Outstanding Company Voting Securities"); or (iii) merger, consolidation or reorganization ("Business Combination") unless following such Business Combination all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from the Business Combination in substantially the same proportions as their ownership immediately prior to the Business Combination of the Outstanding Company Voting Securities; provided that a Change of Control shall not be construed to include any transaction that occurs solely as a result of transfer of equity to holders of claims against the Company or Holding or any affiliate on account of such claims in connection with the consummation of a plan of reorganization for the Company or Holding or any affiliate in connection with the proceedings under Chapter 11 of the United States Bankruptcy Code pending at the date of hereof. Except as provided in the following sentence, payments pursuant to this employment agreement ("Payments") shall not exceed the largest sum ("Parachute Limitation") which will not result, directly or indirectly, in the treatment of any amount paid or payable by the Company or any successor to you (whether or not pursuant to this employment agreement, and including the Payments) as an Excess Parachute Payment. Notwithstanding the preceding sentence, you shall receive the full amount of the Payments without regard to the Parachute Limitation if you would realize a greater aftertax amount receiving the full amount of the Payments without regard to the Parachute Limitation than you would realize by receiving the Payments limited to the Parachute Limitation as provided in the preceding sentence. All computations and determinations required by the preceding paragraph shall be made by your accountant, acting in good faith. The computations and determinations made any time by your accountant shall affect only those Payments not yet made pursuant to this employment agreement. For purposes of this employment agreement, the term "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" has under section 280G of the Internal Revenue Code of 1986, as amended and the regulations thereunder. NON-COMPETE - - ----------- In the event that you voluntarily leave Montgomery Ward, you will be bound by a non-compete agreement that provides that you will not be directly employed by nor perform work as director, officer, independent contractor, partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc., Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a period of one (1) year following your termination date. This Agreement will be subject to the Laws of Illinois where applicable. /s/ Spencer Heine ----------------------------- November 3, 1997 ----------------------------- Date /s/ Robert A. Kasenter ----------------------------- EX-10.(XIV)(C) 13 LETTER AGREEMENT DATED 11/3/1997 10.(xiv)(C) November 3, 1997 Spencer Heine Executive Vice President General Counsel and President Montgomery Ward Properties Montgomery Ward Chicago, IL 60671 Dear Spencer: As we discussed, last Friday, October 31, 1997, the court approved our Executive Compensation Plan for Executive Committee members. A copy of the court order is attached. This package includes the pieces of your personal compensation and security plan for your position at Montgomery Ward. Your plan includes: 1.) The assumption of your employment agreement dated April 11, 1997 (attached) that gives specific details on your compensation plan with Wards. 2.) The Wards Executive Committee Severance Plan. 3.) The Montgomery Ward Special Emergence Bonus Plan. Please read your agreements and plan documents very carefully. Payments under these plans are considered "administrative" claims and have a very secure priority in our claims payment. If you have any questions, please contact Bob Kasenter and he will provide you with any answers. Once you are comfortable with your participation in your plans, please sign the documents and return them to Bob. These plans provide us with the incentives and the security we requested so that we can focus on the turnaround of our company. Now it is up to us to make it happen. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman and C.E.O. Attachment [LETTERHEAD APPEARS HERE] MONTGOMERY WARD SPECIAL EMERGENCE BONUS PLAN Spencer Heine EVP, General Counsel and Montgomery Ward Properties Montgomery Ward Dear Spencer: You have been selected to participate in a special Emergence Bonus Plan for members of the Montgomery Ward Executive Committee. This Plan will pay you a lump-sum bonus based upon the date we have a court approved Plan of Reorganization (POR). Your bonus potential is as follows: BONUS AMOUNT POR APPROVAL AS OF ------------ ------------------ $500,000 April 1, 1999 $400,000 October 1, 1999 $200,000 After October 1, 1999 The bonus amount earned based upon the date of the POR's approval will be paid within thirty (30) days of the approval. This bonus payment will be subject to the following rules: 1. Any award under this plan will be made as a lump sum payment and will be subject to normal tax withholding. 2. In order to receive an award payment under this plan, except for a Change of Control, the participant must be actively employed by the Company upon approval of a POR from the bankruptcy court. 3. In the event of a Change of Control as defined in the Wards Executive Committee Plan, participants who are actively employed as of the date of the change of control and who are no longer employed by the company upon approval from the bankruptcy court of a POR will be eligible for an award under the plan if the separation date is within six months of the approved POR. By copy of this letter, you are offered participation in this Special Emergence Bonus Plan. If you agree to participate and be governed by the rules of this plan, please sign your acceptance below and return this letter to Bob Kasenter. This plan offers us an opportunity to earn a bonus for successfully doing what we want to do.....emerge from bankruptcy quickly. With your help, we will accomplish this goal. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman & CEO I have read the Wards Executive Committee Severance Plan and understand its terms and have voluntarily signed this Agreement thereby agreeing to participate in this Plan and accept its provisions. Spencer H. Heine - - ---------------------------- Print Executive's Name /s/ Spencer H. Heine - - ---------------------------- Executive's Signature 11/3/97 /s/ Robert A. Kasenter - - ---------------------------- --------------------------- Date EX-10.(XVI)(A) 14 EMPLOYMENT AGREEMENT DATED 9/2/1997 10.(xvi)(A) September 2, 1997 Thomas J. Paup 1353 Park Lane Pelham Manor, NY 10803 Dear Tom: As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997 necessitated the approval by the Court of all Senior Executive Employment Agreements. This letter confirms our employment agreement with you. The terms of your agreement as a member of the Senior Executive Team at Montgomery Ward are as follows: POSITION - - -------- Your job title is EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. You will be a member of the Montgomery Ward Executive Committee and be responsible for all Controller, Tax, Audit, Accounting and Systems activities for the Company. BASE SALARY - - ----------- Your annual base salary is $400,000 and is paid semi-monthly. Any salary adjustments will require approval of the Compensation Committee of the Board of Directors, and until our emergence from bankruptcy, the Court. We anticipate the first salary review to occur in May, 1998. SHORT TERM BONUS - - ---------------- Your short term incentive plan target is $150,000 annually. Based upon the achievement of specific goals as set by the Chairman & CEO, or his designee, and approved by the Compensation Committee of the Board of Directors, you may earn from zero up to 150% of your annual target amount. Some or all of your annual target award may be canceled due to non- achievement of your personal or total company objectives. For 1997 and 1998 your annual target award of $150,000 is guaranteed. HIRING BONUS - - ------------ You will receive a hiring bonus of $50,000 within 30 days of your employment date. Thomas J. Paup September 2, 1997 Page 2 EQUITY CONSIDERATION - - -------------------- Due to Chapter 11 filing, the specifics of long term equity awards to individual participants are not possible to announce at this time. However, upon the company's emergence from bankruptcy, you will be eligible for participation in any equity plans at a level consistent with your Executive Committee peers, provided that you are actively employed by Montgomery Ward at such time and have a satisfactory performance evaluation. EMERGENCE PLAN - - -------------- In lieu of equity participation during the Chapter 11 process, you will participate in a special Emergence Bonus Plan (copy attached) that has a target of $400,000 that is payable upon Montgomery Ward's emergence from bankruptcy with a confirmed Plan of Reorganization. BENEFITS & PERQUISITES - - ---------------------- In addition to all normal company benefit plans, you will participate in the following Executive Benefits Plan: . Annual Physical Examination . Executive Accident Insurance . Executive Medical Coverage . Executive Vacation TERM OF EMPLOYMENT - - ------------------ The term of this employment agreement is for September 22, 1997 until September 22, 2000. TERMINATION PLAN - - ---------------- If your employment is terminated by Montgomery Ward for any reason other than "Cause" as defined below or your voluntary resignation, you will receive a lump sum payment equal to the greater of your base salary for the remainder of the agreement period; or, your base salary for a twenty-four month period. Thomas J. Paup September 2, 1997 Page 3 In addition, you will receive Executive Outplacement Services and continuation of Executive Benefits for the twenty-four month period following your separation. If this agreement is not renewed at the end of its term, you will receive within thirty (30) days following the end of this agreement a lump sum payment equal to twenty-four months base salary, as well as the outplacement and severance benefits above. "Cause" shall mean (i) your willful failure to substantially perform your duties hereunder, (ii) your willful failure to follow a written, lawful order or written directive for the Board of Directors or Chief Executive Officer of the company, or (iii) your conviction of any kind of felony or any misdemeanor involving moral turpitude. For purposes of this paragraph, no act, or failure to act, on your part will be considered "willful" unless such act, or failure to act by you was not in good faith and was without reasonable belief that your action or omission was in the best interest of the Company. For purposes of this agreement, any diminution of your job title, executive committee membership, base salary, target bonus, other compensation or benefits, or a reduction in your job responsibilities, or a relocation of your job location of greater than 50 miles from the present location without your prior written approval during the terms of this agreement, will allow you to elect the terms of this section as if you were terminated without "Cause." However, such election must be done in writing to the Chairman & CEO within sixty (60) days of the triggering event. CHANGE OF CONTROL - - ----------------- A Change of Control is defined as an event where the Company is sold to a third party (not including re-organization as a result of the emergence from bankruptcy). After a Change of Control event and for a period of three years after such date, if you are separated from the Company under provisions in the Termination Plan above (including any of the diminutions, reductions or relocation provisions under which you may elect to leave the Company), the lump sum severance payment will be three years base salary, plus three times your target bonus amount. In addition, your Executive Benefits will be extended to three years from your separation date. Thomas J. Paup September 2, 1997 Page 4 NON-COMPETE - - ----------- In the event that you voluntarily leave Montgomery Ward, you will be bound by a non-compete agreement that provides that you will not be directly employed by nor perform work as director, officer, independent contractor, partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc., Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a period of one (1) year following your termination date. RELOCATION - - ---------- Montgomery Ward will provide you with a relocation plan, including movement of household goods, househunting trips, home purchase plan at 100% of the appraised value of your home, and payment of your closing costs on your home purchase, plus up to two points on your financing of a new home. Your temporary housing expenses in the Chicago area for the first six months (or until relocation if sooner) will be paid by Montgomery Ward. You will receive a gross up for the taxes you incur as a result of your relocation. This agreement will be subject to the Laws of Illinois where applicable. If you are in agreement with this offer letter, please sign for your acceptance below and return it to me. Sincerely, /s/ Robert A. Kasenter Robert A. Kasenter Agreed: /s/ Thomas J. Paup -------------------------- Thomas J. Paup September 2, 1997 -------------------------- Date c: Roger Goddu Burnie Donoho EX-10.(XVI)(B) 15 LETTER AGREEMENT DATED 9/4/1997 10.(xvi)(B) September 4, 1997 Mr. Thomas J. Paup 1353 Park Lane Pelham Manor, NY 10803 Dear Tom: Reference is made to your Compensation Agreement (the "Agreement") dated as of September 2, 1997, with Montgomery Ward & Co., Incorporated (the "Company"). In order to induce you to accept the offer of employment contained in the Agreement, General Electric Capital Corporation ("GE Capital"), as a principal shareholder in the Company, hereby agrees with you that if, for any reason other than termination of your employment, either voluntarily by you or for "cause" by the Company, the Company shall fail to pay to you the base salary for the first three years of such Agreement and the guaranteed bonuses for each of the first two years of such Agreement and the Emergence Bonus, then GE Capital shall pay such amounts to you as provided in and subject to the conditions of the Agreement. This obligation on the part of GE Capital shall be triggered by your written notice to GE Capital that the Company has ceased to make such payments as required by such Agreement. Sincerely, General Electric Capital Corporation By /s/ Edward D. Stewart ------------------------------ Edward D. Stewart Executive Vice President EX-10.(XVI)(C) 16 LETTER AGREEMENT DATED 11/3/1997 10.(xvi)(C) November 3, 1997 Tom Paup Executive Vice President Finance & C.F.O. Montgomery Ward Chicago, IL 60671 Dear Tom: As we discussed, last Friday, October 31, 1997, the court approved our Executive Compensation Plan for Executive Committee members. A copy of the court order is attached. This package includes the pieces of your personal compensation and security plan for your position at Montgomery Ward. Your plan includes: 1.) Your employment agreement dated September 2, 1997 continues to have guarantees of your base salary and specified bonuses as written in the GECC agreement attached. We fully expect that these payments will be made by Montgomery Ward. But, if they are not paid by Wards, GE will pay them. 2.) The Wards Executive Committee Severance Plan. 3.) The Montgomery Ward Special Emergence Bonus Plan. Please read your severance and emergence plan documents very carefully. Payments under these plans are considered "administrative" claims and have a very secure priority in our claims payment. If you have any questions, please contact Bob Kasenter and he will provide you with any answers. Once you are comfortable with your participation in your plans, please sign the documents and return them to Bob. These plans provide us with the incentives and the security we requested so that we can focus on the turnaround of our company. Now it is up to us to make it happen. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman and C.E.O. Attachment [LETTERHEAD OF MONTGOMERY WARD APPEARS HERE] MONTGOMERY WARD SPECIAL EMERGENCE BONUS PLAN Thomas Paup EVP Finance & CFO Montgomery Ward Dear Tom: You have been selected to participate in a special Emergence Bonus Plan for members of the Montgomery Ward Executive Committee. This Plan will pay you a lump-sum bonus based upon the date we have a court approved Plan of Reorganization (POR). Your bonus potential is as follows:
Bonus Amount POR APPROVAL AS OF ------------ ----------------------- $ 500,000 April 1, 1999 $ 400,000 October 1, 1999 $ 200,000 After October 1, 1999
The bonus amount earned based upon the date of the POR's approval will be paid within thirty (30) days of the approval. This bonus payment will be subject to the following rules: 1. Any award under this plan will be made as a lump sum payment and will be subject to normal tax withholding. 2. In order to receive an award payment under this plan, except for a Change of Control, the participant must be actively employed by the Company upon approval of a POR from the bankruptcy court. 3. In the event of a Change of Control as defined in the Wards Executive Committee Plan, participants who are actively employed as of the date of the change of control and who are no longer employed by the company upon approval from the bankruptcy court of a POR will be eligible for an award under the plan if the separation date is within six months of the approved POR. By copy of this letter, you are offered participation in this Special Emergence Bonus Plan. If you agree to participate and be governed by the rules of this plan, please sign your acceptance below and return this letter to Bob Kasenter. This plan offers us an opportunity to earn a bonus for successfully doing what we want to do.....emerge from bankruptcy quickly. With your help, we will accomplish this goal. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman & CEO I have read the Wards Executive Committee Severance Plan and understand its terms and have voluntarily signed this Agreement thereby agreeing to participate in this Plan and accept its provisions. Thomas J. Paup - - --------------------------------------- Print Executive's Name /s/ Thomas J. Paup - - --------------------------------------- Executive's Signature 11/13/97 /s/ Robert A. Kasenter - - --------------------------------------- ------------------------------- Date EX-10.(XVII)(A) 17 LETTER AGREEMENT DATED 4/30/1997 10.(xvii)(A) CONFIDENTIAL ------------ March 17, 1997 Kevin Freeman 105 Harbor Drive Unit 128 Stamford, CT 06902 Dear Kevin: This letter confirms our offer to you as Executive Vice President, Store Operations for Montgomery Ward. You will report to Burnie Donoho, Vice Chairman and Chief Operating Officer. You will be a member of the Montgomery Ward Executive Committee. Your compensation plan will include the following: 1.) Base salary of $450,000 annually, paid semi-monthly. 2.) Target bonus on the Performance Management Plan of $150,000. Based upon the achievement of superior performance against specific objectives for the year, you have the opportunity to earn up to 150% of your target bonus. For fiscal 1997, your target bonus of $150,000 will be guaranteed. For fiscal 1998, $75,000 of your target bonus will be guaranteed. 3.) You will receive a hiring bonus of $50,000 within 30 days of employment to handle miscellaneous losses incurred by the move. 4.) You will participate in the senior officer perquisites, including; financial counselling, tax assistance, executive medical, and annual physical examination. 5.) Montgomery Ward will provide you with a relocation plan, including movement of household goods, househunting trips, home purchase plan at 100% of the appraised value of your home, and payment of your closing costs on your home purchase, plus up to two points on your financing of a new home. Your temporary housing expenses in the Chicago area for the first six months (or until relocation if sooner) will be paid by Montgomery Ward. You will receive a gross up for the taxes you incur as a result of your relocation. Kevin Freeman March 17, 1997 Page 2 6.) As soon as possible after your start date, you will receive a stock option for 200,000 shares of Montgomery Ward Holding stock at the 1997 fair value. These options will vest as follows: 80,000 - April 1, 1998 60,000 - April 1, 1999 60,000 - April 1, 2000 All stock options in point 6 to the Terms and Conditions of the Stockholders Agreement. (A copy of the current 10-Q is included). 7.) If Montgomery Ward initiates a separation of your employment for any reason other than "Cause" as defined below, you will receive: A) Your base salary through April 1, 2000, however, not less than twelve months. B) The continuation of the vesting of your stock and stock options through April 1, 2000. "Cause" shall mean (i) your willful failure to substantially perform your duties hereunder, (ii) your willful failure to follow a written, lawful order or written directive from the Board of Directors or Chief Executive Officer of the company, or (iii) your conviction of any kind of felony or any misdemeanor involving moral turpitude. For purposes of this paragraph, no act, failure to act, on your part shall be considered "willful" unless such act, or failure to act by you was not in good faith and was without reasonable belief that your action or omission was in the best interest of the Company. If you voluntarily leave Montgomery Ward, or are separated for "Cause", you will receive no severance payments, nor will your stock continue to vest beyond your separation date. Kevin Freeman March 17, 1997 Page 3 8.) The non-compete provision of the Stockholder's Agreement is modified for you to provide only a one year non-compete period following any separation from Montgomery Ward; and, such non-competition will apply only to Sears, J.C. Penney and Toys 'R Us. I am happy that you are considering joining Montgomery Ward. If you are in agreement with this letter, please sign below and return it to me whereupon it will become our binding agreement. I am certain that your management ability can help move Montgomery Ward to the premier position in the Industry. Sincerely, /s/ Robert A. Kasenter Robert A. Kasenter Executive Vice President Human Resources cc: Roger Goddu Burnie Donoho /s/ Kevin Freeman --------------------------------- Kevin Freeman 3-19-97 --------------------------------- Date EX-10.(XVII)(B) 18 LETTER AGREEMENT DATED 4/30/1997 10.(xvii)(B) April 30, 1997 Mr. Kevin Freeman 105 Harbor Drive, #128 Stamford, Connecticut 06902 Dear Kevin: Reference is made to your Compensation Agreement (the "Agreement") dated as of March 17, 1997, with Montgomery Ward & Co., Incorporated (the "Company"). In order to induce you to accept the offer of employment contained in the Agreement, General Electric Capital Corporation ("GE Capital"), as a principal shareholder in the Company, hereby agrees with you that if, for any reason other than termination of your employment, either voluntarily by you or for "cause" by the Company, the Company shall fail to pay to you the base salary for the first three years of such Agreement and the guaranteed bonuses for each of the first two years of such Agreement, then GE Capital shall pay such amounts to you as provided in and subject to the conditions of the Agreement. This obligation on the part of GE Capital shall be triggered by your written notice to GE Capital that the Company has ceased to make such payments as required by such Agreement. Very truly yours, General Electric Capital Corporation By: /s/ Edward D. Stewart ------------------------------ Edward D. Stewart Executive Vice President EX-10.(XVII)(C) 19 LETTER AGREEMENT DATED 11/3/1997 10.(xvii)(C) November 3, 1997 Kevin Freeman Executive Vice President Store Operations Montgomery Ward Chicago, IL 60671 Dear Kevin: As we discussed, last Friday, October 31, 1997, the court approved our Executive Compensation Plan for Executive Committee members. A copy of the court order is attached. This package includes the pieces of your personal compensation and security plan for your position at Montgomery Ward. Your plan includes: 1.) Your employment agreement dated March 17, 1997 continues to have guarantees of your base salary and specified bonuses as written in the GECC agreement attached. We fully expect that these payments will be made by Montgomery Ward. But, if they are not paid by Wards, GE will pay them. 2.) The Wards Executive Committee Severance Plan. 3.) The Montgomery Ward Special Emergence Bonus Plan. Please read your severance and emergence plan documents very carefully. Payments under these plans are considered "administrative" claims and have a very secure priority in our claims payment. If you have any questions, please contact Bob Kasenter and he will provide you with any answers. Once you are comfortable with your participation in your plans, please sign the documents and return them to Bob. These plans provide us with the incentives and the security we requested so that we can focus on the turnaround of our company. Now it is up to us to make it happen. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman and C.E.O. Attachment [LETTERHEAD OF WARDS APPEARS HERE] MONTGOMERY WARD SPECIAL EMERGENCE BONUS PLAN Kevin Freeman EVP Store Operations Montgomery Ward Dear Kevin: You have been selected to participate in a special Emergence Bonus Plan for members of the Montgomery Ward Executive Committee. This Plan will pay you a lump-sum bonus based upon the date we have a court approved Plan of Reorganization (POR). Your bonus potential is as follows: BONUS AMOUNT POR APPROVAL AS OF ------------ --------------------- $562,500 April 1, 1999 $450,000 October 1, 1999 $225,000 After October 1, 1999 The bonus amount earned based upon the date of the POR's approval will be paid within thirty (30) days of the approval. This bonus payment will be subject to the following rules: 1. Any award under this plan will be made as a lump sum payment and will be subject to normal tax withholding. 2. In order to receive an award payment under this plan, except for a Change of Control, the participant must be actively employed by the Company upon approval of a POR from the bankruptcy court. 3. In the event of a Change of Control as defined in the Wards Executive Committee Plan, participants who are actively employed as of the date of the change of control and who are no longer employed by the company upon approval from the bankruptcy court of a POR will be eligible for an award under the plan if the separation date is within six months of the approved POR. By copy of this letter, you are offered participation in this Special Emergence Bonus Plan. If you agree to participate and be governed by the rules of this plan, please sign your acceptance below and return this letter to Bob Kasenter. This plan offers us an opportunity to earn a bonus for successfully doing what we want to do.....emerge from bankruptcy quickly. With your help, we will accomplish this goal. Sincerely, /s/ Roger V. Goddu Roger V. Goddu Chairman & CEO I have read the Wards Executive Committee Severance Plan and understand its terms and have voluntarily signed this Agreement thereby agreeing to participate in this Plan and accept its provisions. Kevin Freeman - - -------------------------------- Print Executive's Name /s/ Kevin Freeman - - -------------------------------- Executive's Signature 11/6/97 /s/ Robert A. Kasenter - - -------------------------------- ------------------------------- Date EX-10.(XVII)(D) 20 SUPPLEMENTAL EMPLOYMENT AGREEMENT-11/6/1977 10.(xvii)(D) SUPPLEMENTAL EMPLOYMENT AGREEMENT --------------------------------- THIS SUPPLEMENTAL AGREEMENT IS ADDED TO THE EMPLOYMENT AGREEMENT OF KEVIN FREEMAN DATED MARCH 19, 1997 As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997 necessitated the re-approval by the Court of all Senior Executive Employment Agreements. This letter affirms this Supplemental Employment Agreement with you. The terms of your original agreement as a member of the Senior Executive Team at Montgomery Ward remain the same (including your G.E. Guarantee of your base and bonus payments) except that decisions concerning equity considerations will be deferred until Montgomery Ward emerges from bankruptcy with a confirmed Plan of Reorganization. The following provisions are added to and modify your existing Employment Agreement: EQUITY CONSIDERATION - - -------------------- Due to Chapter 11 filing, the specifics of long term equity awards to individual participants are not possible to announce at this time. However, upon the company's emergence from bankruptcy, you will be eligible for participation in any equity plans at a level consistent with your Executive Committee peers, provided that you are actively employed by Montgomery Ward at such time and have a satisfactory performance evaluation. EMERGENCE PLAN - - -------------- In lieu of equity participation during the Chapter 11 process, you will participate in a special Emergence Bonus Plan (copy attached) that has a target range of $225,000 to $562,500 that is payable upon Montgomery Ward's emergence from bankruptcy with a confirmed Plan of Reorganization. BENEFITS & PERQUISITES - - ---------------------- In addition to all normal company benefit plans, you will participate in the following Executive Benefits Plan: . Annual Physical Examination . Executive Accident Insurance . Executive Medical Coverage . Executive Vacation TERMINATION PLAN - - ---------------- The term of this employment agreement is for October 1, 1997 until October 1, 2000. If your employment is terminated by Montgomery Ward for any reason other than "Cause" as defined below or your voluntary resignation, you will receive a lump sum payment equal to the greater of your base salary for the remainder of the agreement period; or, your base salary for a twenty-four month period. In addition, you will receive Executive Outplacement Services and continue to participate in Executive Benefits Plans which includes the Health Care Plan along with "Benefits and Perquisites" described above for the twenty- four month period following your separation. If this agreement is not renewed at the end of its term, you will receive within thirty (30) days following the end of this agreement a lump sum payment equal to twenty-four months base salary, as well as the outplacement and Executive Benefits. "Cause" shall mean (i) your willful failure to substantially perform your duties hereunder, (ii) your willful failure to follow a written, lawful order or written directive for the Board of Directors or Chief Executive Officer of the company, or (iii) your conviction of any kind of felony or any misdemeanor involving moral turpitude. For purposes of this paragraph, no act, or failure to act, on your part will be considered "willful" unless such act, or failure to act by you was not in good faith and was without reasonable belief that your action or omission was in the best interest of the Company. For purposes of this agreement, any diminution of your job title, executive committee membership, base salary, target bonus, other compensation or benefits, or a reduction in your job responsibilities, or a relocation of your job location of greater than 50 miles from the present location without your prior written approval during the terms of this agreement, will allow you to elect the terms of this section as if you were terminated without "Cause". However, such election must be done in writing to the Chairman & CEO within sixty (60) days of the triggering event. CHANGE OF CONTROL - - ----------------- After a Change of Control Event as defined below, and for a period of three years after such date, if you are separated from the Company under provisions in the Termination Plan above (including any of the diminutions, reductions or relocation provisions under which you may elect to leave the Company), the lump sum severance payment will be three years base salary, plus three times your target bonus amount. In addition, your Executive Benefits will be extended to three years from your separation date. A "Change of Control" shall mean: (i) any sale, lease, license, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the business and/or assets of the Company or Holding (without regard to Signature); (ii) the possession by any person or entity (other than Holding, General Electric Capital Corporation or an affiliate of either of them) of beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of either (A) a number of securities carrying a greater voting power than General Electric Capital Corporation and its affiliates taken together or (B) over 50% of the then outstanding voting securities of the Company (entitled to vote generally in the election of directors) ("Outstanding Company Voting Securities"); or (iii) merger, consolidation or reorganization ("Business Combination") unless following such Business Combination all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from the Business Combination in substantially the same proportions as their ownership immediately prior to the Business Combination in substantially the same relative proportions as their ownership immediately prior to the Outstanding Company Voting Securities; provided that a Change of Control shall not be construed to include any transaction that occurs solely as a result of transfer of equity to holders of claims against the Company or Holding or any affiliate on account of such claims in connection with the consummation of a plan of reorganization for the Company or Holding or any affiliate in connection with the proceedings under Chapter 11 of the United States Bankruptcy Code pending at the date of hereof. Except as provided in the following sentence, payments pursuant to this employment agreement ("Payments") shall not exceed the largest sum ("Parachute Limitation") which will not result, directly or indirectly, in the treatment of any amount paid or payable by the Company or any successor to you (whether or not pursuant to this employment agreement, and including the Payments) as an Excess Parachute Payment. Notwithstanding the preceding sentence, you shall receive the full amount of the Payments without regard to the Parachute Limitation if you would realize a greater aftertax amount receiving the full amount of the Payments without regard to the Parachute Limitation than you would realize by receiving the Payments limited to the Parachute Limitation as provided in the preceding sentence. All computations and determinations required by the preceding paragraph shall be made by your accountant, acting in good faith. The computations and determinations made any time by your accountant shall affect only those Payments not yet made pursuant to this employment agreement. For purposes of this employment agreement, the term "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" has under section 280G of the Internal Revenue Code of 1986, as amended and the regulations thereunder. PAYMENT GUARANTEE - - ----------------- In the event of your separation from Montgomery Ward for reasons other than "Cause" or voluntary resignation, to the extent that you are eligible to receive a guaranteed payment from General Electric Capital Corporation of base salary and/or bonus amounts due to non-payment under your previous compensation agreement with Montgomery Ward, then the obligation of the Company under this agreement shall be reduced dollar for dollar of any amount representing base salary or bonus amounts which would become payable by General Electric Capital Corporation under that compensation guarantee. NON-COMPETE - - ----------- In the event that you voluntarily leave Montgomery Ward, you will be bound by a non-compete agreement that provides that you will not be directly employed by nor perform work as director, officer, independent contractor, partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc., Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a period of one (1) year following your termination date. This Agreement will be subject to the Laws of Illinois where applicable. /s/ Kevin Freeman ------------------------ November 6, 1997 ------------------------ Date /s/ Robert A. Kasenter ------------------------ EX-23 21 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 11, 1999 included in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-57075. /s/ Arthur Andersen LLP Chicago, IL April 2, 1999 EX-24 22 POWER OF ATTORNEY EXHIBIT 24 MONGOMERY WARD HOLDING CORP. POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors and/or officers of Montgomery Ward Holding Corp., a Delaware corporation, hereby constitutes and appoints SPENCER H. HEINE, THOMAS J. PAUP AND PHILIP D. DELK, his or her true and lawful attorneys-in-fact and agents to execute in his or her name and capacity the 1998 Annual Report on Form 10-K of this Corporation and any amendments to such annual report, with all exhibits thereto, and any and all documents in connection therewith pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, each of them with full power to act without the others. AND FURTHER, that each of the undersigned directors and/or officers of the Corporation hereby grants to said attorneys-in-fact and agents and each of them, full power and authority to do and perform any and all acts and things essential and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person in connection with the proper exercise of the powers granted hereunder. IN WITNESS WHEREOF, the undersigned as directors and/or officers of said Montgomery Ward Holding Corp. or as individuals, have hereunto set their hands and seals as of this ____ day of March, 1999. NAME AND TITLE /s/ Dennis D. Dammerman ----------------------------------- Dennis D. Dammerman, Director NAME AND TITLE /s/ Denis J. Nayden ----------------------------------- Denis J. Nayden, Director NAME AND TITLE /s/ Edward D. Stewart ----------------------------------- Edward D. Stewart, Director NAME AND TITLE /s/ James A. Parke ----------------------------------- James A. Parke, Director NAME AND TITLE /s/ Roger V. Goddu ----------------------------------- Roger V. Goddu, Director NAME AND TITLE /s/ Silas S. Cathcart ----------------------------------- Silas S. Cathcart, Director NAME AND TITLE /s/ Bernard F. Brennan ----------------------------------- Bernard F. Brennan, Director NAME AND TITLE /s/ Tommy T. Cato ----------------------------------- Tommy T. Cato, Director 2 EX-27 23 FINANCIAL DATA SCHEDULE
5 1,000,000 12-MOS JAN-02-1999 JAN-04-1998 JAN-02-1999 58 3 310 0 953 0 1,752 (789) 3,492 0 0 177 0 1 (1,689) 3,492 3,634 3,634 2,949 2,949 1,047 218 56 (636) 306 (942) (29) 0 0 (971) (26.25) (19.58)
-----END PRIVACY-ENHANCED MESSAGE-----