<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[x] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Montgomery Ward Holding Corp.
..............................................................................
(Name of Registrant as Specified in Its Charter)
Montgomery Ward Holding Corp.
...............................................................................
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
......................................................................
(2) Aggregate number of securities to which transaction applies:
......................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: /1/
......................................................................
(4) Proposed maximum aggregate value of transaction:
......................................................................
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
(1) Amount previously paid:
.....................................................................
(2) Form, schedule or registration statement no.:
.....................................................................
(3) Filing party:
.....................................................................
(4) Date filed:
.....................................................................
- -------------
/1/ Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
One Montgomery Ward Plaza
Chicago, IL 60671
April 15, 1994
To the stockholders of Montgomery Ward Holding Corp. (the "Company"):
Enclosed is a preliminary proxy statement in connection with an amendment
to the certificate of incorporation of the Company with respect to the
authorization and issuance of Senior Preferred Stock to General Electric Capital
Corporation. No proxy is requested at this time. A form of written consent will
be included with definitive proxy materials to be mailed to you shortly.
Also enclosed is a copy of the Company's annual report on Form 10-K for the
fiscal year ended January 1, 1994.
Very truly yours,
SPENCER H. HEINE,
Executive Vice President, Secretary
and General Counsel
<PAGE>
PRELIMINARY MATERIALS
PROXY STATEMENT
MONTGOMERY WARD HOLDING CORP.
Montgomery Ward Plaza
Chicago, Illinois 60671
(312) 467-2000
This Proxy Statement, dated April 15, 1994, is furnished in connection with
the solicitation by the Board of Directors of Montgomery Ward Holding Corp. ("MW
Holding" or the "Company") of written consents to take the actions contemplated
hereby in lieu of a special meeting of the stockholders of the Company. This
Proxy Statement and the Company's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 are being mailed to stockholders on or about April 15,
1994. This Proxy Statement and an accompanying form of written consent in lieu
of meeting will be mailed to stockholders on or about April 25, 1994.
RECORD DATE AND OUTSTANDING VOTING SECURITIES
Stockholders of record at the close of business on April 15, 1994, are
entitled to vote the shares held on that date. The number of voting securities
of MW Holding outstanding on April 13, 1994 was 19,391,080 shares of Class A
Common Stock, Series 1, $0.01 par value ("Series 1 Shares"), owned by three
stockholders of record; 155,048 shares of Class A Common Stock, Series 2, $0.01
par value ("Series 2 Shares" and together with the Series 1 Shares, the "Class A
Shares"), owned by one stockholder of record; and 25,000,000 shares of Class B
Common Stock, $0.01 par value (the "Class B Shares" and together with the Class
A Shares, the "Common Stock"), owned by one stockholder of record. Each share
of Class A Common Stock, Series 1, Class A Common Stock, Series 2, and Class B
Common Stock is entitled to one vote.
GIVING OF CONSENTS
Stockholders are urged to read carefully the material in this Proxy
Statement, sign the written consent to the proposed amendment to the certificate
of incorporation of the Company (the "Certificate of Incorporation") and date
and return the written consent. A stockholder giving a written consent may
revoke it at any time prior to the filing of the amendment to the Certificate of
Incorporation by written notice of revocation to the Secretary of the Company.
Stockholders are requested to return the consent with respect to the amendment
to the Certificate of Incorporation to the Company by delivery to the attention
of Spencer H. Heine, Esq., Secretary, at the Company's executive offices by
April 27, 1994.
REQUISITE VOTE
The affirmative vote of a majority of the shares of Common Stock
outstanding is required for approval of the amendment to the Certificate of
Incorporation to be voted upon.
1
<PAGE>
AMENDMENT TO CERTIFICATE OF INCORPORATION
INTRODUCTION
On April 15, 1994, by unanimous written consent, the Board of
Directors of the Company authorized an amendment to the Certificate of
Incorporation (the "Amendment"), a form of which amendment is attached to this
Proxy Statement as Annex A. The Board of Directors recommends a vote FOR the
Amendment.
The Amendment would authorize a new series of senior preferred stock
of the Company (the "Senior Preferred Stock") with characteristics as described
herein. The Board of Directors expects to issue 750 shares of the Senior
Preferred Stock to General Electric Capital Corporation ("GE Capital") in
exchange for $75 million in cash. The Company will be required to pay a closing
fee of $187,500 to GE Capital at the closing of such issuance and is required to
pay GE Capital's legal fees in connection therewith. GE Capital is presently
the holder of all of the outstanding Class B Common Stock. The Board of
Directors has determined that it is in the best interests of the Company to so
issue the Senior Preferred Stock and use the proceeds to acquire from the
Company's wholly-owned subsidiary, Montgomery Ward & Co., Incorporated
("Montgomery Ward") 750 shares of a new issue of senior preferred stock of
Montgomery Ward (the "Montgomery Ward Preferred") for $75 million. Montgomery
Ward has agreed to reimburse the Company for its cost of issuing the Senior
Preferred Stock, including the $187,500 closing fee, GE Capital's legal fees and
the Company's legal fees and expenses in connection with the issuance of the
Senior Preferred Stock. The proceeds from the issuance of the Montgomery Ward
Preferred to the Company will be applied by Montgomery Ward to the reduction of
its outstanding debt. The Senior Preferred Stock will be preferred as to
dividends and upon liquidation to the Common Stock on the terms discussed below.
The terms of the Montgomery Ward Preferred will be substantially the
same as the terms of the Senior Preferred Stock, with the exceptions that (i)
Montgomery Ward will be required to redeem the Montgomery Ward Preferred upon
two months prior written notice from the Company, provided that such redemption
cannot occur until a substantially later date (currently anticipated to be the
fifteenth anniversary of the issuance of the Montgomery Ward Preferred); (ii)
the holders of the Montgomery Ward Preferred will not have any voting rights;
and (iii) the terms of the Montgomery Ward Preferred will specifically provide
that (A) the restrictions on payments to holders of capital stock of Montgomery
Ward which are junior to the Montgomery Ward Preferred shall not apply to
payments made pursuant to any tax sharing or tax allocation arrangement and (B)
without limitation, the Montgomery Ward Preferred is subordinate and junior in
right of payment to indebtedness for borrowed money of Montgomery Ward upon the
occurrence and continuance of an event of default, as defined in the documents
governing such indebtedness.
RIGHTS OF THE SENIOR PREFERRED STOCK
The Senior Preferred Stock will have the rights and characteristics
described herein.
Voting Rights. Except as required by law, the holders of the Senior
Preferred Stock will not have any voting rights, except 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
2
<PAGE>
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.
Dividends. Holders of the Senior Preferred Stock are entitled to
receive, before any dividends may be declared and paid upon or set aside for the
Common Stock, cumulative cash dividends of $4,850 per share per annum, in equal
quarterly payments on the last business day of March, June, September and
December, with the first payment due June 30, 1994. Dividend payments made with
respect to the Senior Preferred Stock may be made only in cash and, assuming
issuance of all of the authorized shares of Senior Preferred Stock, will total
$3,637,500 per annum. No dividends may be declared or paid on the Senior
Preferred Stock when such declaration or payment would constitute a default
under any agreements governing indebtedness for borrowed money of the Company,
Montgomery Ward or any of its subsidiaries (collectively, the "Ward Group").
Optional Redemption. The Company may, upon ten business days notice
to the holders thereof, at any time redeem the whole or any part of the Senior
Preferred Stock. Any such optional redemption shall be at a price of $100,000
per share of the Senior Preferred Stock being redeemed plus unpaid accrued
dividends thereon. No redemption of Senior Preferred Stock may be made when
such redemption would constitute a default under any agreements governing
indebtedness for borrowed money of the Company or any other member of the Ward
Group.
Mandatory Redemption. The Company is required to redeem from time to
time all or any portion of the Senior Preferred Stock at a redemption price of
$100,000 per share plus unpaid accrued dividends, upon four months written
notice by GE Capital, provided, however, any such redemption cannot occur prior
to the first day following the fifth anniversary of the issuance of the Senior
Preferred Stock. No redemption of Senior Preferred Stock may be made when such
redemption would constitute a default under any agreements governing
indebtedness for borrowed money of the Company or any other member of the Ward
Group.
Liquidation Rights. Upon any liquidation, dissolution or winding up
of the Company, the holders of Preferred Stock shall be entitled to be paid,
before any distribution or payment is made to any holder of Common Stock, an
amount in cash equal to $100,000 per share of their shares of Senior Preferred
Stock outstanding plus unpaid accrued dividends.
3
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership, as of April
2, 1994, of Class A Shares (i) by each person who is a director of the Company
(none of whom except the individuals identified owns any shares of the Company's
equity securities), (ii) by each executive officer whose compensation will be
reflected in the Summary Compensation Table included in the Company's Definitive
Proxy Statement for its 1994 Annual Meeting, (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.
<TABLE>
<CAPTION>
Individual or Group Shares %
- ------------------- ---------- -----
<S> <C> <C>
Bernard F. Brennan (a) 17,357,914 88.8%
Chairman of the Board, Chief
Executive Officer and a
Director
Myron Lieberman (b) 2,510,532 12.8%
Director
Richard M. Bergel (c)(d) 852,500 4.4%
Executive Vice President
and a Director
Spencer H. Heine (c) 251,250 1.3%
Executive Vice President,
Secretary, General Counsel
and a Director
Bernard W. Andrews (c) 100,000 0.5%
President and a Director
Silas S. Cathcart (c)(e) 15,322 0.1%
Director
Robert R. Schoeberl (c)(f) 228,333 1.2%
Executive Vice President
Leslie A. Ball (c)(g) 75,000 0.4%
Harold D. Kahn (h) 0 0.0%
Tamara Brennan (i) 2,200,000 11.2%
All directors and executive
officers as a group (18 persons) (j) 18,691,040 93.9%
</TABLE>
_______________________________________________________
(a) Comprised of 13,025,750 Class A Shares (66.6% of the Class A Shares and
29.2% of the Common Stock outstanding as of April 2, 1994) owned of record
by Mr. Brennan and with respect to which Mr. Brennan has sole investment
and voting power, and 4,332,164 Class A Shares (22.2% of the Class A shares
and 9.7% of the Common Stock outstanding as of April 2, 1994) owned of
record by Mr. Brennan as voting trustee and with respect to which Mr.
Brennan has sole voting power as voting trustee but no investment power.
Does not include
4
<PAGE>
2,200,000 Class A Shares (11.2% of the Class A Shares and
4.9% of the Common Stock outstanding as of April 2, 1994) which are
owned by Myron Lieberman, 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 (i) below. Mr. Brennan disclaims beneficial
ownership of such 2,200,000 Class A Shares. Mr. Brennan's business
address is One Montgomery Ward Plaza, Chicago, Illinois 60671.
(b) Includes 294,250 Class A Shares represented by Voting Trust Certificates
owned by Lieberman Investment Limited Partnership, a limited partnership of
which Mr. Lieberman is the sole general partner. Also includes 2,200,000
Class A Shares with respect to which Mr. Lieberman has sole voting and
investment power as trustee of the Family Trust. Such 2,200,000 Class A
Shares are not deposited in the voting trust under which Mr. Brennan serves
as voting trustee. See Note (c) below. All shares other than the
2,200,000 Class A Shares as to which Mr. Lieberman has beneficial ownership
are represented by Voting Trust Certificates and such shares are held in a
voting trust as to which Mr. Brennan, as voting trustee, has sole voting
power. Includes 339 Class A Shares which Mr. Lieberman acquired on April
8, 1994 pursuant to rights under the Montgomery Ward Holding Corp.
Directors Plan ("Conversion Rights"), which Conversion Rights arose on
April 1, 1994 and which, pursuant to a prior election by Mr. Lieberman,
were automatically exercised on April 8, 1994. Mr. Lieberman's business
address is 10 South Wacker Drive, Chicago, Illinois 60606.
(c) Represents ownership of Voting Trust Certificates with respect to shares
held in a voting trust as to which Mr. Brennan, as voting trustee, has sole
voting power and the persons indicated have sole investment power.
(d) Includes 60,000 Class A Shares with respect to which Mr. Bergel has sole
investment power as trustee of trusts for the benefit of members of the
family of Robert A. Kasenter, an officer of the Company. Does not include
90,000 Class A Shares with respect to which Mr. Kasenter, as trustee of a
trust for the benefit of members of Mr. Bergel's family, has sole
investment power, but with respect to which Mr. Bergel has no voting or
investment power.
(e) Includes 283 Class A Shares which Mr. Cathcart acquired on April 8, 1994
pursuant to Conversion Rights which arose on April 1, 1994 and which,
pursuant to a prior election by Mr. Cathcart, were automatically exercised
on April 8, 1994.
(f) Does not include 21,667 Class A Shares with respect to which a trustee of a
trust for the benefit of members of Mr. Schoeberl's family has sole
investment power, but with respect to which Mr. Schoeberl has no voting or
investment power.
(g) Mr. Ball resigned from the Company effective January 31, 1994. On April
12, 1994, the Company exercised an option pursuant to which it will
purchase all such shares from Mr. Ball on or before May 16, 1994.
(h) Mr. Kahn resigned from the Company effective December 15, 1993. All shares
of Common Stock owned by Mr. Kahn have been sold by Mr. Kahn prior to April
2, 1994.
5
<PAGE>
(i) 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 Note (b) above.
(j) Represents all Class A Shares with respect to which officers and directors
have investment power, which is in each case sole investment power. Does
not include 1,219,924 Class A Shares with respect to which Mr. Brennan has
sole voting power as voting trustee, but with respect to which neither he
nor any other officer or director of the Company has investment power.
Includes 298,650 Class A Shares which may be acquired by executive officers
or directors at purchase prices ranging from $0.20 to $22.50 per share
pursuant to options exercisable on April 2, 1994. Includes 622 Class A
Shares acquired pursuant to Conversion Rights on April 8, 1994. Includes
54,400 Class A Shares which can be acquired pursuant to options which
become exercisable on May 15, 1994, June 14, 1994 or June 23, 1994 (all
dates within 60 days of the Special Meeting to which this Proxy Statement
relates).
GE Capital owns 100% of the 25,000,000 Class B Shares currently
outstanding. GE Capital's address is 260 Long Ridge Road, Stamford, Connecticut
06927. Such shares represent 56.1% of the outstanding Common Stock. The Common
Stock represents all of the equity securities of the Company currently
outstanding. If the amendment to the Certificate of Incorporation of the
Company, in support of which this Proxy Statement is issued, is adopted, GE
Capital intends to purchase all of the authorized shares of Senior Preferred
Stock.
CONTROL MATTERS
Voting of Shares. In the event that the Voting Trust is not in effect or
in the event shares of Common Stock of MW Holding deposited therein are not
subject to the Voting Trust, all such shares held by the stockholders, except
those held by Mr. Brennan and certain trusts for the benefit of members of his
family, are subject to a voting agreement under which the holders agreed to vote
their shares in the same way Mr. Brennan votes his shares until June 17, 1998.
Directors. The Board of Directors consists of nine members. The MW Holding
Stockholders' Agreement dated as of June 17, 1988, as amended (the
"Stockholders' Agreement") provides that five of the Company's directors shall
be designated by the Designator, presently Mr. Brennan, and four shall be
designated by GE Capital.
If GE Capital and its affiliates cease to own more than 50% of the number
of shares of Common Stock initially purchased by them, the number of directors
which the Designator 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 seven, five 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 Montgomery Ward and
Montgomery Ward Credit Corporation, a wholly-owned subsidiary of GE Capital
("Montgomery Ward Credit"), relating to the purchase by Montgomery Ward Credit
of customer receivables of Montgomery Ward remains in effect, and GE Capital or
6
<PAGE>
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.
Holders of Senior Preferred Stock have 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.
The Company's By-laws contain supermajority provisions which require that
certain actions, such as mergers, substantial asset sales, certain amendments to
the Company's Certificate of Incorporation or By-laws, payment of dividends and
redemption of Shares other than in accordance with the terms of the Stockholders
Agreement, public offerings and certain other major corporate transactions be
undertaken only upon the approval of two-thirds of the directors of the Company.
CERTAIN RELATIONSHIPS
If the amendment to the Certificate of Incorporation of the Company, in
support of which this Proxy Statement is issued, is adopted, GE Capital will own
all of the shares of Senior Preferred Stock issued and outstanding. David D.
Ekedahl, Denis J. Nayden and James A. Parke, directors of the Company, are
executive officers of GE Capital and Mr. Cathcart is a director of GE Capital
and of General Electric Company, the parent of GE Capital.
PROXY SOLICITATION AND REVOCATION
The enclosed form of written consent is solicited on behalf of the Board of
Directors and is revocable at any time prior to the filing of the amendment to
the Certificate of Incorporation to be authorized thereby. The cost of
soliciting consents will be borne by MW Holding.
7
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1995 annual
meeting of stockholders must be received by the Company no later than December
23, 1994, in order to be considered for inclusion in the Company's proxy
statement and form or proxy relating to such meeting.
FINANCIAL AND OTHER INFORMATION
The following information is incorporated herein by reference to the
Company's report on Form 10-K for its fiscal year ended January 1, 1994, a copy
of which is included herewith:
<TABLE>
<CAPTION>
Information Page No.
- ----------- --------
<S> <C>
Audited Financial Statements of the Company 25-72
Supplementary Financial Information N/A
Management's Discussion and Analysis of Financial Condition and Results of 18-25
Operations
The Company has not had, during the Company's two most recent fiscal 73
years, any disagreements with Arthur Andersen & Co., the Company's
independent accountants, with respect to accounting matters. Arthur Andersen
& Co. has served as the Company's independent auditors since the Company's
organization in 1988.
</TABLE>
By Order of the Board of Directors,
Spencer H. Heine
Executive Vice President,
Secretary and General Counsel
8
<PAGE>
ANNEX A
CERTIFICATE OF AMENDMENT
------------------------
TO
--
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
MONTGOMERY WARD HOLDING CORP.
-----------------------------
MONTGOMERY WARD HOLDING CORP., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The original Certificate of Incorporation of the Corporation was filed
in the Office of the Secretary of State of Delaware on February 8, 1988 and
recorded in the Office of the Recorder of Kent County, Delaware. The name under
which the Corporation was originally incorporated is BFB Acquisition Corp.
2. Article FOURTH of the Certificate of Incorporation of the Corporation
is hereby amended as follows:
(i) The introduction to Article FOURTH and Part A thereof are amended
in their entirety to read as follows:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is fifty-five million four
hundred twelve thousand seven hundred fifty (55,412,750) consisting of
the following amounts in the following designations:
1. Common Stock. Fifty-five million four hundred twelve
thousand (55,412,000) shares of Common Stock, par value one cent
($0.01) per share (hereinafter referred to as "Common Stock"),
which shall consist of the following classes:
(a) thirty million four hundred twelve thousand
(30,412,000) shares of Class A Common Stock (hereinafter
referred to as "Class A Common Stock"), which shall consist
of the following series:
(i) twenty-five million (25,000,000) shares of
Class A Common Stock, Series 1 (hereinafter referred to
as "Class A Common Stock, Series 1"), and
(ii) five million four hundred twelve thousand
(5,412,000) shares of Class A Common Stock, Series 2
(hereinafter referred to as "Class A Common Stock,
Series 2"), and
<PAGE>
(b) twenty-five million (25,000,000) shares of Class B
Common Stock (hereinafter referred to as the "Class B Common
Stock").
2. Preferred Stock. Seven hundred fifty (750) shares of
Preferred Stock, par value one dollar ($1.00) per share
(hereinafter referred to as "Preferred Stock" or "Senior
Preferred Stock").
Such shares of Common Stock and Preferred Stock may be issued for such
consideration, not less than the par value thereof, as shall be fixed
from time to time by the Board of Directors, and shares issued for not
less than the consideration so fixed shall be fully paid and non-
assessable.
A statement of the powers, preferences, rights, qualifications,
limitations, restrictions and the relative, participating, optional and
other special rights in respect of the shares of each class or series of
stock is as follows:
PART A. SENIOR PREFERRED STOCK
------ ----------------------
Except as otherwise provided herein, each share of Senior
Preferred Stock shall be identical in all respects to all other shares
of Senior Preferred Stock and shall entitle the holder thereof to the
same rights and privileges as to which the holders of the other shares
of Senior Preferred Stock are entitled.
1. Rank. The Senior Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and
dissolution, rank prior to the Common Stock.
2. Dividends.
(a) In each year, the holders of the shares of Senior
Preferred Stock shall be entitled to receive, before any
dividends shall be declared and paid upon or set aside for
the Common Stock, when and as declared by the Board of
Directors, except as may be prohibited by Section A.5, out
of funds legally available for that purpose, cumulative cash
dividends at the annual rate of four thousand eight hundred
fifty dollars ($4,850) per share (the "Dividend Rate"), and
no more, in equal quarterly payments of one thousand two
hundred twelve dollars and fifty cents ($1,212.50) per
share, on the last business day of March, June, September
and December (each of such dates being a "Dividend Payment
Date"), commencing with the Dividend Payment Date in June,
1994. The dividend payable on the Dividend Payment Date in
June, 1994 with respect to any share of Senior Preferred
Stock shall be the pro rata amount of the Dividend Rate
based upon the number of days from and including the date of
first issuance (the "Issuance Date") of the Senior Preferred
Stock up to and including the Dividend Payment Date in June,
1994 and a 365-day year. (The period from the Issuance Date
to the first Dividend Payment Date, and each quarterly
period between consecutive Dividend Payment Dates, shall
2
<PAGE>
hereinafter be referred to as a "Dividend Period.") Such
dividends shall be paid to the holders of record at the
close of business on the date specified by the Board of
Directors of the Corporation at the time such dividend is
declared; provided, however, that such date shall not be
more than sixty (60) days nor less than ten (10) days
prior to the respective Dividend Payment Date.
Dividends on the Senior Preferred Stock shall be cumulative
from the Issuance Date (whether or not there shall be net
profits or net assets of the Corporation legally available
for the payment of such dividends), so that:
(i) except as provided in Section A.2(a)(ii),
the Corporation shall not take any of the following
actions:
(A) declare, order or pay any dividend on
any class of stock ranking as to dividends or on
liquidation junior to the Senior Preferred Stock
(such junior stock being herein sometimes referred
to as the "Stock Junior to the Senior Preferred
Stock"), or
(B) redeem any Stock Junior to the Senior
Preferred Stock,
(each of such actions described in clauses A.2(a)(i)(A)
or (B) above being herein sometimes referred to as a
"Junior Distribution" and the proposed date of each
such action being herein sometimes referred to as a
"Proposed Junior Distribution Date") if the Corporation
shall not, on or before the Proposed Junior
Distribution Date, have completed both of the
following:
(1) declared on the outstanding shares
of Senior Preferred Stock, and paid or set
apart for payment, all "Accrued Dividends"
(defined in Section A.4(c)(i)) to the
Proposed Junior Distribution Date; and
(2) paid or deposited as required in
this Part A all amounts payable to holders
of Senior Preferred Stock in respect of all
mandatory redemptions required to have been
paid or deposited for their benefit on or
before the Proposed Junior Distribution
Date; and
(ii) the Corporation may redeem or purchase any
shares of Common Stock in accordance with either (x)
the terms, conditions and provisions of the
"Stockholders
3
<PAGE>
Agreement" (defined in Section C.1) or (y) the terms,
conditions and provisions of the "Employee Stock Option
Plan" (defined in Section C.1), if on or before the
date of each such proposed Common Stock redemption or
purchase (each such time, with respect to redemptions
or purchases under either the Stockholders Agreement or
the Employee Stock Option Plan, being herein sometimes
referred to as a "Proposed Common Stock Repurchase
Date"), the Corporation shall have:
(A) declared on the outstanding shares of
Senior Preferred Stock, and paid or set apart for
payment, all Accrued Dividends (defined in Section
A.4(c)(i)) through all Dividend Payment Dates
occurring on or prior to such Proposed Common
Stock Repurchase Date, and
(B) paid or deposited as required in this
Part A all amounts payable to holders of Senior
Preferred Stock in respect of all mandatory
redemptions required to have been paid or
deposited for their benefit on or before all
"Mandatory Redemption Dates" (defined in Section
A.4(a)(i)) occurring on or prior to such Proposed
Common Stock Repurchase Date.
All dividends declared upon Senior Preferred Stock and any
other class of stock ranking on a parity as to dividends
with the Senior Preferred Stock shall be declared pro rata
per share. Accrued but unpaid dividends shall not bear
interest.
(b) Each fractional share of the Senior Preferred
Stock outstanding shall be entitled to a ratably
proportionate amount of all dividends to which each
outstanding full share of the Senior Preferred Stock is
entitled pursuant to Section A.2(a) hereof, and all of such
dividends with respect to such outstanding fractional shares
shall be fully cumulative and shall accrue (whether or not
declared) and shall be payable in the same manner and at
such times as provided for in Section A.2(a) with respect to
dividends on each outstanding full share of the Senior
Preferred Stock.
3. Rights on Liquidation, Dissolution or Winding Up.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, the holders of shares of
Senior Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available for
distribution to its stockholders, whether from capital,
surplus or earnings, except as may be prohibited by
4
<PAGE>
Section A.5, but before any payment shall be made to the
holders of any stock ranking on liquidation junior to the
Senior Preferred Stock, an amount equal to one hundred
thousand dollars ($100,000) per share, plus an amount equal
to Accrued Dividends (as defined in Section A.4(c)(i)) to
the date of payment (the "Liquidation Payment"). If upon any
liquidation, dissolution or winding up of the Corporation
the assets of the Corporation available for distribution to
its stockholders shall be insufficient to pay the holders of
shares of Senior Preferred Stock the full amounts to which
they respectively shall be entitled, the holders of shares
of Senior Preferred Stock, and any class of stock ranking on
liquidation on a parity with the Senior Preferred Stock,
shall share ratably in any distribution of assets according
to the respective amounts which would be payable in respect
of the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid
in full. In the event of any liquidation, dissolution or
winding up of the Corporation after payment shall have been
made to the holders of shares of Senior Preferred Stock and
any class of stock ranking on liquidation on a parity with
the Senior Preferred Stock of the full amount to which they
shall be entitled as aforesaid, the holders of any class or
classes of stock ranking on liquidation junior to the Senior
Preferred Stock shall be entitled, to the exclusion of the
holders of shares of Senior Preferred Stock, to share,
according to their respective rights and preferences, in all
remaining assets of the Corporation available for
distribution to its stockholders.
(b) The Liquidation Payment with respect to each
fractional share of the Senior Preferred Stock outstanding
or accrued but unpaid, shall be equal to a ratably
proportionate amount of the Liquidation Payment with respect
to each outstanding share of Senior Preferred Stock.
(c) For the purposes of this Section A.3, neither the
consolidation or merger of the Corporation into or with any
other corporation or corporations, nor the sale or transfer
by the Corporation of all or any part of its assets shall be
deemed to be a liquidation, dissolution or winding up of the
Corporation, unless such transaction shall be in connection
with the liquidation, dissolution or winding up of the
Corporation.
4. Redemption.
(a) Mandatory Redemption.
(i) The holders of not less than a majority of
the outstanding shares of Senior Preferred Stock may,
by notice served on the Corporation, require the
Corporation to redeem, on the date which is four (4)
months after the
5
<PAGE>
effective date of such notice, but not prior to the
date which is one day after the fifth anniversary of
the Issuance Date, all or any portion, as set forth in
such notice, of the outstanding shares of Senior
Preferred Stock at a redemption price of (A) one
hundred thousand dollars ($100,000) per share (payable
in cash or other consideration as the Corporation and
holders of a majority of the Senior Preferred Stock may
agree), plus (B) an amount equal to Accrued Dividends
(defined in Section A.4(c)(i)) to the date of payment
(the "Redemption Price") (each such date being herein
sometimes referred to as a "Mandatory Redemption
Date"). Such notice may be given from time to time with
respect to any partial or full redemptions. Notice of
every redemption pursuant to this Section A.4(a) shall
be personally delivered or sent by certified mail,
postage prepaid and return receipt requested, to the
Corporation at the address of its principal executive
offices to the attention of its Secretary. Such notice
shall be effective upon receipt by the Corporation. The
procedures set forth in Section A.4(b)(i) shall be
followed for partial redemptions.
(ii) On and after any Mandatory Redemption Date
(unless default shall be made by the Corporation in
depositing moneys for the payment of the Redemption
Price as hereinafter provided), all rights of the
holders of shares of Senior Preferred Stock as
stockholders of the Corporation with respect to those
shares of Senior Preferred Stock to be redeemed, except
the right to receive the Redemption Price as
hereinafter provided, shall cease and terminate.
(iii) The Corporation shall provide moneys for
the payment of the Redemption Price by depositing on
the Mandatory Redemption Date the amount thereof for
the account of the holders of record of the Senior
Preferred Stock entitled thereto with the Continental
Bank N.A., or such other bank or trust company doing
business in the City of Chicago, as may be designated
by (A) the holders of not less than a majority of the
outstanding shares of Senior Preferred Stock, and,
failing said designation, (B) the Corporation, as
paying agent for the benefit of such holders. The
holders of the shares of Senior Preferred Stock
redeemed shall surrender to the Corporation the
certificates for the shares of Senior Preferred Stock
so redeemed. Upon notification by such designated bank
or trust company to the holders of the Senior Preferred
Stock that such moneys representing the Redemption
Price have been deposited by the Corporation, the
shares designated for redemption shall no longer be
outstanding, whether or not the certificates for the
shares so redeemed have been received by the
6
<PAGE>
Corporation on the date of such notification and all
rights relating thereto shall cease and terminate.
(b) Optional Redemption.
(i) So long as any shares of Senior Preferred
Stock are outstanding, except as may be prohibited by
Section A.5, the Corporation may, at the option of the
Board of Directors, at any time or from time to time
after the Issuance Date, redeem the whole or any part
of such Senior Preferred Stock. Any redemption
pursuant to this Section A.4(b)(i) shall be at the
Redemption Price. If less than all the shares of
Senior Preferred Stock at any time outstanding shall be
called for redemption, the redemption shall be made pro
rata with respect to such shares and in such manner as
may be prescribed by resolution of the Board of
Directors. The date of each such redemption is herein
sometimes referred to as an "Optional Redemption Date".
(ii) Notice of every redemption pursuant to this
Section A.4(b) shall be sent by first-class mail,
postage prepaid, to the holders of record of the shares
of Senior Preferred Stock so to be redeemed at their
respective addresses as the same shall appear on the
books of the Corporation. Such notice shall be mailed
not less than ten (10) business days in advance of the
Optional Redemption Date to the holders of record of
the shares of Senior Preferred Stock so to be redeemed.
On and after the Optional Redemption Date, unless
default shall be made by the Corporation in providing
moneys to the bank or trust company for the account of
the holders of record of the Senior Preferred Stock as
provided in Section A.4(a)(iii) for the payment of the
Redemption Price, all rights of the holders of Senior
Preferred Stock as stockholders of the Corporation with
respect to those shares of Senior Preferred Stock to be
redeemed, except the right to receive the Redemption
Price, shall cease and terminate whether or not the
certificates for the shares so redeemed have been
received by the Corporation as provided in Section
A.4(a)(iii). In this Section A.4(b)(ii), a business
day refers to any day, except a Saturday, Sunday or any
day on which banks in the City of Chicago are
authorized or required by law to close.
(c) Definitions.
(i) The term "Accrued Dividends" with respect to
the Senior Preferred Stock shall mean, as of any given
time, the
7
<PAGE>
then "Full Cumulative Dividends" (defined in Section
A.4(c)(ii)) less the amount of all dividends
theretofore paid upon the relevant shares of Senior
Preferred Stock.
(ii) The term "Full Cumulative Dividends" with
respect to the Senior Preferred Stock shall mean
(whether or not in any Dividend Period, or any part
thereof, in respect of which such term is used there
shall have been net profits or net assets of the
Corporation legally available for the payment of such
dividends) that amount which shall be equal to
dividends upon the relevant shares at the full rate
fixed for Senior Preferred Stock as provided herein for
the period of time elapsed from the date of issuance
thereof to the date as of which Full Cumulative
Dividends are computed.
(d) Shares of Senior Preferred Stock which have been
issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall not be reissued.
(e) Each fractional share of the Senior Preferred
Stock outstanding shall be entitled to a ratably
proportionate fraction of the Redemption Price payable in
respect of each outstanding full share of the Senior
Preferred Stock pursuant to this Section A.4, and such
fraction of the price shall be payable in the same manner
and at such times as provided for in this Section A.4 with
respect to redemptions of each outstanding full share of the
Senior Preferred Stock.
(f) The foregoing provisions of this Section A.4 to
the contrary notwithstanding but without limitation of the
Corporation's obligations to make mandatory redemptions as
required by Section A.4(a), unless the Accrued Dividends on
all outstanding shares of Senior Preferred Stock shall have
been paid or contemporaneously are declared and paid through
the date of a proposed optional redemption, none of the
shares of Senior Preferred Stock shall be redeemed unless
all outstanding shares of Senior Preferred Stock are
simultaneously redeemed and the Corporation shall not
purchase by optional redemption or otherwise acquire any
shares of Senior Preferred Stock; provided, however, that
the foregoing shall not prevent the purchase or acquisition
of shares of Senior Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all
outstanding shares of Senior Preferred Stock.
(g) If fewer than all the outstanding shares of Senior
Preferred Stock are to be redeemed, the number of shares to
be redeemed shall be determined by the Board of Directors in
accordance with the provisions of this Part A, and the
shares to be redeemed shall be determined by lot or pro rata
as may be determined by the Board of Directors.
8
<PAGE>
5. Restriction on Payments. Anything contained in this
Article to the contrary notwithstanding, no cash dividends or
dividends paid by transfer of any other property on shares of the
Senior Preferred Stock shall be declared by the Board of
Directors or paid or set apart for payment by the Corporation, no
distribution in respect of the Senior Preferred Stock shall be
paid or set apart for payment by the Corporation, and no payment
shall be made by the Corporation with respect to any redemption
of the Senior Preferred Stock (such payments, distributions and
settings aside being herein sometimes referred to collectively as
"Distributions") at any time when the terms and provisions of any
agreement to which the Corporation or any other member of the
"Wards Group" (defined in Section C.1) is a party relating to
indebtedness for money borrowed specifically prohibits or limits
such Distribution (and such Distribution exceeds said limits), or
such Distribution would constitute a breach, default or event of
default thereunder.
6. Voting Rights.
(a) Except as expressly provided in Section A.6(b) or
elsewhere in this certificate of incorporation or as
required by law (in relation to which the holders of shares
of Senior Preferred Stock shall be treated as a class), the
holders of shares of Senior Preferred Stock shall not have
voting rights and at every meeting of the stockholders of
the Corporation, or by written consent in lieu of any such
meeting, all voting power in the election of directors
and/or for all other purposes shall be vested exclusively in
the holders of shares of Common Stock. Without limitation of
the next preceding sentence and without implication that the
contrary would otherwise be true, no consent of the holders
of Senior Preferred Stock shall be required for (a) the
creation of any indebtedness of any kind of the Corporation,
(b) the creation of any class of stock of the Corporation
junior in right as to dividends and upon liquidation to the
Senior Preferred Stock, or (c) any increase or decrease in
the amount of authorized Common Stock or any increase,
decrease or change in the par value thereof.
(b) Anything elsewhere in this certificate of
incorporation to the contrary notwithstanding, if (i)
Accrued Dividends on the Senior Preferred Stock are not paid
in full on any of four (4) consecutive Dividend Payment
Dates, or (ii) the Corporation shall have failed to effect
the redemption of shares of Senior Preferred Stock on a
Mandatory Redemption Date as required in Section A.4(a), the
holders of shares of Senior Preferred Stock shall have
voting rights as specified in this Section A.6(b). In the
event of the occurrence of either of the foregoing events,
such occurrence shall mark the beginning of a period (the
"Default Period") which shall continue until such time as
(i) Accrued Dividends on the Senior Preferred Stock have
been paid in full through the date of payment, or (ii) the
9
<PAGE>
failure to redeem shares of Senior Preferred Stock as
required by Section A.4(a) has been cured by the
Corporation. Any provision of the by-laws of the
Corporation to the contrary notwithstanding, during any
Default Period, the holders of shares of the Senior
Preferred Stock then outstanding shall have the exclusive
and special right (but not the obligation), voting
separately as a class (each share of Senior Preferred Stock
being entitled to one (1) vote), to elect one (1) director
to the Board of Directors of the Corporation (the "Preferred
Stock Director") and the number of directors constituting
the Board of Directors of the Corporation shall be
automatically increased in order to provide one (1) vacancy
for the Preferred Stock Director. Upon written request,
made at any time after the beginning of the Default Period,
by the holders of not less than a majority of the shares of
the Senior Preferred Stock then outstanding, the Corporation
shall call a special meeting of all of the stockholders of
the Corporation, at which meeting the holders of shares of
Senior Preferred Stock, voting separately as a class, shall
elect the Preferred Stock Director as set forth above;
provided, however, that if such meeting shall not have been
called by the Corporation within ten (10) days after the
beginning of a Default Period, such meeting may be called,
upon like notice, at the expense of the Corporation, by the
holders of not less than a majority of the outstanding
shares of Senior Preferred Stock. After the first such
election during any Default Period, the holders of the
shares of Senior Preferred Stock, voting separately as a
class, may continue to exercise their voting rights, as set
forth above, at each annual meeting of the stockholders of
the Corporation occurring during such Default Period. During
any Default Period, no Preferred Stock Director may be
removed from office without the vote or consent of the
holders of a majority of the number of shares of the Senior
Preferred Stock at the time outstanding. If at any time
during a Default Period the directorship of the Preferred
Stock Director is vacant, the secretary of the Corporation
shall, upon the written request of the holders of shares
representing at least a majority of the Senior Preferred
Stock then outstanding, call a special meeting of all of the
stockholders at the expense of the Corporation, upon the
notice required for special meetings of stockholders. At any
meeting held for the purpose of electing directors at which
the holders of the Senior Preferred Stock shall have the
right, voting as a class, to elect the Preferred Stock
Director, the presence, in person or by proxy, of the
holders of a majority of the Senior Preferred Stock then
outstanding shall be required to constitute a quorum of the
Senior Preferred Stock on such election. At any such meeting
or adjournment thereof, the absence of the quorum of the
Senior Preferred Stock shall not prevent the election of
directors other than the Preferred Stock Director, and the
absence of a quorum for the election of such other directors
shall not prevent the election of the Preferred Stock
Director, and in the absence of either or both such
10
<PAGE>
quorums, a majority of the holders present in person or by
proxy of the stock which lacks a quorum shall have the power
to adjourn the meeting for the election of directors which
they are entitled to elect from time to time without notice
other than announcement at the meeting until a quorum shall
be present. A vacancy in the directorship of the Preferred
Stock Director may be filled only by the vote or written
consent of the holders of a majority of the shares of the
outstanding Senior Preferred Stock. Upon termination of a
Default Period, the term of office of the then Preferred
Stock Director shall automatically terminate, the shares of
Senior Preferred Stock shall cease to have the voting rights
specified in this Section A.6(b), the number of directors
constituting the Board of Directors of the Corporation shall
be automatically reduced to eliminate the vacancy caused by
the termination of the office of the Preferred Stock
Director and all voting rights shall be vested exclusively
in the holders of shares of Common Stock, subject to the
revesting of voting rights in the shares of Senior Preferred
Stock in the event of the beginning of another Default
Period.
7. Amendment. This certificate of incorporation of the
Corporation shall not be amended in any manner which would alter
or change the powers, preferences or special rights of the Senior
Preferred Stock so as to affect them adversely (including,
without limitation, providing for the creation of any new
class of capital stock senior to, or on a parity with, the Senior
Preferred Stock as to dividends, redemption rights or on
liquidation) without the affirmative vote of the holders of at
least a majority of the outstanding shares of Senior Preferred
Stock, voting together as a single class. The Board of Directors
reserves the right to act by resolution from time to time to
decrease the number of shares which constitute Senior Preferred
Stock (but not below the number of shares thereof outstanding)."
(ii) Part B of Article FOURTH is hereby eliminated in its entirety and
replaced with the following:
"PART B. - Intentionally Omitted"
------
Any references in the Certificate of Incorporation of the Corporation
to such Part B or the Junior Preferred Stock are hereby eliminated.
Except to the extent specifically provided to the contrary in this
Certificate of Amendment, the terms, provisions and conditions of the
Certificate of Incorporation of the Corporation shall remain unamended and in
full force and effect.
This Certificate of Amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
11
<PAGE>
IN WITNESS WHEREOF, MONTGOMERY WARD HOLDING CORP. has caused this
certificate to be signed by Bernard F. Brennan, its Chairman of the Board, and
attested by Spencer H. Heine, its Secretary, this day of April, 1994.
MONTGOMERY WARD HOLDING CORP.
By: _____________________________
Bernard F. Brennan,
Chairman of the Board
(CORPORATE SEAL)
ATTEST:
By: _____________________________
Spencer H. Heine,
Secretary
12
<PAGE>
CONSENT OF STOCKHOLDERS
-----------------------
OF
--
MONTGOMERY WARD HOLDING CORP.
-----------------------------
The undersigned stockholders of MONTGOMERY WARD HOLDING CORP., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "Corporation"), holding at least a
majority of the outstanding common stock of the Corporation ("Common Stock"), do
hereby consent and agree to the adoption of the following recitals and
resolutions pursuant to Section 228 of the General Corporation Law of the State
of Delaware, in lieu of holding a special meeting of the stockholders of the
Corporation:
WHEREAS, the Board of Directors of the Corporation have adopted resolutions
authorizing an amendment to the Certificate of Incorporation of the
Corporation to authorize the issuance of a class of senior preferred stock
of the Corporation (the "Amendment"); and
WHEREAS, the stockholders of the Corporation deem it desirable and in the
best interest of the Corporation to amend the Certificate of Incorporation
of the Corporation through the adoption of the Amendment,
NOW, THEREFORE, BE IT RESOLVED: That the Amendment, in the form attached
hereto as Exhibit A, is hereby approved and adopted.
FURTHER RESOLVED: That the President or any Vice President of the
Corporation, alone or with the Secretary or any Assistant Secretary of the
Corporation, and each of them hereby are, authorized, empowered and
directed to execute, deliver and file, in the name and on behalf of the
Corporation, the Amendment, in substantially the form of Exhibit A attached
hereto, with such changes thereto as such officers shall deem appropriate,
the approval of which shall be conclusively established by the execution
thereof.
<PAGE>
FURTHER RESOLVED: That this Consent may be signed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which taken together shall be deemed to be a single document.
Dated: April , 1994
_____________________________________
Bernard F. Brennan
_____________________________________
Bernard F. Brennan, as Voting Trustee
under that certain Voting Trust under
Trust Agreement dated June 21, 1988
_____________________________________
Myron Lieberman, as Trustee of
the Brennan 1988 MW Trust
GENERAL ELECTRIC CAPITAL CORPORATION
By:
__________________________________
Its:
__________________________________
