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 Rule 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 Rules 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 transactions
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(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:
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PRELIMINARY COPIES
PROXY STATEMENT
MONTGOMERY WARD HOLDING CORP.
Montgomery Ward Plaza
Chicago, Illinois 60671
(312) 467-2000
This Proxy Statement, dated October , 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 in lieu of a special meeting of the stockholders
of the Company to (i) approve an amendment to the Certificate of
Incorporation of the Company (the "Certificate Amendment") to
authorize an additional 2,000,000 shares of Class A Common Stock,
Series 3, $0.01 par value, of the Company ("Series 3 Shares"),
and (ii) approve an amendment to the Montgomery Ward & Co.
Incorporated Stock Ownership Plan (the "Plan") to include such
newly authorized Series 3 Shares in the Plan (the "Plan
Amendment"). This Proxy Statement and an accompanying form of
written consent in lieu of meeting are being mailed to
stockholders on or about October , 1994.
RECORD DATE AND OUTSTANDING VOTING SECURITIES
Stockholders of record at the close of business on September
23, 1994, are entitled to vote the shares held on that date. The
number of voting securities of MW Holding outstanding on
September 23, 1994 was 19,316,826 shares of Class A Common Stock,
Series 1, $0.01 par value ("Series 1 Shares"), owned by three
stockholders of record; 144,894 shares of Class A Common Stock,
Series 2, $0.01 par value ("Series 2 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"), owned by one
stockholder of record. There are no Series 3 Shares outstanding.
The Series 1 Shares, Series 2 Shares and Series 3 Shares are
sometimes collectively referred to herein as "Class A Shares",
and the Class A Shares and Class B Shares are collectively
referred to herein as the "Common Stock." 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 accompanying written consent in
lieu of special meeting 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 Certificate Amendment by giving
written notice of revocation to the Secretary of the Company.
Stockholders are requested to return the consent to the Company
by delivery to the attention of Spencer H. Heine, Esq.,
Secretary, at the Company's executive offices by October , 1994.
REQUISITE VOTES
The affirmative vote of a majority of the outstanding shares
of each of (i) the Common Stock; (ii) the Series 1 Shares; and
(iii) the Class B Shares is required for approval of the
Certificate Amendment, and the affirmative vote of the holders of
record of a majority of the outstanding shares of (i) the Common
Stock and (ii) the Series 1 Shares is required for approval of
the Plan Amendment. No shares of Common Stock are held by
brokers and thus no broker non-votes will be made with respect to
the consent. Pursuant to Delaware law, votes abstaining from
voting, since they are not cast "for" a particular matter, will
have the same effect as negative votes or votes "against" a
particular matter.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
On September 23, 1994, by resolutions adopted at a meeting
of the Board of Directors of the Company, the Board of Directors
of the Company approved and authorized the Certificate Amendment,
a form of which amendment is included within the certificate
attached to this Proxy Statement as Annex A. The Board of
Directors recommends a vote FOR the Certificate Amendment.
The Certificate Amendment would authorize an additional
2,000,000 shares of Class A Common Stock, Series 3, $0.01 par
value. The additional Series 3 Shares will be added to and
reserved for issuance under the Plan for the granting of Awards,
Purchase Rights and Options (as such terms are defined in the
Plan). The Company expects to grant Options to purchase a
substantial portion of such additional Series 3 Shares pursuant
to the Plan during 1994.
The additional Series 3 Shares shall have all of the same
rights and privileges as presently provided in the Certificate of
Incorporation for Series 3 Shares. The following is a discussion
of the rights of holders of Series 3 Shares.
Dividend and Liquidation Rights. Series 3 Shares have the
same dividend and liquidation rights as Series 1 Shares and
Series 2 Shares. That is, the portion of dividends and
liquidation amounts which is payable to the holders of Class A
Shares shall be allocated among such holders in proportion to
their respective holdings of Class A Shares, without distinction
as to series; provided, however, that dividends paid in kind by
series shall be payable only to the holders of shares of the
respective series.
Dividend and liquidation rights for Class A Shares generally
are more fully described below:
(i) The term "Class A Amount," as used below with respect
to a determination of dividends or proceeds, shall mean the
number equal to the lesser of 25,000,000 (the "Series 1 Amount")
or the aggregate number of outstanding Class A Shares of all
series (the "Outstanding Amount") as of the date of
determination;
(ii) The portion of such dividends or proceeds which is
payable to the holders of Class A Shares, as a class, and without
distinction as to series, at any time when the Outstanding Amount
does not exceed the Series 1 Amount, shall be the amount which
bears the same ratio to the total amount of such dividends as the
Class A Amount bears to the sum of (A) the Class A Amount, plus
(B) the number of shares of Class B Common Stock outstanding as
of the date of the determination; and such portion of such
dividends or proceeds which is payable to the holders of the
Class A Shares shall be allocated among such holders in
proportion to their respective holdings of Class A Shares,
without distinction as to series;
(iii) The portion of such dividends or proceeds which is
payable to the holders of Class A Shares, as a class, and without
distinction as to series, at any time when the Outstanding Amount
exceeds the Series 1 Amount (but the Outstanding Amount less the
number of shares of Class A Common Stock, Series 3, outstanding
(such difference being the "Non-Series 3 Outstanding Amount")
does not exceed the Series 1 Amount), shall be the product of the
amount which would be payable to holders of Class A Shares if the
immediately preceding paragraph (ii) were applicable and the
Class A Amount were equal to the Series 1 Amount multiplied by a
fraction the numerator of which is the Outstanding Amount and the
denominator of which is the sum of the Series 1 Amount plus fifty
percent (50%) of the excess of the Outstanding Amount over the
Series 1 Amount; and such portion of such dividends or proceeds
which is payable to the holders of the Class A Shares shall be
allocated among such holders in proportion to their respective
holdings of Class Shares, without distinction as to series; and
(iv) The portion of such dividends or proceeds which is
payable to the holders of Class A Shares, as a class, and without
distinction as to series, at any time when the Outstanding Amount
exceeds the Series 1 Amount (and paragraph (iii) immediately
preceding is not applicable), shall be the product of (x) the
amount which would be payable to holders of Class A Shares if
paragraph (ii) above were applicable and the Class A Amount were
equal to the Series 1 Amount, multiplied by (y) a fraction the
numerator of which is the Non-Series 3 Outstanding Amount and the
denominator of which is the sum of the Series 1 Amount plus
eighty-one point five percent (81.5%) of the excess of the Non-
Series 3 Outstanding Amount over the Series 1 Amount, and
multiplied by (z) a fraction the numerator of which is the
Outstanding Amount and the denominator of which is the sum of the
Non-Series 3 Outstanding Amount plus fifty percent (50%) of the
number of shares of Class A Common Stock, Series 3, outstanding
at such time; and such portion of such dividends or proceeds
which is payable to the holders of the Class A Shares shall be
allocated among such holders in proportion to their respective
holdings of Class A Shares, without distinction as to series.
(v) The portion of such dividends or proceeds which is
payable to the holders of Class B Shares shall be the portion of
the total amount of such dividends or proceeds that is not
payable to the holders of Class A Shares in accordance with
paragraph (ii), (iii) or (iv) above, as applicable, and such
portion of such dividends or proceeds which is payable to the
holders of Class B Shares shall be allocated among such holders
in proportion to their respective holdings of Class B Shares.
Voting Rights. All series of Class A Shares have the same
general voting rights. Notwithstanding the foregoing, Series 1
Shares currently have certain voting rights that Series 2 Shares
and Series 3 Shares do not have. Accordingly, except as
described below, each Class A Share, without distinction as to
series, has the same number of votes per share and is entitled to
vote on the same matters.
So long as the Outstanding Amount is less than or equal to
the Series 1 Amount, each Class A Share, without distinction as
to series, is entitled to one (1) vote per share. If the
Outstanding Amount is greater than the Series 1 Amount, each
Class A Share, irrespective of series, is entitled to a fraction
of a vote per share determined by dividing the Series 1 Amount by
the Outstanding Amount.
In addition to the voting rights specified above, amendments
to the Certificate of Incorporation of the Company increasing the
number of shares of any class or series of Class A Common Stock
or Class B Common Stock (including the Certificate Amendment)
require the affirmative vote of the holders of a majority of both
(A) the Series 1 Shares then outstanding and (B) the Class B
Shares then outstanding, each voting as a class. In addition,
amendments to the Plan and the determination of the number of
shares as to which options to purchase thereunder shall be
granted (including the Plan Amendment) require the affirmative
vote of the holders of a majority of the Series 1 Shares then
outstanding.
Preemptive Rights. Shares of Common Stock of the Company
have no pre-emptive rights.
APPROVAL OF AMENDMENT TO STOCK OWNERSHIP PLAN
On September 23, 1994, by resolutions adopted at a meeting
of the Board of Directors of the Company, the Board of Directors
of the Company approved and authorized the Plan Amendment, which
would increase the number of Class A Shares allocated to the Plan
to include the 2,000,000 Series 3 Shares to be authorized
pursuant to the Certificate Amendment. A copy of the Plan
Amendment is attached hereto as Annex B. The Board of Directors
recommends a vote FOR the Plan Amendment.
The Stock Ownership Plan was adopted by the Board of
Directors of the Company ("Board of Directors") and by the
Stockholders of the Company effective July 19, 1988, and has
subsequently been amended. Shares acquired by the holder thereof
pursuant to the Plan and such shares held by certain permitted
transferees are collectively referred to herein as "Plan Shares."
On September 9, 1993, the Stock Ownership Plan was amended to
provide for two plans, the Associate Plan and the Director Plan.
Pursuant to the Associate Plan, key associates, and in certain
limited instances, advisors and consultants, of the Company and
its direct or indirect subsidiaries (the "Ward Group") (excluding
associates, advisors and consultants who are also directors of
the Company), may be granted Awards of Plan Shares or provided
Purchase Rights and/or granted Options to purchase Plan Shares.
Pursuant to the Director Plan, directors of the Company may be
granted Awards of Plan Shares or provided Purchase Rights and/or
granted Options to purchase Plan Shares. Purchase Rights are
non-qualified stock options to acquire Plan Shares identified as
such and generally to be exercised during a shorter period of
time than Options. Options are non-qualified stock options to
acquire Plan Shares. A total of 1,000,000 Series 1 Shares and
5,412,000 Series 2 Shares have been reserved for issuance under
the Stock Ownership Plan. Pursuant to an amendment to the Stock
Ownership Plan for which approval of stockholders is sought
hereby, 2,000,000 Series 3 Shares will be reserved for issuance
under the Stock Ownership Plan. The number of Plan Shares
available for issuance, the number of Plan Shares subject to
outstanding Purchase Rights and Options and the exercise price
for outstanding Purchase Rights and Options are subject to
adjustment in the event of a stock dividend, recapitalization or
other similar change affecting the number of outstanding shares
of the Company. In 1994, the Board of Directors established a
limit of 1,000,000 Shares on the number of Shares available to
any participant under the Stock Ownership Plan through Awards,
Purchase Rights and Options.
The Associate Plan is designed to attract and retain
outstanding individuals as key associates, and, in certain
limited instances, advisors and consultants, of the Ward Group
(excluding associates, advisors and consultants who are also
directors of the Company), and to provide incentives for such key
associates, advisors and consultants to expand and improve the
profits and achieve the objectives of the Ward Group by providing
to such persons opportunities to acquire Plan Shares and thereby
provide such persons with a greater proprietary interest in and
closer identity with the Ward Group and its financial success.
The Director Plan is designed to attract and retain
outstanding individuals as directors of the Company, and to
provide incentives for such directors to expand and improve the
profits and achieve the objectives of the Ward Group by providing
to such directors opportunities to acquire Plan Shares and
thereby provide such directors with a greater proprietary
interest in and closer identity with the Ward Group and its
financial success. It is intended that directors who are members
of the Director Committee, as herein defined, shall not
participate in the Director Plan at this time.
It is expected that the exercise price for Purchase Rights
and Options will generally be the fair market value of the Plan
Shares subject thereto as of the date of the grant of such
Purchase Right or Option.
No Awards, Purchase Rights or Options may be granted under
the Stock Ownership Plan after July 19, 1998, without further
action by the Board of Directors or stockholders. Purchase
Rights and Options granted prior to July 19, 1998 will continue
to be exercisable after such date pursuant to the terms of the
applicable grant. The Board of Directors may at any time amend
or terminate the Stock Ownership Plan, except that no such action
by the Board of Directors may change the terms and conditions of
any Purchase Right or Option previously granted in a manner
adverse to the holder of the Purchase Right or the optionee
without the consent of the holder of the Purchase Right or the
optionee, and, approval by the stockholders of the Company is
required to the extent deemed appropriate by the Plan Committee,
as herein defined, if adoption of such amendment without approval
by the stockholders of the Company would cause the Stock
Ownership Plan to no longer comply with Rule 16b-3 promulgated
under Section 16(b) of the Securities Exchange Act of 1934, as
amended, or any successor rule or regulatory requirement. Plan
Shares will be subject either to the provisions of the Montgomery
Ward & Co., Incorporated Stock Ownership Plan Terms and
Conditions, as amended from time to time (the "Terms and
Conditions") or that certain Stockholders' Agreement dated as of
June 17, 1988, as amended from time to time (the "Stockholders'
Agreement"). The Terms and Conditions can be amended with the
consent of the holders of 66 % of Shares subject thereto or to
the Stockholders' Agreement, but no such amendment shall
adversely affect the method of valuation of any participant's
Shares without such party's specific consent, and, except in
certain limited circumstances, the Stockholders' Agreement can be
amended with the consent of the holders of 66 % of the Shares
subject thereto, but no such amendment shall adversely affect the
method of valuation of a party's Shares without such party's
specific consent. With respect to Shares which are subject to
either the Voting Trust created by the Voting Trust Agreement
dated as of June 21, 1988 or the Voting Trust created by the
Voting Trust Agreement dated as of October ____, 1994, each with
respect to shares of Common Stock of the Company (each, a "Voting
Trust"), the power to exercise such stockholders' consents,
including with respect to amendments which adversely affect the
method of valuation, shall be held by the Voting Trustee under
such Voting Trust, except for purposes of certain amendments to
the provisions of the Stockholders' Agreement relating to
registration rights and for purposes of a vote to terminate the
Stockholders' Agreement or the Terms and Conditions. The Stock
Ownership Plan is not qualified under section 401(a) of the
Internal Revenue Code of 1986, as amended and is not subject to
the provisions of the Employee Retirement Income Security Act of
1974, as amended.
The Stock Ownership Plan is administered by two separate
committees (each being a "Plan Committee"). The Associate Plan
is administered by the Associate Plan Committee ("Associate Plan
Committee") and the Director Plan is administered by the Director
Plan Committee ("Director Plan Committee"). Each 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 telephone number and address of each Plan
Committee are (312) 467-2000 and Montgomery Ward Plaza, Chicago,
Illinois, 60671, respectively. The members of the Associate Plan
Committee are Bernard F. Brennan, Chairman and Chief Executive
Officer of the Company; Spencer H. Heine, Executive Vice
President, Secretary and General Counsel and a director of the
Company; and Myron Lieberman, a director of the Company. The
members of the Director Plan Committee are Denis J. Nayden, a
director of the Company, and James A. Parke, a director of the
Company.
The Associate Plan Committee determines, within the limits
of the express provisions of the Associate Plan, those key
associates, advisors and consultants to whom, and the time or
times at which, Awards, Purchase Rights and Options shall be
granted. The Director Plan Committee determines, within the
limits of the express provisions of the Director Plan, those
directors to whom, and the time or times at which, Awards,
Purchase Rights and Options shall be granted. Each Plan
Committee interprets its respective plan, adopts rules relating
thereto and determines the terms and provisions of Awards,
Purchase Rights and Option grants thereunder, including the
number of Plan Shares to be subject to each Award, Purchase Right
and Option, the duration of each such Purchase Right and Option,
the exercise price under each such Option, the purchase price
under each such Purchase Right, the time or times within which
(during the term of the Option) all or portions of each such
Option may be exercised, and whether cash, Plan Shares or Non-
Plan Shares or other property may be accepted in full or partial
payment upon purchase of Plan Shares pursuant to a Purchase Right
or exercise of an Option. Each Plan Committee also has the right
to accelerate Purchase Rights or Option exercise rights or make
other adjustments, including, but not limited to the cancellation
of Purchase Rights or Options in exchange for cash payments, if
the Company or Montgomery Ward & Co., Incorporated, an Illinois
corporation and a wholly-owned subsidiary of the Company
("Montgomery Ward") is a party to a transaction involving certain
mergers or consolidations, sales of all or substantially all of
its assets, or if Montgomery Ward or the Company dissolves or is
liquidated or upon the occurrence of a public offering of shares
of the Company. The Stock Ownership Plan provides that any of
the foregoing actions by either Plan Committee will be final and
conclusive.
Each grant of an Award, Purchase Right or Option to a
participant in the Stock Ownership Plan will be evidenced by a
Notice. Each Notice with respect to an Award will state (i) the
number of Plan Shares awarded and (ii) such other information as
the Plan Committee deems appropriate or necessary. Each Notice
with respect to a Purchase Right will state (i) the number of
Plan Shares with respect to which the Purchase Right is granted,
(ii) the exercise price, (iii) the duration of the Purchase
Right, (iv) the method of purchasing such Plan Shares, and (v)
such other information as the Plan Committee deems appropriate or
necessary. Each Notice with respect to an Option will state (i)
the number of Plan Shares with respect to which the Option is
granted, (ii) the Option exercise price, (iii) the Option
exercise schedule, (iv) the Option term, (v) the method of
exercising such Option, and (vi) such other information as the
Plan Committee deems appropriate or necessary.
The following summary describes the material federal income
tax aspects of the grant of Plan Shares to Award Recipients and
the purchase of Plan Shares through the exercise of Purchase
Rights or Options, with respect to the Company, Award Recipients
and Purchasers. The federal income tax laws are technical and
complex whereas the discussion herein is in general terms. The
following discussion is not tax advice, but is instead a guide to
assist participants in the Stock Ownership Plan and their
advisors. Furthermore, the tax laws are subject to change (even
retroactively) by legislation, administrative rulings and
regulations, and judicial decisions.
Generally, neither the grant nor the expiration of a
Purchase Right or Option is a taxable event. The deposit of Plan
Shares in the Voting Trust also is not a taxable event.
The tax treatment of Plan Shares granted to Award Recipients
and Plan Shares purchased by exercising Purchase Rights or
Options depends on whether or not the stock so transferred is
"transferable" or not "subject to a substantial risk of
forfeiture" for purposes of the federal income tax laws. Stock
is generally considered subject to a substantial risk of
forfeiture if rights with respect to the stock are conditioned
upon the future performance of substantial services. Stock is
treated as nontransferable unless the rights in such stock of any
transferee will not be subject to a substantial risk of
forfeiture. Because of the restrictions on the sale of Plan
Shares, it is anticipated that Plan Shares granted to Award
Recipients and Plan Shares purchased pursuant to Purchase Rights
under the Stock Ownership Plan to the extent such Plan Shares
have not vested will be considered nontransferable and subject to
a substantial risk of forfeiture upon award or purchase of Plan
Shares for purposes of the federal income tax laws.
Subject to the effect of a section 83(b) election, discussed
below, as long as the Plan Shares awarded or purchased are
nontransferable and subject to a substantial risk of forfeiture,
they will, in effect, be treated as not having been transferred
to the Award Recipient or Purchaser, respectively. Thus, for
example, dividends on such Plan Shares will be treated as
compensation and the sale of such Plan Shares will give rise to
ordinary income. When such Plan Shares become transferable or
not subject to a substantial risk of forfeiture they will, in
effect, be treated as having been transferred at such time, and
the amount of taxable compensation, if any, deemed to be paid by
a member of the Ward Group to the Award Recipient or Purchaser
will be equal to the excess, if any, of the fair market value
(determined without regard to any lapse restriction) of such Plan
Shares at such time over the amount paid for the Plan Shares. The
Award Recipient or Purchaser will include such compensation as
ordinary income and the appropriate member of the Ward Group will
be entitled to a deduction for compensation paid. The tax basis
for Plan Shares will be the amount paid for such Plan Shares plus
the amount of such compensation, if any, included as income. The
holding period for long-term capital gain purposes will commence
on the next day after the date the Plan Shares become
transferable or are not subject to a substantial risk of
forfeiture. Any appreciation or decline in value of Plan Shares
after they become transferable or not subject to a substantial
risk of forfeiture generally will be taxed as a capital gain or
loss (either short-term or long-term, as applicable) upon a sale,
exchange or other taxable disposition of such Plan Shares.
As an alternative to the foregoing tax consequences, an
Award Recipient or Purchaser within 30 days after the Award or
the purchase of Plan Shares through the exercise of Purchase
Rights or Options may file an election under section 83(b) of the
Code, to treat the acquisition of such Plan Shares as a taxable
compensation event. If the Award Recipient or Purchaser files
such election he or she will include in his or her gross income
as compensation for the year of the Award or the purchase of Plan
Shares, respectively, the excess, if any, of the fair market
value of such Plan Shares (determined without regard to any lapse
restriction) over the amount he or she paid therefor, and the
appropriate member of the Ward Group will be entitled to a
compensation deduction in the amount of such excess. (A "lapse
restriction" is any restriction, such as a vesting requirement,
whether imposed by agreement or by law, other than a restriction
which by its terms will never lapse.) Although the Internal
Revenue Service ("IRS") may consider Plan Shares vested under the
Stockholders Agreement and purchased by the exercise of Options
not subject to substantial risk of forfeiture for purposes of the
federal income tax laws, by making a section 83(b) election, a
Purchaser through the exercise of an Option can ensure inclusion
in income in the year the Option is exercised of the difference
at exercise between the fair market value (determined without
regard to any lapse restriction) of the Plan Shares with respect
to which the Option was exercised and the Option exercise price
multiplied by the number of Plan Shares with respect to which the
Option was exercised. In determining the fair market value of
Plan Shares (determined without regard to any lapse restriction)
for the purpose of computing the amount of compensation
includable in an Award Recipient or Purchaser's gross income, the
IRS will not be bound by the fair market value as determined by
any other party and may consider all the facts and circumstances.
The disadvantage of a section 83(b) election is that if Plan
Shares are subsequently forfeited or disposed of in a transaction
that is in substance a forfeiture while such Plan Shares are in
fact nontransferable and subject to a substantial risk of
forfeiture, then no loss or other deduction will be allowed for
the amount, if any, included as compensation at the time of the
transfer. Except for such limitation, if the Plan Shares are
subsequently sold, the Award Recipient or Purchaser generally
will recognize capital gain or loss (either short-term or long-
term, as applicable) on such sale equal to the difference between
the sales price and the tax basis of the Plan Shares, i.e., the
fair market value of the Plan Shares (determined without regard
to any lapse restriction) at the time of the Award or purchase of
Plan Shares, respectively.
Vested Shares, although subject to numerous restrictions
under the Stockholders Agreement and the Terms and Conditions,
will probably not be considered nontransferable and subject to
substantial risk of forfeiture for purposes of the federal income
tax laws. Accordingly, to the extent the fair market value of
such Plan Shares exceeds the amount paid therefor, such excess
shall constitute compensation income to the Purchaser.
In general, amounts treated as compensation income to a
participant in the Stock Ownership Plan (such as amounts treated
as compensation under the rules described above) constitute wages
subject to withholding of income taxes and social security taxes.
The following table sets forth the benefits which are
currently expected to be granted during 1994 under the Plan to
the executive officers of the Company for whom compensation
information is provided in the Summary Compensation Table
included herein (the "Named Executive Officers"), to the
executive officers of the Company, as a group, to the directors
of the Company who are not executive officers, as a group, and to
the Company's associates who are not executive officers, as a
group, to the extent that such benefits have been determined.
Additional benefits may be granted during 1994, but such grants
are not determinable at this time.
NEW PLAN BENEFITS
Name and
Position or Group Number of Units1
Bernard F. Brennan - 0
Chairman and Chief
Executive Officer
Richard Bergel - 200,000 3
Vice Chairman
Robert R. Schoeberl - 0
Executive Vice President2
Spencer H. Heine - 0 3
Executive Vice President,
Secretary and General Counsel
Leslie A. Ball2 0
Harold D. Kahn2 0
Executive Group 1,350,000 3
Non-Executive Director Group 0 3
Non-Executive Officer Employee Group 1,197,605 4
- ------------------------------------
1 Number of Class A Shares underlying options to be granted under the Plan.
2 Messrs. Ball and Kahn have resigned from the Company and will receive no
new benefits under the Plan. Mr. Schoeberl has retired from the Company and
will received no new benefits under the Plan.
3 Reflects Class A Shares underlying options granted during 1994 under the
Plan to date and Class A Shares underlying options which executive officers have
been informed they will receive. Further grants may
and groups indicated during 1994 under the Plan as amended, but the numbers of
shares underlying such grants are not determinable at this time.
4 Reflects Class A Shares underlying options granted during the Company's
1993 fiscal year under the Plan. Grants of options have been made under the
Plan during 1994 and further grants will be made during 1994 under the Plan as
amended, but the number of shares underlying such grants are not determinable at
this time. The Company anticipates that options with respect to a similar
aggregate number of Class A Shares have been and will be granted during the
Company's 1994 fiscal year under the Plan as amended.
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EXECUTIVE COMPENSATION
The Company had no employees and paid no compensation in
1993. The following information details compensation accrued by
Montgomery Ward and its subsidiaries to executive officers of the
Company.
SUMMARY COMPENSATION TABLE
The following table sets forth summary compensation
information for (i) the Company's Chief Executive Officer, (ii)
the four most highly compensated other executive officers who
were serving as executive officers at the end of the Company's
1993 fiscal year, and (iii) for Harold D. Kahn, for whom
disclosure would have been provided pursuant to clause (ii) above
but for the fact that he was not serving as an executive officer
of the Company at the end of the Company's 1993 fiscal year. Mr.
Schoeberl has retired from the Company effective October 1, 1994.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
Long Term
Annual Compensation Compensation
Other Securities All Other
Annual Underlying LTIP Compen-
Name and Compensation Options Payout sation
Principal Position Year Salary($) Bonus($) ($)1 (#) ($) ($)2
<S> <C> <C> <C> <C> <C> <C>
Bernard F. Brennan 1993 1,052,500 400,000 3,747,054 --- 732,555 2,936
Chairman and Chief 1992 1,017,500 354,200 1,497,488 --- 587,777 2,884
Executive Officer 1991 993,333 364,210 --- --- 591,894 2,800
Richard Bergel 1993 404,167 130,000 279,336 --- 200,700 2,936
Vice Chairman 1992 350,000 125,000 136,993 --- 132,510 2,884
1991 283,958 69,000 --- --- 99,801 2,800
Robert R. Schoeberl 1993 312,500 71,557 65,612 50,000 112,153 2,936
Executive Vice 1992 264,167 49,850 25,309 --- 82,168 2,884
President 1991 216,667 61,800 --- --- 79,704 2,683
Leslie A. Ball3 1993 450,000 150,000 1,413,040 --- 194,423 ---
1992 112,500 125,000 307,832 100,000 107,565 ---
Spencer H. Heine 1993 279,167 75,000 59,196 --- 101,775 2,936
Executive Vice 1992 223,750 68,304 22,460 --- 72,870 2,694
President, Sec- 1991 181,667 60,000 --- --- 67,687 2,415
retary and General
Counsel
Harold D. Kahn4 1993 598,958 200,000 3,139,277 --- 270,031 ---
1992 208,333 100,000 308,294 300,000 149,396 ---
<FN>
1 Includes company paid legal fees, taxes paid on stock transfers and purchases of
Company stock at below-market prices. With respect to such legal fees, see "OTHER
TRANSACTIONS AND CERTAIN RELATIONSHIPS" below. Also includes executive
perquisites for Mr. Bergel (primarily a living expense allowance of $27,201 and
$25,708 and a cash bonus equal to related income taxes of $21,160 and $14,732, in
each case for 1993 and 1992, respectively). No other Named Executive Officer
received perquisites exceeding $50,000 or 10% of salary and bonus. Information is
given for 1993 and 1992 only pursuant to the proxy rule transitional provisions
applicable to this column.
2 Represents Company matching contributions to the Savings and Profit Sharing Plan.
3 Mr. Ball joined the Company as Executive Vice President, Apparel of Montgomery
Ward on September 18, 1992 and resigned from the Company effective January 31,
1994.
4 Mr. Kahn joined the Company on September 11, 1992 as President and resigned from
the Company effective December 15, 1993.
</TABLE>
<PAGE>
OPTION GRANTS AND EXERCISES
The following tables set forth summaries of the terms of
stock options granted to Mr. Schoeberl during the Company's 1993
fiscal year and the value of unexercised options held by him and
Messrs. Ball and Kahn as of January 1, 1994. No other Named
Executive Officer received options during the 1993 fiscal year.
None of the Named Executive Officers exercised any stock options
during the 1993 fiscal year. No stock appreciation rights were
granted to or exercised by any of the named executive officers
during the 1993 fiscal year.
<TABLE>
Option Grants in Last Fiscal Year
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
Percentage of
No. of Total
Securities Options
Underlying Granted to Exercise
Options Associates or Base Expir-
Granted in Fiscal Price ation
Name (#) Year ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert R. Schoeberl 50,000 2.5% $22.50 9/30/2003 $708,750 $1,788,750
</TABLE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities Underlying Unexercised Value of Unexercised
Options at FY-End (#) In-the-Money Options at FY-End
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Robert R. Schoeberl 0 50,000 0 0
Leslie A. Ball 50,000 50,000 $187,500 $187,500
Harold D. Kahn 150,000 150,000 $562,500 $562,500
</TABLE>
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Certain Montgomery Ward executives recommended by Montgomery
Ward's Chief Executive Officer (the "CEO") formerly participated
in the Long Term Incentive Plan.
The Long Term Incentive Plan consisted of three-year cycles
that were initiated annually. If specific corporate, financial,
strategic and operational objectives approved by the CEO were
achieved for any designated cycle, cash was awarded under the
Long Term Incentive Plan to each participant based upon the
average base salary of such participant if, in the judgment of
the CEO, such participant contributed substantially and
positively to Montgomery Ward's overall corporate performance.
Target payouts, which were 50% of average base salary for each of
the Named Executive Officers except for Mr. Brennan, could be
adjusted with the approval of the CEO upward or downward by 40%
based upon the results of Montgomery Ward against its objectives
for the cycle, and no award would be given for performance below
minimum performance levels. Mr. Brennan participated in a long
term incentive plan which was the same as the Long Term Incentive
Plan, except that his maximum award was 75% of his then-current
base salary.
The following table sets forth information regarding the
participation of Messrs. Brennan, Bergel, Schoeberl, Ball, Heine,
and Kahn in the three-year award cycle under the Montgomery Ward
Long Term Incentive Plan commencing in the Company's 1993 fiscal
year. In May 1994, the Company's stockholders approved the
Executive Long-Term Incentive Plan, under which senior executive
officers of Montgomery Ward may receive future benefits in place
of the Long Term Incentive Plan.
<TABLE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
Performance Estimated Future Payouts under Non-Stock
Number of or Other Price-Based Plans
Shares, Units Period Until
or Other Maturation or
Name Rights (#)1 Payout Threshold($)2 Target($)3 Maximum($)4
<S> <C> <C> <C> <C> <C>
Bernard F. Brennan 712,500 1995 427,500 712,500 997,500
Richard Bergel 225,000 1995 135,000 225,000 315,000
Robert R. Schoeberl 175,000 1995 105,000 175,000 245,000
Leslie A. Ball5 --- ---- --- --- ---
Spencer H. Heine 200,000 1995 120,000 200,000 280,000
Harold D. Kahn6 --- ---- --- --- ---
</TABLE>
<PAGE>
1 Units each represent one dollar of target payout, based
on a target of 50% of then-current base salary for Messrs.
Bergel, Schoeberl, Ball, Heine and Kahn and 75% of then-current
base salary for Mr. Brennan.
2 Threshold amounts are 60% of target payouts, representing
payout for accomplishment of minimum performance levels.
3 Target levels are based on the attainment of performance
goals, with no adjustment to the payout made by the CEO.
4 Maximum levels represent 140% of target payouts,
comprising the maximum upward adjustment possible under the Long
Term Incentive Plan.
5 Mr. Ball resigned as an officer of the Company effective
January 31, 1994. He will receive no further payouts under the
Long Term Incentive Plan. Had he not resigned, Mr. Ball would
have been eligible to receive from a threshold level of $135,000
to a maximum payout of $315,000.
6 Mr. Kahn resigned as an officer of the Company effective
December 15, 1993. He will receive no further payouts under the
Long Term Incentive Plan. Had he not resigned, Mr. Kahn would
have been eligible to receive from a threshold level of $187,500
to a maximum payout of $437,500.
PENSION PLAN
Executive officers of Montgomery Ward, in addition to many
other associates, participate in a pension plan (the "Pension
Plan") which provides benefits defined by formulae based
primarily on a participant's annual compensation offset by
benefits provided by associates' Basic Contribution and
Transferred Contribution accounts in the Savings and Profit
Sharing Plan ("Savings Plan"), in which executive officers of
Montgomery Ward, 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 annual 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 annually
under Section 401(a)(17) of the Code, of any participant's annual
compensation was 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 normal retirement age (65 years old) is
generally based on three benefit formulae that are applicable to
different years of service. The formula for service after 1988
applies to credited service, as defined in the Pension Plan,
earned after 1988 while making contributions to the Savings Plan
and is based on "career earnings". A participant's annual
benefit under the post-1988 formula is 1.5% of the participant's
eligible pay for each year of credited service after 1988. The
Pension Plan formulae benefit is determined by adding the benefit
under the post-1988 formula to the participant's accrued benefit
under the Pension Plan as of December 31, 1988, as determined
under the formulae in effect prior to 1988. A participant's
benefit determined under the Pension Plan 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.
The following table sets forth the estimated annual benefits
(calculated on a straight life annuity basis) upon retirement at
age 65 under the Pension Plan, which is the only defined benefit
plan under which associates of Montgomery Ward 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 1993 (including
compensation pursuant to the Performance Management Program),
assuming 6% annual increases; and without regard to any reduction
for benefits under the Savings Plan):
Estimated Annual Pension
Name of Participant at Retirement
Bernard F. Brennan . . . . $107,185
Richard Bergel . . . . . . $98,173
Robert R. Schoeberl. . . . $84,913
Leslie A. Ball . . . . . . N/A
Spencer H. Heine . . . . . $98,399
Harold D. Kahn . . . . . . N/A
Messrs. Ball and Kahn have resigned from the Company and
will receive no payments under the Pension Plan.
DIRECTOR COMPENSATION ARRANGEMENTS
Silas S. Cathcart and Myron Lieberman, directors of the
Company, are paid director fees of $6,000 per fiscal quarter,
plus $1,500 for each meeting such director attends of the Board
of Directors of MW Holding and Montgomery Ward, plus $1,500 for
each meeting such director attends of a committee of MW Holding
and Montgomery Ward of which such director is a member, provided
that if a meeting of the Board of Directors of MW Holding is held
jointly with or immediately prior to or following a meeting of
the Board of Directors of Montgomery Ward, the aggregate fees for
such meetings shall be $1,500, and provided further that if a
meeting of a committee of MW Holding is held jointly with or
immediately prior to or following a meeting of a committee of
Montgomery Ward the aggregate fees for such meetings shall be
$1,500. Such directors fees may be converted into Series 1 or
Series 2 Shares pursuant to the Directors Fee Plan described
below. Directors of the Company who are also executive officers
of Montgomery Ward currently receive no directors fees or other
compensation for their service as directors of the Company.
Likewise, directors of the Company who are executive officers of
GE Capital currently receive no directors fees or other
compensation for their service as directors of the Company.
In December, 1990, the Board of Directors adopted a plan,
which was approved by the shareholders in May, 1991, allowing
Messrs. Cathcart and Lieberman to elect to receive all or any
portion of the fees for their services as directors of the
Company and Montgomery Ward in Series 1 Shares. In May, 1991,
the Board of Directors amended and restated the plan as the
Directors Plan (the "Directors Fee Plan") to permit (a) the
participation of additional directors, (b) the receipt of Series
2 Shares as well as Series 1 Shares and (c) the establishment of
a committee (the "Directors Fee Plan Committee") to (i)
administer the 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.
The Directors Fee Plan as so amended and restated was approved by
the shareholders on May 17, 1991.
Directors of the Company or Montgomery Ward 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 Heine. Of the seven eligible
directors, the Directors Fee Plan Committee has designated only
Messrs. Cathcart and Lieberman as participants in the Directors
Plan as of September 23, 1994. Pursuant to an irrevocable
election made in 1992, each of Messrs. Cathcart and Lieberman has
elected to receive all of the fees earned by them for service as
directors of the Company in Series 1 Shares. As of September 23,
1994, Messrs. Cathcart and Lieberman have acquired 5,605 and
6,623 Series 1 Shares, respectively, pursuant to rights
("Conversion Rights") under the Directors Fee Plan.
Conversion Rights are automatically granted after the end of
each fiscal quarter of the Company to participating directors 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.
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. Shareholder
approval of an amendment to the Directors Fee Plan is necessary
if required for compliance with Rule 16b-3 promulgated under
Section 16(b) of the Exchange Act, and the timing of certain
amendments may be limited by Rule 16b-3. The Directors Fee Plan
Committee has the right to make adjustments with respect to
Conversion Rights if Montgomery Ward or the Company dissolves or
is liquidated or upon the occurrence of a public offering of
shares of the Company.
EMPLOYMENT CONTRACTS AND SEVERANCE ARRANGEMENTS
Executive Employment Agreements. In the course of recruiting
new executives, promoting existing associates to executive
positions and increasing the responsibilities of existing
executives, Montgomery Ward 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 bonus under the Performance Management Program
(the "PMP"), the maximum percentage of the target bonus under the
PMP that can be earned, participation in the Long Term Incentive
Plan with initial target bonuses for applicable Long Term
Incentive Plan cycles, the percentage of the executive's base pay
that can be earned annually through the Long Term Incentive Plan
after the initial bonus target period has run, bonus guarantees,
if any, and the number of stock options, if any, that will
initially be granted to the executive in his or her new position.
Recent employment agreements provide for compensation
arrangements pursuant to the Senior Executive Performance
Management Program and the Executive Long-Term Incentive Plan,
each of which was approved by the Company's stockholders of the
Company's May 20, 1994 annual meeting of stockholders and which
have replaced the PMP and the Long Term Incentive Plan,
respectively. Of the executive officers named in the Summary
Compensation Table, Mr. Bergel has an agreement of this type and
Mr. Ball and Mr. Kahn had agreements of this type.
Mr. Kahn and Montgomery Ward entered into their agreement in
connection with Mr. Kahn's agreement to serve as President of
Montgomery Ward; Mr. Bergel and Montgomery Ward entered into
their agreement in connection with Mr. Bergel's appointment to
the position of Chief Executive Officer of Lechmere, Inc.
("Lechmere"), an indirect wholly-owned subsidiary of Montgomery
Ward; and Mr. Ball and Montgomery Ward entered into their
agreement when Mr. Ball was named Executive Vice President,
Apparel of Montgomery Ward. The agreement with Mr. Bergel
provides, and the agreements with Mr. Kahn and Mr. Ball provided,
for, respectively, (i) initial annual base salaries of $600,000,
$625,000, and $450,000; (ii) PMP target bonuses of $200,000
(guaranteed at 100% for 1994), $200,000 (guaranteed at 50% for
1992 and 100% for 1993), and $150,000 (guaranteed at 83.33% for
1992 and 100% for 1993), in each case with opportunities to earn
up to 150% of such target bonuses; and (iii) Long Term Incentive
Plan participation at a target bonus level of base salary for
each executive of 50%. With respect to Mr. Bergel, the Company
will apply these provisions to the Senior Executive Performance
Management Program and the Executive Long-Term Incentive Plan.
The agreements with Mr. Kahn and Mr. Ball stated that the
executive would receive options to purchase 300,000 and 100,000
Class A Shares, respectively, with 25% of such options
exercisable immediately and 25% becoming exercisable each year
thereafter (which options were granted). The agreement with Mr.
Bergel stated that he would receive options to purchase 200,000
Class A Shares at $22.50 per share, with such options becoming
exercisable 100% on April 4, 1996. Mr. Bergel was granted such
options on July 1, 1994. Mr. Bergel's employment agreement also
provides that if, before March 1, 1996, Mr. Bergel incurs state
tax liability on dividends paid on the Company's Common Stock or
on his sale of such stock in a public market, the Company will
"gross-up" such taxes to the extent they exceed 3.0% of the
income derived thereby. Each of the employment agreements also
contained certain severance arrangements. The severance
arrangements with Mr. Bergel are more fully described below.
Each of Messrs. Kahn and Ball entered into a General Release and
Covenant Not to Sue (a "Release") with Montgomery Ward upon the
termination of the employment of such executive with Montgomery
Ward. The provisions of each Release expressly supersede the
severance provisions in the applicable employment agreement and
are more fully described below.
Mr. Bergel's employment agreement also provides that, upon
the occurrence of certain events, including his separation from
Lechmere before April 1, 1996, Mr. Bergel may elect to retire
upon thirty days notice. The agreement provides that upon Mr.
Bergel's retirement, he will be permitted to sell 25% of the
Class A Shares held by him to the Company for cash in each of the
year of such retirement and the next succeeding three (3) years.
Also upon Mr. Bergel's retirement, the Company will provide him
with a 100% relocation package to move to any location of his
choice in the continental United States.
The Releases with Mr. Kahn and Mr. Ball provide for cash
payments of a total of $2,373,157 and $810,000, respectively,
subsidization of each executive's continuation of coverage in
Montgomery Ward's health care plan through December 31, 1995 and
January 31, 1995, respectively, and certain modifications of the
non-compete clauses in each executive's letter employment
agreement. In addition, the Company promised in each Release to
pay the executive the "spread" between the exercise price of all
then-exercisable options held by the executive and $26.50 per
share, the fair market value of the Common Stock for the
Company's 1994 fiscal year, as determined pursuant to the
Stockholders' Agreement. The Company also agreed to purchase all
vested stock held by each executive at $26.50 per share. In
connection with the foregoing, the executive in each Release
discharged Montgomery Ward and its officers, directors, agents,
employees and affiliates from all claims arising out of the
executive's employment with Montgomery Ward. Each Release also
contains provisions relating to confidentiality of information
received in connection with the executive's employment.
Senior Officer Severance Plan. The normal Severance Plan for
certain senior officers of Montgomery Ward provides that upon
termination of a participating officer's employment with
Montgomery Ward, for reasons other than cause, death, retirement
or resignation, the senior officer will receive from Montgomery
Ward a payment equal to 12 months of his or her base pay. This
payment is to be in lieu of any other severance pay benefits
available to the senior officer under any other Montgomery Ward
policy. The participants in this plan currently consist of
twenty-five (25) senior officers of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Brennan, Chairman and Chief Executive Officer of the
Company and Chairman and Chief Executive Officer of Montgomery
Ward, serves as a member of the Compensation Committee of
Montgomery Ward's Board of Directors. Robert A. Kasenter,
Executive Vice President of the Company and Executive Vice
President, Human Resources of Montgomery Ward, serves as
Secretary of the Compensation Committee of Montgomery Ward's
Board of Directors, although Mr. Kasenter is not a director of
the Company or of Montgomery Ward.<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership, as
of September 23, 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 is reflected in
the Summary Compensation Table (none of whom except the
individuals identified 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.
No. of % of
Individual or Group Class A Shares Class A Shares
Bernard F. Brennan (a) 17,261,720 88.7%
Chairman of the Board
and Chief Executive Officer
and a Director
Myron Lieberman (b) 2,511,099 12.9%
Director
Richard Bergel (c)(d) 852,500 4.4%
Vice Chairman
and a Director
Spencer H. Heine (c) 251,250 1.3%
Executive Vice President,
Secretary and General Counsel
and a Director
Bernard W. Andrews (c)(e) 350,000 1.8%
President and a Director
Silas S. Cathcart (c)(f) 15,888 0.0%
Director
Robert R. Schoeberl (c)(g) 278,333 1.4%
Executive Vice President
Tamara Brennan (h) 2,200,000 11.3%
All directors and executive
officers as a group (20 persons) (i) 18,937,645 94.3%
_______________________________________________________
(a) Comprised of 13,025,750 Class A Shares (66.9% of the Class A
Shares and 29.3% of the Common Stock outstanding as of
September 23, 1994) owned of record by Mr. Brennan and with
respect to which Mr. Brennan has sole investment and voting
power, and 4,235,970 Class A Shares (21.8% of the Class A
shares and 9.5% of the Common Stock outstanding as of
September 23, 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 2,200,000 Class A Shares (11.3% of the
Class A Shares and 5.0% of the Common Stock outstanding as
of September 23, 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 (h)
below. Mr. Brennan disclaims beneficial ownership of such
2,200,000 Class A Shares. Does not include Class A Shares
which may be acquired by the holders of Options exercisable
as of September 23, 1994 or which become exercisable within
60 days of the date hereof, which Class A Shares will be
required to be deposited by the holders hereof in the Voting
Trust upon exercise of such Options. Mr. Brennan's business
address is 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 226 Class A
Shares which Mr. Lieberman will acquire on October 8, 1994,
a date within sixty days of the date of this Proxy
Statement, pursuant to Conversion Rights which arose on
October 1, 1994 and which, pursuant to a prior election by
Mr. Lieberman, will automatically be exercised on October 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 Class A Shares held (or to be deposited upon
acquisition pursuant to exercise of Options) 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 350,000 Class A Shares which may be acquired by Mr.
Andrews pursuant to options exercisable on September 23,
1994.
(f) Includes 283 Class A Shares which Mr. Cathcart will acquire
on October 8, 1994, a date within sixty days of the date of
this Proxy Statement, pursuant to Conversion Rights which
arose on October 1, 1994 and which, pursuant to a prior
election by Mr. Cathcart, will automatically be exercised on
October 8, 1994.
(g) Does not include 26,667 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. Includes 50,000 Class A Shares which may be acquired
by Mr. Schoeberl pursuant to options exercisable on
September 30, 1994.
(h) 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.
(i) 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 1,147,484 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 572,900 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 September 23, 1994. Includes 509
Class A Shares which will be acquired pursuant to Conversion
Rights on October 8, 1994, a date within 60 days of the date
hereof. Includes 50,000 Class A Shares which can be
acquired pursuant to options which became exercisable on
September 30, 1994.
GE Capital owns 100% of the 25,000,000 Class B Shares
currently outstanding. Such shares represented 56.2% of the
outstanding Common Stock as of September 23, 1994. GE Capital
also owns 100% of the 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 of this
Proxy Statement. Such shares represent 100% of the Company's
outstanding preferred stock. GE Capital's address is 260 Long
Ridge Road, Stamford, Connecticut 06927.
CONTROL MATTERS
Voting of Shares. In the event that a Voting Trust is not in
effect or in the event shares of Common Stock of the Company
deposited therein are not subject to a 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 have 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 eleven
members, including one vacancy. The Stockholders' Agreement
provides that six of the Company's directors shall be designated
by the Designator (as defined therein), presently Mr. Brennan,
and five 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 purchased by them in June
1988, 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 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 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 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.
The holders of the 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 Certificate Amendment and the Plan Amendment, in
support of which this Proxy Statement is issued, are adopted, the
Company anticipates that it will grant options to purchase a
number of the additional Series 3 Shares pursuant to the Plan to
key associates and, in certain limited cases, consultants to the
Company and its subsidiaries. Executive officers and directors
of the Company may be among the recipients of such Options.
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.
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.
By Order of the Board of Directors,
Spencer H. Heine
Executive Vice President,
Secretary and General Counsel
<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. A Certificate of Correction of Certificate of
Incorporation of the Corporation was filed in the Office of the
Secretary of State of Delaware on February 9, 1988.
3. The original Restated Certificate of Incorporation of
the Corporation was filed in the Office of the Secretary of State
of Delaware on June 17, 1988 and amendments thereto were filed on
each of June 20, 1988; June 24, 1988; January 30, 1990; and March
20, 1992.
4. The Second Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of
Delaware on June 25, 1992 and an amendment thereto was filed on
April 27, 1994.
5. The Third Restated Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of
Delaware on June 28, 1994.
6. The Board of Directors of the Corporation, at a meeting
duly called and held, authorized, adopted and approved
resolutions proposing and declaring advisable the First Amendment
to the Third Restated Certificate of Incorporation of the
Corporation, setting forth amendments to Articles SECOND and
FOURTH thereof as follows:
Article SECOND is amended in its entirety to read as
follows:
"SECOND: The address of its registered office in
the State of Delaware is 32 Loockerman Square, Suite L-
100, in the City of Dover 19901, County of Kent. The
name of its registered agent at such address is the
Prentice-Hall Corporation System, Inc."
That portion of Article FOURTH which precedes the heading
"PART A. SENIOR PREFERRED STOCK" is amended in its entirety
to read as follows:
"FOURTH: The total number of shares of capital
stock which the Corporation shall have authority to
issue is fifty-seven million eight hundred twelve
thousand seven hundred fifty (57,812,750) consisting of
the following amounts in the following designations:
1. Common Stock. Fifty-seven million eight
hundred twelve thousand (57,812,000) 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-two million eight hundred
twelve thousand (32,812,000) 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
(iii) two million four hundred
thousand (2,400,000) shares of Class A
Common Stock, Series 3 (hereinafter
referred to as "Class A Common Stock,
Series 3"), and
(b) twenty-five million (25,000,000)
shares of Class B Common Stock (hereinafter
referred to as "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:"
Section 2(b)(i) of Part B of Article FOURTH is amended in
its entirety to read as follows:
"(i) At such time, if any, as GE Capital and GE
Capital Affiliates shall cease to own, in the
aggregate, beneficially or of record, twenty percent
(20%) or more of the shares of Common Stock which GE
Capital and GE Capital Affiliates purchased in June
1988, (x) if the number of directorships on the Board
of Directors of the Corporation at such time shall be
nine (9), the number of directors shall be
automatically changed to seven (7), the holders of the
Class A Common Stock, voting as a class, shall be
entitled to elect five (5) of such directors, and the
holders of the Class B Common Stock, voting as a class,
shall be entitled to elect two (2) of such directors,
and (y) if the number of directorships on the Board of
Directors of the Corporation at such time shall be
eleven (11), the number of directors shall be
automatically changed to nine (9), the holders of the
Class A Common Stock, voting as a class, shall be
entitled to elect seven (7) of such directors, and the
holders of the Class B Common Stock, voting as a class,
shall be entitled to elect two (2) of such directors;
provided, however, that, in either of the foregoing
cases, as long as the Account Purchase Agreement
referred to in the Stockholders Agreement is in effect
and GE Capital or any GE Capital Affiliate shall own
beneficially or of record any shares of Class B Common
Stock, GE Capital shall have the right to elect one (1)
of the two (2) directors which the holders of the Class
B Common Stock shall be entitled to elect and all other
holders of Class B Common Stock in the aggregate shall
be entitled to elect the other of the two (2) directors
which the holders of Class B Common Stock shall be
entitled to elect. A vacancy in the directorships to
be elected, respectively, by the holders of the Class A
Common Stock or the Class B Common Stock may be filled
only by the vote or written consent of the holders of
Class A Common Stock or Class B Common Stock, as the
case may be."
7. The Stockholders of the Corporation, by unanimous
written consent, adopted resolutions authorizing, adopting and
approving the aforesaid amendments to Articles SECOND and FOURTH
of the Third Restated Certificate of Incorporation of the
Corporation.
8. 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.
9. 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.
IN WITNESS WHEREOF, MONTGOMERY WARD HOLDING CORP. has
caused this certificate to be signed by Bernard F. Brennan, its
Chairman of the Board and Chief Executive Officer, and attested
by Spencer H. Heine, its Secretary, this _____day of
_______________, 1994.
MONTGOMERY WARD HOLDING CORP.
By:
Bernard F. Brennan
Chairman of the Board
and Chief Executive Officer
(CORPORATE SEAL)
ATTEST:
By:
Spencer H. Heine
Secretary
<PAGE>
ANNEX B
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
MONTGOMERY WARD & CO., INCORPORATED STOCK OWNERSHIP PLAN
This Amendment No. 1 to the amended and restated Montgomery
Ward & Co., Incorporated Stock Ownership Plan (the "Plan") is
made as of the _____ day of _______________, 1994.
WHEREAS, MONTGOMERY HOLDING CORP., a Delaware corporation,
(the "Company") has previously amended and restated the Plan; and
WHEREAS, pursuant to Section 16 of the Plan the Company has
reserved the right to amend the Plan; and
WHEREAS, the Company desires to amend the Plan.
NOW, THEREFORE, the Plan is hereby amended in the following
manner:
1. The second sentence of Section 1 is deleted in its
entirety and the following is inserted in lieu thereof:
"The purpose of the Associate Plan of the Program is to
attract and retain outstanding individuals as associates,
advisors and consultants of Montgomery Ward Holding Corp.
("Company"), Montgomery Ward & Co., Incorporated ("Ward"),
and their subsidiaries and affiliates (Company, Ward and
their subsidiaries and affiliates, collectively or
individually, "Ward Group"), excluding associates, advisors
and consultants who are also directors of the Company, and
to provide incentives for such associates, advisors and
consultants to expand and improve the profits and achieve
the objectives of the Ward Group by providing to such
individuals opportunities to acquire shares of Class A
Common Stock, Series 1 (par value $.01 per share) ("Series 1
Shares"), Class A Common Stock, Series 2 (par value $.01 per
share) ("Series 2 Shares") and Class A Common Stock, Series
3 (par value $.01 per share) ("Series 3 Shares") of the
Company (the Series 1 Shares, the Series 2 Shares and the
Series 3 Shares being hereinafter collectively referred to
as "Shares") and thereby provide such individuals with a
greater proprietary interest in and closer identity with the
Ward Group and its financial success."
2. The first sentence of Section 7 is deleted in its
entirety and the following is inserted in lieu thereof:
"The total number of Shares allocated to this Program and
available to designated Participants under this Program is
One Million (1,000,000) Series 1 Shares, Five Million Four
Hundred Twelve Thousand (5,412,000) Series 2 Shares and Two
Million (2,000,000) Series 3 Shares, except as such numbers
of Shares shall be adjusted in accordance with the
provisions of Section 11."
3. The following sentence is inserted as the first
sentence of Section 12: "Notwithstanding anything herein to
the contrary, no Awards, Purchase Rights or Options shall be
granted to any person who is not an associate of the Company
or of one of its direct or indirect subsidiaries unless the
applicable Committee, by resolution, determines that such
grant of an Award, Purchase Right or Option would not be
contrary to the securities laws of any applicable
jurisdictions at the time of such grant."
* * *
<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 with respect
to the authorization of an additional two million
(2,000,000) shares (the "New Shares") of Class A Common
Stock, Series 3 of the Company (the "Certificate
Amendment");
WHEREAS, the Board of Directors of the Corporation have
adopted resolutions authorizing an amendment (the "Plan
Amendment") to the Montgomery Ward & Co., Incorporated Stock
Ownership Plan (the "Plan") with respect to the allocation
of the New Shares to the Plan; 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 Certificate Amendment, and to
amend the Plan through adoption of the Plan Amendment in the
manner set forth by the Board of Directors;
NOW, THEREFORE, BE IT RESOLVED: That the Certificate
Amendment, as reflected in the certificate attached hereto
as Annex A, is hereby approved and adopted.
FURTHER RESOLVED: That the Chairman of the Board, Vice
Chairman, President or any Executive Vice President of the
Corporation, alone or with the Secretary or any Assistant
Secretary of the Corporation, are, and each of them hereby
is, authorized, empowered and directed to execute, deliver
and file, in the name and on behalf of the Corporation, the
Certificate Amendment.
FURTHER RESOLVED: That the Plan Amendment, in the form
attached hereto as Annex B, is hereby approved and adopted.
FURTHER RESOLVED: That the Chairman of the Board, Vice
Chairman, President or any Executive Vice President of the
Corporation, alone or with the Secretary or any Assistant
Secretary of the Corporation, are, and each of them hereby
is, authorized, empowered and directed to file, in the name
and on behalf of the Corporation, the Plan Amendment in all
jurisdictions in which such officers determine that such
filing is necessary or desirable.
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: October , 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:
