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
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy statement
x 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:
<PAGE>
PROXY STATEMENT
MONTGOMERY WARD HOLDING CORP.
Montgomery Ward Plaza
Chicago, Illinois 60671
(312) 467-2000
This Proxy Statement, dated October 17, 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 Certifi-
cate 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 17, 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 out-
standing. The Series 1 Shares, Series 2 Shares and Series 3 Shares are some-
times 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
21, 1994.
REQUISITE VOTES
The affirmative vote of the holders of record 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 Amend-
ment, and the affirmative vote of the holders of record of a majority of the
outstanding shares of each 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 grant-
ing 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 out-
standing 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 propor-
tion 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, any 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 ex-
ercised 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 Pur-
chase 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 identi-
ty 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 partici-
pate 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 term-
inate 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 any similar voting trust
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 amend-
ments 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 sec-
tion 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 administer-
ed by the Director Plan Committee ("Director Plan Committee"). Each Plan Comm-
ittee 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 Exec-
utive Officer of the Company; Spencer H. Heine, Executive Vice President, Sec-
retary 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 there-
to 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
or 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 restric-
tion) 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 in-
come and the appropriate member of the Ward Group will be entitled to a deduc-
tion 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 sub-
stantial 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 re-
striction 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 inclu-
sion 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 restric-
tion) 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 Purch-
aser'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 Comp-
any for whom compensation information is provided in the Summary Compensation
Table included herein (the "Named Executive Officers"), to the executive offi-
cers 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 be made to the individuals
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.
<PAGE>
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 effec-
tive October 1, 1994.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
Long Term
Annual Compensation Compensation
Other
Annual Securities All Other
Compen- Underlying LTIP Compen-
Name sation Options Payout sation
Principal Position Year Salary($) Bonus($) ($)1 (#) ($) ($)2
<S> <C> <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 $50,000 or 10% of salary and bonus. Information
is given for 1993 and 1992 only pursuant to the proxy rule transitional provisions
applicable to this column.
2 Represents Company matching contributions to the Savings and Profit Sharing Plan.
3 Mr. Ball joined the Company as Executive Vice President, Apparel of Montgomery
Ward on September 18, 1992 and resigned from the Company effective January 31,
1994.
4 Mr. Kahn joined the Company on September 11, 1992 as President and resigned from
the Company effective December 15, 1993.
</TABLE>
<PAGE>
OPTION GRANTS AND EXERCISES
The following tables set forth summaries of the terms of stock options
granted to Mr. Schoeberl during the Company's 1993 fiscal year and the value of
unexercised options held by him and Messrs. Ball and Kahn as of January 1, 1994.
No other Named Executive Officer received options during the 1993 fiscal year.
None of the Named Executive Officers exercised any stock options during the 1993
fiscal year. No stock appreciation rights were granted to or exercised by any
of the named executive officers during the 1993 fiscal year.
Option Grants in Last Fiscal Year
<TABLE>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term
Percent-
age of
Total
No. of Options
Securities Granted
Underlying to Associ- Exercise
Options ates in or Base Expir-
Granted Fiscal Price ation
Name (#) Year ($/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 $562,500
</TABLE>
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Certain Montgomery Ward executives recommended by Montgomery Ward's Chief
Executive Officer (the "CEO") formerly participated in the Long Term Incentive
Plan.
The Long Term Incentive Plan consisted of three-year cycles that were
initiated annually. If specific corporate, financial, strategic and operational
objectives approved by the CEO were achieved for any designated cycle, cash was
awarded under the Long Term Incentive Plan to each participant based upon the
average base salary of such participant if, in the judgment of the CEO, such
participant contributed substantially and positively to Montgomery Ward's over-
all corporate performance. Target payouts, which were 50% of average base
salary for each of the Named Executive Officers except for Mr. Brennan, could be
adjusted with the approval of the CEO upward or downward by 40% based upon the
results of Montgomery Ward against its objectives for the cycle, and no award
would be given for performance below minimum performance levels. Mr. Brennan
participated in a long term incentive plan which was the same as the Long Term
Incentive Plan, except that his maximum award was 75% of his then-current base
salary.
The following table sets forth information regarding the participation of
Messrs. Brennan, Bergel, Schoeberl, Ball, Heine, and Kahn in the three-year
award cycle under the Montgomery Ward Long Term Incentive Plan commencing in the
Company's 1993 fiscal year. In May 1994, the Company's stockholders approved
the Executive Long-Term Incentive Plan, under which senior executive officers of
Montgomery Ward may receive future benefits in place of the Long Term Incentive
Plan.
Long-Term Incentive Plans - Awards in Last Fiscal Year
<TABLE>
Performance Estimated Future Payouts under Non-Stock
Number of or Other Price-Based Plans
Shares, Units Period Until
or Other Maturation or
Name Rights (#)1 Payout Threshold($)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 annual-
ly under Section 401(a)(17) of the Code, of any participant's annual compensa-
tion 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 partici-
pant's accrued benefit under the Pension Plan as of December 31, 1988, as deter-
mined 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 Mont-
gomery 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 designated by GE Capital (other than Mr. Cathcart) 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 direc-
tors 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 pur-
suant 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. Share-
holder 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 liqui-
dated 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 (guaran-
teed 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 execu-
tive'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' Agree-
ment. The Company also agreed to purchase all vested stock held by each execu-
tive 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 individual 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 acquired on October 8, 1994, pursuant to Conversion Rights which
arose on October 1, 1994, and which, pursuant to a prior election by Mr.
Lieberman, were automatically 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 acquired on October 8,
1994, pursuant to Conversion Rights which arose on October 1, 1994, and
which, pursuant to a prior election by Mr. Cathcart, were automatically
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 were acquired pursuant to Conversion Rights on October 8,
1994. 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 sub-
ject to a Voting Trust, all such shares held by the stockholders, except those
held by Mr. Brennan, certain trusts for the benefit of members of his family, GE
Capital and its affiliates 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 initially 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 Mont-
gomery 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 Class B 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 Stock-
holders' Agreement, public offerings and certain other major corporate trans-
actions 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, consul-
tants 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 recor-
ded 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 Certifi-
cate 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 Corpora-
tion 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, in the
form 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:
