<PAGE>
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MONTGOMERY WARD HOLDING CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3571585
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
MONTGOMERY WARD PLAZA
CHICAGO, ILLINOIS 60671-0042
(ADDRESS OF REGISTRANT'S PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
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MONTGOMERY WARD & CO., INCORPORATED
STOCK OWNERSHIP PLAN
(FULL TITLE OF THE PLAN)
----------------
SPENCER H. HEINE, ESQ.
EXECUTIVE VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
MONTGOMERY WARD HOLDING CORP.
MONTGOMERY WARD PLAZA
CHICAGO, ILLINOIS 60671-0042
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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(312) 467-2000
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
JOHN E. LOWE, ESQ.
ALTHEIMER & GRAY
10 SOUTH WACKER DRIVE
SUITE 4000
CHICAGO, ILLINOIS 60606
(312) 715-4000
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CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE OFFERING PRICE REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE (1) (1) FEE (1)
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Montgomery Ward Holding Corp.
Class A Common Stock, Series 3, 2,000,000
$.01 par value.................. Shares $26.50 $53,000,000 $18,275.99
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Voting Trust Certificates repre-
senting such Shares of Class A 2,000,000
Common Stock, Series 3.......... Certificates
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(1) Estimated solely for purposes of calculating registration fee, pursuant to
Rule 457(h), on the basis of the value of the Registrant's Class A Common
Stock, Series 3, on December 27, 1994. The registration fee for the
Registrant's Class A Common Stock, Series 1, and Class A Common Stock,
Series 2, covered under the Prospectus which constitutes Part I of this
Registration Statement, was paid on June 13, 1991, upon the filing of the
Registrant's Registration Statement on Form S-1 (Registration No. 33-
41161).
----------------
THE PROSPECTUS, WHICH CONSTITUTES PART I OF THIS REGISTRATION STATEMENT, ALSO
CONSTITUTES PART I OF THE REGISTRANT'S POST EFFECTIVE AMENDMENT ON FORM S-8 TO
FORM S-1 REGISTRATION STATEMENT (REGISTRATION NO. 33-41161) WHICH IS
SPECIFICALLY INCORPORATED HEREIN BY REFERENCE.
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<PAGE>
MONTGOMERY WARD & CO., INCORPORATED STOCK OWNERSHIP PLAN
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Pursuant to Instruction E of Form S-8, the contents of the Post Effective
Amendment on Form S-8 to Form S-1 Registration Statement, Registration No. 33-
41161, which was filed by Montgomery Ward Holding Corp. (the "Company") with
the Securities and Exchange Commission ("Commission") on June 15, 1992, are
specifically incorporated herein by reference, including all exhibits thereto,
all documents incorporated therein by reference and all exhibits to such
documents, except as indicated otherwise under Item 8 hereof.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the shares of Class A Common Stock, Series 3, and the Voting
Trust Certificates registered hereby is being passed upon for the Company by
Altheimer & Gray, Chicago, Illinois. A limited partnership consisting of
certain members of such firm owns 294,250 shares of Class A Common Stock,
Series 1 ("Series 1 Shares"). Myron Lieberman, a director of the Company and a
senior partner in Altheimer & Gray, is the sole general partner of such limited
partnership. Mr. Lieberman also holds 16,849 Series 1 Shares in his own name.
Additionally, Mr. Lieberman is the beneficial owner of 2,200,000 Series 1
Shares as trustee of a trust for the benefit of Bernard F. Brennan's family.
Mr. Brennan is currently Chairman of the Board and Chief Executive Officer of
the Company. In addition, certain partners of Altheimer & Gray hold options to
purchase shares of Class A Common Stock, Series 2, which they received as
associates of the Company.
ITEM 8. EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION
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4.(a) Third Restated Certificate of Incorporation of the Company, filed
June 28, 1994, incorporated by reference to Exhibit 3.2(iii) of
the Company's Registration Statement on Form S-1 (Registration No.
33-33252).
(b) Certificate of Amendment to Certificate of Incorporation of the
Company, filed with the State of Delaware on October 25, 1994,
incorporated by reference to Exhibit 3.2(iv) of the Company's
Quarterly Report on Form 10-Q for the quarter ended October 1,
1994.
(c) Voting Trust Agreement dated as of June 21, 1988, incorporated by
reference to Annex 2 of the Prospectus contained in the Company's
Registration Statement on Form S-1 (Registration No. 33-33252).
(d) Voting Trust Agreement dated as of October 21, 1994, incorporated
by reference to Exhibit 9.(i) of the Company's Quarterly Report on
Form 10-Q for the quarter ended October 1, 1994.
(e) Stockholders' Agreement dated as of June 17, 1988, as amended
through December 27, 1994, and as proposed to be amended and
restated as of such date.
(f) Montgomery Ward & Co., Incorporated Stock Ownership Plan Terms and
Conditions, as amended through December 27, 1994, and as proposed
to be amended and restated as of such date.
(g) Montgomery Ward & Co., Incorporated Stock Ownership Plan, as
amended and restated May 20, 1994, incorporated by reference to
Exhibit 10.(iv)(A)(ii)(a) of the Company's Registration Statement
on Form S-1 (Registration No. 33-33252).
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II-1
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EXHIBIT
NUMBER DESCRIPTION
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(h) Amendment to Montgomery Ward & Co., Incorporated Stock Ownership
Plan, dated October 20, 1994, incorporated by reference to Exhibit
10.(iv)(A)(iii) of the Company's Quarterly Report on Form 10-Q for
the quarter ended October 1, 1994.
(i) Amended and Restated By-laws of the Company, dated April 15, 1994,
incorporated by reference to Exhibit 3.2(iii) of the Company's
Registration Statement on Form S-1 (Registration No. 33-33252).
(j) Amendment No. 1 to Restated By-laws of the Company, dated
September 21, 1994, incorporated by reference to Exhibit 3.3(i) of
the Company's Quarterly Report on Form 10-Q for the quarter ended
October 1, 1994.
5. Opinion of Counsel.
15. Not applicable.
23. Consents of Experts and Counsel.
(a) Consent of Arthur Andersen LLP
(b) The consent of Altheimer & Gray is included in that firm's opinion
filed as Exhibit 5 hereto.
24. Powers of attorney executed by the following Directors and
Officers of Montgomery Ward Holding Corp. authorizing execution of
the Registration Statement on Form S-8:
(a) Bernard F. Brennan
(b) Bernard W. Andrews
(c) Richard Bergel
(d) Spencer H. Heine
(e) Myron Lieberman
(f) G. Joseph Reddington
(g) Silas S. Cathcart
(h) David D. Ekedahl
(i) Denis J. Nayden
(j) James A. Parke
27. Not applicable.
28. Not applicable.
99. Not applicable.
</TABLE>
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-8 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, AND STATE OF ILLINOIS, ON DECEMBER 27,
1994.
Montgomery Ward Holding Corp.
/s/ John L. Workman
By___________________________________
John L. Workman
Executive Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
ON DECEMBER 27, 1994.
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SIGNATURE TITLE
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<S> <C>
Chairman and Chief Executive Officer, and a
___________________________________________ Director (principal executive officer)
Bernard F. Brennan*
/s/ John L. Workman Executive Vice President and Chief
___________________________________________ Financial Officer (principal financial
John L. Workman officer and principal accounting officer)
Director
___________________________________________
Bernard W. Andrews*
Director
___________________________________________
Richard Bergel*
Director
___________________________________________
Spencer H. Heine*
Director
___________________________________________
Myron Lieberman*
Director
___________________________________________
G. Joseph Reddington*
Director
___________________________________________
Silas S. Cathcart*
Director
___________________________________________
David D. Ekedahl*
Director
___________________________________________
Denis J. Nayden*
Director
___________________________________________
James A. Parke*
</TABLE>
/s/ John L. Workman
*By__________________________________
John L. Workman
Attorney-in-Fact
II-3
<PAGE>
INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION PAGE
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4.(a) Third Restated Certificate of Incorporation of the Company,
filed June 28, 1994, incorporated by reference to Exhibit
3.2(iii) of the Company's Registration Statement on Form S-1
(Registration No. 33-33252).
(b) Certificate of Amendment to Certificate of Incorporation of the
Company filed with the State of Delaware on October 25, 1994,
incorporated by reference to Exhibit 3.2(iv) of the Company's
Quarterly Report on Form 10-Q for the quarter ended October 1,
1994.
(c) Voting Trust Agreement dated as of June 21, 1988, incorporated
by reference to Annex 2 of the Prospectus contained in the
Company's Registration Statement on Form S-1 (Registration No.
33-33252).
(d) Voting Trust Agreement dated as of October 21, 1994,
incorporated by reference to Exhibit 9.(i) of the Company's
Quarterly Report on Form 10-Q for the quarter ended October 1,
1994.
(e) Stockholders' Agreement dated as of June 17, 1988, as amended
through December 27, 1994, and as proposed to be amended and
restated as of such date.
(f) Montgomery Ward & Co., Incorporated Stock Ownership Plan Terms
and Conditions, as amended through December 27, 1994, and as
proposed to be amended and restated as of such date.
(g) Montgomery Ward & Co., Incorporated Stock Ownership Plan, as
amended and restated May 20, 1994, incorporated by reference to
Exhibit 10.(iv)(A)(ii)(a) of the Company's Registration
Statement on Form S-1 (Registration No. 33-33252).
(h) Amendment to Montgomery Ward & Co., Incorporated Stock
Ownership Plan, dated October 20, 1994, incorporated by
reference to Exhibit 10.(iv)(A)(iii) of the Company's Quarterly
Report on Form 10-Q for the quarter ended October 1, 1994.
(i) Amended and Restated By-laws of the Company, dated April 15,
1994, incorporated by reference to Exhibit 3.2(iii) of the
Company's Registration Statement on Form S-1 (Registration No.
33-33252).
(j) Amendment No. 1 to Restated By-laws of the Company, dated
September 21, 1994, incorporated by reference to Exhibit 3.3(i)
of the Company's Quarterly Report on Form 10-Q for the quarter
ended October 1, 1994.
5. Opinion of Counsel.
15. Not applicable.
23. Consents of Experts and Counsel.
(a) Consent of Arthur Andersen LLP
(b) The consent of Altheimer & Gray is included in that firm's
opinion filed as Exhibit 5 hereto.
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EXHIBIT
NUMBER DESCRIPTION PAGE
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24. Powers of attorney executed by the following Directors and
Officers of Montgomery Ward Holding Corp. authorizing execution
of the Registration Statement on Form S-8:
(a) Bernard F. Brennan
(b) Bernard W. Andrews
(c) Richard Bergel
(d) Spencer H. Heine
(e) Myron Lieberman
(f) G. Joseph Reddington
(g) Silas S. Cathcart
(h) David D. Ekedahl
(i) Denis J. Nayden
(j) James A. Parke
27. Not applicable.
28. Not applicable.
99. Not applicable.
</TABLE>
<PAGE>
EXHIBIT 4(E)
STOCKHOLDERS' AGREEMENT
dated as of
June 17, 1988
as amended through December 27, 1994 and as proposed to be amended and restated
as of such date
<PAGE>
TABLE OF CONTENTS
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PAGE
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ARTICLE I
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Definitions and Introductory Matters............................... 1
1.1 Adoption of Recitals............................................... 1
1.2 Definitions........................................................ 1
1.3 Securities Law Restrictions........................................ 11
1.4 Transferability of Certain Shares.................................. 12
Duration of Certain Portions of Article II and Certain Portions of
1.5 Article III........................................................ 12
1.6 Duration of Certain Portions of Article V.......................... 12
1.7 Withholding........................................................ 12
1.8 Applicability to Plan Shares....................................... 13
1.9 Joinder in Agreement............................................... 13
1.10 Adjustment for Dilutive Events..................................... 13
1.11 Shortening or Lengthening of Option Periods........................ 13
1.12 Action by 2/3 of Members of Board of Directors..................... 13
1.13 Execution of Voting Trust Agreement by Participants................ 13
ARTICLE II
Voluntary Transfers of Shares...................................... 13
2.1 General Effect of Agreement........................................ 13
2.2 Certain Permitted Transfers of Shares.............................. 14
2.3 Certain Prohibited Transfers....................................... 15
2.4 Notice of Transfer of Shares....................................... 16
2.5 Form of Transfer Notice............................................ 16
2.6 Approval of Board of Directors..................................... 17
2.7 Options............................................................ 17
2.8 Transfer if Options Not Exercised.................................. 19
2.9 Exercise of Options for Less than All of the Shares................ 19
2.10 Closing of Exercise of Options..................................... 20
2.11 Effect of Shares in the Hands of the Transferee.................... 20
2.12 Termination of GE Capital's Rights................................. 20
ARTICLE III
Purchases of Shares upon Termination of Employment................. 20
3.1 Termination of Employment of Type 2 Management Shareholder......... 20
3.2 Death or Permanent Disability of a Type 2 Management Shareholder... 21
Death of Type 2 Management Shareholder Following Termination of
3.3 Employment......................................................... 22
3.4 Notice of Death.................................................... 22
3.5 Termination of Brennan's Employment or Death....................... 22
3.6 Death of Other Type 1 Management Shareholder....................... 24
3.7 Purchase Price of Shares........................................... 24
3.8 Manner of Payment.................................................. 25
3.9 Notes and Security................................................. 25
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PAGE
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3.10 Fair Market Value.................................................. 26
3.11 Closing............................................................ 29
3.12 Priorities......................................................... 29
3.13 Failure to Deliver Shares.......................................... 29
3.14 Resale of Shares................................................... 30
3.15 Modification of Options............................................ 30
3.16 Offset of Purchase Price........................................... 30
ARTICLE IV
Certain Limitations on Purchases of Shares......................... 30
Restrictions on the Company's Right and/or Obligation to Purchase
4.1 Shares............................................................. 30
4.2 Definition of the Limitations...................................... 32
4.3 Cash Payments Limitation........................................... 32
4.4 Right of GE Capital to Cure Limitations............................ 33
ARTICLE V
Corporate Governance Matters....................................... 33
5.1 Voting of Shares held by Management Shareholders................... 33
5.2 Election of Directors.............................................. 33
5.3 Certain Supermajority Requirements................................. 34
5.4 Certain Required Provisions of Certificate of Incorporation........ 36
5.5 By-laws of Members of the Ward Group............................... 37
5.6 Election of Chief Executive Officer................................ 38
5.7 Agreement to Vote.................................................. 38
5.8 Recapitalization................................................... 38
ARTICLE VI
Registration Rights................................................ 38
6.1 Demand Registration Rights......................................... 38
6.2 Piggyback Registration Rights...................................... 40
6.3 Registration Procedures............................................ 41
6.4 Restrictions on Public Sale........................................ 44
6.5 Other Registrations................................................ 45
6.6 Registration Expenses.............................................. 45
6.7 Indemnity and Contribution......................................... 45
6.8 Rule 144........................................................... 47
6.9 Participation in Underwritten Registrations........................ 48
6.10 Other Registration Rights.......................................... 48
6.11 Amendments and Waivers............................................. 48
6.12 Inclusion of Vested Shares......................................... 48
6.13 Exception.......................................................... 49
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ii
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PAGE
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ARTICLE VII
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Restrictive Covenants............................................... 49
7.1 Restrictive Covenants............................................... 49
7.2 Limitations on Restrictive Covenants................................ 49
7.3 Return of Documents................................................. 50
7.4 Cooperation......................................................... 50
7.5 Enforcement......................................................... 50
7.6 Survival; Waiver of Offset.......................................... 50
7.7 Jurisdiction........................................................ 51
7.8 Construction........................................................ 51
7.9 Exception........................................................... 51
ARTICLE VIII
General Matters..................................................... 51
8.1 Legend on Certificates.............................................. 51
8.2 Termination and Amendment of Agreement.............................. 52
8.3 Termination of Status as Management Shareholder..................... 53
8.4 Not an Employment Agreement......................................... 53
8.5 Indemnification..................................................... 53
8.6 Notices............................................................. 53
8.7 Miscellaneous....................................................... 53
8.8 Counterparts........................................................ 53
8.9 Descriptive Headings................................................ 53
8.10 Entire Agreement.................................................... 53
8.11 Waivers............................................................. 54
8.12 Binding Effect; Enforcement......................................... 54
8.13 Applicable Law...................................................... 54
8.14 Severability........................................................ 54
8.15 Resolution of Certain Ambiguities and Conflicts..................... 54
8.16 Joinder by Brennan.................................................. 54
8.17 Authority to Give Consents, Approvals, etc.......................... 54
</TABLE>
iii
<PAGE>
STOCKHOLDERS' AGREEMENT
THIS AGREEMENT ("Agreement") is made as of June 17, 1988 among BFB
Acquisition Corp., a Delaware corporation (the "Company"), Bernard F. Brennan
("Brennan"), General Electric Capital Corporation, a New York corporation ("GE
Capital") and the other Persons (as herein defined) who are parties to this
Agreement.
RECITALS
A. The Company was organized for the purpose of acquiring all of the
outstanding shares of stock of Montgomery Ward & Co., Incorporated ("Ward"),
and, to this end, the Company entered into a Stock Purchase Agreement, dated as
of March 6, 1988, as amended, with Mobil Corporation and Marcor Inc. (the
"Purchase Agreement"), and, on June 23, 1988, completed the acquisition of Ward
pursuant to the provisions thereof.
B. Brennan and the other individuals executing this Agreement as of the date
hereof have purchased shares of Class A Common Stock, Series 1, of the Company.
C. GE Capital has purchased shares of Class B Common Stock and Senior
Preferred Stock, par value $1.00 per share (the "Preferred Stock").
D. The Company's authorized common stock consists of Class A Common Stock,
Series 1 ("Series 1 Shares"), Class A Common Stock, Series 2 ("Series 2
Shares"), and Class A Common Stock, Series 3 ("Series 3 Shares") (the Series 1
Shares, Series 2 Shares and Series 3 Shares being hereinafter collectively
referred to as "Class A Shares" and the holders thereof being sometimes
collectively referred to as "Class A Shareholders") and shares of Class B
Common Stock ("Class B Shares" and the holders thereof being sometimes
collectively referred to as "Class B Shareholders").
E. The parties desire to set forth certain restrictions with respect to their
ownership of shares of common stock of the Company, certain options and
obligations to purchase such shares and certain matters relating to corporate
governance of the Company, all as herein set forth.
AGREEMENTS
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE I
Definitions and Introductory Matters
1.1 Adoption of Recitals. The parties hereto adopt the foregoing Recitals and
agree and affirm that construction of this Agreement shall be guided thereby.
1.2 Definitions. For the purposes hereof:
(a) "Acquisition Date" shall mean the date on which a Management
Shareholder (as herein defined) first acquired any Shares (as herein
defined). The Acquisition Date for a Permitted Transferee (as herein
defined) shall be the same as the Acquisition Date for his Management
Shareholder;
(b) "Acquisition Price" shall mean the price paid to the Company for a
Share purchased from the Company (as adjusted by the Company on an
equitable basis for stock dividends, stock splits, reclassifications and
like actions);
(c) "Act" shall mean the Securities Act of 1933, as amended from time to
time;
<PAGE>
(d) "Adjustment Period" shall have the meaning set forth in Section
3.10(a)(ii);
(e) "Advice" shall have the meaning set forth in Section 6.3;
(f) Intentionally omitted;
(g) "Article III Closing" and "Article III Closing Date" shall have the
meanings set forth in Section 3.11;
(h) "Average Closing Price" shall have the meaning set forth in Section
3.10(b);
(i) "Award" shall mean an award of Shares without cash consideration
pursuant to the terms of the Employee Stock Option Plan (as herein
defined);
(j) Intentionally omitted;
(k) "Board of Directors" shall mean the board of directors of the
Company;
(l) "Cash Payments Limitation" shall have the meaning set forth in
Section 4.3;
(m) "Cause" shall mean any of the following with respect to an employee
of a member of the Ward Group (as herein defined):
(i) the commission of any crime, whether or not involving any member
of the Ward Group, which constitutes a felony in the jurisdiction
involved;
(ii) the sale, use or possession on the premises of any member of the
Ward Group of a controlled substance whose sale, use or possession is
illegal in the manner used or possessed and in the jurisdiction
involved;
(iii) the repeated consumption of drugs or alcohol that interferes
with the employee's ability to discharge his assigned responsibilities;
(iv) an intentional violation of the provisions of Section 7.1 of
this Agreement;
(v) in the case of a Type 2 Management Shareholder, the intentional
and repeated failure on the part of the employee to perform such duties
as may be delegated to him and which are commensurate with his
employment position, and in the case of Brennan, the intentional and
repeated refusal, after repeated written notices thereof from the Board
of Directors, to perform such duties at the Company's executive offices
in Chicago, Illinois as may be delegated to him which are reasonably
commensurate with his position as the chief executive officer of the
Company; or
(vi) the unlawful taking or misappropriation of any property
belonging to any member of the Ward Group or in which any member of the
Ward Group has an interest;
(n) "Class A Amount" shall mean a number of Class A Shares equal to the
Series 1 Amount (as herein defined) or, if less, the Outstanding Amount (as
herein defined);
(o) "Closing Date" shall mean the date on which the closing pursuant to
the Purchase Agreement occurred;
(p) "Commission" shall mean the Securities and Exchange Commission;
(q) "Competing Business" shall mean any person or entity engaged, in any
area of the world, directly or indirectly, in any retail merchandising
business conducted from multiple retail locations, of a type engaged in by
any member of the Ward Group, or any business of the type engaged in by
Signature Financial/Marketing, Inc. ("Signature") or any of its
subsidiaries (as long as Signature or such subsidiary is a member of the
Ward Group), other than the insurance business, as of the time of the
complained of act;
(r) "Confidential Information" shall mean competitive data, trade secrets
or confidential trade information in the possession of the Ward Group which
is not generally known to others and the confidentiality of which the Ward
Group have taken reasonable steps to protect, but does not include general
business knowledge acquired by a Management Shareholder;
(s) Intentionally omitted;
2
<PAGE>
(t) "Controlling Shareholder" shall have the meaning set forth in Section
1.5;
(u) "Demand" and "Demanding Group" and "Demand Registration" shall have
the meanings set forth in Section 6.1;
(v) "Designated Management Optionees" shall mean those Management
Shareholders, or any member or members of their respective Families (as
herein defined), who are designated in writing by the Designator (as herein
defined), with concurrent notice to the Company, as having the right to
exercise a specifically designated option to purchase a specifically
designated number of Shares pursuant to Article II or III. The options so
designated may not, in the aggregate, exceed the number of Shares which, at
the time of the designation, are subject to purchase pursuant to Article II
or Article III, but in making such designation, the Designator may
designate alternate Designated Management Optionees who shall have options
to purchase Shares if the Persons designated as primary Designated
Management Optionees do not exercise the designated options. The Designator
may designate a member of the Committee (as herein defined), or a member of
the Family of a member of the Committee, as a Designated Management
Optionee only as provided elsewhere in this Agreement. Each designation of
a Designated Management Optionee shall be made in writing and delivered by
the Designator to the Designated Management Optionee and the Company. By
written notice delivered to a Designated Management Optionee, with
concurrent notice to the Company, the Designator may change or revoke the
designation of any Management Shareholder (or member of his Family, as the
case may be) as a Designated Management Optionee and/or the designation of
the number of Shares to be purchased, at any time prior to exercise of the
designated option for any reason or for no reason. In the event one or more
Designated Management Optionees are granted an option to purchase Shares
pursuant to Article III, and the Shares as to which such option is
exercisable are not Vested Shares in the hands of the Management
Shareholder (or his Permitted Transferees) whose Shares are subject to
purchase or sale under Article III, the Designator may, as part of the
designation of the identity of the Designated Management Optionee(s),
designate that all or any portion of such Shares shall be Vested Shares in
the hands of the Designated Management Optionee(s);
(w) "Designator" shall mean the person or the committee of three
Management Shareholders, as set forth below and as the case may be, which
has, among other powers, the power to designate the Designated Management
Optionees. Prior to the occurrence of an Event (as defined below) for all
purposes other than designating (and in connection with the designation of)
Designated Management Optionees, the Designator shall be Brennan. At all
times for purposes of designating (and in connection with the designation
of) Designated Management Optionees, and from and after the occurrence of
an Event for all purposes (including, without limitation, designating (and
in connection with the designation of) Designated Management Optionees),
the Designator shall be such committee of three Management Shareholders
(the "Committee").
The Committee shall, except as provided below, be comprised of Brennan,
Edwin G. Pohlmann ("Pohlmann") and Myron Lieberman ("Lieberman"). Prior to
the occurrence of an Event, if any member of the Committee shall resign
from the Committee or cease to be a Qualified Management Shareholder (as
defined below), then such person shall cease to be a member of the
Committee and the remaining members of the Committee shall as soon as
practicable appoint a Qualified Management Shareholder as a member of the
Committee and thereby fill the vacancy on the Committee so created. From
and after the occurrence of an Event, the Committee shall be comprised of
Pohlmann, Spencer H. Heine ("Heine") and Lieberman (each of Pohlmann, Heine
and Lieberman being a "Continuing Member" and collectively being the
"Continuing Members") so long as each is a Qualified Management
Shareholder; provided, however, that at any time from and after the
occurrence of an Event (i) if one, but only one, Continuing Member has
resigned from the Committee or ceased to be a Qualified Management
Shareholder, then the Committee shall be comprised of the two remaining
Continuing Members who have not resigned from the Committee and are
Qualified Management Shareholders and the Largest Management Shareholder
(as defined below) (but the Second Largest Management Shareholder (as
defined below) if the Largest Management Shareholder is one of such
remaining
3
<PAGE>
Continuing Members, but the Third Largest Management Shareholder (as
defined below) if both the Largest Management Shareholder and the Second
Largest Management Shareholder are such remaining Continuing Members), (ii)
if each of two, but only two, of the Continuing Members has either resigned
from the Committee or ceased to be a Qualified Management Shareholder, then
the Committee shall be comprised of the remaining Continuing Member who has
not resigned from the Committee and is a Qualified Management Shareholder,
the Largest Management Shareholder and the Second Largest Management
Shareholder (but the Second Largest Management Shareholder and the Third
Largest Management Shareholder if the Largest Management Shareholder is
such Continuing Member, but the Largest Management Shareholder and the
Third Largest Management Shareholder if the Second Largest Management
Shareholder is such Continuing Member), and (iii) if each of the Continuing
Members has either resigned from the Committee or ceased to be a Qualified
Management Shareholder, then the Committee shall be comprised of the
Largest Management Shareholder, the Second Largest Management Shareholder
and the Third Largest Management Shareholder.
In all cases, the Committee shall act by the vote of a majority of its
members; provided, however, that neither a member of the Committee nor a
member of his Family may be designated as a Designated Management Optionee
except upon the affirmative vote of all other members of the Committee.
A "Qualified Management Shareholder" is each of Brennan and Lieberman and
any other person who is a Management Shareholder and employed by a member
of the Ward Group. A person (including each of Brennan and Lieberman) shall
cease to be a Qualified Management Shareholder if (i) he ceases to be a
Management Shareholder, (ii) he dies, (iii) he is adjudicated incompetent,
(iv) in the case of Lieberman, he ceases to be a director of the Company or
(v) in the case of any Management Shareholder other than Brennan and
Lieberman, no member of the Ward Group employs such Management Shareholder.
An "Event" means that Brennan has resigned from the Committee or ceased
to be a Qualified Management Shareholder.
The "Largest Management Shareholder" shall be the Management Shareholder
(other than Brennan and any Management Shareholder who is not willing or
able to serve on the Committee) who, from time to time, is employed by a
member of the Ward Group and is the owner of the largest number of Shares
(including Plan Shares (as herein defined) subject to the Terms and
Conditions (as herein defined)) as compared to each other Management
Shareholder (other than Brennan and any Management Shareholder who is not
willing or able to serve on the Committee) and who is willing and able to
serve as a member of the Committee.
The "Second Largest Management Shareholder" shall be the Management
Shareholder (other than Brennan, the Largest Management Shareholder and any
Management Shareholder who is not willing or able to serve on the
Committee) who, from time to time, is employed by a member of the Ward
Group and is the owner of the largest number of Shares (including Plan
Shares subject to the Terms and Conditions) as compared to each other
Management Shareholder (other than Brennan, the Largest Management
Shareholder and any Management Shareholder who is not willing or able to
serve on the Committee) and who is willing and able to serve on the
Committee.
The "Third Largest Management Shareholder" shall be the Management
Shareholder (other than Brennan, the Largest Management Shareholder, the
Second Largest Management Shareholder and any Management Shareholder who is
not willing or able to serve on the Committee) who, from time to time, is
employed by a member of the Ward Group and is the owner of the largest
number of Shares (including Plan Shares subject to the Terms and
Conditions) as compared to each other Management Shareholder (other than
Brennan, the Largest Management Shareholder, the Second Largest Management
Shareholder and any Management Shareholder who is not willing or able to
serve on the Committee) and who is willing and able to serve on the
Committee.
For the purposes of the foregoing provisions of this paragraph (w), a
Management Shareholder shall be deemed to own all Shares (including Plan
Shares subject to the Terms and Conditions) owned by his
4
<PAGE>
Permitted Transferees. In the event that two or more persons own the same
number of Shares so that each, in the absence of the other (or others, as
the case may be) would be the Largest Management Shareholder, the Second
Largest Management Shareholder or the Third Largest Management Shareholder
(as the case may be), then the remaining member (or members, as the case
may be) of the Committee from time to time shall determine which of such
person or persons shall be deemed to be the Largest Management Shareholder,
the Second Largest Management Shareholder or the Third Largest Management
Shareholder, as the case may be, and, in the event that there are no
members of the Committee remaining to make such determination or the
remaining members of the Committee are unable to make such determination in
accordance with the Committee's majority voting requirements as set forth
above, then such determination shall be made on the basis of seniority of
service with the Ward Group.
(x) "Employee Stock Option Plan" or "Plan" shall mean a stock option plan
for the benefit of the employees, advisors and consultants of the Ward
Group and directors of the Company adopted by the Board of Directors,
pursuant to which such employees, advisors, consultants and directors may
be granted options to purchase Class A Shares. The Shares issued pursuant
to the Employee Stock Option Plan shall, in the case of Shares issued to
employees of the Ward Group, be subject to options to purchase such Shares
upon termination of employment with the Ward Group, and restrictions on
Transfers, which, unless otherwise changed or waived by 2/3 of the members
of the Board of Directors, are reasonably similar to those which are set
forth in this Agreement;
(y) "Escrow Agent" shall have the meaning set forth in Section 3.13;
(z) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time;
(aa) "Fair Market Value per Share" shall have the meaning set forth in
Section 3.10;
(bb) "Family" shall mean a spouse or descendant or ancestor of a
Management Shareholder, or a spouse of a descendant or ancestor of a
Management Shareholder, or a trustee of a trust or custodian of a
custodianship primarily for the benefit of one or more of the foregoing
and/or a Management Shareholder;
(cc) "First Period" shall have the meaning set forth in Section 2.3(c);
(cc)(A) "Fully Diluted Non-Series 3 Outstanding Amount" shall mean the
Fully Diluted Outstanding Amount (as herein defined) less the sum of (x)
the number of Series 3 Shares outstanding on the date of determination plus
(y) the number of Series 3 Shares subject to purchase pursuant to Options
(as herein defined) or Purchase Rights (as herein defined) outstanding on
the date of determination (whether or not such Options or Purchase Rights
are exercisable on the applicable date of determination);
(cc)(B) "Fully Diluted Outstanding Amount" shall mean the number of Class
A Shares of all series which are outstanding on the date of determination
plus the number of Class A Shares of all series subject to purchase
pursuant to Options or Purchase Rights outstanding on the date of
determination (whether or not such Options or Purchase Rights are
exercisable on the applicable date of determination);
(dd) "GE Capital Affiliate" shall mean any entity which, at the time of
the applicable determination, GE Capital controls, which controls GE
Capital, or which is under common control with GE Capital, but does not
include the Ward Group or any member thereof. For the purposes of the
preceding sentence, "control" means the power, direct or indirect, to
direct or cause the direction of the management and policies of a Person
through voting securities, contract or otherwise. Without limiting the
generality of the foregoing, as of the date of this Agreement, Kidder,
Peabody Group, Inc. ("Kidder, Peabody") is a GE Capital Affiliate;
(ee) "Group" shall have the meaning set forth in Section 6.1(a)(i);
(ff) "Indemnitees" shall mean Brennan, Dominic M. Mangone and Edwin G.
Pohlmann;
(ff)(A) "Insider" shall have the meaning set forth in Section 3.15;
(gg) "Insurance Proceeds" shall have the meaning set forth in Section
3.8(a);
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<PAGE>
(hh) "Limitations" shall have the meaning set forth in Section 4.2;
(ii) "Management Shareholders" or "Management Shareholder" shall mean a
Type 1 Management Shareholder (as herein defined) or a Type 2 Management
Shareholder (as herein defined), without distinction;
(jj) "Non-Plan Shares" shall mean all Shares other than Plan Shares (as
herein defined);
(jj)(A) "Non-Series 3 Outstanding Amount" shall mean the Outstanding
Amount less the number of Series 3 Shares outstanding on the date of
determination;
(kk) "Option" shall mean an option to acquire Shares granted pursuant to
the Employee Stock Option Plan;
(ll) "Originally Scheduled Article III Closing Date" shall have the
meaning set forth in Section 4.1(b);
(mm) "Outstanding Amount" shall mean the number of Class A Shares of all
series which are outstanding on the date of determination;
(mm)(A) "Participant" shall mean any person who has been either granted
an Award, provided a Purchase Right and/or granted an Option by the Company
pursuant to the Employee Stock Option Plan;
(nn) "Period" shall have the meaning set forth in Section 2.3(c);
(oo) "Permanent Disability" shall mean the total permanent disability of
a Management Shareholder who is an employee of the Ward Group, as
determined in accordance with the published policies (in effect on the
applicable date) of the Ward Group with respect to the determination of
total permanent disability;
(oo)(A) "Permanently Disabled" shall mean, with respect to any
individual, that such individual has suffered a Permanent Disability;
(pp) "Permitted Transferee" shall mean:
(i) a Person, other than a Management Shareholder, to whom Shares are
Transferred pursuant to and in compliance with the provisions of
Section 2.2(b); and
(ii) a member of the Family of a Management Shareholder who has
either (x) acquired Shares by virtue of having been designated a
Designated Management Optionee by the Designator or (y) acquired Shares
on or about the date hereof and joined in this Agreement as a Permitted
Transferee of said Management Shareholder.
Each reference herein to a Permitted Transferee of a particular Management
Shareholder shall mean (x) a Permitted Transferee owning Shares which that
Management Shareholder was the last Management Shareholder to own, and (y)
a member of the Family of that Management Shareholder who has acquired
Shares in a manner set forth in (ii) above;
(qq) "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, unincorporated organization, association,
corporation, trust, institution, public benefit corporation, entity or
government;
(rr) "Piggyback Registration" shall have the meaning set forth in Section
6.2(a);
(ss) Intentionally omitted;
(tt) "Plan Shares" shall mean (i) Shares received by the holder thereof
pursuant to the Employee Stock Option Plan; and (ii) Shares held by a
Permitted Transferee of a Management Shareholder, if such Shares would be
Plan Shares pursuant to clause (i) above if held by such Management
Shareholder;
(uu) "Pledgee" shall have the meaning set forth in Section 2.2(c);
(vv) "Post-Termination Death" shall have the meaning set forth in Section
3.3;
(vv)(A) "Preferred Stock" shall have the meaning set forth in Recital C;
6
<PAGE>
(ww) "Public Offering Termination Date" shall mean the date, if any, on
which, as a result of the public sale or issuance of shares of common stock
pursuant to one or more registration statements under the Act (other than
pursuant to the Employee Stock Option Plan or pursuant to a registration
statement to register shares primarily or exclusively for Transfer (as
hereinafter defined) upon exercise of options pursuant to Article III of
this Agreement or the Terms and Conditions or in connection therewith)
and/or the public sale of shares of common stock under Rule 144 (as herein
defined), 25% or more of the outstanding shares of voting common stock of
the Company consist of shares of voting common stock of the Company which
have been so issued or sold;
(ww)(A) "Purchase Agreement" shall have the meaning set forth in Recital
A;
(xx) "Purchase Price" shall have the meaning set forth in Section 3.7;
(yy) "Purchase Right" shall mean an option to acquire Shares granted
pursuant to the terms of the Employee Stock Option Plan, identified as such
and generally to be exercised during a shorter period of time than other
Options granted pursuant to the terms of the Employee Stock Option Plan;
(zz) "Registration" and "Registration Statement" shall have the meanings
set forth in Section 6.3;
(aaa) "Registration Expenses" shall have the meaning set forth in Section
6.6(a);
(bbb) "Rule 144" shall mean Rule 144, as amended, promulgated by the
Commission under the Act;
(ccc) "Second Period" shall have the meaning set forth in Section 2.3(c);
(ddd) "Second Transfer Notice" shall have the meaning set forth in
Section 2.8(b);
(eee) "Series 1 Amount" shall mean the number twenty-five million
(25,000,000);
(fff) "Shareholder" shall mean a Management Shareholder, a Permitted
Transferee, GE Capital, or a GE Capital Affiliate, in each case who is the
owner of Shares, or any Person owning Shares who is no longer a GE Capital
Affiliate but who was a GE Capital Affiliate at the time such Person first
acquired Shares;
(ggg) "Shares" shall, except as otherwise specifically provided herein,
mean the shares of common stock of the Company, without distinction as to
class or series, and shall include certificates of beneficial interest
issued by the Voting Trustee (as herein defined), pursuant to a Voting
Trust Agreement (as herein defined); provided, however, that (and without
implication that a contrary result was intended, but by way of
clarification):
(i) for the purposes of determining the number of Shares eligible to
vote or receive distributions, there shall be no duplication as between
Shares held by the Voting Trustee, on the one hand, and certificates of
beneficial interest issued by the Voting Trustee, on the other hand;
and
(ii) where the right to vote Shares or execute consents is granted or
required pursuant to the provisions of this Agreement, except as
otherwise expressly provided in Section 8.17, the term "Shares" shall
not include certificates of beneficial interest issued by the Voting
Trustee under a Voting Trust Agreement;
and this Agreement shall be interpreted in accordance with the foregoing
proviso to the extent the context so requires; provided, further, that for
the purposes of Sections 1.2(jj), 1.2(tt), 1.2(sss), the first sentence of
Section 1.9, Article II, Sections 3.1, 3.2, 3.3, 3.5 and 3.6, Article VI
and Sections 8.1, 8.2 and 8.3 of this Agreement, a share of common stock of
the Company shall cease to be a Share at such time as such Share:
(iii) has been effectively registered and disposed of in accordance
with a registration statement under the Act covering it (other than a
registration statement in connection with the Employee Stock Option
Plan or Article III of this Agreement or the Terms and Conditions); or
(iv) has been sold publicly pursuant to Rule 144 after the Public
Offering Termination Date;
7
<PAGE>
and the legend referred to in Section 8.1 has been removed from the
certificate representing such Share, even if such share of common stock is
subsequently acquired by a Shareholder (but, without implication that the
contrary would otherwise be true, with respect to Section 6.11(e), the fact
that a share of common stock of the Company has ceased to be a Share
hereunder pursuant to this subsection shall not operate to divest any
Person of any rights under said Section 6.11(e) with respect to prior
participation in a Registration by such Person); and provided, further,
that a share of common stock shall cease to be a Share for the purposes of
Article II at such time as such Share has been sold in a foreclosure sale
by a Person to whom said Share has been pledged pursuant to Section 3.9, or
retained by such Person in lieu of foreclosure of such pledge;
(hhh) "Solicitation Period" shall have the meaning set forth in Section
2.8(b);
(hhh)(A) "Termination" shall have the meaning set forth in Section 3.15;
(hhh)(B) "Terms and Conditions" shall mean those certain Montgomery Ward
& Co., Incorporated Stock Ownership Plan Terms and Conditions agreed to by
participants in the Employee Stock Option Plan, as such Terms and
Conditions are amended from time to time.
(iii) "Third Party Offer" shall mean a bona fide written offer to
purchase Shares;
(jjj) "Trading Period" shall have the meaning set forth in Section
3.10(b);
(kkk) "Transfer" shall mean any transfer, sale, assignment, pledge,
encumbrance or other disposition of Shares, or, in the case of the Company,
any issuance or sale of Shares, irrespective of whether any of the
foregoing are effected voluntarily or involuntarily, by operation of law or
otherwise, or whether inter vivos or upon death;
(lll) "Transferee" shall mean a Person who has made a Third Party Offer
or to whom a Transfer for no consideration is proposed to be made;
(mmm) "Transferor" shall mean a Person who shall propose to Transfer
Shares pursuant to Article II;
(nnn) "Transfer Notice" shall mean a written notice of a proposed
Transfer;
(ooo) "Type 1 Management Shareholder" shall mean Brennan, Silas S.
Cathcart ("Cathcart"), Lieberman and any other Person who is designated by
the Designator as a Type 1 Management Shareholder and who concurrently
herewith or at any time hereafter, in contemplation of that Person's
acquisition of Shares, executes a counterpart of, or joins in and agrees to
be bound by, this Agreement as a Type 1 Management Shareholder. Other than
Brennan, Cathcart and Lieberman, as long as GE Capital and GE Capital
Affiliates own, in the aggregate, at least 20% of the Shares which they
acquired in June, 1988, no Person shall be designated as a Type 1
Management Shareholder without the prior consent of GE Capital, which
consent shall not unreasonably be withheld;
(ppp) "Type 2 Management Shareholder" shall mean any person who
concurrently herewith or at any time hereafter, in contemplation of that
Person's acquisition of Shares, executes a counterpart of, or joins in and
agrees to be bound by, this Agreement as a Type 2 Management Shareholder.
Unless that Person has been designated by the Designator as, or is already,
a Type 1 Management Shareholder, Type 2 Management Shareholders shall
include all Persons who acquire Options or Purchase Rights or Class A
Shares pursuant to Awards or the exercise of Options or Purchase Rights and
who join in this Agreement or are required to hold such Class A Shares
subject to the terms of this Agreement;
(qqq) Intentionally omitted;
(rrr) Intentionally omitted;
(rrr)(A) "Vesting Date" shall have the meaning set forth in Section
1.2(sss);
(sss) "Vested Shares" shall mean (x) with respect to a Type 1 Management
Shareholder and his Permitted Transferees, all Shares owned by them, and
(y) with respect to a Type 2 Management Shareholder and his Permitted
Transferees, that number of Shares owned by them, as a group, equal to the
amount determined, on the date of determination ("Vesting Date"), by adding
A. below plus B.
8
<PAGE>
below plus C. below plus D. below, and then subtracting E. below, where A.,
B., C., D. and E. are as follows:
A. the aggregate number of Shares theretofore acquired by them as a
group (other than from each other) which as to them as a group are Non-
Plan Shares and which, at the time of acquisition by any member of the
group, were Vested Shares in the hands of the Person who Transferred
such Shares to any one of them or were designated, at the time of
acquisition of such Shares by the Management Shareholder or his
Permitted Transferees, as Vested Shares by the Company or the
Designator pursuant to the provisions hereof;
B. the number of Non-Plan Shares determined by multiplying the total
number of Non-Plan Shares theretofore acquired by them as a group
(other than from each other) and not described in subparagraph A. next
above by the Percentage of Vesting for Non-Plan Shares in effect on the
Vesting Date;
C. the number of Plan Shares determined by multiplying the total
number of Plan Shares theretofore acquired by them as a group (other
than from each other), including the number of Plan Shares Awarded to
them or purchased pursuant to the exercise of Purchase Rights, but
excluding the number of Plan Shares acquired pursuant to exercise of
Options, by the Percentage of Vesting applicable to each of such Plan
Shares in effect on the Vesting Date;
D. the lesser of (i) the number of Plan Shares determined by
multiplying the total number of Plan Shares purchased or subject to
purchase by them under outstanding or previously exercised Options
(whether or not exercisable) by the Percentage of Vesting applicable to
each Plan Share so purchased or subject to purchase pursuant to an
Option on the Vesting Date, and (ii) the number of Plan Shares
theretofore acquired by them pursuant to exercise of Options;
E. the aggregate number of Vested Shares theretofore disposed of by
them, as a group (other than to or among each other).
The number of Vested Shares and Shares which are not Vested Shares owned in
the aggregate by a Management Shareholder and his Permitted Transferees
shall be allocated among them proportionately to the numbers of Shares
owned by each of them. In the event of the occurrence of an event which
would give rise to options contained in Section 3.2 (whether or not such
options are exercised), the Percentage of Vesting shall be 100%. The
Percentage of Vesting of a Type 2 Management Shareholder (and his Permitted
Transferees) whose employment with the Ward Group has been terminated for
Cause shall be 0%.
In all other events, as to a Type 2 Management Shareholder and his Permitted
Transferees, the Percentage of Vesting for Non-Plan Shares shall be determined
as follows:
<TABLE>
<CAPTION>
IF THE VESTING DATE IS THE PERCENTAGE
ON OR AFTER THE: AND BEFORE THE: OF VESTING IS:
---------------------- --------------- --------------
<S> <C> <C>
Date of this Agreement First anniversary of the 0%
Acquisition Date
First anniversary of the Second anniversary of the 20%
Acquisition Date Acquisition Date
Second anniversary of the Third anniversary of the 40%
Acquisition Date Acquisition Date
Third anniversary of the Fourth anniversary of the 60%
Acquisition Date Acquisition Date
Fourth anniversary of the Fifth anniversary of the 80%
Acquisition Date Acquisition Date
Fifth anniversary of the any time thereafter 100%
Acquisition Date
</TABLE>
9
<PAGE>
except to the extent otherwise provided by the Designator in writing to the
Company and to the applicable Type 2 Management Shareholder, including,
without limitation, in connection with the acquisition of specific Shares
(in which event the formula for determining the number of Vested Shares as
set forth above in the first paragraph of this subsection (sss) shall be
appropriately adjusted to take account of such vesting schedule with
respect to such specific Shares).
In all other cases, as to a Type 2 Management Shareholder and his
Permitted Transferees, the Percentage of Vesting for Plan Shares shall be,
if the Vesting Date is before the first anniversary of the Vesting Period
Commencement Date (as herein defined), 0%; on or after the first
anniversary and before the second anniversary of the Vesting Period
Commencement Date, 20%; on or after the second anniversary and before the
third anniversary of the Vesting Period Commencement Date, 40%; on or after
the third anniversary and before the fourth anniversary of the Vesting
Period Commencement Date, 60%; on or after the fourth anniversary and
before the fifth anniversary of the Vesting Period Commencement Date, 80%;
and on or after the fifth anniversary of the Vesting Period Commencement
Date, 100%. Notwithstanding the foregoing, (i) unless otherwise determined
in writing by the Designator, Plan Shares purchased upon exercise of an
Option become Vested Shares upon such purchase and (ii) Plan Shares
acquired pursuant to an Award or Purchase Right shall become Vested Shares
in accordance with any alternative vesting schedule provided by the
Designator in writing to the Company and to the Type 2 Management
Shareholder (in each of which events, the formula for determining the
number of Vested Shares as set forth above in the first paragraph of this
subsection (sss) shall be appropriately adjusted to take account of the
vesting of such Shares upon the purchase pursuant to exercise of an Option
or pursuant to such alternative vesting schedule, as the case may be).
In the following instances the Vesting Date shall be the following date:
(i) in the case of a Transfer of Shares pursuant to Article II (other
than Section 2.2(a) or 2.2(i) thereof), the date on which a Transfer
Notice is served;
(ii) in the case of a Transfer of Shares pursuant to Section 2.2(a),
the date of approval of the proposed Transfer by the Board of
Directors;
(iii) in the case of a sale of Shares under Rule 144 permitted by
Section 2.2(i), the date the Management Shareholder or his Permitted
Transferee Transferred Shares utilizing Rule 144;
(iv) in the case of a purchase of Shares pursuant to Article III, the
date of termination of the applicable Type 2 Management Shareholder's
employment with the Ward Group for any reason whatsoever;
(v) in the case of an exercise of rights under Article VI, the date
on which the Management Shareholder or Permitted Transferee makes a
Demand or requests inclusion of any of such Shares in a Registration
Statement (as the case may be).
Notwithstanding the foregoing provisions of this paragraph (sss):
(vi) in the case of a purchase of Shares pursuant to Article III from
a Type 2 Management Shareholder whose Percentage of Vesting, in
accordance with the foregoing, is less than 100%, the Board of
Directors, in its discretion, may increase the Percentage of Vesting as
determined in accordance with the foregoing, but not in excess of 100%;
(vii) in the case of termination of employment of a Type 2 Management
Shareholder with the Ward Group (other than for Cause), where not all
Shares owned by that Management Shareholder and his Permitted
Transferees were purchased in accordance with Section 3.1, on the
Article III Closing Date those Shares not so purchased which were not
Vested Shares as of the date of termination of employment shall become
Vested Shares for all purposes of this Agreement other than Section
3.3, and for the purposes of Section 3.3 said Shares shall not
thereafter become Vested Shares;
(viii) in connection with any issuance or sale of Shares by the
Company, the Company may designate all or any portion of such Shares as
Vested Shares;
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<PAGE>
(ix) at any time and from time to time, after the Closing Date, upon
written notice delivered to the Company, the Designator may increase
the Percentage of Vesting otherwise applicable to a Type 2 Management
Shareholder and his Permitted Transferees, but not in excess of 100%;
(x) on the Public Offering Termination Date, except for the purposes
of Section 3.3, all Shares which are not then Vested Shares shall
become Vested Shares;
(ttt) "Vesting Period Commencement Date" shall mean (i) in the case of an
Award, the date of the grant of an Award; (ii) in the case of a Purchase
Right, the date of exercise of the Purchase Right; (iii) in the case of an
Option, the date of grant of the Option;
(uuu) "Voting Trust Agreement" shall mean each of that certain Voting
Trust Agreement, dated as of June 20, 1988, among Brennan and the other
individuals who are parties thereto (the "1988 Voting Trust Agreement"),
that certain Voting Trust Agreement, dated as of October , 1994, among
Brennan, the Company and the individuals who are parties thereto (the "1994
Voting Trust Agreement") as well as all agreements adopted hereafter which
have substantially similar provisions (without giving effect to time
periods) as the 1988 Voting Trust Agreement and as the 1994 Voting Trust
Agreement and to which any shares of common stock of the Company are
subject;
(vvv) "Voting Trustee" shall mean the Person serving as voting trustee
under the applicable Voting Trust Agreement;
(www) "Ward Group" shall mean the Company and its direct and indirect
subsidiaries.
1.3 Securities Law Restrictions. In addition to the restrictions on the
Transfer of Shares which are contained in this Agreement, each Shareholder
represents and warrants to the Company, and agrees and acknowledges, that:
(a) all Shares acquired by or for such Shareholder in transactions which
have not been registered pursuant to the Act are being or have been
acquired solely for such Shareholder's own account, for investment purposes
only and not with a view toward the distribution thereof (within the
meaning of the Act), and that, irrespective of any other provisions of this
Agreement, any Transfer of such Shares will be made only in compliance with
all applicable federal and state securities laws, including, without
limitation, the Act;
(b) except to the extent so registered or as provided in Article VI
hereof, the Company is not required to register any Shares acquired by or
for such Shareholder under the Act, and such Shares must be held by such
Shareholder until such Shares are registered under the Act or an exemption
from such registration is available; that the Company will have no
obligation to take any actions that may be necessary to make available any
exemption from registration under the Act; and that the Company will place
"stop transfer" restrictions on the party responsible for recording
Transfers of Shares;
(c) the Shareholder is familiar with Rule 144, which establishes
guidelines governing, among other things, the resale of "restricted
securities" (that is, securities which are acquired from the issuer of such
securities in a transaction not involving any public offering);
(d) Rule 144 may not be available for Transfers of the Shares, because,
among other things, the Company, at the time of the proposed Transfer of
Shares, may not be required to file the reports required to be filed by
Section 15(d) of the Exchange Act and may not then have a class of
securities registered pursuant to Section 12 of the Exchange Act; and, even
if the Company is then required to file reports under the Exchange Act, and
has filed all reports required to be filed, reliance on Rule 144 to
Transfer securities is subject to other restrictions and limitations, as
set forth in Rule 144; and
(e) in connection with any Transfer of the Shares, under Rule 144 or
pursuant to some other exemption, the Shareholder may, if required by the
Company, be required to deliver to the Company an opinion from counsel for
the Shareholder, and/or receive an opinion from counsel for the Company, to
the effect that all applicable federal and state securities law
requirements have been met.
11
<PAGE>
1.4 Transferability of Certain Shares. Shares issued by the Company pursuant
to a stock dividend, stock split, reclassification, or like action, or pursuant
to the exercise of a right granted by the Company to all its stockholders to
purchase Shares on a proportionate basis, shall be Transferred only, and for
all purposes be treated, in the same manner as, and be subject to the same
options with respect to, the Shares which were split or reclassified or with
respect to which a stock dividend was paid or rights to purchase Shares on a
proportionate basis were granted. Notwithstanding the definition of "Shares"
herein and without implication that such definition would require a contrary
result, in the event of a merger of the Company where this Agreement does not
terminate pursuant to Section 8.2(c), shares of stock and/or securities
convertible into shares of stock issued in exchange for Shares shall thereafter
be deemed to be Shares which are subject to the terms of this Agreement.
1.5 Duration of Certain Portions of Article II and Certain Portions of
Article III. From and after the Public Offering Termination Date:
(a) the provisions of Article II shall cease to be in effect as to any
Shareholder other than a Controlling Shareholder; provided, however, that
from and after the Public Offering Termination Date, the Designator may
waive the application of the provisions of Article II as to any particular
Transfer by a Controlling Shareholder (including a Transfer by the
Designator himself) or terminate the provisions of Article II as to all
Controlling Shareholders; provided, further, that as long as GE Capital and
the GE Capital Affiliates own, in the aggregate, 10% or more of the
outstanding shares of common stock of the Company and Brennan is a
Controlling Shareholder, the consent of GE Capital shall be required as to
any waiver or termination of the provisions of Article II with respect to a
Transfer by Brennan or any of his Permitted Transferees. For the purposes
hereof, a Controlling Shareholder shall be a Shareholder who owns (or whose
voting trust certificates represent) 1% or more of the outstanding shares
of common stock of the Company. For the purpose of the preceding sentence,
there shall be full attribution of ownership between a Management
Shareholder and his Permitted Transferees, and between GE Capital and the
GE Capital Affiliates;
(b) the provisions of Section 3.2(a) and Sections 3.5 and 3.6, shall
terminate, and all references in Sections 3.2(b) and (c) to the 90-day
period referred to in Section 3.2(a) shall be eliminated from said
sections.
1.6 Duration of Certain Portions of Article V. Anything in this Agreement to
the contrary notwithstanding, (a) the provisions of Article V of this
Agreement, to the extent they constitute an agreement with respect to the
manner in which Shares shall be voted, and, (b) unless sooner terminated
pursuant to other provisions of this Agreement, Section 5.3, shall be in effect
only until the tenth anniversary of the date of this Agreement.
1.7 Withholding. Each Management Shareholder shall pay, or make arrangements
to pay, all federal, state and local income taxes which may be assessed upon
such Management Shareholder in connection with his ownership of Shares,
including, without limitation, taxes which may be imposed in connection with
the lapse or release of any restrictions set forth herein with respect to the
Shares. In any case in which any member of the Ward Group is legally required
to withhold such taxes, such payment shall be made on or before the date such
withholding is required. In the event any such payment is not made when due and
any member of the Ward Group is legally required to withhold such taxes, then,
to the extent permitted by law, the Company shall have the right to do any of
the following in its sole discretion: (i) direct the applicable Voting Trustee
to sell such number of Shares subject to a Voting Trust Agreement which are
beneficially owned by the Management Shareholder as may be necessary in order
that the net proceeds of sale will equal the member of the Ward Group's
withholding obligation (with such Shares remaining subject to such Voting Trust
Agreement), and pay such net proceeds to such member of the Ward Group; (ii)
deduct the amount required to be withheld from funds otherwise due the
Management Shareholder by the Ward Group (including, without limitation,
salaries and proceeds of the sale of Shares sold to the Company pursuant to the
provisions of this Agreement), and pay the amount so deducted to such member of
the Ward Group; or (iii) pursue any other legal or equitable right or remedy.
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1.8 Applicability to Plan Shares. Unless otherwise specifically agreed
between a Management Shareholder, the Designator and the Company, all Shares
held by a Management Shareholder and his Permitted Transferees, including Plan
Shares, shall be held subject to the provisions of this Agreement and not the
Terms and Conditions.
1.9 Joinder in Agreement. Except as contemplated by this Agreement, Shares
shall not be Transferred to any Person who is not a signatory to this Agreement
unless that Person shall have executed and delivered such documents as are
deemed reasonably necessary by the Company, in consultation with its counsel,
to evidence such Person's acceptance of, and agreement to be bound by, the
provisions of this Agreement. Without limiting the generality of the foregoing,
such documents shall contain the representations, warranties and covenants set
forth in Section 1.3 hereof.
1.10 Adjustment for Dilutive Events. Whenever this Agreement contains a
reference to a percentage of the number of Shares acquired by a Shareholder on
a specific date, during a specific time period or on "the date the Shareholder
first acquired Shares," the number of Shares to which such percentage shall be
applied shall be adjusted to take into account stock splits, stock dividends,
reverse stock splits and similar dilutive events.
1.11 Shortening or Lengthening of Option Periods. Whenever in Article II or
Article III the Company, a Designated Management Optionee or a Shareholder is
given an option to purchase or sell Shares which is exercisable during a given
period of time, if the Company, that Designated Management Optionee (or the
Designator, if no persons are to be designated as Designated Management
Optionees) or that Shareholder (as the case may be) chooses not to exercise
that option, the Company, that Designated Management Optionee (or the
Designator, if no persons are to be designated as Designated Management
Optionees) or that Shareholder (as the case may be) may deliver written notice
of that fact to the Company (in the case where a Designated Management Optionee
(or the Designator, if no persons are to be designated as Designated Management
Optionees) or a Shareholder is relinquishing an option) and the Designator
(except in the case where no persons are to be designated as Designated
Management Optionees). In such event, the applicable option period shall be
deemed to have ended with respect to the Company, such Designated Management
Optionee (or Designated Management Optionees, as the case may be) or such
Shareholder (as the case may be) on the date on which such notice is delivered.
Any period during which an option to purchase is exercisable may be extended by
agreement of the party subject thereto. In such event, options to purchase
which are subsequent to the option with respect to which the period is extended
shall become exercisable on the date upon which the immediately preceding
option expires.
1.12 Action by 2/3 of Members of Board of Directors. Whenever in this
Agreement the vote, consent or waiver of 2/3 of the members of the Board of
Directors is required, the number of directors required shall be determined
without regard to any vacancies on the Board of Directors.
1.13 Execution of Voting Trust Agreement by Participants. At any time in
which a Voting Trust Agreement is in effect, as a condition to any Award, grant
of a Purchase Right, or exercise of an Option, the Participant who is (or in
connection therewith becomes) subject to this Agreement shall be required to
execute a counterpart of a Voting Trust Agreement designated by the Designator,
transfer the Shares to be acquired to the applicable Voting Trustee in exchange
for certificates of beneficial interest representing a like number of Shares,
and take such other steps as may be necessary in order that the applicable
Voting Trustee shall have the sole voting power with respect to the Shares
acquired by such Participant.
ARTICLE II
Voluntary Transfers of Shares
2.1 General Effect of Agreement. Unless a Transfer of Shares is made in
accordance with the provisions of this Agreement, it shall not be valid or have
any force or effect.
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2.2 Certain Permitted Transfers of Shares. Anything contained in this
Agreement to the contrary notwithstanding, Shares may be Transferred:
(a) subject to Section 5.3(p), by a holder of Shares with the prior
approval of the Board of Directors, either subject to this Agreement or
otherwise, as the Board of Directors shall determine;
(b)(i) by a Management Shareholder to any member of his Family;
(ii) by a member of the Family of a Management Shareholder to any
other member of the Family of that Management Shareholder, or to that
Management Shareholder;
(iii) to the personal representative of a Management Shareholder or
Permitted Transferee who is deceased or adjudicated incompetent;
(iv) subject to the provisions of Section 3.2, 3.3 or 3.5 (as the
case may be), by the personal representative of a Management
Shareholder or Permitted Transferee who is deceased or adjudicated
incompetent to any member of said Management Shareholder's Family;
(v) upon termination of a trust or custodianship which is a Permitted
Transferee, by the trustee of such trust or custodian of such
custodianship to the person or persons who, in accordance with the
provisions of said trust or custodianship, are entitled to receive the
Shares held in trust or custody;
(c) by a Management Shareholder to a bank or other institutional lender
(a "Pledgee"), as collateral security for a loan to the Management
Shareholder to solely finance the acquisition of such Shares; provided,
however, that in connection with the exercise of any rights under such
pledge, including without limitation any foreclosure thereof, the Pledgee
shall be obligated to comply with Sections 2.4 through 2.10, both inclusive
(it being understood that following the pledge of Shares to a Pledgee, the
character of such Shares as Vested Shares or otherwise shall be determined
as if such pledge had not occurred, and, for the purposes of Section
1.2(sss)E., a Transfer of such Shares by the Pledgee (other than to the
pledgor) shall be deemed to be a Transfer of such Shares by the pledgor);
(d) by a Voting Trustee (i) pursuant to clause (i) of Section 1.7, or
(ii) to the applicable Management Shareholders and Permitted Transferees
who are beneficiaries under the applicable Voting Trust Agreement, upon the
termination of such Voting Trust Agreement or the release of said Shares
therefrom;
(e) pursuant to Articles III or VI;
(f) by Brennan or his personal representative (as the case may be) to any
Management Shareholder, and by any Management Shareholder or Permitted
Transferee to Brennan;
(g) by GE Capital to any GE Capital Affiliate, and by any GE Capital
Affiliate to any other GE Capital Affiliate or to GE Capital; provided,
however, that if GE Capital or such GE Capital Affiliate shall Transfer
Shares to a GE Capital Affiliate formed for the principal purpose of owning
such Shares, or whose principal asset consists of such Shares (whether at
the time of the Transfer of the Shares to such entity or at the time of a
subsequent transfer of the shares or other ownership interests of such
entity), a subsequent transfer of the shares (or other ownership interest)
of such entity shall be deemed to constitute a Transfer of Shares for the
purposes of this Agreement;
(h) by the Company, either subject to this Agreement or otherwise, as the
Board of Directors shall determine, pursuant to (x) Section 5.3(f), or (y)
the Employee Stock Option Plan;
(i) provided that such Shares are not subject to a Voting Trust
Agreement, and provided that Section 2.3 (except paragraph (d) threof) has
been complied with as if the Transfer was being made pursuant to Sections
2.4 through 2.10, both inclusive, (i) pursuant to Rule 144 or (ii) with
respect to Shares which are not "restricted securities" within the meaning
of Rule 144, pursuant to Rule 144 or any other applicable exemption under
the Act;
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(j) by a Person to whom such Shares have been pledged pursuant to Section
3.9, in connection with the exercise of that Person's rights under such
pledge, including, without limitation, any foreclosure thereof;
(k) by a Management Shareholder to a Pledgee, as collateral security for
a loan to the Management Shareholder pursuant to the line of credit program
which has been established with certain banks under which loans are
available to certain associates of the Company, which loans are to be
secured by an amount of such associate's Shares and which loans the Company
has agreed to repurchase in the event any individual should default on his
or her repayment obligations with respect thereto (the "Line of Credit
Program") and by the Pledgee to the Company or any other member of the Ward
Group pursuant to such Line of Credit Program; provided, however, that in
connection with the exercise of any rights under such pledge (other than a
transfer to the Company or any other member of the Ward Group), including,
without limitation, any foreclosure thereof, the Pledgee (other than the
Company as assignee of or successor to the rights of a Pledgee) shall be
obligated to comply with Sections 2.4 through 2.10, both inclusive (it
being understood that following the pledge of Shares to a Pledgee, the
character of such Shares as Vested Shares or otherwise shall be determined
as if such pledge had not occurred, and for the purposes of Section 1.2
(sss)E., a Transfer of such Shares by the Pledgee (other than to the
pledgor or the Company or any other member of the Ward Group pursuant to
such Line of Credit Program) shall be deemed to be a Transfer of such
Shares by the pledgor); provided further that, except as otherwise provided
in this subparagraph (k), the Shares subject to such pledge shall remain in
all respects subject to the terms and provisions of this Agreement,
including, without limitation, the put and call rights set forth in Article
III of this Agreement and the rights of refusal set forth in Article II of
this Agreement. The Company may resell to any person any Shares which the
Company has acquired as an assignee of, or a successor to the rights of, a
Pledgee or otherwise pursuant to the Line of Credit Program, on such terms
as the Board of Directors shall determine, and such sale shall not be
subject to any of the restrictions or rights of first refusal set forth in
Article II of this Agreement; and
(l) by a Management Shareholder or a Permitted Transferee to the Company
as collateral security for a loan to the Management Shareholder or his or
her Permitted Transferee solely to finance the acquisition of Shares under
the terms of the Montgomery Ward Holding Corp. Loan Program or any such
successor program or any program with substantially the same terms (the
"MWHC Loan Program"). The Company may resell to any person any Shares which
the Company has acquired as pledgee or otherwise pursuant to the MWHC Loan
Program, on such terms as the Board of Directors shall determine, and such
sale shall not be subject to any of the restrictions or rights of first
refusal set forth in Article II of this Agreement.
Regardless of the party to whom a Transfer of Shares is made pursuant to this
Section 2.2, the Shares so Transferred shall thereafter continue to be subject
to the terms, provisions and conditions of this Agreement; provided, however,
that (x) unless the Board of Directors has determined otherwise or unless
otherwise provided in Section 1.8 hereof, Shares Transferred pursuant to
paragraphs (a) or (h) hereof, and (y) Shares Transferred pursuant to paragraphs
(i) or (j) hereof or Article VI, shall not be subject to the terms, provisions
and conditions of this Agreement.
2.3 Certain Prohibited Transfers. Without the prior written approval of the
Board of Directors, the following Transfers of Shares pursuant to Sections 2.4
through 2.10, both inclusive, are prohibited:
(a) no Management Shareholder or Permitted Transferee may Transfer Shares
prior to the first to occur of (x) the third anniversary of the Acquisition
Date and (y) the Public Offering Termination Date;
(b) no Management Shareholder or Permitted Transferee may transfer Shares
which are not Vested Shares or which are pledged to a Pledgee pursuant to
the Line of Credit Program or to the Company pursuant to the MWHC Loan
Program;
(c) during the 12 month period (the "First Period") beginning on the
first to occur of the third anniversary of the Acquisition Date and the
Public Offering Termination Date, and during the 12 month period
immediately following the First Period (the "Second Period", the First
Period and the Second
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Period being referred to generally as a "Period"), neither a Management
Shareholder nor any of his Permitted Transferees may Transfer Shares
pursuant to Sections 2.4 through 2.10, both inclusive, to the extent such
Transfer would result in the Transfer of more than 33 1/3% for the First
Period and 50% for the Second Period of the Vested Shares (including, for
this purpose, Plan Shares owned by such Management Shareholder or his
Permitted Transferees which are subject to the Terms and Conditions)
collectively owned by the Management Shareholder and all of his Permitted
Transferees at the beginning of the applicable Period;
(d) no Transferor (other than GE Capital, a present or former GE Capital
Affiliate or a Pledgee) may Transfer Shares unless that Shareholder has
received a Third Party Offer; and
(e) neither GE Capital nor any present or former GE Capital Affiliate
may, other than a Second Transfer Notice as contemplated by Section 2.8(b),
serve a Transfer Notice prior to the expiration of 150 days following the
date of expiration of the last option period which arose by virtue of the
prior service by GE Capital or a present or former GE Capital Affiliate of
a Transfer Notice.
2.4 Notice of Transfer of Shares. Even though the requirements of Section 2.3
shall have been met, no Shares shall be Transferred, except as may be required
by or permitted pursuant to the provisions of Section 2.2, Article III, Article
IV or Article VI, unless the Transferor first serves a Transfer Notice upon the
Company, the Designator and GE Capital, and thereafter complies with the
remaining provisions of this Article II.
2.5 Form of Transfer Notice. Each Transfer Notice shall specify:
(a) the number of Shares which the Transferor proposes to Transfer and
the consideration per Share which the Transferor desires to receive for
said Transfer (which, in the case where the Transferor has received a Third
Party Offer, shall be the consideration set forth in the Third Party Offer
and which, in the case where a Pledgee is foreclosing a pledge of Shares
pledged by a Type 2 Management Shareholder, shall not exceed the amount for
which the Shares could be purchased pursuant to Section 3.1 if the
Management Shareholder who had pledged the Shares to the Pledgee had ceased
to be an employee of the Ward Group on the date of service of the Transfer
Notice);
(b) in any case in which the Transferor has received a Third Party Offer,
the name, and business and residence addresses of the Transferee;
(c) all of the material terms and conditions, including the terms and
conditions of payment, upon which the Transferor proposes to Transfer said
Shares (which, in the case where the Transferor has received a Third Party
Offer, shall be the terms and conditions set forth in the Third Party
Offer); and
(d) the address of the Transferor to which notices of the exercise of the
options herein provided shall be sent.
In any case in which the Transferor is required, pursuant to the provisions
hereof, to obtain a Third Party Offer, the Transferor shall attach to the
Transfer Notice a true and correct copy of the Third Party Offer. A proposed
Transfer of Shares without consideration shall be deemed to be a proposed
Transfer for a consideration of $.01 per Share (which shall be deemed to be the
consideration per Share set forth in the Transfer Notice). In the event GE
Capital or a present or former GE Capital Affiliate serves a Transfer Notice,
the Transfer Notice shall, at the option of the Transferor, contain the
identities of all Persons with whom the Transferor has had discussions
regarding possible Transfers of Shares, and the identities of all Persons with
whom the Transferor intends in good faith to have such discussions. During the
time between the date on which GE Capital or a present or former GE Capital
Affiliate serves a Transfer Notice, and the last date on which an option to
purchase the Shares sought to be Transferred is exercisable as provided in
Section 2.7, the Transferor shall (if it has elected to include the information
set forth in the preceding sentence in its Transfer Notice), by written notice
to the Company and the Designator, update the information contained in the
Transfer Notice not less frequently than monthly. During the 60-day period
commencing on the date of service of a Transfer Notice served by GE Capital or
a present or former GE Capital Affiliate, the
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Transferor may, by written notice to the Company and the Designator, amend the
Transfer Notice to add the identities of additional Persons with whom the
Transferor has had discussions or intends in good faith to have discussions
regarding Transfers of the Shares sought to be Transferred, but if such a
written notice is served, the period of time in which the options set forth in
Section 2.7(c) may be exercised by the Designated Management Optionees shall be
extended by 60 days from the date on which the last such written notice was
served.
2.6 Approval of Board of Directors. The options set forth in Section 2.7 or
2.8 shall be exercisable, and a Transfer of Shares to a Transferee can be made,
only if the Board of Directors (and, in the case of a proposed transfer by
Kidder, Peabody to any Person, other than a Management Shareholder, GE Capital
or another GE Capital Affiliate, the Designator) within the 10-day period next
following the date of service of the Transfer Notice (or, in the case of a
Transfer pursuant to Section 2.8(b), the Second Transfer Notice), shall approve
the Transferee as a prospective holder of Shares; provided, however, that the
approval by the Board of Directors (and, to the extent required by the
foregoing, the Designator) of a Transfer of Shares by GE Capital or a present
or former GE Capital Affiliate shall not be required with respect to any
Transfer Notice served by any of them after the fifth anniversary of the
Closing Date, as long as the Transferee is not engaged in a Competing Business
at the time of service of the Transfer Notice. In any case where approval by
the Board of Directors (and, to the extent required by the foregoing, the
Designator) for a proposed Transfer is required, subject to the following
sentence, the Board of Directors (and, to the extent required by the foregoing,
the Designator) shall not unreasonably withhold their approval of any
Transferee, and shall not withhold their approval if the Transferee is then a
Management Shareholder, GE Capital or a GE Capital Affiliate. However, the
Board of Directors (and, in the case of a proposed transfer by Kidder, Peabody
to any Person, other than a Management Shareholder, GE Capital or another GE
Capital Affiliate, the Designator) may, in its sole discretion, withhold its or
his approval of any Transferee which is then engaged in a Competing Business.
The Board of Directors (and, in the case of a proposed transfer by Kidder,
Peabody to any Person, other than a Management Shareholder, GE Capital or
another GE Capital Affiliate, the Designator) shall be conclusively deemed to
have approved the Transferee unless, prior to the expiration of the 10-day
period, it or he shall notify the Transferor in writing of its or his
disapproval.
2.7 Options. Upon the service of a Transfer Notice, and provided that the
Transferee has been approved by the Board of Directors as set forth in Section
2.6, options to purchase the Shares described therein shall be created, and may
be exercised, as follows:
(a) the service of a Transfer Notice by a Management Shareholder shall
create:
(i) options in each of the Designated Management Optionees
(exercisable by service of written notice upon the Transferor, the
Designator, GE Capital and the Company within the 45-day period next
following the date of service of the Transfer Notice) to purchase all
or any portion of the Shares described in the Transfer Notice, at the
price and on the terms therein contained;
(ii) an option in the Company (exercisable by service of written
notice upon the Transferor, the Designator and GE Capital within the
15-day period next following the date of expiration of the 45-day
period described in subparagraph (i) of this paragraph (a)) to purchase
all or any portion of the Shares described in the Transfer Notice which
were not purchased by the Designated Management Optionees, at the price
and on the terms contained in the Transfer Notice; and
(iii) an option in GE Capital (exercisable by service of written
notice upon the Transferor, the Designator and the Company within the
15-day period next following the date of expiration of the 15-day
period described in subparagraph (ii) of this paragraph (a)) to
purchase all or any portion of the Shares described in the Transfer
Notice which were not purchased by the Designated Management Optionees
and the Company, at the price and on the terms contained in the
Transfer Notice;
(b) the service of a Transfer Notice by a Permitted Transferee shall
create an option in his, her or its (as the case may be) Management
Shareholder (exercisable by service of written notice upon the Transferor,
the Designator, the Company and GE Capital within the 30-day period next
following the
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date of service of the Transfer Notice) to purchase all or any portion of
the Shares described therein, at the price and on the terms therein
contained. If said Management Shareholder does not exercise the foregoing
option with respect to all Shares described in the Transfer Notice, the
optionees described in paragraph (a) above shall have the options to
purchase the Shares with respect to which said Management Shareholder has
not exercised his foregoing option that would have been created if said
Management Shareholder had been the Transferor and if the Transfer Notice
had been served on the last day of the 30-day period during which said
Management Shareholder could have exercised his option pursuant to this
paragraph (b);
(c) the service of a Transfer Notice by GE Capital, a present or former
GE Capital Affiliate, or a Pledgee shall create:
(i) options in each of (x) the Designated Management Optionees and/or
(y) in the case of a Transfer Notice served by GE Capital or a GE
Capital Affiliate, any other Person designated by the Designator
(exercisable by service of written notice upon the Transferor, the
Designator and the Company within the 60-day period next following the
date of service of the Transfer Notice) to purchase all or any portion
of the Shares described in the Transfer Notice, at the price and on the
terms therein contained (it being understood that in the event a Person
referred to in clause (y), next above, acquires any Shares pursuant to
the option granted to such Person, pursuant to this subparagraph (i),
such Shares shall, following the acquisition thereof, be subject to
such rights, options and restrictions, whether pursuant to this
Agreement, or otherwise, as shall be agreed upon by the Designator and
such Person) and if so agreed upon by the Designator and such Person,
such Person, notwithstanding anything to the contrary elsewhere herein
contained, shall not be required to join in and become a party to this
Agreement;
(ii) an option in the Company (exercisable by service of written
notice upon the Transferor and the Designator within the 15-day period
next following the date of expiration of the 60-day period described in
subparagraph (i) of this paragraph (c)) to purchase all or any portion
of the Shares described in the Transfer Notice which the Designated
Management Optionees and Persons specified in clause (y) of paragraph
(i) next above did not elect to purchase, at the price and on the terms
contained in the Transfer Notice; and
(iii) if the Transferor is a former GE Capital Affiliate or a
Pledgee, an option in GE Capital (exercisable by service of written
notice upon the Transferor and the Designator within the 15-day period
next following the date of expiration of the 15-day period described in
subparagraph (ii) of this paragraph (c)) to purchase all or any portion
of the Shares described in the Transfer Notice which the Designated
Management Optionees, Persons specified in clause (y) of paragraph (i)
next above and the Company did not elect to purchase, at the price and
on the terms contained in the Transfer Notice.
If the consideration desired to be received for a Transfer of Shares, as set
forth in the Transfer Notice, is other than cash to be paid at the consummation
of the Transfer or thereafter (that is, if the consideration would constitute
so-called "in kind" property), then any optionee exercising its option under
this Agreement to purchase Shares may satisfy its payment obligations with
respect to such purchase by making cash payment(s) (in lieu of "in kind"
transfer(s) of property) equal to the fair market value of the property which
would have been transferred in kind. The determination of such fair market
value shall be made, as of the time the Transfer Notice with respect to the
Transfer was served, by (x) not less than 2/3 of the members of the Board of
Directors in the good-faith exercise of their reasonable discretion, or (y) a
nationally recognized investment banking firm retained by the Board of
Directors. If the Transferor is a member of the Board of Directors, or, in the
case of a Transfer of Shares by GE Capital or present or former GE Capital
Affiliates, employees of GE Capital or present or former GE Capital Affiliates
are members of the Board of Directors, he or they (as the case may be) shall
not vote on the issue of whether the Company shall exercise its option to
purchase the Transferor's Shares.
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2.8 Transfer if Options Not Exercised. If none of the options provided in
Section 2.7 are exercised, or if such options are exercised only in part, or if
such options are treated, pursuant to Section 2.9, as if not exercised:
(a) if the Transferor is a party other than GE Capital, a present or
former GE Capital Affiliate or a Pledgee, then, during a period of 60 days
beginning on the day following the date of expiration of the last
applicable option period, the Transferor may Transfer all, but not less
than all, Shares sought to be Transferred as to which such options were not
exercised (or treated, pursuant to Section 2.9, as if not exercised), to
the Transferee, at a price which is not less than 95% of the price
specified in the Transfer Notice and on terms and conditions not less
favorable to the Transferor than those specified in the Transfer Notice;
(b) if GE Capital, a present or former GE Capital Affiliate or a Pledgee
is the Transferor, then, during a period of 60 days beginning on the day
following the date of expiration of the last applicable option period (the
"Solicitation Period"), the Transferor may solicit Third Party Offers to
purchase all, but not less than all, Shares sought to be Transferred as to
which such options were not exercised (or treated, pursuant to Section 2.9,
as if not exercised), and on terms and conditions (other than price) not
less favorable to the Transferor than the terms and conditions specified in
the Transfer Notice, and at a price which is not less than 95% of the price
set forth in the Transfer Notice. If any such Third Party Offer is obtained
during the Solicitation Period, then, subject to the following sentence,
during a period of 60 days beginning on the date the Third Party Offer was
obtained, the Transferor may Transfer all, but not less than all, of the
Shares described in the Transfer Notice at the price, and on the terms and
conditions, set forth in the preceding sentence. Notwithstanding the
preceding sentence, if prior to the end of the Solicitation Period the
Transferor shall obtain a Third Party Offer to purchase the Shares, and if
in the case of a proposed Transfer by GE Capital or a present or former GE
Capital Affiliate the Transferee was not identified in the Transfer Notice
(as amended) as a potential Transferee, the Transferor shall serve a new
Transfer Notice ("Second Transfer Notice") upon the Company and the
Designator, containing the terms of the Third Party Offer, and the
Transferor shall attach a copy of the Third Party Offer to the Second
Transfer Notice; provided, however, that the Second Transfer Notice may not
be served prior to the expiration of 15 days after the date of commencement
of said 60-day period. Upon the service of a Second Transfer Notice, the
options set forth in Section 2.7(c) may once again be exercised, at the
price and on the terms contained in the Second Transfer Notice, except that
(x) the period of time in which the Designated Management Optionees and
Persons specified in clause (y) of Section 2.7(c)(i) may exercise the
options set forth in Section 2.7(c)(i) shall be 30 days rather than 60 days
(and the 60-day period referred to in Section 2.7(c) (ii) shall be such 30-
day period), (y) the period of time in which the Company may exercise the
option set forth in Section 2.7(c)(ii) shall be 5 days (and the 15-day
period referred to in Section 2.7(c)(iii) shall be such 5-day period), and
(z) in the case of a Transfer of Shares by a Pledgee or a former GE Capital
Affiliate, the period of time in which GE Capital may exercise the option
set forth in Section 2.7(c)(iii) shall be 5 days. If said options are not
exercised, or are treated pursuant to Section 2.9 as if not exercised, and
provided that the Board of Directors shall have approved the Transferee as
provided in Section 2.6, then, during a period of 60 days beginning on the
day following the date of expiration of the last applicable option period,
the Transferor may Transfer all, but not less than all, Shares sought to be
Transferred to the Transferee, at the price specified in the Second
Transfer Notice and on terms and conditions not less favorable to the
Transferor than those specified in the Second Transfer Notice.
In the event said Shares are not so Transferred, they shall remain subject in
all respects to the terms of this Agreement and may not thereafter be
Transferred except in compliance with all terms, conditions and provisions of
this Agreement.
2.9 Exercise of Options for Less than All of the Shares. If options exercised
pursuant to Section 2.7 or 2.8(b) call for the purchase of less than all of the
Shares sought to be Transferred, then, at the election of the Transferor
(exercised by the service of written notice of such election upon the Company
and each
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Shareholder exercising an option to purchase Shares within 10 days next
following the expiration of the last period in which such options may be
exercised), the exercise of all or any such options shall be deemed null and
void and treated, for purposes hereof, as if said options had not been
exercised.
2.10 Closing of Exercise of Options. To the extent Shares are to be purchased
by Designated Management Optionees, Persons specified in clause (y) of Section
2.7(c)(i), the Company or GE Capital by reason of their exercises of options
under Section 2.7 or 2.8(b), the closing of all such purchases shall take
place, at the principal offices of the Company, on the 30th day next following
the date on which the last applicable option period expired.
2.11 Effect of Shares in the Hands of the Transferee. Except as may otherwise
be contemplated by Section 2.7(c)(i), Shares which are Transferred to a
Transferee shall thereafter continue to be subject to all restrictions on
Transfer and all other agreements, provisions, terms and conditions which are
contained in this Agreement, and, without limiting the generality of the
foregoing, the Transferee must comply:
(a) with the provisions of Sections 2.4 through 2.10, both inclusive, if
he shall desire to Transfer any such Shares, as if the Transferee was a
Management Shareholder; and
(b) with the voting agreement provisions of Article V, as if the
Transferee was a Shareholder.
Except as provided in the following sentence, the Transferee (if he is not a
Shareholder) shall not have any of the rights which are given to the
Shareholders pursuant to the provisions of this Agreement. However, if the
Transferee acquired Shares from GE Capital or a present or former GE Capital
Affiliate, the Transferee shall be entitled to the rights granted to GE Capital
and the present or former GE Capital Affiliates under Article VI with respect
to the Shares acquired by the Transferee.
2.12 Termination of GE Capital's Rights. From and after the date that GE
Capital and the GE Capital Affiliates cease to own, in the aggregate, at least
20% of the Shares which GE Capital and the GE Capital Affiliates purchased in
June, 1988, all rights of GE Capital under Sections 2.7(a)(iii), (b) and
(c)(iii) and Section 2.8(b) of this Article II shall terminate.
ARTICLE III
Purchases of Shares upon Termination of Employment
3.1 Termination of Employment of Type 2 Management Shareholder. Upon the
termination of a Type 2 Management Shareholder's employment with the Ward Group
for any reason other than death or Permanent Disability (including, without
limitation, resignation or discharge for or without Cause), the Company shall
forthwith notify the Designator of such termination, and:
(a) each of the Designated Management Optionees shall have an option
(exercisable by service of written notice upon such Management Shareholder,
each of his Permitted Transferees, and the Designator, within the 45-day
period next following the date on which the Company has notified the
Designator that such Management Shareholder's employment has terminated),
to purchase all or any portion of the Shares owned by such Management
Shareholder and each of his Permitted Transferees at the time of such
termination of employment; and
(b) the Company shall have an option (exercisable by service of written
notice upon such Management Shareholder, each of his Permitted Transferees,
and the Designator, within the 30-day period next following the last day of
the 45-day period referred to in paragraph (a)), to purchase all or any
portion of such Shares as to which the Designated Management Optionees did
not exercise their options to purchase pursuant to paragraph (a); and
(c) each of the Designated Management Optionees (it being expressly
understood and agreed that, without limiting the generality of anything
else herein contained, the Designated Management Optionees referred to in
this paragraph (c) may be different from the Designated Management
Optionees referred
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to in paragraph (a) next above) shall have an additional option
(exercisable by service of written notice upon such Management Shareholder,
each of his Permitted Transferees, and the Designator, within the 105-day
period next following the date on which the Company has notified the
Designator that such Management Shareholder's employment has terminated),
to purchase all or any portion of the Shares of such Management Shareholder
and each of his Permitted Transferees which were purchased upon exercise of
an Option or Purchase Right after termination of the Management
Shareholder's employment; and
(d) the Company shall have an option (exercisable by service of written
notice upon such Management Shareholder, each of his Permitted Transferees
and the Designator, within the 30-day period next following the last day of
the 105-day period referred to in the immediately preceding paragraph (c)),
to purchase any or all of the Shares subject to the options created by such
paragraph (c) as to which the Designated Management Optionees did not
exercise their options to purchase pursuant to paragraph (c);
all in the manner, for the price and on the terms and conditions contained in
Sections 3.7 through 3.16, both inclusive, of this Article III.
3.2 Death or Permanent Disability of a Type 2 Management Shareholder. Upon
the death of a Type 2 Management Shareholder while such Type 2 Management
Shareholder is an employee of any member of the Ward Group; or in the event the
employment of a Type 2 Management Shareholder with the Ward Group shall be
terminated by reason of Permanent Disability:
(a) the personal representative of the deceased or Permanently Disabled
Type 2 Management Shareholder or the Permanently Disabled Type 2 Management
Shareholder (as the case may be), and each Permitted Transferee of the
deceased or Permanently Disabled Type 2 Management Shareholder, shall each
have the option (exercisable by written notice delivered to the Company and
the Designator not later than 90 days after the date of death or the date
of termination of the Type 2 Management Shareholder's employment with the
Ward Group by reason of Permanent Disability, as the case may be, of the
Type 2 Management Shareholder), to sell all or any portion of the Shares
then owned by such respective Shareholders in accordance with paragraph
(b);
(b) if the options described in paragraph (a) are exercised, the
Designated Management Optionees shall each have the option (exercisable by
written notice delivered to the Company and each Shareholder having an
option to sell Shares pursuant to paragraph (a), within the 30-day period
next following the expiration of the 90-day period described in paragraph
(a)) to purchase all or any portion of the Shares as to which the options
to sell described in paragraph (a) were exercised, and the Company shall
purchase the Shares as to which the options described in paragraph (a) to
sell were exercised which the Designated Management Optionees have not
exercised their options to purchase pursuant to this paragraph (b);
(c) if and to the extent the options described in paragraph (a) are not
exercised, the Designated Management Optionees shall have the option
(exercisable by written notice delivered to each Shareholder having an
option to sell Shares to the Company pursuant to paragraph (a) and the
Company within the 30-day period next following the 90-day period referred
to in paragraph (a)), to purchase from such Shareholders all or any portion
of the Shares then owned by such Shareholders as to which they did not
exercise their respective options to sell as set forth in paragraph (a);
and
(d) the Company shall have the option (exercisable by written notice to
each Shareholder having an option to sell Shares to the Company pursuant to
paragraph (a) within the 30-day period next following the expiration of the
30-day period referred to in paragraph (c)), to purchase from such
Shareholders all or any portion of the Shares then owned by such
Shareholders as to which they did not exercise their respective options to
sell as set forth in paragraph (a) and as to which the Designated
Management Optionees did not exercise their respective options to purchase
as set forth in paragraph (c);
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all in the manner, for the price, and on the terms and subject to the
conditions contained in Sections 3.7 through 3.16, both inclusive, of this
Article III.
3.3 Death of Type 2 Management Shareholder Following Termination of
Employment. Upon the death of a Type 2 Management Shareholder following
termination of the Type 2 Management Shareholder's employment with the Ward
Group (a "Post-Termination Death"), in the case where that Type 2 Management
Shareholder and his Permitted Transferees did not previously sell all Shares
owned by them respectively pursuant to Section 3.1 or Section 3.2:
(a) each of the Designated Management Optionees shall have an option
(exercisable by service of written notice upon such Management Shareholder,
each of his Permitted Transferees, and the Designator, within the 90-day
period next following the date on which the Company has notified the
Designator that such Management Shareholder has died), to purchase all or
any portion of the Shares owned by such Management Shareholder and each of
his Permitted Transferees; and
(b) the Company shall have an option (exercisable by service of written
notice upon such Management Shareholder, each of his Permitted Transferees,
and the Designator, within the 30-day period next following the last day of
the 90-day period referred to in paragraph (a)), to purchase all or any
portion of the Shares as to which the Designated Management Optionees did
not exercise their options to purchase pursuant to paragraph (a);
all in the manner, for the price and on the terms and conditions contained in
Sections 3.7 through 3.16, both inclusive, of this Article III.
3.4 Notice of Death. In order to effectuate the exercise of the options set
forth in Section 3.2 in the event of the death of a Type 2 Management
Shareholder, the personal representative of a deceased Type 2 Management
Shareholder shall give written notice of such Type 2 Management Shareholder's
death to the Company within 90 days after the date of such death, regardless of
whether such personal representative shall be entitled to exercise any option
granted to him pursuant to this Article III. Forthwith following the receipt of
such notice, the Company shall deliver a copy thereof to the Designator. In the
event such notice is not so given by the personal representative of the
deceased Type 2 Management Shareholder, the period of time in which the options
set forth in Section 3.2 may be exercised shall be appropriately extended. In
addition, in order to permit the timely operation of Section 3.3 hereof, the
personal representative of a deceased Type 2 Management Shareholder subject to
Section 3.3 shall give written notice of such Type 2 Management Shareholder's
death to the Company within 90 days after the date of such death and the
Company shall forthwith deliver a copy of such written notice to the
Designator.
3.5 Termination of Brennan's Employment or Death. In the event of:
(a) the termination of Brennan's employment with the Ward Group which
occurs during the three year period commencing on the Closing Date by
reason of his voluntary resignation or termination for Cause:
(i) Brennan and each of his Permitted Transferees shall each have the
option (exercisable by written notice delivered to the Company not
later than 60 days after the date of termination of Brennan's
employment with the Ward Group) to sell to the Company all or any
portion of the Shares then owned by such respective Shareholders, and
the Company shall purchase all such Shares with respect to which such
options to sell were exercised; and
(ii) the Company shall have the option (exercisable by written notice
to Brennan and each of his Permitted Transferees within the 30-day
period next following the expiration of the 60-day period referred to
in paragraph (a)(i)), to purchase from such Shareholders all or any
portion of the Shares then owned by such Shareholders as to which they
did not exercise their respective options to sell as set forth in
paragraph (a), and Brennan and his Permitted Transferees shall sell all
such Shares with respect to which such options were exercised by the
Company;
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provided, however, that the number of Shares as to which Brennan, his
Permitted Transferees and the Company may exercise such options, shall not,
in the aggregate, exceed 20% of the Shares which Brennan and his Permitted
Transferees owned on the Closing Date; provided, further, that if the
options exercised by Brennan and his Permitted Transferees, in the
aggregate, exceed 20% of the Shares which Brennan and his Permitted
Transferees owned on the Closing Date, the Shares which Brennan owned on
the date of exercise of his option shall be the first Shares so sold to the
Company pursuant to this paragraph (a); and provided, further, that if the
Company exercises the option set forth in paragraph (a)(ii), the numbers of
Shares which the Company shall purchase, in the aggregate, from Brennan and
his Permitted Transferees shall be allocated among them in such manner as
Brennan and his Permitted Transferees shall agree, and in the absence of
such an agreement, in proportion to their respective ownership of Shares;
(b) the termination of Brennan's employment with the Ward Group which
occurs by reason of the Ward Group's termination of Brennan's employment
without Cause, Brennan and each of his Permitted Transferees shall each
have the option from time to time (exercisable by written notice delivered
to the Company at any time and from time to time after the date of
termination of Brennan's employment with the Ward Group), to sell all or
any portion of the Shares then owned by such respective Shareholders, and
the Company shall purchase all such Shares with respect to which such
options were exercised;
(c) the termination of Brennan's employment with the Ward Group which
occurs by reason of his death or Permanent Disability:
(i) Brennan or his personal representative (as the case may be) and
each of his Permitted Transferees shall each have the option,
exercisable from time to time prior to the fifth anniversary of the
date of termination of Brennan's employment with the Ward Group by
written notice delivered to the Company at any time and from time to
time prior to said fifth anniversary, to sell all or any portion of the
Shares then owned by such respective Shareholders to the Company, and
the Company shall purchase such Shares with respect to which such
options were exercised; and
(ii) the Company shall have the option (exercisable by written notice
to each Shareholder having an option to sell Shares to the Company
pursuant to paragraph (c)(i) within the 90-day period next following
the date of termination of Brennan's employment with the Ward Group),
to purchase from such Shareholders all or any portion of the Shares
then owned by such Shareholders as to which they did not theretofore
exercise their respective options to sell as set forth in paragraph
(c)(i), and Brennan or his personal representative (as the case may be)
and his Permitted Transferees shall sell all such Shares with respect
to which the Company has exercised its option to the Company; provided,
however, that the number of Shares as to which the Company may exercise
such options, when added to the number of Shares as to which Brennan or
his personal representative (as the case may be) and his Permitted
Transferees have theretofore exercised their options pursuant to
paragraph (c)(i), shall not exceed 35% of the Shares which Brennan and
his Permitted Transferees owned on the Closing Date;
(d) the death of Brennan following the termination of his employment with
the Ward Group, Brennan's personal representative, and each of his
Permitted Transferees, shall each have the option, exercisable from time to
time prior to the fifth anniversary of the date of Brennan's death, by
written notice delivered to the Company at any time and from time to time
prior to said fifth anniversary, to sell all or any portion of the Shares
then owned by such respective Shareholders to the Company, and the Company
shall purchase all such Shares with respect to which such options were
exercised;
all in the manner, for the price, and on the terms and subject to the
conditions contained in Sections 3.7 through 3.16, both inclusive, of this
Article III. Notwithstanding the preceding provisions of paragraphs (b), (c)
and (d) of this Section 3.5, permitting multiple exercises of options by
Brennan or his personal representative (as the case may be) and his Permitted
Transferees, no such option may be exercised by each of Brennan, his personal
representative or any Permitted Transferee more frequently than once in each
one
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year period commencing on the date on which the first such option arose or an
anniversary of that date. The time for exercise of such options within any such
one year period shall be determined by Brennan or his personal representatives
(as the case may be), and all such options shall be exercised concurrently by
all optionors desiring to exercise their respective options.
3.6 Death of Other Type 1 Management Shareholder. In the event of the death
of any Type 1 Management Shareholder other than Brennan:
(a) the personal representative of the deceased Type 1 Management
Shareholder, and each Permitted Transferee of the deceased Type 1
Management Shareholder (as the case may be), shall each have the option
(exercisable by written notice delivered to the Company and the Designator
not later than 90 days after the date of death of the Type 1 Management
Shareholder) to sell all or any portion of the Shares then owned by such
respective Shareholders;
(b) if the options described in paragraph (a) are exercised, the
Designated Management Optionees shall each have the option (exercisable by
written notice delivered to the Company and each Shareholder having an
option to sell Shares pursuant to paragraph (a), within the 30-day period
next following the expiration of the 90-day period described in paragraph
(a)) to purchase all or any portion of the Shares as to which the options
to sell described in paragraph (a) were exercised; and
(c) the Company shall purchase the Shares as to which the options
described in paragraph (a) to sell were exercised which the Designated
Management Optionees have not elected to purchase pursuant to paragraph
(b);
all in the manner, for the price, and on the terms and subject to the
conditions contained in Sections 3.7 through 3.16, both inclusive, of this
Article III.
3.7 Purchase Price of Shares. The aggregate purchase price ("Purchase Price")
of Shares to be purchased pursuant to Section 3.1, 3.2, 3.3, 3.5 or 3.6 shall
be the following:
(a) where Shares are to be purchased pursuant to Section 3.1, 3.2 or 3.3:
(i) if the product of the Fair Market Value per Share multiplied by
the aggregate number of Shares to be purchased is equal to or less than
the sum of (x) the Acquisition Price of all Shares which are not Vested
Shares multiplied by the aggregate number of such Shares, plus (y) the
Fair Market Value per Share of all Shares which are Vested Shares
multiplied by the aggregate number of such Shares, then the Purchase
Price shall be the product of the Fair Market Value per Share,
multiplied by the aggregate number of Shares to be purchased;
(ii) if subparagraph (i) of this paragraph (a) is not applicable,
subject to paragraph (e) below, the Purchase Price shall be equal to
the sum of (x) the product of the Fair Market Value per Share
multiplied by the number of Vested Shares, plus (y) the product of the
Acquisition Price multiplied by the number of Shares to be purchased
which are not Vested Shares;
(b) Intentionally omitted;
(c) where Shares are to be purchased pursuant to Section 3.5 (other than
paragraph (a) thereof) or Section 3.6, the Purchase Price shall be the
product of the Fair Market Value per Share, multiplied by the aggregate
number of Shares to be purchased;
(d) where Shares are to be purchased pursuant to Section 3.5(a), the
purchase price of each of the Shares shall be the book value thereof as of
the last day of the month next preceding the month in which Brennan's
employment with the Ward Group terminated, as determined by the Company's
chief financial officer in accordance with the generally accepted
accounting principles applied by the Company in the preparation of its
consolidated financial statements;
(e) where options are exercised pursuant to Section 3.1 or 3.3 for less
than all of the Shares owned by a Management Shareholder and his Permitted
Transferees, in determining the Purchase Price in
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accordance with paragraph (a) or (b), the Shares which are not Vested
Shares shall be deemed to have been purchased or sold first;
(f) for the sole purpose of computing the Purchase Price in connection
with a purchase of Shares pursuant to Section 3.3, in computing that
portion of the Purchase Price which is allocable to Shares which are not
Vested Shares, the Acquisition Price of each of the Shares which are not
Vested Shares shall be increased by a simple interest factor of 8% per
annum calculated from the date of termination of employment to the Article
III Closing Date, but the Acquisition Price, as so increased, shall not
exceed the Fair Market Value per Share on the Article III Closing Date.
3.8 Manner of Payment. Subject to the provisions of Article IV, the Purchase
Price shall be paid in the following manner:
(a) except as otherwise provided in paragraph (c), an amount equal to 25%
of the Purchase Price of all Shares shall be paid in cash on the Article
III Closing Date; provided, however, that if the Company is a purchaser of
Shares and the Company or any member of the Ward Group shall have obtained
insurance on the life of a Management Shareholder whose Shares (or Shares
owned by his Permitted Transferees) are to be purchased pursuant to Section
3.2, 3.3, 3.5 or 3.6, for the purpose of providing funds with which to
purchase such Shares, and in the event the proceeds of such insurance
("Insurance Proceeds") exceed the amount which would be payable by the
Company on the Article III Closing Date in cash but for this proviso, and
if the Insurance Proceeds have been collected as of the Article III Closing
Date, an amount equal to the Insurance Proceeds, but not in excess of the
Purchase Price for the Shares purchased by the Company, shall be paid in
cash on the Article III Closing Date (it being understood that if the
Insurance Proceeds are collected after the Article III Closing Date, the
Company shall make a mandatory prepayment under the note(s) delivered by
the Company pursuant to paragraph (b) of the amount by which the Insurance
Proceeds exceeds the amount which was paid on the Article III Closing Date,
forthwith following the collection thereof, with all installments coming
due under said note(s) to be reduced ratably);
(b) except as otherwise provided in paragraph (c), the balance of the
Purchase Price shall be paid in three equal annual installments on the
first through third anniversaries, both inclusive, of the Article III
Closing Date. The principal amount of the balance of the Purchase Price
remaining from time to time unpaid shall bear interest, payable on the same
dates as each installment of principal, at a rate per annum equal to the
lowest rate of interest which will not result in any portion of the
Purchase Price being deemed to be unstated interest or original issue
discount under the provisions of the Internal Revenue Code of 1986. If said
provisions are inapplicable for any reason, the interest rate shall be 8%
per annum;
(c) notwithstanding the preceding provisions of this Section 3.8, in the
event of a purchase of Shares following the voluntary termination of
employment of a Type 2 Management Shareholder with the Ward Group (other
than by reason of normal retirement in accordance with the Ward Group's
retirement policies), or the termination of employment of such Management
Shareholder with the Ward Group for Cause, the amount which shall be paid
on the Article III Closing Date shall equal 16 2/3% of the Purchase Price,
and the balance of the Purchase Price shall be paid in five equal annual
installments on the first through fifth anniversaries, both inclusive, of
the Article III Closing Date, plus interest, payable on the same dates as
each installment of principal, at the rate determined pursuant to paragraph
(b);
(d) the Purchase Price shall be payable by the Designated Management
Optionees and the Company in proportion to their respective purchases of
Shares pursuant to this Article III.
3.9 Notes and Security. The portion of the Purchase Price which has not been
paid in cash on the Article III Closing Date shall be evidenced and secured as
follows:
(a) the portion of the Purchase Price which is not paid on the Article
III Closing Date shall be evidenced by a non-negotiable secured promissory
installment note(s) made by the Company and/or the
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Designated Management Optionee(s) purchasing Shares (as the case may be).
Each such note or notes shall be in a commercially reasonable form of
promissory note given to evidence an installment indebtedness, providing
for payment of the unpaid balance of the Purchase Price, and interest
thereon, all as provided in Section 3.8. Each such promissory installment
note shall provide for acceleration in the event of non-payment after a
reasonable grace period, and shall provide that it may be prepaid at any
time or from time to time, in whole or in part, without premium, penalty or
notice. Except as provided in Section 3.8(a), all prepayments shall be
applied against installments coming due in the inverse order of their
maturity. If there is more than one seller of such Shares, a separate note
shall be issued to each seller of such Shares. Each promissory note which
is made by the Company shall provide that the obligations thereunder are
subordinated to the extent provided in, and are subject to the provisions
of, Article IV. Each note shall provide that a default under any note made
by the party issuing it to a Management Shareholder or his Permitted
Transferees pursuant to this Article III shall be a default under all notes
made by that party to such Management Shareholder and his Permitted
Transferees pursuant to this Article III. Each such note or notes shall be
substantially in the form contained in Exhibit B attached hereto;
(b) each note shall be secured, at the option of the purchaser of the
Shares, by either (x) a pledge, meeting the requirements of the Illinois
Uniform Commercial Code, of a number of the Shares purchased which have an
aggregate value, valued at their purchase price at the time of the pledge
(determined in the manner provided in Section 3.7 and in the following
sentences), equal to the original principal amount of such note, or (y) a
standby letter of credit reasonably satisfactory to the Shareholder whose
Shares are being sold. If Shares are to be pledged, for the purposes of
determining the type and number thereof, on the Article III Closing Date
the Company and the Designated Management Optionees shall be deemed to have
made payment in full for a type (Vested Shares or Shares which are not
Vested Shares, as the case may be) and number of Shares which has an
aggregate value (determined as provided herein) equal to the amount so
paid, and the Shares which are so deemed to have been paid for in full
shall not be subject to the pledge, and only the balance of the Shares
shall be subject to the pledge. In determining the value of the Shares
which are deemed to have been paid for in full on the Article III Closing
Date in accordance with the two preceding sentences, Shares which are not
Vested Shares shall first be deemed to have been paid for in full, until
all of such Shares have been deemed to have been paid for in full. If
Shares are to be pledged, at the option of the pledgor, the Shares to be
pledged shall be held by an escrowee reasonably satisfactory to the
pledgor, pursuant to an Escrow Agreement containing terms and provisions
which are reasonably satisfactory to the pledgor.
3.10 Fair Market Value. The Fair Market Value per Share of Shares purchased
pursuant to this Article III shall be determined as follows:
(a) unless a public market for the Shares exists, the Fair Market Value
per Share of each of the Shares shall be based upon the fair market value
of the consolidated common equity of the Company for the fiscal year in
which the Article III Closing Date occurs, adjusted as provided herein.
Subject to the following provisions, the fair market value of the
consolidated common equity of the Company shall be determined annually by
the Board of Directors, as of the first day of the then-current fiscal year
of the Company, in its reasonable discretion and in good faith, as soon
after the commencement of each fiscal year of the Company as possible. In
the event the fair market value of the consolidated common equity of the
Company, as so determined, would exceed 150% of the consolidated common
equity of the Company (determined in accordance with the generally accepted
accounting principles applied by the Ward Group) as of the first day of the
fiscal year for which the determination is to be made, the affirmative vote
of not less than 2/3 of the members of the Board of Directors shall be
required in order to determine the amount of the excess. The Board of
Directors may in its discretion retain an independent investment banker to
make recommendations to the Board of Directors as to the fair market value
of the consolidated common equity of the Company. Each such determination
shall be effective as of the first day of the then-current fiscal year, and
remain in effect with respect to all Article III Closing
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Dates occurring during that fiscal year; provided, however that the fair
market value of the common equity as so determined by the Board of
Directors shall be adjusted by adding:
(i) an amount equal to the aggregate Fair Market Value per Share at
the date of grant for the Shares underlying all Options and Purchase
Rights and other options or rights to acquire shares of common stock,
in each case which are outstanding, unexercised and unexpired on the
Article III Closing Date;
(ii) the amount of cash and other consideration (including any
difference between the Fair Market Value per Share at the date of grant
and the exercise price) received or receivable by the Company during
the period commencing on the first day of the fiscal year in which the
Article III Closing Date occurs and ending on the Article III Closing
Date (the "Adjustment Period") with respect to any Options, Purchase
Rights, or other options or rights to acquire shares of common stock
which have been exercised prior to the Article III Closing Date;
(iii) the aggregate consideration received by the Company for shares
of common stock issued during the Adjustment Period and not accounted
for in either (i) or (ii) above;
and by subtracting:
(iv) the aggregate amount of dividends paid or payable by the Company
on its common stock during the Adjustment Period; and
(v) the aggregate amount paid by the Company to redeem, repurchase or
otherwise acquire for consideration shares of its common stock during
the Adjustment Period;
and the said fair market value of the consolidated common equity of the
Company, as so adjusted, shall be the fair market value of the consolidated
common equity of the Company. The foregoing adjustments shall be made by
the Company's chief financial officer, acting reasonably and in good faith
and in accordance with the provisions of this Section 3.10. For the first
fiscal year of the Company, the parties agree that the fair market value of
the consolidated common equity of the Company as of the first day of such
first fiscal year shall be $10,000,000. Once the fair market value of the
consolidated common equity of the Company has been determined as provided
in the foregoing provisions of this paragraph (a), the Fair Market Value
per Share of each of the Shares to be purchased pursuant to this Article
III shall be determined as follows:
(vi) the Fair Market Value per Share of each of the Class A Shares
shall be the amount determined as follows:
a. First, at any time when the Fully Diluted Outstanding Amount on
the date of determination does not exceed the Series 1 Amount, the
fair market value of the consolidated common equity of the Company
shall be multiplied by a fraction the numerator of which is the
Fully Diluted Outstanding Amount and the denominator of which is the
sum of the Fully Diluted Outstanding Amount plus the number of
outstanding Class B Shares on the day immediately preceding the
Article III Closing Date; or
b. at any time when the Fully Diluted Outstanding Amount on the
date of determination exceeds the Series 1 Amount, but the Fully
Diluted Non-Series 3 Outstanding Amount does not exceed the Series 1
Amount, the amount which would be determined if the immediately
preceding Section 3.10(a)(vi)a. were applicable and the Fully
Diluted Outstanding Amount were equal to the Series 1 Amount shall
be multiplied by a fraction the numerator of which is the Fully
Diluted Outstanding Amount and the denominator of which is the sum
of the Series 1 Amount plus fifty percent (50.0%) of the excess of
the Fully Diluted Outstanding Amount over the Series 1 Amount on the
day immediately preceding the Article III Closing Date; or
c. at any time when the Fully Diluted Outstanding Amount as of the
date of determination exceeds the Series 1 Amount (and Section
3.10(a)(vi)b. is not applicable), the amount which would be
determined if Section 3.10(a)(vi)a. were applicable and the Fully
Diluted Outstanding Amount were equal to the Series 1 Amount shall
be multiplied by (x) a fraction the numerator of which is the Fully
Diluted Non-Series 3 Outstanding Amount and the denominator of which
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is the sum of the Series 1 Amount plus eighty-one point five percent
(81.5%) of the excess of the Fully Diluted Non-Series 3 Outstanding
Amount over the Series 1 Amount, and multiplied by (y) a fraction
the numerator of which is the Fully Diluted Outstanding Amount and
the denominator of which is the sum of the Fully Diluted Non-Series
3 Outstanding Amount plus fifty percent (50.0%) of the sum of the
number of Series 3 Shares outstanding on the day immediately
preceding the Article III Closing Date plus the number of Series 3
Shares subject to purchase pursuant to Options or Purchase Rights
outstanding on the day immediately preceding the Article III Closing
Date, whether or not such Options or Purchase Rights are exercisable
on the day immediately preceding such Article III Closing Date;
d. Second, the amount determined pursuant to subparagraph a., b.
or c., as applicable, shall be divided by the aggregate number of
Class A Shares (without distinction as to series) on the day
immediately preceding the Article III Closing Date, with Class A
Shares which are subject to purchase pursuant to Options or Purchase
Rights being treated, for the purposes of this subparagraph d., as
being outstanding Class A Shares, whether or not such Options or
Purchase Rights are exercisable on the day immediately preceding
such Article III Closing Date;
provided, however, that no adjustment to the Fair Market Value per
Share of the Class A Shares as calculated as of the first day of the
then-current fiscal year shall be required unless such adjustment would
result in an increase or a decrease of at least 1% from the amount as
so determined as of the beginning of the then-current fiscal year;
(vii) the Fair Market Value per Share of each of the Class B Shares
shall be the amount determined by (x) subtracting from the fair market
value of the consolidated common equity of the Company the aggregate
Fair Market Value per Share of all of the Class A Shares of all series,
as determined pursuant to subparagraph (vi), and (y) dividing the
resulting number by the total number of Class B Shares which are
outstanding as of the day immediately preceding the Article III Closing
Date.
In the event the Article III Closing Date occurs prior to the date on which
the appropriate fair market value of the consolidated common equity of the
Company has been determined, the Purchase Price shall initially be
determined on the basis of the most recent determination of the fair market
value of the consolidated common equity of the Company and shall thereafter
be adjusted as soon as the fair market value of the consolidated common
equity of the Company for the current fiscal year has been determined. If
necessary in order to accomplish any such adjustment, the parties shall
immediately substitute new notes and/or exchange cash payments as soon as
practicable after the amount of such adjustment is determined, so that the
parties are placed in the same positions in which they would have been if
the appropriate fair market value of the consolidated common equity of the
Company had been known on the Article III Closing Date.
(b) if a public market for shares of common stock of the Company exists,
the Fair Market Value per Share shall be the Average Closing Price of such
shares during the period ("Trading Period") consisting of the ten trading
days ending on the day immediately preceding the Article III Closing Date.
For the purposes of the preceding sentence:
(i) if such shares are listed on any national securities exchange or
traded in the over-the-counter market and included in the NASDAQ
National Market System, the Average Closing Price shall be the
arithmetic mean of the last sale prices of such shares on each day of
the Trading Period on the national securities exchange where such
shares are principally traded if such shares are listed for trading on
such exchange, or in the over-the-counter market as reported by NASDAQ
if such shares are included in the National Market System;
(ii) if such shares are traded over-the-counter but are not included
in the NASDAQ National Market System, the Average Closing Price shall
be the arithmetic mean of the average of the closing bid and asked
quotations on each day of the Trading Period.
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3.11 Closing. Subject to the remainder of this Section 3.11 and to Section
4.1, any purchase of Shares pursuant to this Article III shall be consummated
("Article III Closing") at the Company's principal office at 10:00 a.m.,
prevailing business time, on the 30th day next following the last day on which
the last option to purchase or sell such Shares which is granted pursuant to
this Article III is exercisable ("Article III Closing Date"), or on such
earlier day as designated by the purchaser(s) in the sole discretion of the
purchaser(s) upon not less than three days prior notice to the Management
Shareholder or his personal representative, as the case may be, and to the
Management Shareholder's Permitted Transferees; provided, however, that with
respect to any specific Shares which, if the Article III Closing were to occur
in accordance with the foregoing, would be acquired by the Company pursuant to
this Article III within six months of the date of acquisition (whether through
an Award, exercise of a Purchase Right or Option or otherwise) of such Shares
from the Company by either of (i) such Management Shareholder or (ii) any of
such Management Shareholder's Permitted Transferees, then the Article III
Closing and the Article III Closing Date with respect to such specific Shares
may, at the option of the Company, be postponed until the date which is six
months and ten days following the last such acquisition of any of such Shares
from the Company by either of (i) such Management Shareholder or (ii) any of
such Management Shareholder's Permitted Transferees. If any of the foregoing
dates is a Saturday, Sunday or legal holiday, the Article III Closing shall
occur at the same time and place on the next succeeding business day. At the
Article III Closing, each person selling Shares shall deliver certificates
representing the Shares being purchased, duly endorsed, and each shall furnish
such other evidence, including applicable inheritance and estate tax waivers
and releases, as may reasonably be necessary to effect the Transfers of Shares.
The Company and/or the Designated Management Optionee(s) purchasing Shares
shall make the payments, deliver the notes, and effect the pledges, which are
set forth in Sections 3.8 and 3.9. In the event that a Designated Management
Optionee fails to make the payments, deliver the notes and effect the pledges
required by such a Designated Management Optionee (a "Non-Performing DMO") in
connection with a purchase of Shares pursuant to Section 3.2(a) and (b) or
Section 3.6(a) and (b), then, at the election of the seller of such Shares, the
Company shall, in place of such Non-Performing DMO, purchase such Shares and
make such payments, deliver such notes and effect such pledges (it being
understood and agreed that a replacement Designated Management Optionee, rather
than the Company, shall be entitled to satisfy such purchase in place of such
Non-Performing DMO). In the event that the Company so purchases the Shares
which were to be purchased by a Non-Performing DMO, the Company shall be
subrogated to the rights of the seller of such Shares with respect to such Non-
Performing DMO.
3.12 Priorities. In the event options to purchase Shares owned by a
Management Shareholder or a Permitted Transferee shall arise under both Article
II and Article III, as between the provisions of Article II, on the one hand,
and Article III, on the other hand, if on the date on which an option to
purchase or sell Shares arises under Article III, any option under Article II
has not been exercised, or, if exercised, the purchase to be made pursuant to
said exercise has not been closed, the priority of such Articles shall be
determined by the Designator, but if the Designator fails to make any such
determination by written notice delivered to the Company within 30 days next
following the date on which the option or obligation under Article III arose,
Article III shall have priority.
3.13 Failure to Deliver Shares. In the event the Company or any of the
Designated Management Optionees exercise one or more options to purchase Shares
pursuant to this Article III, or the Company becomes obligated to purchase
Shares pursuant to this Article III, and in the event a Management Shareholder
or Permitted Transferee whose Shares are to be purchased pursuant to this
Article III fails to deliver them on the Article III Closing Date, the Company
and/or the Designated Management Optionees purchasing Shares may elect at any
time from and after the Article III Closing Date to deposit the cash and
promissory note(s) representing the Purchase Price with the Company's general
counsel ("Escrow Agent"). If the Purchase Price is so deposited within 180 days
of the Article III Closing Date, the deposit shall be deemed to have occurred
on the Article III Closing Date, and if the Purchase Price is deposited after
180 days following the Article III Closing Date, the deposit shall be deemed to
have occurred on the actual date of such deposit. In the event the Company
and/or said Designated Management Optionees do so, the Shares shall, from the
date of such deemed deposit, be deemed for all purposes (including the right to
vote and receive
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payment of dividends) to have been Transferred to the purchasers thereof, the
Company or the Voting Trustee (as the case may be) shall issue new certificates
representing the Shares to the purchasers thereof, and the certificates
registered in the name of the Shareholders obligated to sell them (or the
voting trust certificates, as the case may be) shall be deemed to have been
cancelled and to represent solely a right to receive payment of the Purchase
Price, with interest (if any) earned thereon, from the escrow. If the proceeds
of sale have not been claimed by the former Shareholders whose Shares were
purchased pursuant to this Article III prior to the third anniversary of the
Article III Closing Date, the escrow deposits, and all interest (if any) earned
thereon, shall be returned to the respective depositors, and the former
Shareholders whose Shares were purchased shall look solely to the purchasers
for payment of the Purchase Price. The Escrow Agent shall not be liable for any
action or inaction taken by him in good faith, and shall have no liability
whatsoever for failure to earn interest (or with respect to the amount of
interest earned) on the escrow deposits.
3.14 Resale of Shares. The Company may resell to any employee or prospective
employee of the Ward Group, including any person who is already a Management
Shareholder, any Shares which the Company has repurchased pursuant to this
Article III or Article II on such terms as the Board of Directors shall
determine. At any time in which a Voting Trust Agreement is in effect, the
employee or prospective employee shall join in and become a party to such
Voting Trust Agreement as the Company shall specify, the Company shall, on
behalf of the employee or prospective employee, issue shares of common stock to
the Voting Trustee for the benefit of the employee or prospective employee, and
the Voting Trustee shall issue to the employee certificates of beneficial
interest constituting an equal number of Shares.
3.15 Modification of Options. Notwithstanding anything to the contrary
contained herein, with respect to any options exercisable pursuant to Sections
3.1, 3.2 or 3.5 hereof as a result of termination of employment ("Termination")
of a person whose short-swing profits with respect to sales of Shares after
such Termination as a result of this Article III would be subject to recapture
under Section 16 of the Exchange Act ("Insider"), such options shall arise with
respect to each such Insider and his or her Permitted Transferees, only upon
the earlier of (i) six months and one day after such Termination or (ii) the
date of service of a Transfer Notice by such Insider or Permitted Transferee,
as the case may be, on or after the date of such Termination; provided,
however, that this Section 3.15 shall not apply to any Insider or Permitted
Transferee who, as of the date of such Termination, holds any Shares, with
respect to which any option under Article II has not been exercised and has not
yet expired, or, if exercised, the purchase of Shares pursuant thereto has not
been closed. All time periods contained elsewhere in this Agreement with
respect to exercise of options modified pursuant to this Section 3.15 shall be
adjusted accordingly in connection with this Section 3.15.
3.16 Offset of Purchase Price. Notwithstanding anything to the contrary
contained herein, in the event that any person selling Shares pursuant to this
Article III is, immediately prior to the Closing, indebted to the Company or
any member of the Ward Group or any Pledgee by virtue of the Line of Credit
Program, the MWHC Loan Program or otherwise, then the Company (or any assignee
thereof) may pay and satisfy all or a portion of the Purchase Price by
forgiving or offsetting such indebtedness, such forgiveness or offset not to
exceed the amount of the Purchase Price to be so paid, by causing such
indebtedness to be forgiven or offset in an amount not to exceed the amount of
the Purchase Price to be so paid or by paying to the holder of such debt on
behalf of such seller an amount not to exceed the amount of the Purchase Price
to be so paid.
ARTICLE IV
Certain Limitations on Purchases of Shares
4.1 Restrictions on the Company's Right and/or Obligation to Purchase Shares.
Notwithstanding anything to the contrary contained in this Agreement, the
Company: (x) shall have the right to conditionally exercise any option arising
under Article III to purchase Shares (other than an option arising under
Section 3.5(a) or (c)); (y) shall not be obligated to purchase Shares; and (z)
shall not be obligated to make payments with respect to the Purchase Price of
Shares it has theretofore purchased; to the extent unconditional exercise
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of such option, the purchase of such Shares or the making of such a payment,
when taken together with all other unconditional exercises of options by the
Company, all other purchases by the Company of shares of its common stock
pursuant to this Agreement or under the Terms and Conditions and the making of
all other payments by the Company on account of such shares which the Company
has purchased, would result in a violation of one of the Limitations (as herein
defined). If this Section 4.1 is applicable, the following shall govern the
exercises of such options and the making of such purchases and payments:
(a) in the event the Company has an option to purchase Shares (other than
an option arising under Section 3.5(a) or (c)) but, by virtue of the
Limitations, is unable to purchase all Shares as to which it desires to
exercise its option to purchase, it may unconditionally exercise its option
as to the number of Shares which it may purchase without violation of the
Limitations, and shall purchase those Shares on the Article III Closing
Date, and may exercise said option as to the remaining Shares it desires to
purchase conditioned upon its being able to do so without violation of the
Limitations. In the event the Company is obligated to purchase Shares but
is unable, by virtue of the Limitations, to pay the full amount which is
payable by the Company on the Article III Closing Date with respect to the
Shares which it is obligated to purchase, the Article III Closing shall
take place with respect to the purchase of those Shares which the Company
is able to purchase without violation of the Limitations;
(b) with respect to those Shares which the Company was obligated, or
conditionally exercised an option, to purchase but was unable, on the
Article III Closing Date to purchase by virtue of the Limitations, the
Article III Closing Date shall be extended with respect to such Shares by
the period of such inability, but not in excess of one year from the date
on which the Article III Closing Date would have occurred with respect to
such Shares but for this Section 4.1. If said inability is cured in whole
prior to the expiration of said one year period, the Article III Closing
shall occur with respect to such Shares on the 30th day after the date on
which the inability has been cured. If as of the end of said one year
period the inability to purchase such Shares was cured in part, the Article
III Closing shall take place with respect to the Shares as to which the
inability was cured, on the 30th day after the expiration of said one-year
period. If the Article III Closing Date is extended as to any Shares
pursuant to this paragraph (b), the Purchase Price of such Shares shall be
computed as if the Article III Closing had occurred with respect to such
Shares on the date set forth in Section 3.11, without regard to this
Section 4.1 (the "Originally Scheduled Article III Closing Date"). The
Purchase Price of such Shares (and interest thereon as herein provided), as
so computed, shall be reduced (with reductions applied first to accrued and
unpaid interest) by the amount of any cash dividends paid or declared and
distributions made or delivered with respect to such Shares, during the
period commencing on the Originally Scheduled Article III Closing Date and
ending on the actual Article III Closing Date with respect to such Shares,
and the portion of such Purchase Price remaining unpaid from time to time
shall bear interest for the period commencing on the Originally Scheduled
Article III Closing Date and ending on the actual Article III Closing Date,
at the rate of interest which would be applicable under Section 3.8(b) if
the Article III Closing had occurred with respect to such Shares on the
Originally Scheduled Article III Closing Date, and shall be payable on the
Article III Closing Date, and the rate of interest which is payable on the
portion of the Purchase Price which is payable in installments pursuant to
Section 3.8(b) or (c) shall be that same rate of interest. To the extent
that after the expiration of said one year period, the Company remains
unable to purchase any of the Shares which it is otherwise obligated to
purchase or has conditionally exercised an option to purchase, the Company
shall be relieved of the obligation which it was unable to fulfill, the
Company's conditional exercise of its option to purchase such Shares shall
terminate, and the Shares which the Company was otherwise obligated, or had
conditionally exercised an option, to purchase shall thereafter remain
subject to all applicable provisions of this Agreement;
(c) in applying the foregoing provisions of this Section 4.1, the Shares
which are not Vested Shares shall be deemed to have been purchased or sold
first;
(d) if after the Article III Closing the Company is precluded by virtue
of the Limitations from making all or any portion of an installment payment
on account of the unpaid balance of the Purchase
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Price, the Company's obligation to make such payment (or portion thereof)
shall be tolled until the earlier of the date on which it is no longer
precluded from making such payment (or portion thereof) or the first
anniversary of the date on which the payment (or portion thereof) was due.
During the time in which the Company's obligation is so tolled, interest
shall continue to accrue on the payment which was due but not made, but the
holder of any note made by the Company which represents the unpaid portion
of the Purchase Price of the Shares purchased by the Company shall not take
any action to collect the payment due, or to accelerate the maturity of any
payments not then due;
(e) if after the expiration of the period of time in which the Company's
obligation has been tolled pursuant to paragraph (d) the Company has not
made the payment in full of the total amount then due, the holder of the
note made by the Company shall have the right to foreclose the pledge of
the Shares pledged by the Company, or draw against the letter of credit
provided by the Company, as security therefor. If the holder does so, or
takes other legal action to collect on the note, the holder's right to
collect the amount owed by the Company to such holder (other than by way of
foreclosure of the pledge of Shares pledged as collateral therefor or
drawing on the letter of credit furnished by the Company in connection
therewith) shall be subordinated to the Company's obligations under its
then most junior subordinated debt and all debt which is senior thereto,
and such holder's right to enforce its right to collect such amount shall
be restricted to the extent of the maximum restriction contained in any of
such debt with respect to such enforcement; provided, however, that
notwithstanding any subordination provisions which may be contained in the
instruments evidencing such debt, the holder of the note shall be entitled
to collect the amount owing from the Company on account of the purchase of
the Shares to the extent that payment of the amount sought to be collected
would not result in a violation of any provisions of the instruments
evidencing any debt of the Company which is senior to the holder's note and
which permit distributions by, and/or intercompany dividends to, the
Company in connection with its repurchases of Shares. For the purposes of
the immediately preceding sentence, references to the Company shall be
deemed to include references to Ward;
(f) if any of the Designated Management Optionees shall have exercised
options to purchase any of the Shares which are subject to purchase under
Article III, the Article III Closing shall nonetheless take place with
respect to the Shares as to which said options have been exercised, and the
provisions of this Section 4.1 shall have no effect on the Shares as to
which such options have been exercised, or on the obligations of the
Designated Management Optionees with respect to payment of the Purchase
Price thereof.
4.2 Definition of the Limitations. The Limitations shall consist of the
following:
(a) any provision of the law of the Company's state of incorporation
which restricts the Company's ability to repurchase its Shares or restricts
payments on account of the Purchase Price thereof;
(b) any provision of any material contract to which a member of the Ward
Group is a party (including, without limitation, loan agreements), and any
provision of any Certificate of Incorporation of any member of the Ward
Group, which would be violated by the Company's repurchase of its Shares,
the making of payments on account of the Purchase Price thereof, or the
payment of intercompany dividends or other distributions or advances to the
Company so that it can repurchase Shares or make payments on account of the
Purchase Price thereof; and
(c) the Cash Payments Limitation then in effect.
4.3 Cash Payments Limitation. Except as otherwise determined by the Board of
Directors, the Cash Payments Limitation shall be, with respect to each fiscal
year of the Company, equal to the sum of $25,000,000 plus the aggregate
Insurance Proceeds collected during a fiscal year. To the extent the Cash
Payments Limitation restricts the aggregate amount which can be paid by the
Company in a fiscal year with respect to repurchases of its Shares, obligations
of the Company to make payments shall be honored in the order in which they
arose.
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4.4 Right of GE Capital to Cure Limitations. In the event the Company is
unable to exercise an option pursuant to Section 3.5(a) or (c) because of the
Limitations, and provided that the number of members of the Board of Directors
has not theretofore been reduced as provided in Section 5.2(c), the Board of
Directors (by action of a majority of the members of the Board of Directors
designated by GE Capital) may waive the Cash Payments Limitation, or GE Capital
may, on such terms as are reasonably agreed upon between the Company and GE
Capital, lend to the Company sufficient funds to permit the exercise of such
option without violation of the Limitations.
ARTICLE V
Corporate Governance Matters
5.1 Voting of Shares held by Management Shareholders. At any time in which
this Article V of this Agreement is in effect and a Voting Trust Agreement is
not in effect, and, in addition, with respect to any Shares which are owned by
Management Shareholders or Permitted Transferees which for any reason are not
subject to the provisions of a Voting Trust Agreement, on all matters requiring
a vote of the Management Shareholders, as long as Brennan is a Management
Shareholder, all Shares held by all Management Shareholders other than Brennan,
and all Shares held by Permitted Transferees (other than the Shares acquired,
on or about the date hereof, by Brennan's Permitted Transferees), shall be
voted in the same manner that Brennan votes his Shares with respect to that
matter.
5.2 Election of Directors. Subject to the limitations set forth herein, and
in addition to any provisions relating to the election of directors by the
holders of Preferred Stock which are contained in the Certificate of
Incorporation and/or By-laws of the Company, at all times in which this Article
V is in effect, the By-laws of the Company shall provide, and the Shareholders
agree to vote, for the election of a Board of Directors consisting of eleven
members, six to be designated by the Designator and five to be designated by GE
Capital. The By-laws shall further provide, and the Shareholders agree, that,
disregarding any directors which may be elected by the holders of Preferred
Stock pursuant to the provisions of the Company's Certificate of Incorporation:
(a) Intentionally omitted;
(b) at such time, if any, as GE Capital and the GE Capital Affiliates
shall cease to own, in the aggregate, more than 50% of the Shares which GE
Capital and the GE Capital Affiliates held on the Closing Date, the number
of members of the Board of Directors which the Designator shall have the
right to designate shall be increased by one and the number of members of
the Board of Directors which GE Capital shall have the right to designate
shall be reduced by one;
(c) at such time, if any, as GE Capital and the GE Capital Affiliates
shall cease to own, in the aggregate, 20% or more of the Shares which GE
Capital and the GE Capital Affiliates held on the Closing Date, GE Capital
shall no longer have the right to designate members of the Board of
Directors in accordance with the foregoing provisions of this Section 5.2;
and the number of directors to be elected shall be reduced to nine, seven
to be elected by the Class A Shareholders, voting as a class, and two to be
elected by the Class B Shareholders, voting as a class; provided, however,
that as long as that certain Account Purchase Agreement, dated as of June
24, 1988, between Ward and Montgomery Ward Credit Corporation (the "Account
Purchase Agreement") shall be in effect and GE Capital or any GE Capital
Affiliate shall own any Class B Shares, GE Capital shall have the right to
elect one of the two directors to be elected by the Class B Shareholders.
In the event of a vacancy on the Board of Directors, the party who had the
right to designate the director whose seat is vacant shall have the right to
designate the party who shall fill the vacancy. The party who had the right to
designate a director shall also have the right to cause that director to be
removed.
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5.3 Certain Supermajority Requirements. At all times in which this Article V
is in force, the By-laws of the Company shall provide, and the Shareholders
agree, that in addition to those other provisions of this Agreement which
require the affirmative vote of not less than 2/3 of the members of the Board
of Directors for the taking of actions by the Company, the affirmative vote of
not less than 2/3 of the members of the Board of Directors (but, in the case of
paragraph (t), instead of the aforesaid 2/3 requirement, the affirmative vote
of a majority of the directors designated by the Designator or, at any time in
which class voting is in effect, by a majority of the directors elected by the
holders of Class A Shares) shall be required in order for the Company to take,
or permit any member of the Ward Group to take, any of the following actions:
(a) a merger, consolidation or other business combination (other than
among members of the Ward Group and other than as part of an acquisition of
assets permitted pursuant to paragraph (m));
(b) any of the following sales (other than intercompany sales within the
Ward Group, sales solely of inventory in the ordinary course of business,
and sale and leaseback transactions in the ordinary course of business or,
to the extent out of the ordinary course of business, consistent with the
past practices of the Ward Group):
(i) any sale of assets of the Ward Group (including assets consisting
of shares of stock of a subsidiary of the Company) where the gross
proceeds of sale (exclusive of assumption of liabilities) are in an
amount equal to the greater of (A) $50,000,000 or (B) 20% of the
consolidated common stockholders' equity of the Company as of the time
of the sale; or
(ii) any sale of assets of the Ward Group (including assets
consisting of shares of stock of a subsidiary of the Company) to the
extent the gross proceeds of sale (exclusive of assumption of
liabilities), when added to the gross proceeds of all other sales of
assets of the Ward Group (exclusive of assumption of liabilities)
occurring during that fiscal year, exceed an amount equal to the
greater of (A) $100,000,000 or (B) 30% of the consolidated common
stockholders' equity of the Company as of the time of the sale;
provided, however, that notwithstanding the foregoing limitation, any
single sale of assets for gross proceeds not exceeding $1,000,000
(exclusive of assumption of liabilities) shall be excluded from the
foregoing computation;
(c) amendments to the Certificate of Incorporation or By-laws of the
Company (other than amendments to the By-laws permitted pursuant to Section
8.2);
(d) payment of dividends on Shares (other than intercompany dividends
among members of the Ward Group);
(e) redemptions of Shares, other than pursuant to the provisions of this
Agreement or the Employee Stock Option Plan;
(f) public or private offerings of debt or equity securities of any
member of the Ward Group, other than (i) to other members of the Ward
Group, (ii) pursuant to the Employee Stock Option Plan, or (iii) pursuant
to Section 3.14, Section 6.1 with respect to the offering of Shares in
Demand Registrations on behalf of those Persons exercising their demand
registration rights thereunder or Section 6.2 with respect to the offering
of Shares in Piggyback Registrations on behalf of those Persons exercising
their piggyback registration rights thereunder;
(g) guaranties of any indebtedness in excess of $5,000,000 for borrowed
money of any Person other than a member of the Ward Group;
(h) setting of annual financial goals and targets;
(i) the making of, or the entry into a binding commitment to make, any
capital expenditures which would cause the amount expended (or committed to
be expended) by the Ward Group for capital expenditures during a fiscal
year to exceed the capital expenditure budget to be contained in the annual
financial goals and targets of the Ward Group for such year by more than
10% of the budgeted amount;
(j) borrowings by any member of the Ward Group which would cause the
aggregate consolidated indebtedness of the Company for money borrowed to
exceed an amount equal to $25,000,000, plus 5% of the amount of the
consolidated common stockholders' equity of the Company measured at the
time
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of such borrowings, but in determining both the amount of such borrowings
and the necessity for approval of 2/3 of the members of the Board of
Directors, the following borrowings shall be excluded:
(i) borrowings made in connection with the acquisition, pursuant to
the Purchase Agreement, of Ward, and under the term loan, revolving
credit, tax standby letter of credit, "Tax Loan" and commercial letter
of credit facilities established in connection with such acquisition,
borrowings pursuant to the Subordinated Loan Agreement, dated June 23,
1988, between Ward and GE Capital, borrowings of any member of the Ward
Group existing at the time of such acquisition, and borrowings made
under any whole or partial refunding or replacement thereof without
increasing the principal amount thereof, other than increases for
closing costs (including, without limitation, prepayment penalties)
incurred in connection with such refunding or replacement;
(ii) purchase money financing incurred in accordance with the annual
financial goals and targets of the Ward Group, and purchase money
financing in connection with the issuance of notes pursuant to Sections
3.8 and 3.9 or Sections 3.6 and 3.7 of the Terms and Conditions, it
being understood that purchase money financing shall include financing,
refinancing or funding of the acquisition price of real property (or
any interest therein) or other fixed assets acquired hereafter by a
member of the Ward Group, regardless of whether said financing,
refinancing or funding is done at the time of, or subsequent to, the
acquisition of any such real property (or interest therein) or other
fixed assets;
(iii) Intentionally omitted;
(iv) borrowings made for the purpose of redeeming any of the
Preferred Stock; or
(v) borrowings made pursuant to Section 4.4;
(k) increases in compensation and/or fringe, welfare or pension benefits
for any member of the Executive Committee of the Ward Group, other than in
accordance with the practices and guidelines of the Ward Group in effect
from time to time (it being understood that any material change from the
current practices and guidelines shall require the affirmative vote of 2/3
of the members of the Board of Directors), but in no event beyond the
increases being given for comparable executives in comparable retail
businesses, as determined from published survey data and guidelines;
(l) adoption of a plan of liquidation of the Company;
(m) acquisition of assets (other than purchases of inventory and capital
expenditures) which would cause the amount expended (or committed to be
expended) by the Ward Group for the acquisition of such assets during a
fiscal year to exceed the budget for acquisitions of such assets to be
contained in the annual financial goals and targets of the Ward Group for
such year by more than 10% of the budgeted amount;
(n) entry into any transaction (exclusive of compensation and fringe,
welfare and pension benefit arrangements with affiliates who are officers,
directors or employees of the Ward Group for services rendered by them to
the Ward Group) with an affiliate, as that term is defined in the Act,
other than affiliates constituting members of the Ward Group;
(o) seeking of a consent or waiver from a lender to a member of the Ward
Group whose loan to the member of the Ward Group has a then outstanding
principal balance in excess of $30,000,000, in any case in which consent or
waiver is required for the entry into a transaction by the Ward Group and
which, in the absence of such consent or waiver, would constitute a default
or an event of default under the documents evidencing or pertaining to the
loan made by the lender, other than any consent or waiver required in
connection with:
(i) the making of any borrowing permitted pursuant to paragraph
(j)(ii), (iii), (iv) or (v);
(ii) any mandatory prepayment obligation arising from the sale or
financing of any real property (or interests therein) or other fixed
assets;
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(iii) any prepayment occurring by reason of a "Change of Control" (as
defined in one or more of the loan documents evidencing the loans
referred to in subparagraph (j)(i) made in connection with the
acquisition of Ward by the Company); or
(iv) the incurring of any liens (other than for money borrowed);
provided, however, that approval of 2/3 of the members of the Board of
Directors for the seeking of such consent or waiver shall not be required
if the transaction for which such consent or waiver is being sought (x) is
specifically permitted pursuant to any of the other paragraphs of this
Section 5.3 without the approval of 2/3 of the members of the Board of
Directors, or (y) has been authorized by 2/3 of the members of the Board of
Directors pursuant to any of said other paragraphs;
(p) authorizing a Transfer of Shares pursuant to Section 2.2(a) in a case
where the transferee is not a Management Shareholder, a Permitted
Transferee, or a present or prospective employee of the Ward Group;
(q) a waiver of the prohibitions on Transfers of Shares contained in
Sections 2.3(a) and (c), as applied to Brennan; provided, however, that by
action of a simple majority of the members of the Board of Directors, the
references in those paragraphs to the third anniversary may be amended to
constitute references to the second anniversary;
(r) a waiver of the prohibitions on Transfers of Shares contained in
Section 2.3(e);
(s) any determination, pursuant to Section 4.3, of a Cash Payments
Limitation other than that expressly set forth in that section;
(t) without limiting the generality of any other provision of this
Section 5.3, any of the following actions with respect to the Account
Purchase Agreement:
(i) termination thereof by agreement of the parties thereto;
(ii) the exercise of a unilateral right of termination and the
exercise of all other rights, options and elections granted thereunder
to Ward;
(iii) the giving of waivers and consents with respect thereto; and/or
(iv) any amendment thereto;
(u) the termination for Cause of Brennan's employment with any member of
the Ward Group.
5.4 Certain Required Provisions of Certificate of Incorporation. At all times
in which this Article V is in effect, the Certificate of Incorporation of the
Company will contain provisions to the following effect, and the Shareholders
agree that:
(a) the common stock of the Company shall consist of two classes of
shares, Class A Shares and Class B Shares; and the Class A Shares shall
consist of three series, Series 1, Series 2 and Series 3;
(b) no amendment to the Certificate of Incorporation which increases the
number of authorized Shares of any class or series of Common Stock shall be
adopted without the affirmative vote of the holders of a majority of the
outstanding Series 1 Shares and the holders of a majority of the
outstanding Class B Shares, each voting separately as a class;
(c) in addition to the class voting required pursuant to paragraph (b),
class voting will be provided to the extent necessary to effectuate the
provisions of this Agreement requiring class votes;
(d) the adoption of the Employee Stock Option Plan, the making of any
amendments thereto, and the determination of the number of Shares as to
which options to purchase shall be granted thereunder, shall require the
affirmative vote of (i) a majority of the members of the Board of
Directors, and (ii) the holders of a majority of the outstanding Series 1
Shares; and the By-laws of the Company shall provide that the determination
of the manner in which options shall be awarded and may be exercised
(including the exercise prices of options granted thereunder) shall be
determined by the affirmative vote of a majority of the members of the
Board of Directors;
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(e) except for the issuance of Shares pursuant to the exercise of options
granted under the Employee Stock Option Plan, in addition to complying with
Section 5.3(f), the Company may issue authorized but unissued Class A
Shares of either Series only upon the affirmative vote of the holders of a
majority of the outstanding Class A Shares; and
(f) in connection with the payment of dividends, proceeds payable in
liquidation of the Company, and proceeds of a merger of the Company, the
aggregate amount which is payable to holders of Shares, without distinction
as to class or series, shall be allocated among the classes and series of
Shares, as follows:
(i) 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 as of the date of
determination does not exceed the Series 1 Amount, shall be the amount
which bears the same ratio to the total amount of such dividends or
proceeds as the Class A Amount bears to the sum of (x) the Class A
Amount, plus (y) the number of Class B Shares outstanding as of the
date of determination; and such portion of such dividends or proceeds
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;
(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 as of the date of
determination exceeds the Series 1 Amount (but the Non-Series 3
Outstanding Amount as of the date of determination 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
Section 5.4(f)(i) 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 (50.0%) 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 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 as of the date of
determination exceeds the Series 1 Amount (and Section 5.4(f)(ii)
immediately preceding is not applicable), shall be the product of the
amount which would be payable to holders of Class A Shares if Section
5.4(f)(i) 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 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 (50.0%) of the number of
Series 3 Shares outstanding as of the date of such determination; and
such portion of such dividends or proceeds 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; and
(iv) The portion of such dividends or proceeds which is payable to
the holders of Class B Shares as a class, shall be the portion of the
total amount of such dividends or proceeds which is not payable to the
holders of Class A Shares in accordance with Section 5.4(f)(i),
5.4(f)(ii) or 5.4(f)(iii) above, as applicable; and such portion of
such dividends or proceeds which is payable to the holders of the Class
B Shares shall be allocated among such holders in proportion to their
respective holdings of Class B Shares.
5.5 By-laws of Members of the Ward Group. Forthwith following the Closing
Date, the Company shall cause the By-laws of each member of the Ward Group,
other than the Company, to be amended to provide
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that no action may be taken by that member which, if such action was taken by
the Company, would require that the affirmative vote of 2/3 of the members of
the Board of Directors be obtained pursuant to Section 5.3 for the taking of
such action, unless that action has also been authorized or ratified by 2/3 of
the members of the Board of Directors.
5.6 Election of Chief Executive Officer. The person serving from time to time
as the chief executive officer of the Company shall concurrently serve as the
chief executive officer of Ward.
5.7 Agreement to Vote. All Shareholders (exclusive of Brennan's Permitted
Transferees who have acquired Shares on or about the date hereof, it being
understood that said Permitted Transferees are not bound by the provisions of
this Section 5.7), and (without implication that the Voting Trustee is not
otherwise a Shareholder) the Voting Trustee, agree that at all meetings of
stockholders of the Company, including, without limitation, meetings called for
the election and/or removal of directors, they will vote their respective
Shares in such a manner as will accomplish the provisions of this Article V.
The Shareholders' (and Voting Trustee's) agreement to vote their Shares as
provided in this Article V shall include an agreement to execute written
consents of stockholders of the Company in lieu of a meeting.
5.8 Recapitalization. In connection with any public offering of Shares (other
than pursuant to the Employee Stock Option Plan or Article III of this
Agreement or of the Terms and Conditions), the Company shall have the right to
cause a recapitalization of the Company to occur, in order to facilitate such
public offering. Any such recapitalization, as nearly as possible, shall put
the parties in the same relative positions with respect to equity ownership and
voting control of the Company in which they were prior to the recapitalization,
after taking into account any dilution resulting from outstanding but
unexercised Purchase Rights or Options under the Employee Stock Option Plan.
Each of the Shareholders, and the Voting Trustee, agrees to vote his Shares in
favor of any recapitalization of the Company which meets the foregoing
requirements, and to treat the shares of stock and other securities issued in
such recapitalization as Shares under this Agreement.
ARTICLE VI
Registration Rights
6.1 Demand Registration Rights. The Shareholders shall have the following
Demand Registration rights:
(a) at any time after the earlier of (i) 90 days after the first
registration of shares of common stock of the Company under the Act (other
than any registrations on Form S-4 or S-8 or any form substituting therefor
or any registration statement filed in connection with an offering of
securities or granting of options primarily to employees of any member of
the Ward Group or any registration statement filed to register shares
primarily or exclusively for Transfer upon exercise of options pursuant to
this Agreement or the Terms and Conditions or in connection therewith) or
(ii) July 1, 1992, subject to paragraph (e) below of this Section 6.1 and
to Section 6.12, a Demanding Group (as herein defined) may make a written
request of the Company (a "Demand") for registration with the Commission,
under and in accordance with the provisions of the Act and this Section
6.1, of all or part of its Shares (a "Demand Registration"), subject to the
following:
(i) for the purposes of this Article VI, the Management Shareholders
and their Permitted Transferees, as a class, shall constitute one
Group, and GE Capital and the present and former GE Capital Affiliates,
as a class, shall constitute the other Group. As used herein, a
"Demanding Group" shall mean a Group which shall make a Demand pursuant
to this Section 6.1. Each Demanding Group shall be entitled to (x) two
Demand Registrations (other than Demand Registrations on Form S-3
promulgated by the Commission or any successor form) and (y) at any
time at which the Company is eligible to register Shares on Form S-3 or
any successor form, an
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unlimited number of Demand Registrations on Form S-3. Any Demand made
by the Management Shareholders, as a Demanding Group, shall only be
made by the Designator in his or its (as the case may be) sole
discretion;
(ii) the Company need not effect a Demand Registration unless such
Demand Registration shall include at least 20% of the Shares held in
the aggregate, as of the Closing Date, by the Demanding Group making
the Demand;
(iii) if:
a. the Company has filed, or has taken substantial steps toward
filing, a registration statement relating to any of the Company's
securities, and the managing underwriter of the offering to which
such registration relates or, if not an underwritten offering, the
Board of Directors, is of the opinion that the filing of a
Registration Statement relating to a Demand Registration would
adversely affect the offering by the Company of, or the market for,
its securities; or
b. the Board of Directors determines in the exercise of its
reasonable judgment that the Company's ability to pursue a
contemplated merger, acquisition, significant sale of assets or
other significant business transaction (authorization for the
negotiation of which has been obtained from the Board of Directors)
would be adversely affected by the filing of a Registration
Statement with respect to a Demand Registration;
the Company may defer such Demand Registration for a single period not
to exceed 180 days; and
(iv) if the Company shall elect to defer any Demand Registration
pursuant to the terms of subparagraph (iii), no Demand shall be deemed
to have been made for the purposes of this Section 6.1 unless and until
the Demand Registration has become effective in accordance with
paragraph (b) below;
All Demands made pursuant to this paragraph (a) shall specify the aggregate
number of Shares requested to be registered, the intended methods of
disposition thereof (if known) and the anticipated price per Share
(expressed as a minimum price before expenses and commissions) at which the
Shares will be sold pursuant to the Demand Registration;
(b) a Demand shall not be counted as such for the purposes of paragraph
(a) until the Registration Statement relating thereto shall have been (i)
filed with the Commission, (ii) declared effective by the Commission and
(iii) maintained continuously effective for a period of at least 120 days
or such shorter period when all Shares included therein have been sold in
accordance with such Demand Registration. If a Demand Registration shall
have occurred, a subsequent Demand shall not be made by a Demanding Group
prior to 180 days after the expiration of the period described in the
preceding sentence;
(c) immediately upon receipt of a Demand, the Company shall give written
notice to all members of both Groups which have not made a Demand that the
Demanding Group has made a Demand. Subject to the following provisions of
this paragraph (c), and to paragraph (e) below of this Section 6.1 and
Section 6.12, each of the members of both Groups who has not made a Demand
may, upon written notice to the Company delivered within 15 days next
following the date on which the Demand is made, elect to include all or any
portion of its respective Shares in the Demand Registration. If, however,
in any Demand Registration the managing underwriter or underwriters thereof
(or in the case of a Demand Registration not being underwritten, an
independent underwriter, of nationally recognized standing, selected by the
holders of a majority of the Shares being registered therein, whose fees
and expenses shall be borne by the Company), advise the Company in writing
that in its or their reasonable opinion the number of securities proposed
to be sold in such Demand Registration exceeds the number that can be sold
in such offering without having a material adverse effect on the success of
the offering or the market for the Shares, the Company will include in such
Demand Registration only the number of Shares which, in the reasonable
opinion of such underwriter or underwriters, can be sold without having a
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material adverse effect on the success of the offering or the market for
the Shares, in the following order of priority:
(i) first, the Shares requested to be included in such Demand
Registration by the Shareholders who have made such requests in
accordance with paragraphs (a) and (c) of this Section 6.1; provided,
however, that if in the opinion of such underwriter(s), not all such
Shares can be so included without having a material adverse effect on
the success of the offering or the market for the Shares, the number of
Shares which in the opinion of such underwriters can be included shall
be allocated pro rata among the Shareholders requesting such
registration on the basis of the respective numbers of Shares requested
to be included by each of them;
(ii) second, Shares to be issued and sold by the Company requested to
be included in such Demand Registration shall be included, but only to
the extent that in the opinion of such underwriter(s) they may be
included without having a material adverse effect on the success of the
offering or the market for the Shares;
(d) if a Demand Registration is to be an underwritten offering, the
holders of a majority of the Shares to be included in such Demand
Registration held by such members of the Demanding Group that initiated
such Demand Registration shall select a managing underwriter or
underwriters of recognized national standing to administer the offering,
who shall be reasonably satisfactory to the Company;
(e) notwithstanding the foregoing, with respect to Shares held in a
Voting Trust, no Demand by a Management Shareholder or Permitted Transferee
with respect to such Shares, and no request for inclusion of such Shares by
a Management Shareholder or Permitted Transferee pursuant to paragraph (c)
of this Section 6.1 or paragraph (a) of Section 6.2, shall be made, unless
the Voting Trustee with respect to such Shares shall have consented to
releasing such Shares from the Voting Trust Agreement applicable thereto as
of the effective date of the applicable Registration Statement.
6.2 Piggyback Registration Rights. The Shareholders shall have the following
Piggyback Registration rights:
(a) whenever during the period commencing on the date hereof and ending
on the tenth anniversary of the date hereof the Company proposes to
register any equity securities under the Act (other than any registrations
on Form S-4 or S-8 or any form substituting therefor or any registration
statement filed in connection with an offering of securities or granting of
options primarily to employees of any member of the Ward Group or any
registration statement filed to register shares primarily or exclusively
for Transfer pursuant to this Agreement or the Terms and Conditions or in
connection therewith), the Company will give written notice to all
Shareholders, at least 30 days prior to the anticipated filing date, of its
intention to effect such a registration, which notice will specify the
proposed offering price (if known), the kind and number of securities
proposed to be registered, the distribution arrangements and such other
information that at the time would be appropriate to include in such
notice. Subject to paragraph (b) below and to Section 6.12, the Company
shall include in such registration all Shares with respect to which written
requests for inclusion therein have been delivered by Shareholders to the
Company within 15 business days after the date of delivery of the Company's
notice (a "Piggyback Registration"). Except as may otherwise be provided in
this Article VI, Shares with respect to which such requests for
registration have been received will be registered by the Company and
offered for sale to the public in a Piggyback Registration pursuant to this
Article VI on the same terms and subject to the same conditions as are
applicable to any similar securities of the Company included therein;
(b) If in any Piggyback Registration the managing underwriter or
underwriters thereof (or in the case of a Piggyback Registration not being
underwritten, an independent underwriter, of nationally recognized
standing, selected by the holders of a majority of the Shares being
registered therein, whose fees and expenses shall be borne by the Company),
advise the Company in writing that in its or their reasonable opinion the
number of Shares proposed to be sold in such Piggyback Registration exceeds
the number that can be sold in such offering without having a material
adverse effect on the success of the offering of securities to be sold by,
or the market for any equity securities of, the Company, the
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Company will include in such Piggyback Registration (in addition to the
equity securities the Company proposes to sell) only the number of Shares
owned by the Shareholders requesting such Piggyback Registration, if any,
which, in the opinion of such underwriter or underwriters can be sold
without having such a material adverse effect. If some, but not all, of
such Shares can be so included, the number of Shares which in the opinion
of such underwriter or underwriters can be included shall be allocated pro
rata among the Shareholders requesting such Piggyback Registration on the
basis of the respective numbers of Shares requested to be included by each
of them;
(c) if any Piggyback Registration is an underwritten offering, the
Company will select a managing underwriter or underwriters of nationally
recognized standing to administer the offering; and
(d) notwithstanding anything to the contrary contained in this Section
6.2, the Company shall not be obligated to include any Shares in any
registration statement filed by the Company if counsel to the Company who
is reasonably satisfactory to the Shareholders who have made a request
pursuant to paragraph (a) of this Section 6.2 shall render an opinion to
such Shareholders to the effect that (i) registration is not required for
the proposed Transfer of such Shares or (ii) a post-effective amendment to
an existing registration statement filed simultaneously with the proposed
Transfer would be sufficient for such proposed Transfer, and the Company in
fact files such a post-effective amendment.
6.3 Registration Procedures. With respect to any Demand Registration or
Piggyback Registration (generically, a "Registration"), the Company will,
subject to subparagraph 6.1(a)(iii) and Section 6.5, as expeditiously as
practicable:
(a) prepare and file with the Commission as soon as practicable a
registration statement or registration statements (the "Registration
Statement") relating to the applicable Registration on any appropriate form
under the Act which shall be available for use in connection with the sale
of the Shares in accordance with the intended method or methods of
distribution thereof; provided, however, that in the case of a Demand
Registration the Company shall not be required to undergo or pay for any
special audit to effect such Registration, and if a special audit would be
required, either the Shareholders selling Shares thereunder shall agree to
pay the costs and expense of such audit (and such costs and expenses shall
not constitute Registration Expenses) or the Company shall have the right
to delay the filing or effectiveness of the Registration Statement until
such time as a regular audit in the ordinary course of the Company's
business shall have been completed. The Company will use its best efforts
to cause such Registration Statement to become effective. The Company shall
not be deemed to have breached such "best efforts" undertaking if it shall
take any action which is required under applicable law, or shall take any
action in good faith and for valid business reasons, including without
limitation the acquisition or divestiture of assets;
(b) prepare and file with the Commission such amendments and post-
effective amendments to the Registration Statement as may be necessary to
keep each Registration Statement effective for a period of not more than
120 days after the date of its effectiveness, or such shorter period as
will terminate when all Shares covered by such Registration Statement have
been sold; cause each prospectus required in connection therewith (a
"Prospectus") to be supplemented by any required Prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 under the Act; and
comply with the provisions of the Act with respect to the disposition of
all securities covered by such Registration Statement during the applicable
period, in accordance with the intended method or methods of distribution
by the sellers thereof as set forth in the Registration Statement or
supplement to the Prospectus;
(c) promptly notify the selling holders of Shares and the managing
underwriters, if any (and, if requested by any such Person, confirm such
advice in writing), of:
(i) the date on which the Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement has been filed,
and, with respect to the Registration Statement or any post-effective
amendment, the date on which the same has become effective;
(ii) any written request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus or for
additional information;
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(iii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) the receipt by the Company of any written request by any state
securities authority for additional information or written notification
with respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(v) the happening of any event which makes any material statement
made in the Registration Statement, the Prospectus or any document
incorporated therein by reference untrue in any material respect or
which requires the making of any changes in the Registration Statement,
the Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading in the light of the
circumstances under which they were made;
(d) make every reasonable effort (taking into account the interest of all
selling Shareholders, the Company, and its officers and directors) to
obtain the withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible moment;
(e) if requested by the managing underwriter or underwriters or a holder
of Shares being sold in connection with an underwritten offering, promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managing underwriters and
the holders of a majority of the Shares being sold agree should reasonably
be included therein relating to the plan of distribution with respect to
such Shares, including, without limitation, in the case of an underwritten
offering, information with respect to (i) the number of Shares being sold
to such underwriters in a firm commitment underwriting and the purchase
price being paid therefor by such underwriters, and (ii) any other terms of
the underwriting; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable upon being
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(f) furnish to each selling holder of Shares and each managing
underwriter (if any), without charge, at least one signed copy of the
Registration Statement and any amendment thereto, including financial
statements and schedules, all documents incorporated therein by reference
and, to the extent reasonable, all exhibits (including those incorporated
by reference);
(g) deliver to each selling holder of Shares and the underwriters, if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
selling holder of Shares and underwriters may reasonably request; the
Company consents to the use, in accordance with the Act, of each Prospectus
or any amendment or supplement thereto by each of the selling holders of
Shares and the underwriters, if any, in connection with the offering and
sale of the Shares covered by such Prospectus or any amendment or
supplement thereto;
(h) in connection with any Registration of Shares, use its best efforts
to register or qualify or cooperate with the selling holders of Shares, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Shares for offer and sale under the
securities or "blue sky" laws of such jurisdictions as the holders of not
less than 25% of the Shares covered by the Registration Statement (or, in
the case of Shares being sold by Management Shareholders and/or their
Permitted Transferee, the Designator) or the managing underwriter
reasonably requests in writing, considering the amount of Shares proposed
to be sold in each such jurisdiction, and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Shares covered by the Registration Statement; provided
that the Company will not be required to qualify generally to do business
in any jurisdiction where it is not then so qualified or to take any action
that would subject it to taxation in any such jurisdiction or to submit to
the general service of process in any such jurisdiction;
(i) cooperate with the selling holders of Shares and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing the Shares to be sold free from any restrictive
legends; and cause such Shares to be in such denominations and registered
in such names as
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the managing underwriters may request at least two business days prior to
any sale of Shares to the underwriters;
(j) use reasonable efforts to cause the Shares covered by the applicable
Registration Statement to be registered with or approved by such
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Shares in the jurisdictions contemplated by paragraph
(h) of this Section 6.3;
(k) upon the occurrence of any event contemplated by subparagraph (ii),
(iv) or (v) of paragraph (c) of this Section 6.3, prepare any required
supplement or post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Shares, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(l) not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Shares;
(m) enter into such agreements (including an underwriting agreement) and
take all such other actions in connection therewith which are reasonably
required in order to expedite or facilitate the disposition of such Shares,
and, in such connection, whether or not an underwriting agreement is
entered into and whether or not the Registration is an underwritten
Registration:
(i) make such representations and warranties to the holders of such
Shares and the underwriters, if any, in such form, substance and scope
as are reasonably required and customarily made by issuers to
underwriters in primary underwritten offerings;
(ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and the
holders of a majority of the Shares being sold) addressed to each
selling holder and the underwriters, if any, covering the matters
reasonably required and customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such underwriters and holders;
(iii) use its best efforts to obtain "cold comfort" letters and
updates thereof from the Company's independent certified public
accountants addressed to the selling holders of Shares and the
underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters
received by underwriters in connection with primary underwritten
offerings;
(iv) if an underwriting agreement is entered into, cause to be
included therein the indemnification provisions and procedures set
forth in Section 6.7 with respect to all parties to be indemnified
pursuant to said Section; and
(v) deliver such documents and certificates as may reasonably be
requested by the holders of a majority of the Shares being sold and the
managing underwriters, if any, to evidence compliance with subparagraph
(m) (i) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The above shall be done at each closing under such underwriting or
similar agreement as and to the extent required thereunder;
(n) make available for inspection by a representative of the holders of a
majority of the Shares, any underwriter participating in any disposition
pursuant to such Registration, and any attorney or accountant retained by
the sellers or underwriter, at reasonable times and upon reasonable prior
notice, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided, however, that any records, information or
documents that are designated by the Company in writing as confidential
shall be kept confidential by such Persons unless disclosure of such
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records, information or documents is required by court or administrative
order of any regulatory body having jurisdiction;
(o) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make generally available to its
security holders (which may be accomplished through compliance with Rule
158 under the Act), earning statements satisfying the provisions of Section
11(a) of the Act, for the twelve month period:
(i) commencing at the end of any fiscal quarter in which Shares are
sold to underwriters in a firm commitment or best efforts underwritten
offering; or
(ii) if not sold to underwriters in such an offering, commencing with
the first month of the Company's first fiscal quarter after the quarter
in which the Registration Statement became effective.
Said earning statements shall be furnished within 45 days after the
expiration of such 12-month period unless such 12-month period constitutes
a fiscal year, in which latter event said statements shall be furnished
within 90 days after the expiration of such 12-month period; and
(p) prior to the filing of the Registration Statement, any Prospectus or
any other document that is to be incorporated by reference into the
Registration Statement or the Prospectus after initial filing of the
Registration Statement, provide copies of each such document to counsel to
the selling holders of Shares and to the managing underwriters, if any;
make the Company's representatives available, at reasonable times and upon
reasonable prior notice, for discussion of such document; and make such
changes in such document prior to the filing thereof as counsel for such
selling holders or underwriters may reasonably request.
The Company may require each seller of Shares as to which any Registration is
being effected to furnish to the Company in writing or orally as the Company
may request, such information regarding such seller and the proposed
distribution of such securities as the Company may from time to time reasonably
request in writing. Each Shareholder agrees that upon receipt of notice from
the Company of the happening of any event of the kind described in subparagraph
(c)(ii), (iii) (iv) or (v) of this Section 6.3, such Shareholder will forthwith
discontinue disposition of Shares (but in the case of subparagraph (c)(iv) of
this Section 6.3, only in the applicable jurisdiction or jurisdictions, as the
case may be) pursuant to the Registration Statement until such Shareholder has
received copies of the supplemented or amended Prospectus as contemplated by
paragraph (k) of this Section 6.3, or until it has been advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, such Shareholder
will deliver to the Company (at the Company's expense) all copies, (other than
permanent file copies then in such Shareholder's possession), of the Prospectus
covering such Shares which is current at the time of receipt of such notice. In
the event the Company shall give any notice of the happening of any event of
the kind described in subparagraph (c)(ii), (iii) or (v) of this Section 6.3,
the 120-day period referred to in paragraph (b) of this Section 6.3 shall be
extended by the number of days during the period from the date of the giving of
such notice to the date when each seller of Shares covered by such Registration
Statement shall have received either the copies of the supplemented or amended
Prospectus contemplated by paragraph (k) of this Section 6.3 or the Advice (as
the case may be), both dates inclusive.
6.4 Restrictions on Public Sale. Each Shareholder whose Shares are included
in a Registration Statement agrees not to effect any public sale or
distribution of the securities of the Company, of the same or similar class or
classes as the securities included in such Registration Statement or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144, during the 15-day period prior to, and
during the 90-day period beginning on, the effective date of such Registration
Statement (except as part of such Registration), if and to the extent requested
by the Company in the case of a non-underwritten public offering, or if and to
the extent requested by the managing underwriter or underwriters, in the case
of an underwritten public offering.
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6.5 Other Registrations. The Company agrees not to effect any public sale or
distribution of any securities similar to the Shares being registered, or any
securities convertible into or exchangeable or exercisable for such securities
(other than any such sale or distribution of such securities in connection with
any merger or consolidation by the Company or any other member of the Ward
Group or the acquisition by the Company or any other member of the Ward Group
of the capital stock or substantially all of the assets of any other Person or
the continuation of a distribution under a registration statement filed in
connection with an offering of securities or granting of options primarily to
employees of any member of the Ward Group), during the 15-day period prior to,
and during the 90-day period beginning on, the effective date of any
Registration Statement filed in connection with a Demand made pursuant to
Section 6.1(a).
6.6 Registration Expenses. Expenses incident to Registrations pursuant to
this Article VI shall be borne as follows:
(a) all expenses incident to the Company's performance of or compliance
with this Agreement ("Registration Expenses") will be borne by the Company.
Registration Expenses shall include, without limitation, all registration
and filing fees, the fees and expenses of the counsel and accountants for
the Company (including the expenses of any "cold comfort" letters), all
other costs and expenses of the Company incident to the preparation,
printing and filing under the Act of the Registration Statement (and all
amendments and supplements thereto) and furnishing copies thereof and of
the Prospectus included therein, the costs and expenses incurred by the
Company in connection with the qualification of the Shares under the state
securities or "blue sky" laws of various jurisdictions, the costs and
expenses associated with filings required to be made with the National
Association of Securities Dealers, Inc., the costs and expenses of listing
the Shares for trading on a national securities exchange or authorizing
them for trading on the NASDAQ National Market System and all other costs
and expenses incurred by the Company in connection with any Registration
hereunder. Notwithstanding the preceding sentence, Registration Expenses
shall not include the costs and expenses of any Shareholders for
underwriters' commissions and discounts, brokerage fees, transfer taxes
with respect to the Shareholders' Shares to be Transferred pursuant to the
Registration, or the fees and expenses of any counsel, accountants or other
representatives retained by any Shareholder, all of which shall be paid by
the respective Shareholders who are selling Shares pursuant to the
Registration;
(b) if the holders of Shares possessing, in the aggregate, a majority of
the Shares covered by a Registration Statement which has been filed (or
which the Company notifies such holders it is prepared to file within five
days) pursuant to Section 6.1(a), but has not yet become effective, shall
request the Company to withdraw (or to cease the preparation of) such
Registration Statement, the Company shall use its best efforts to withdraw
(or cease the preparation of) such Registration Statement; provided,
however, that if prior to the date which is 180 days after the date on
which the Registration Statement was withdrawn or the preparation thereof
was ceased, the holders of 90% of the Shares covered by such Registration
Statement may thereafter request the Company to refile (or to recommence
the preparation of) such Registration Statement, if permitted under the
Act, the Company shall use its best efforts to do so, and such Registration
Statement shall not constitute a second Demand pursuant to Section 6.1;
provided further, that as a condition to any such request, such holders of
the Shares shall agree in writing to reimburse the Company for all
Registration Expenses over and above those which the Company, by
proceeding, would have incurred had such initial Registration Statement not
been withdrawn (or the preparation thereof ceased). Except as provided
above, in any offering initiated as a Demand Registration pursuant to
Section 6.1(a), the Company shall pay all Registration Expenses in
connection therewith, whether or not the Registration Statement relating
thereto becomes effective.
6.7 Indemnity and Contribution. The parties shall be entitled to indemnity
and contribution in connection with Registrations, as follows:
(a) the Company agrees to indemnify each Shareholder, its officers,
directors and agents and each Person who (within the meaning of the Act)
controls such Shareholder, and hold them harmless against,
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all losses, claims, damages, liabilities and expenses (which, subject to
the limitations herein contained, shall include reasonable attorneys' fees)
resulting from (i) any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or based upon any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading (except insofar as the same are caused by any such
untrue statement or alleged untrue statement or omission or alleged
omission being based upon or contained in any information relating to such
Shareholder furnished in writing to the Company by such Shareholder or his,
her or its representatives expressly for use therein or by such
Shareholder's or such Shareholder's agent's failure to deliver a copy of
the Registration Statement or Prospectus or any amendments or supplements
thereto after the Company has furnished such Shareholder with a sufficient
number of copies of the same), or (ii) the Company's failure to perform its
obligations under this Section 6.7. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers
and directors and each Person who (within the meaning of the Act) controls
such Persons, to the same extent as provided above with respect to the
indemnification of the holders of Shares. Notwithstanding the foregoing,
the Company shall not be obligated to indemnify any holder of Shares
(including the indemnified parties related to such holders) with respect to
any losses, claims, damages, liabilities or expenses to the extent the same
result from the breach by such holder of the agreements set forth in the
last paragraph of Section 6.3;
(b) in connection with any Registration in which any Shareholder is
participating, each such Shareholder will furnish to the Company in writing
such information with respect to such Shareholder as the Company reasonably
requests for use in connection with any Registration Statement or
Prospectus, and such Shareholder shall indemnify the Company, its directors
and officers, each underwriter and each Person who (within the meaning of
the Act) controls the Company or any such underwriter, and hold them
harmless, against any losses, claims, damages, liabilities and expenses
(which, subject to the limitations herein contained, shall include
reasonable attorneys' fees) resulting from (i) a breach by such
Shareholders of the provisions of the last paragraph of Section 6.3, (ii)
any untrue statement of a material fact or any omission to state a material
fact required to be stated therein or necessary to make the statements in
the Registration Statement or Prospectus or preliminary Prospectus or any
amendment or supplement thereto, in light of the circumstances under which
they were made, not misleading, to the extent (but only to the extent) that
such untrue statement or omission is contained in any information relating
to such Shareholder so furnished in writing by such Shareholder or his, her
or its representative specifically for inclusion therein, or (iii) such
Shareholder's failure to perform his obligations under this Section 6.7.
The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as
provided above with respect to information with respect to such Persons so
furnished in writing by such Persons or their representatives specifically
for inclusion in any Prospectus or Registration Statement;
(c) any Person entitled to indemnification hereunder will:
(i) give prompt written notice to the indemnifying party after the
receipt by the indemnified party of a written notice of the
commencement of any action, suit, proceeding or investigation or any
threat thereof made in writing for which such indemnified party will
claim rights of indemnification or contribution pursuant to this
Section 6.7; provided, however, that the failure of any indemnified
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under paragraphs (a) and (b) next
above, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice; and
(ii) unless in such indemnified party's reasonable judgment a
conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such
indemnifying party to unconditionally (but subject to the exceptions
herein contained) assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party.
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If the defense is so assumed by the indemnifying party, the indemnifying
party shall lose its right to defend and settle the claim if it fails to
proceed diligently and in good faith with the defense of the claim. If the
defense of the claim is not so assumed by the indemnifying party, or if the
indemnifying party shall lose its right to defend and settle the third
party claim as provided in the previous sentence, the indemnified party
shall have the right to defend and settle the claim provided that the
indemnified party gives the indemnifying party not less than 10 days prior
written notice of any proposed settlement. If the defense is assumed by the
indemnifying party and is not lost as provided above, subject to the
provisions of the following sentence, the indemnifying party shall have the
right to defend and settle the claim. Notwithstanding the preceding
sentence, in connection with any settlement negotiated by an indemnifying
party, no indemnified party will be required by an indemnifying party (x)
to enter into any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation, (y)
to enter into any settlement that attributes by its terms liability to the
indemnified party, or (z) to consent to the entry of any judgment that does
not include as a term thereof a full dismissal of the litigation or
proceeding with prejudice. An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel in any one jurisdiction for
all parties indemnified by such indemnifying party with respect to such
claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other
of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels;
(d) if for any reason the rights of indemnification provided for in
paragraphs (a) and (b) of this Section 6.7 are unavailable to an
indemnified party as contemplated by such paragraphs (a) and (b), then the
indemnifying party in lieu of indemnification shall contribute to the
amount paid or payable by the indemnified party (which, subject to the
limitation provided in paragraph (c) next above, shall include legal fees
and expenses paid) as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying
party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations;
(e) the Company and the Shareholders agree that it would not be just and
equitable if contribution pursuant to paragraph (d) next above were
determined by pro rata allocation or other method of allocation which does
not take account of equitable considerations. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any Person not guilty of such
misrepresentation. The obligations of the holders of Shares to contribute
pursuant to paragraph 6.7(d) are several and not joint;
(f) if indemnification is available under this Section 6.7, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in paragraphs (a) and (b) hereof without regard to (x) the
relative fault of the indemnifying party or indemnified party or (y) any
other equitable considerations.
6.8 Rule 144. Once the first registration statement filed by the Company
under the Act (other than any registration statement on Form S-4 or S-8 or any
form substituting therefor, or in connection with the Employee Stock Option
Plan or to register shares primarily or exclusively for Transfer upon exercise
of options pursuant to this Agreement or the Terms and Conditions or in
connection therewith or for an offering of less than 5% of the common stock
equity of the Company) has become effective, the Company will file the reports
required to be filed by it pursuant to the Act and the Exchange Act, and the
rules and regulations adopted by the Commission thereunder, and will take such
further actions as any Shareholder may reasonably request, all to the extent
required from time to time to enable such Shareholder (subject, however, to the
applicable provisions, if any, of Article II hereof) to effect sales of Shares
without registration under the Act within the limitations of the exemption
provided by Rule 144, if applicable to the sale of Shares, or any similar rule
or regulation hereafter adopted by the Commission. At any reasonable time and
upon request of a Shareholder, the Company will deliver to that Shareholder a
written statement as to whether it has complied
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with such informational requirements. Notwithstanding the foregoing, the
Company may deregister any class of its equity securities under Section 12 of
the Exchange Act or suspend its duty to file reports with respect to any class
of its securities pursuant to Section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the provisions of the Exchange Act and the rules
and regulations thereunder.
6.9 Participation in Underwritten Registrations. No Shareholder may
participate in any underwritten Registration hereunder unless such Shareholder
has:
(a) agreed to sell its Shares on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to select the
underwriter pursuant to Sections 6.1 and 6.2 above; and
(b) accurately completed in a timely manner and executed all
questionnaires, powers of attorney, underwriting agreements and other
documents customarily required under the terms of such underwriting
arrangements.
6.10 Other Registration Rights. Except as granted herein to the Shareholders,
the Company will not grant any Person (including the Shareholders) any demand
or piggyback registration rights with respect to the shares of common stock of
the Company (or securities convertible into or exchangeable for, or options to
purchase, shares of common stock of the Company), other than piggyback
registration rights that are not inconsistent with the terms of this Article
VI. Any right to prior or pro rata inclusion in a Registration Statement with
the Shares entitled to the benefits of this Article VI shall be deemed to be
inconsistent with the terms of this Article VI. Except as provided in Section
6.1(c), the Company shall not grant to any Person the right to piggyback on a
Demand Registration.
6.11 Amendments and Waivers. The provisions of this Article VI, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers of or consents to departures from the provisions hereof may not be
given, unless such amendment, modification, supplement, waiver or consent shall
have been approved by not less than 2/3 of the members of the Board of
Directors. Notwithstanding the foregoing:
(a) the provisions regarding Registrations, insofar as such provisions
affect the rights of GE Capital and the GE Capital Affiliates, may not be
amended, modified, supplemented, waived or departed from without the prior
written approval of GE Capital;
(b) the provisions regarding Registrations, insofar as such provisions
affect the rights of the Management Shareholders and Permitted Transferees,
may not be amended, modified, supplemented, waived or departed from without
the prior written approval of Management Shareholders and Permitted
Transferees holding at least a majority of the Shares then held by all
Management Shareholders and their Permitted Transferees;
(c) any amendment, modification, supplement, waiver or consent that
materially and adversely affects any Group differently from the other Group
shall require the prior written approval of the holders of at least a
majority of the Shares then held by all members of the Group so affected;
(d) an amendment, modification, supplement, waiver or consent to
departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of holders of Shares whose Shares are being sold
pursuant to a Registration Statement, that relates to the Shares being so
sold, and that does not directly or indirectly affect the rights of the
other holders of Shares or Shares not being so sold, may be given by the
holders of a majority of the Shares being sold by such Shareholders; and
(e) no amendment, modification, supplement, waiver or consent to the
departure from its terms with respect to Section 6.7 shall be effective
with respect to any Registration against any holder of Shares who
participated in such Registration and is entitled to its protection unless
consented to in writing by such holder.
6.12 Inclusion of Vested Shares. Notwithstanding any provision of this
Article VI to the contrary, only Shares owned by a Management Shareholder or
Permitted Transferee which are Vested Shares may be included in any
Registration pursuant to the provisions of this Article VI.
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6.13 Exception. Notwithstanding anything to the contrary contained in a
separate section of this Agreement, the provisions of this Article VI shall not
inure to the benefit of or be applicable to any Management Shareholder who (a)
first became party hereto after June 15, 1991 and (b) at the time he seeks to
assert any rights hereunder owns less than 10,000 Shares. For purposes of the
foregoing calculations, Plan Shares, whether or not subject to this Agreement,
are included. Notwithstanding anything contained herein or in the Terms and
Conditions to the contrary, Plan Shares, whether subject to this Agreement or
the Terms and Conditions, held by a Management Shareholder or a Management
Shareholder's Permitted Transferees shall be treated as Shares held by such
Management Shareholder or by such Management Shareholder's Permitted
Transferee, as the case may be, for all purposes of this Article VI.
ARTICLE VII
Restrictive Covenants
7.1 Restrictive Covenants. In consideration of the issuance of Shares,
Options or Purchase Rights to him, as the case may be, each Management
Shareholder who is an employee of the Ward Group individually covenants and
agrees that:
(a) during the time that he is employed by a member of the Ward Group and
for a period of three years following the termination of his employment by
the Ward Group for any reason whatsoever other than discharge without Cause
(or, in the case of Brennan, during the period commencing on the date
hereof and ending on the first to occur of (i) the fifth anniversary of the
date hereof, and (ii) the date, if any, on which his employment with the
Ward Group has been terminated by the Ward Group without Cause), he shall
not directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, any
Competing Business in any of the states of the United States or any foreign
countries in which any member of the Ward Group was so engaged during the
period of his employment and continues to be so engaged at the time of the
complained-of act; provided, however, that the Board of Directors, by the
affirmative vote of not less than 2/3 of its members, may waive the
foregoing provision on behalf of the Company; provided, further, that the
foregoing shall not restrict the Management Shareholder's passive ownership
of shares of stock of a Person which is engaged in a Competing Business, as
long as such shares are listed on a national securities exchange or traded
in the over-the-counter market, such shares are held for investment
purposes only, and the Management Shareholder does not own more than 2% of
the outstanding shares of stock of such Person; provided, further, that a
former Management Shareholder who has become employed by a Person which was
not engaged in a Competing Business at the time his employment with such
Person commenced shall not be deemed to have become engaged in a Competing
Business by virtue of such Person's having acquired a business which is a
Competing Business after the time such Management Shareholder's employment
with such Person commenced, as long as (x) the Competing Business is not a
substantial part of the acquired business, (y) the former Management
Shareholder is not involved in the affairs of such acquired business and is
not an officer or director of such Person, and (z) the former Management
Shareholder is not the owner of 2% or more of the voting securities of such
Person;
(b) during the time that he is employed by the Ward Group, and thereafter
following the termination of his employment by the Ward Group for any
reason whatsoever, he will not divulge to persons not employed by the Ward
Group or use for his own benefit or the benefit of Persons not employed by
the Ward Group, any Confidential Information.
7.2 Limitations on Restrictive Covenants. For the purposes of Section 7.1(b):
(a) information which is at any time Confidential Information shall cease
to be such, and each Management Shareholder shall thereafter be under no
obligations with respect thereto, at such time that:
(i) it shall be disclosed by the Ward Group to the public; or
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(ii) it shall become known by the public other than by reason of the
disclosure thereof in violation of applicable confidentiality
agreements; and
(b) notwithstanding the provisions thereof, nothing contained therein
shall be construed to prohibit any Management Shareholder from making any
disclosure of information, either to his legal counsel in connection with
the defense of any claim, under this Agreement or otherwise, made by any
member of the Ward Group, or in connection with the enforcement of any
right, under this Agreement or otherwise, existing in favor of the
Management Shareholder against any member of the Ward Group, or to any
governmental agency to the extent that the Management Shareholder is
required by law to do so.
7.3 Return of Documents. Promptly on the termination of his employment with
the Ward Group for any reason, each Management Shareholder (or in the event of
his death, his personal representative) shall return to the Company any and all
copies (whether prepared by himself or by any member of the Ward Group), of
books, records, notes, materials, memoranda and other data pertaining to
Confidential Information, which are in his possession or control at the time of
termination of employment. Each Management Shareholder acknowledges that he
does not have, nor can he acquire, any property rights or claims to any of such
materials or the underlying data.
7.4 Cooperation. At the request of any member of the Ward Group made at any
time or from time to time hereafter, each Management Shareholder, or in the
event of his death, his personal representative, shall make, execute and
deliver all applications, papers, assignments, conveyances, instruments or
other documents and shall perform or cause to be performed such other lawful
acts as any member of the Ward Group may deem necessary or desirable to
implement any of the provisions of this Article VII, and he shall give
testimony and cooperate with the Ward Group in any controversy or legal
proceedings involving any member of the Ward Group. The applicable member of
the Ward Group shall reimburse the Management Shareholder for his reasonable
expenses which are incurred in connection with the giving of any such
testimony.
7.5 Enforcement. Each Management Shareholder agrees and acknowledges that his
violation or breach of the covenants contained in this Article VII shall cause
the Company irreparable injury and, in addition to any other right or remedy
available to the Company at law or in equity, the Company shall be entitled to
enforcement by court injunction. Notwithstanding the foregoing sentence,
nothing herein shall be construed as prohibiting the Company from also pursuing
any other rights, remedies or defenses, for such breach or threatened breach
including recovering damages and attorney's fees. In addition to the foregoing,
in the event of a breach or violation of this Article VII by a former Type 2
Management Shareholder which occurs after the Company and/or the Designated
Management Optionees have purchased the Shareholder's Shares pursuant to
Article III, to the extent that the Purchase Price of the Shares purchased
exceeds the Purchase Price which would have been paid if his employment with
the Ward Group had been terminated for Cause by reason of a violation of
Section 7.1, the Purchase Price shall be reduced to such latter amount, and if
at the time the Purchase Price is so reduced the Management Shareholder and his
Permitted Transferees shall have received payments on account of the Purchase
Price which, in the aggregate, exceed the amount to which they would have been
entitled by virtue of such reduction, they shall forthwith pay the difference
to the purchasers of such Shares. The election of any remedy shall not be
construed as a waiver on the part of the Company of any rights it might
otherwise have at law or in equity. Said rights and remedies shall be
cumulative.
7.6 Survival; Waiver of Offset. The provisions of this Article VII shall
survive any termination of this Agreement and shall run and inure to the
benefit of the Company, its successors and assigns. Each section of this
Article VII shall be construed as an agreement independent of any other
provision of this Agreement; and the existence of any claim or cause of action
of any Management Shareholder against any member of the Ward Group, whether
predicated or based upon this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of this Article VII.
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7.7 Jurisdiction. Each Management Shareholder hereby consents to the personal
jurisdiction of the Circuit Court of Cook County, Illinois and to the United
States District Court for the Northern District of Illinois, Eastern Division,
for any legal proceedings instituted by the Company to enforce any of the
covenants or agreements of each Management Shareholder contained in this
Article VII, and waives any and all objections which he may have to venue or
the issuance of service of process in any such proceedings, or any claim of
forum non conveniens.
7.8 Construction. In the event any court shall finally hold that the time or
territory or any other provision of this Article VII constitutes an
unreasonable restriction against any Management Shareholder, each Management
Shareholder agrees that the provisions hereof shall not be rendered void, but
shall apply as to such time, territory, and other extent as such court may
judicially determine or indicate constitutes a reasonable restriction under the
circumstances involved.
7.9 Exception. Notwithstanding anything to the contrary contained in a
separate section of this Agreement, the restrictions contained in Section
7.1(a) do not apply to any Person who (i) if his Acquisition Date occurred on
or before June 15, 1991, at no time owned 5,000 or more Shares after taking
into account the split-up of the Company's common stock on April 2, 1990, or
(ii) if his Acquisition Date occurred after June 15, 1991, at no time owned
25,000 or more Shares. For purposes of the foregoing calculations, Plan Shares,
whether or not subject to this Agreement or the Terms and Conditions, are
included, and Plan Shares subject to purchase upon exercise of Options or
Purchase Rights, whether or not such Options or Purchase Rights are exercisable
and whether or not such Plan Shares, upon such purchase, would be subject to
this Agreement or the Terms and Conditions, are included.
ARTICLE VIII
General Matters
8.1 Legend on Certificates. All certificates evidencing Shares (other than
certificates of beneficial interest issued by the Voting Trustee under a Voting
Trust Agreement and Shares purchased in a sale registered pursuant to an
effective registration statement) shall bear the following legend:
"The sale, transfer and encumbrance of the shares represented by
this Certificate are subject to a certain Stockholders Agreement
among the corporation and its shareholders, dated as of June 17,
1988. A copy of said Agreement is on file in the office of the
Secretary of the corporation. No sale or other transfer of the
shares represented by this Certificate may be effected except
pursuant to the terms of said Agreement. In addition, the shares
represented by this Certificate have not been registered under the
Securities Act of 1933, as amended. The shares represented by this
Certificate may not be sold or transferred in the absence of an
effective Registration Statement for the shares under the Securities
Act of 1933 or pursuant to an applicable exemption from
registration. In connection with any proposed sale or transfer of
the shares pursuant to an exemption from registration, the holder of
the shares represented by this Certificate may be required to
deliver to the corporation an opinion of counsel satisfactory to the
corporation, or the corporation may require that it shall have
received an opinion of its counsel, that registration under said Act
is not required. In addition, the right to vote the shares
represented by this certificate is restricted in the manner provided
in said Agreement. The corporation will furnish without charge to
each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special
rights of each class of stock or series thereof authorized to be
issued by the corporation and the qualifications, limitations or
restrictions of such preferences and/or rights."
All certificates evidencing Shares purchased in a sale registered pursuant to
an effective registration statement (other than certificates of beneficial
ownership issued by the Voting Trustee under a Voting Trust
51
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Agreement) which Shares, after such purchase still constitute Shares hereunder,
shall bear the following legend:
"The sale, transfer and encumbrance of the shares represented by
this Certificate are subject to a certain Stockholders Agreement
among the corporation and its shareholders, dated as of June 17,
1988. A copy of said Agreement is on file in the office of the
Secretary of the corporation. No sale or other transfer of the
shares represented by this Certificate may be effected except
pursuant to the terms of said Agreement. In addition, the right to
vote the shares represented by this certificate is restricted in the
manner provided in said Agreement. The corporation will furnish
without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof
authorized to be issued by the corporation and the qualifications,
limitations or restrictions of such preferences and/or rights."
Upon termination of this Agreement, certificates for Shares (other than
certificates of beneficial interest issued by the Voting Trustee pursuant to a
Voting Trust Agreement) may be surrendered to the Company in exchange for new
certificates without the foregoing legend, but, if necessary, said new
certificates shall bear that portion of the foregoing legend which relates to
compliance with the Act.
8.2 Termination and Amendment of Agreement. This Agreement shall be
terminated:
(a) by the written consent of the holders of not less than 66 2/3% of the
outstanding Shares of each class, acting separately as a class, subject to
the consent of the Company with the approval of its Board of Directors;
(b) upon a sale by the Ward Group of all or substantially all of their
aggregate assets (other than an intercompany sale within the Ward Group),
to a single purchaser or a related group of purchasers in a single
transaction or a related series of transactions;
(c) upon a merger or consolidation of the Company as a result of which
the Shareholders' percentage of ownership of the surviving or resulting
entity is less than 50% of their percentage of ownership of the Company
immediately prior to such merger or consolidation; or
(d) upon a sale, to a single purchaser or a related group of purchasers,
in a single transaction or a related series of transactions, of not less
than 66 2/3% of the outstanding shares of common stock of the Company of
each class.
Termination of this Agreement shall not affect any rights or obligations which
arose prior to termination, nor shall it terminate Article VI or Article VII.
Except as otherwise provided in Section 6.11 and in the following sentence,
this Agreement may be amended by the written consent of the holders of not less
than 66 2/3% of the outstanding Shares of each class, acting separately as a
class, subject to the consent of the Company with the approval of its Board of
Directors, but no such amendment shall adversely affect the method of valuation
of any Management Shareholder's Shares for the purposes of Article III without
his specific consent. From and after the date on which the number of members of
the Board of Directors which GE Capital has the right to designate pursuant to
Section 5.2 has been reduced pursuant to paragraph (b) or (c) thereof, Section
5.3, and the conforming provisions of the By-laws of the Company, may be
amended or terminated in whole or in part from time to time, upon the
affirmative vote or consent of (x) a majority of the members of the Board of
Directors and (y) the holders of a majority of the then outstanding Class A
Shares. With respect to Shares subject to a Voting Trust Agreement, the Voting
Trustee, and with respect to Shares not subject to a Voting Trust Agreement,
the Designator, shall have the power, as attorney in fact, to act for each of
the Management Shareholders and each Permitted Transferee in connection with
the termination, or any amendment or restatement, of this Agreement which has
been authorized by the Shareholders as provided in this Section 8.2. Said power
shall be deemed to be coupled with an interest and shall be irrevocable.
Without implication that the contrary would otherwise be true, "Shares" as used
in this Section 8.2 shall mean only Shares subject to the provisions of this
Agreement.
52
<PAGE>
8.3 Termination of Status as Management Shareholder. From and after the date
that a Management Shareholder ceases to own any Shares and ceases to hold any
Options or Purchase Rights, except for the provisions of Article VII, he shall
no longer be deemed to be a Management Shareholder for purposes of this
Agreement and all rights he may have hereunder (including, without limitation,
the right to exercise any option herein granted) shall terminate. For the
purposes of this Section 8.3, a Management Shareholder shall be deemed to own
all Shares owned by his Permitted Transferees.
8.4 Not an Employment Agreement. Nothing contained in this Agreement shall be
deemed or construed as creating any agreement of employment between a
Management Shareholder and any member of the Ward Group or a right of any
Management Shareholder to employment by any member of the Ward Group.
8.5 Indemnification. Concurrently herewith, the Company shall (and will cause
Ward to) enter into an indemnification agreement in the form of Exhibit A
hereto, with the Indemnitees.
8.6 Notices. All notices required hereunder shall be in writing and shall be
deemed served when delivered personally to the person for whom intended or sent
by confirmed facsimile, or two days after deposit in the United States Mail,
certified mail, return receipt requested, addressed to the persons for whom
intended at the following respective addresses:
The Company:
Montgomery Ward Plaza
Chicago, IL 60671-0042
Attention: Chairman and Chief Executive Officer
Any Management Shareholder, Permitted Transferee or GE Capital
Affiliate, as the case may be: at the last known address of said
Management Shareholder, Permitted Transferee or GE Capital Affiliate,
as the case may be, as disclosed by the books and records of the
Company;
GE Capital:
260 Long Ridge Road
Stamford, CT 06902
Attention: General Manager, Corporate Finance Group
with a copy to:
Associate General Counsel, Corporate Finance Group at the same address
and/or to such other persons and/or at such other addresses as may be
designated by written notice served in accordance with the provisions hereof.
8.7 Miscellaneous. The use of the singular or plural or masculine, feminine
or neuter gender shall not be given an exclusionary meaning and, where
applicable, shall be intended to include the appropriate number or gender, as
the case may be.
8.8 Counterparts. This Agreement may be executed in counterparts. Each of
such counterparts shall be deemed to be an original and all of such
counterparts, when taken together, shall constitute a single instrument.
8.9 Descriptive Headings. Title headings are for reference purposes only and
shall have no interpretative effect.
8.10 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. Any amendments
to this Agreement must be made in writing and duly
53
<PAGE>
executed by each of the parties entitled to adopt said amendment or by an
authorized representative or agent of each such party, all as provided in
Section 8.2.
8.11 Waivers. No action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as waiver of any preceding or succeeding breach and no failure by any
party to exercise any right or privilege hereunder shall be deemed a waiver of
such party's rights or privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent time or times hereunder.
The preceding sentence shall not apply to the failure of a party to exercise a
specific option granted to that party pursuant to the terms of this Agreement
within the period of time provided herein. Any waiver shall be in writing,
signed by the waiving party.
8.12 Binding Effect; Enforcement. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their heirs, representatives,
successors and permitted assigns. Each Shareholder agrees and acknowledges that
its breach of any of the provisions contained in this Agreement would cause
irreparable injury and that monetary damages would be inadequate. Accordingly,
each Shareholder agrees that, in addition to all other legal rights and
remedies, the aggrieved party shall be entitled to specific performance of the
rights granted to it under this Agreement.
8.13 Applicable Law. This Agreement shall be governed as to validity,
construction and in all other respects by the internal laws of the State of
Delaware.
8.14 Severability. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
8.15 Resolution of Certain Ambiguities and Conflicts. In the event of any
ambiguity or conflict in this Agreement (i) with respect to whether any
particular Shares constitute Vested Shares, (ii) the Percentage of Vesting
applicable thereto, or (iii) the application of the provisions of Article III
to any particular Management Shareholder and his Permitted Transferees, the
ambiguity or conflict shall be resolved by the Designator in his sole
discretion.
8.16 Joinder by Brennan. In addition to executing this Agreement in his
individual capacity, Brennan (i) accepts his appointment herein as the
Designator, and (ii) in his capacity as Voting Trustee, agrees to vote all
Shares which are subject to a Voting Trust Agreement in the manner provided in
Article V.
8.17 Authority to Give Consents, Approvals, etc. Any votes, approvals,
waivers or consents of Shareholders whose Shares are subject to a Voting Trust
Agreement shall be made by the Voting Trustee, rather than the beneficial
owners of such Shares, except that for the purposes of Sections 6.11(d) and (e)
and Section 8.2(a), the beneficial owner of such Shares, rather than the Voting
Trustee, shall be the Person to give such approval, waiver or consent.
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
Montgomery Ward Holding Corp. f/k/a General Electric Capital Corporation
BFB Acquisition Corp.
By: _________________________________ By: _________________________________
Title ____________________________ Title ____________________________
------------------------------------------
Bernard F. Brennan
Type 1 Management Shareholder,
Designator and Voting Trustee
The undersigned hereby executes a counterpart of this Agreement, is hereby
made a party to this Agreement, and joins in and agrees to be bound by the
provisions of this Agreement as a (Type 1 Management Shareholder) (Type 2
Management Shareholder) (Permitted Transferee) (GE Capital Affiliate) (strike
three).
------------------------------------------
Signature
------------------------------------------
Printed name
------------------------------------------
Street address
------------------------------------------
City, state, zip code
55
<PAGE>
SCHEDULE A
AND
EXHIBIT A
INTENTIONALLY OMITTED
56
<PAGE>
EXHIBIT B
FORM OF NON-NEGOTIABLE SECURED PROMISSORY INSTALLMENT NOTE
$ , 19
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to
("Payee"), the principal sum of Dollars and Cents ($ ),
subject to Payee's continued compliance with the restrictive covenants set
forth in Article VII of the Stockholders' Agreement (as defined herein),
including without limitation, Sections 7.1, 7.3 and 7.5 thereof, in each case
to the extent applicable by their terms. The balance of principal from time to
time outstanding and unpaid hereunder shall bear interest from the date hereof
at the rate of % per annum. The balance of principal shall be payable in five
(5) equal annual installments of $ each on the first through fifth
anniversaries, both inclusive, of the Article III Closing Date (as defined in
that certain Stockholders' Agreement dated as of June 17, 1988, as heretofore
amended and restated, hereinafter referred to as the "Stockholders'
Agreement"), such that the first installment is due and payable on ,
19 , the second installment is due and payable on , 19 , the third
installment is due and payable on , 19 , the fourth installment is due
and payable on , 19 , and the final installment is due and payable on
, 19 . Accrued interest on the principal sum shall be paid at the times
above provided for payment of principal.
Payee has sold shares of Class A Common Stock (the "Shares") of
Montgomery Ward Holding Corp., a Delaware corporation (the "Company"),
represented by Voting Trust Certificates, to Maker pursuant to Article III of
the Stockholders' Agreement and the purchase price for such Shares has been
paid, in part, through delivery of this Note to Payee.
All payments on account of the indebtedness evidenced by this Note shall be
applied first to accrued and unpaid interest and the remainder to principal.
Payments shall be made to Payee at , or such other place as Payee may
from time to time designate in writing to Maker.
This Note is secured by a Pledge and Escrow Agreement of even date herewith
(the "Pledge Agreement") between Maker, as Pledgor thereunder, and Payee, as
Pledgee thereunder.
The unpaid principal balance may be prepaid, in whole or in part, at any time
from time to time, without penalty or premium and without notice to Payee. All
prepayments shall be applied against installments coming due in the inverse
order of their maturity.
The obligations hereunder are subordinated to all other indebtedness of Maker
to the extent provided in, and are subject to the provisions of, Article IV of
the Stockholders' Agreement.
It shall constitute an "Event of Default" hereunder: (a) if Maker shall fail
to pay any payment of principal or interest when due hereunder within thirty
(30) days from the date written notice from the Payee of such default is
received by Maker; provided, however, that the foregoing clause shall not apply
in the event that Maker does not make all or any portion of such payment in
accordance with Article IV of the Stockholders' Agreement, in which event Maker
shall provide notice that the limitations imposed by Article IV are in effect,
prior to the expiration of such thirty (30) day period, or (b) if an Event of
Default by Maker shall occur under the Pledge Agreement, as the same may be
amended from time to time.
If an Event of Default shall occur hereunder, Payee, at its option and
without notice to Maker, may declare the unpaid principal balance, together
with accrued interest thereon, immediately due and payable.
This Note is secured by, and entitled to the benefits of, the Pledge
Agreement, whereby Maker has pledged to Payee voting trust certificates
representing shares of Class A Common Stock (the "Collateral") of the Company
to secure Maker's obligations to Payee hereunder.
57
<PAGE>
No delay or omission on the part of Payee in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other right or remedy.
Maker hereby expressly waives presentment for payment, acceptance, notice of
dishonor, protest and notice of protest.
Maker represents and agrees that the indebtedness evidenced by this Note has
been incurred for business purposes and constitutes a business loan within the
meaning of 815 Illinois Compiled Statutes Section 205/4(1)(c).
Any notice given hereunder shall be in accordance with the notice provisions
provided under the Pledge Agreement and shall be deemed given when given in
accordance with those provisions.
This Note has been delivered at Chicago, Illinois and shall be governed by
and construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, Maker has caused this Note to be executed as of the day
and year first above written.
Maker:
Montgomery Ward Holding Corp.
By: _________________________________
Chief Financial Officer
58
<PAGE>
EXHIBIT 4(F)
MONTGOMERY WARD & CO., INCORPORATED
STOCK OWNERSHIP PLAN TERMS AND CONDITIONS
as amended through December 27, 1994
and as proposed to be amended and restated as of such date
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<C> <S> <C>
Definitions and Introductory Matters............................... 1
1.1 Adoption of Recitals............................................... 1
1.2 Definitions........................................................ 1
1.3 Transferability of Certain Shares.................................. 9
Duration of Certain Portions of Article II and Certain Portions of
1.4 Article III........................................................ 9
1.5 Duration of Certain Portions of Article V.......................... 9
Applicability of Terms and Conditions; Continuation of Terms and
1.6 Conditions......................................................... 9
1.7 Withholding........................................................ 10
1.8 Shortening or Lengthening of Option Periods........................ 10
1.9 Execution of Voting Trust Agreement................................ 10
ARTICLE II
Voluntary Transfers of Shares...................................... 11
2.1 General Effect of Terms and Conditions............................. 11
2.2 Certain Permitted Transfers of Shares.............................. 11
2.3 Certain Prohibited Transfers....................................... 12
2.4 Notice of Transfer of Shares....................................... 12
2.5 Form of Transfer Notice............................................ 12
2.6 Approval of Board of Directors..................................... 13
2.7 Options............................................................ 13
2.8 Transfer if Options Not Exercised.................................. 14
2.9 Exercise of Options for Less than All of the Shares................ 14
2.10 Closing of Exercise of Options..................................... 14
2.11 Effect of Shares in the Hands of Third-Party Transferee............ 14
2.12 Termination of GE Capital's Rights................................. 14
ARTICLE III
Purchases of Shares Upon Termination of Employment................. 14
3.1 Termination of Employment of Participant........................... 14
3.2 Death or Total Permanent Disability of a Participant............... 15
3.3 Death of Participant Following Termination of Employment........... 16
3.4 Notice of Death.................................................... 16
3.5 Purchase Price of Shares........................................... 16
3.6 Manner of Payment.................................................. 17
3.7 Notes and Security................................................. 17
3.8 Fair Market Value.................................................. 18
3.9 Closing............................................................ 20
3.10 Priorities......................................................... 21
3.11 Failure to Deliver Shares.......................................... 21
3.12 Resale of Shares................................................... 22
3.13 Modification of Options............................................ 22
3.14 Offset of Purchase Price........................................... 22
</TABLE>
<PAGE>
ARTICLE IV
<TABLE>
<C> <S> <C>
Certain Limitations on Purchases of Shares.......................... 22
Restrictions on the Company's Right and/or Obligation to Purchase
4.1 Shares.............................................................. 22
4.2 Definition of the Limitations....................................... 24
4.3 Cash Payments Limitation............................................ 24
ARTICLE V
Corporate Governance Matters........................................ 24
5.1 Voting of Shares Held by Participants............................... 24
5.2 Election of Directors............................................... 25
5.3 Recapitalization.................................................... 25
ARTICLE VI
Confidential Information............................................ 26
6.1 No Disclosure of Confidential Information........................... 26
6.2 Limitations on No Disclosure Covenant............................... 26
6.3 Return of Documents................................................. 26
6.4 Enforcement......................................................... 26
ARTICLE VII
General Matters..................................................... 27
7.1 Legend on Certificates.............................................. 27
7.2 Termination and Amendment of Terms and Conditions................... 27
7.3 Not an Employment Agreement; Termination of Status as a Participant. 28
7.4 Notices............................................................. 28
7.5 Miscellaneous....................................................... 28
7.6 Descriptive Headings................................................ 29
7.7 Waivers............................................................. 29
7.8 Binding Effect; Enforcement......................................... 29
7.9 Applicable Law...................................................... 29
7.10 Severability........................................................ 29
7.11 Resolution of Certain Ambiguities and Conflicts..................... 29
7.12 Authority to Give Consents, Approvals, etc.......................... 29
</TABLE>
ii
<PAGE>
MONTGOMERY WARD & CO., INCORPORATED STOCK OWNERSHIP PLAN
TERMS AND CONDITIONS
AS AMENDED AND RESTATED
RECITALS:
A. Montgomery Ward Holding Corp., a Delaware corporation ("Company"), owns
all of the outstanding stock of Montgomery Ward & Co., Incorporated, an
Illinois corporation ("Ward").
B. The Company currently has an authorized capitalization of 25,000,000
shares of Class A Common Stock, Series 1, par value $.01 per share; 5,412,000
shares of Class A Common Stock, Series 2, par value $.01 per share; 2,400,000
shares of Class A Common Stock, Series 3, par value $.01 per share; 25,000,000
shares of Class B Common Stock, par value $.01 per share; and 750 shares of
Senior Preferred Stock, par value $1.00 per share.
C. The Company has adopted, for the benefit of its employees and the
employees of Ward and its subsidiaries, a stock ownership plan known as the
Montgomery Ward & Co., Incorporated Stock Ownership Plan ("Plan").
D. The Company's authorized common stock consists of Class A Common Stock,
Series 1 ("Series 1 Shares"), Class A Common Stock, Series 2 ("Series 2
Shares"), and Class A Common Stock, Series 3 ("Series 3 Shares"), of the
Company (the Series 1 Shares, Series 2 Shares and Series 3 Shares being
hereinafter collectively referred to as "Class A Shares") and shares of Class B
Common Stock of the Company ("Class B Shares").
E. The parties desire to set forth certain restrictions with respect to their
ownership of shares of the common stock of the Company, certain options and
obligations to purchase such shares and certain matters relating to corporate
governance of the Company, all as herein set forth.
F. Except as otherwise provided herein, all of the Awards and grants of
Purchase Rights or Options made under the Plan are subject to the following
Terms and Conditions and each Participant shall be required to agree to execute
a counterpart hereof prior to or concurrently with receipt of his or her Award,
or exercise of a Purchase Right or Option.
AGREEMENTS:
NOW, THEREFORE, the undersigned Participant hereby agrees as follows:
ARTICLE I
Definitions and Introductory Matters
1.1 Adoption of Recitals. The undersigned hereby adopts the foregoing
Recitals and agrees and affirms that the construction of these Terms and
Conditions will be guided thereby.
1.2 Definitions. For the purposes hereof:
(a) "Acquisition Price" shall mean the price paid to the Company for a
Share (as herein defined) purchased from the Company and $.01 per Share for
Shares received as Awards (in each case as adjusted by the Company on an
equitable basis for stock dividends, stock splits, reclassifications and
like actions);
(b) "Act" shall mean the Securities Act of 1933, as amended from time to
time;
(c) "Adjustment Period" shall have the meaning set forth in Section
3.8(a)(ii);
<PAGE>
(d) Intentionally omitted;
(e) "Article III Closing" and "Article III Closing Date" shall have the
meanings set forth in Section 3.9;
(f) "Average Closing Price" shall have the meaning set forth in Section
3.8(b);
(g) "Award" shall mean an award of Shares without cash consideration
pursuant to the terms of the Plan;
(h) Intentionally omitted;
(i) "Board of Directors" shall mean the board of directors of the
Company;
(j) "Brennan" shall mean Bernard F. Brennan;
(k) "Cash Payments Limitation" shall have the meaning set forth in
Section 4.3;
(l) "Cause" shall mean any of the following with respect to a Participant
(as herein defined):
(i) the commission of any crime, whether or not involving any member
of the Ward Group (as herein defined), which constitutes a felony in
the jurisdiction involved;
(ii) the sale, use or possession on the premises of any member of the
Ward Group of a controlled substance whose sale, use or possession is
illegal in the manner used or possessed and in the jurisdiction
involved;
(iii) the repeated consumption of drugs or alcohol that interferes
with a Participant's ability to discharge his or her assigned
responsibilities;
(iv) an intentional violation of the provisions of Section 6.1 of
these Terms and Conditions;
(v) the intentional and repeated failure on the part of a Participant
to perform such duties as may be delegated to him or her and which are
commensurate with his or her employment position; or
(vi) the unlawful taking or misappropriation of any property
belonging to any member of the Ward Group or in which any member of the
Ward Group has an interest;
(m) "Class A Amount" shall mean a number of Class A Shares equal to the
Series 1 Amount (as herein defined) or, if less, the Outstanding Amount (as
herein defined);
(n) "Class A Shares" shall have the meaning set forth in Recital D;
(o) "Commission" shall mean the Securities and Exchange Commission;
(p) "Common Stock" shall, except as otherwise specifically provided
herein, mean the shares of common stock of the Company, without distinction
as to class or series, and shall include certificates of beneficial
interest issued by the Voting Trustee (as herein defined), pursuant to a
Voting Trust Agreement (as herein defined);
(q) "Company" shall mean Montgomery Ward Holding Corp., a Delaware
corporation;
(r) "Competing Business" shall mean any person or entity engaged, in any
area of the world, directly or indirectly, in any retail merchandising
business conducted from multiple retail locations, of a type engaged in by
any member of the Ward Group, or any business of the type engaged in by
Signature Financial Marketing, Inc. ("Signature") or any of its
subsidiaries (as long as Signature or such subsidiary is a member of the
Ward Group), other than the insurance business, as of the time of the
complained of act;
(s) "Confidential Information" shall mean competitive data, trade secrets
or confidential trade information in the possession of the Ward Group which
is not generally known to others and the confidentiality of which the Ward
Group has taken reasonable steps to protect, but does not include general
business knowledge acquired by a Participant;
(t) Intentionally omitted;
2
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(u) "Designated Management Optionees" shall mean those Management
Shareholders (as herein defined) or any member or members of their Families
(as herein defined) or Participants or any member or members of their
respective Families, who are designated in writing by the Designator (as
herein defined), with concurrent notice to the Company, as having the right
to exercise a specifically designated option to purchase a specifically
designated number of Shares pursuant to Article II or III. The options so
designated may not, in the aggregate, exceed the number of Shares which, at
the time of the designation, are subject to purchase pursuant to Article II
or Article III, but in making such designation, the Designator may
designate alternate Designated Management Optionees who shall have options
to purchase Shares if the Persons designated as primary Designated
Management Optionees do not exercise the designated options. The Designator
may designate a member of the Committee (as herein defined), or a member of
the Family of a member of the Committee, as a Designated Management
Optionee only as provided in the Stockholders' Agreement. Each designation
of a Designated Management Optionee shall be made in writing and delivered
by the Designator to the Designated Management Optionee and the Company. By
written notice delivered to a Designated Management Optionee, with
concurrent notice to the Company, the Designator may change or revoke the
designation of any Person as a Designated Management Optionee and/or the
designation of the number of Shares to be purchased, at any time prior to
exercise of the designated option for any reason or for no reason. In the
event one or more Designated Management Optionees are granted an option to
purchase Shares pursuant to Article III, and the Shares as to which such
option is exercisable are not Vested Shares in the hands of the Participant
(or his or her Permitted Transferees) whose Shares are subject to purchase
or sale under Article III, the Designator may, as part of the designation
of the identity of the Designated Management Optionee(s), designate that
all or any portion of such Shares shall be Vested Shares in the hands of
the Designated Management Optionee(s);
(v) "Designator" shall mean the person or the committee of three
Management Shareholders, as set forth below and as the case may be, which
has, among other powers, the power to designate the Designated Management
Optionees. Prior to the occurrence of an Event (as defined below) for all
purposes other than designating (and in connection with the designation of)
Designated Management Optionees, the Designator shall be Brennan. At all
times for purposes of designating (and in connection with the designation
of) Designated Management Optionees, and from and after the occurrence of
an Event for all purposes (including, without limitation, designating (and
in connection with the designation of) Designated Management Optionees),
the Designator shall be such committee of three Management Shareholders
(the "Committee").
The Committee shall, except as provided below, be comprised of Brennan,
Edwin G. Pohlmann ("Pohlmann") and Myron Lieberman ("Lieberman"). Prior to
the occurrence of an Event, if any member of the Committee shall resign
from the Committee or cease to be a Qualified Management Shareholder (as
defined below), then such person shall cease to be a member of the
Committee and the remaining members of the Committee shall as soon as
practicable appoint a Qualified Management Shareholder as a member of the
Committee and thereby fill the vacancy on the Committee so created. From
and after the occurrence of an Event, the Committee shall be comprised of
Pohlmann, Spencer H. Heine ("Heine") and Lieberman (each of Pohlmann, Heine
and Lieberman being a "Continuing Member" and collectively being the
"Continuing Members") so long as each is a Qualified Management
Shareholder; provided, however, that at any time from and after the
occurrence of an Event (i) if one, but only one, Continuing Member has
resigned from the Committee or ceased to be a Qualified Management
Shareholder, then the Committee shall be comprised of the two remaining
Continuing Members who have not resigned from the Committee and are
Qualified Management Shareholders and the Largest Management Shareholder
(as defined below) (but the Second Largest Management Shareholder (as
defined below) if the Largest Management Shareholder is one of such
remaining Continuing Members, but the Third Largest Management Shareholder
(as defined below) if both the Largest Management Shareholder and the
Second Largest Management Shareholder are such remaining Continuing
Members), (ii) if each of two, but only two, of the Continuing Members has
either resigned from the Committee or ceased to be a Qualified Management
Shareholder, then the Committee shall be comprised
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of the remaining Continuing Member who has not resigned from the Committee
and is a Qualified Management Shareholder, the Largest Management
Shareholder and the Second Largest Management Shareholder (but the Second
Largest Management Shareholder and the Third Largest Management Shareholder
if the Largest Management Shareholder is such Continuing Member, but the
Largest Management Shareholder and the Third Largest Management Shareholder
if the Second Largest Management Shareholder is such Continuing Member),
and (iii) if each of the Continuing Members has either resigned from the
Committee or ceased to be a Qualified Management Shareholder, the Second
Largest Management Shareholder and the Third Largest Management
Shareholder.
In all cases, the Committee shall act by the vote of a majority of its
members; provided, however, that neither a member of the Committee nor a
member of his Family may be designated as a Designated Management Optionee
except upon the affirmative vote of all other members of the Committee.
A "Qualified Management Shareholder" is each of Brennan and Lieberman and
any other person who is a Management Shareholder and employed by a member
of the Ward Group. A person (including each of Brennan and Lieberman) shall
cease to be a Qualified Management Shareholder if (i) he ceases to be a
Management Shareholder, (ii) he dies, (iii) he is adjudicated incompetent,
(iv) in the case of Lieberman, he ceases to be a director of the Company or
(v) in the case of any Management Shareholder other than Brennan and
Lieberman, no member of the Ward Group employs such Management Shareholder.
An "Event" means that Brennan has resigned from the Committee or ceased
to be a Qualified Management Shareholder.
The "Largest Management Shareholder" shall be the Management Shareholder
(other than Brennan and any Management Shareholder who is not willing or
able to serve on the Committee) who, from time to time, is employed by a
member of the Ward Group and is the owner of the largest number of shares
of Common Stock as compared to each other Management Shareholder (other
than Brennan and any Management Shareholder who is not willing or able to
serve on the Committee) and who is willing and able to serve as a member of
the Committee.
The "Second Largest Management Shareholder" shall be the Management
Shareholder (other than Brennan, the Largest Management Shareholder and any
Management Shareholder who is not willing or able to serve on the
Committee) who, from time to time, is employed by a member of the Ward
Group and is the owner of the largest number of shares of Common Stock as
compared to each other Management Shareholder (other than Brennan, the
Largest Management Shareholder and any Management Shareholder who is not
willing or able to serve on the Committee) and who is willing and able to
serve on the Committee.
The "Third Largest Management Shareholder" shall be the Management
Shareholder (other than Brennan, the Largest Management Shareholder, the
Second Largest Management Shareholder and any Management Shareholder who is
not willing or able to serve on the Committee) who, from time to time, is
employed by a member of the Ward Group and is the owner of the largest
number of shares of Common Stock as compared to each other Management
Shareholder (other than Brennan, the Largest Management Shareholder, the
Second Largest Management Shareholder and any Management Shareholder who is
not willing or able to serve on the Committee) and who is willing and able
to serve on the Committee.
For the purposes of the foregoing provisions of this paragraph (v), a
Management Shareholder shall be deemed to own all shares of Common Stock
owned by his Permitted Transferees (as defined in the Stockholders'
Agreement). In the event that two or more persons own the same number of
shares of Common Stock so that each, in the absence of the other (or
others, as the case may be) would be the Largest Management Shareholder,
the Second Largest Management Shareholder or the Third Largest Management
Shareholder (as the case may be), then the remaining member (or members, as
the case may be) of the Committee from time to time shall determine which
of such person or persons shall be deemed to be the Largest Management
Shareholder, the Second Largest Management Shareholder or
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the Third Largest Management Shareholder, as the case may be, and, in the
event that there are no members of the Committee remaining to make such
determination or the remaining members of the Committee are unable to make
such determination in accordance with the Committee's majority voting
requirements as set forth above, then such determination shall be made on
the basis of seniority of service with the Ward Group.
(w) "Escrow Agent" shall have the meaning set forth in Section 3.11;
(x) "Fair Market Value per Share" shall have the meaning set forth in
Section 3.8;
(y) "Family" shall mean a spouse or descendant or ancestor of a
Participant, or a Management Shareholder, as the case may be, or a spouse
of a descendant or ancestor of a Participant or a Management Shareholder,
as the case may be, or a trustee of a trust or custodian of a custodianship
primarily for the benefit of one or more of the foregoing and/or a
Participant or a Management Shareholder, as the case may be;
(z) "First Period" shall have the meaning set forth in Section 2.3(c);
(z)(A) "Fully Diluted Non-Series 3 Outstanding Amount" shall mean the
Fully Diluted Outstanding Amount (as herein defined) less the sum of (x)
the number of Series 3 Shares outstanding on the date of determination plus
(y) the number of Series 3 Shares subject to purchase pursuant to Options
(as herein defined) or Purchase Rights (as herein defined) outstanding on
the date of determination (whether or not such Options or Purchase Rights
are exercisable on the applicable date of determination);
(z)(B) "Fully Diluted Outstanding Amount" shall mean the number of Class
A Shares of all series which are outstanding on the date of determination
plus the number of Class A Shares of all series subject to purchase
pursuant to Options or Purchase Rights outstanding on the date of
determination (whether or not such Options or Purchase Rights are
exercisable on the applicable date of determination);
(aa) "GE Capital" shall mean General Electric Capital Corporation, a New
York corporation;
(bb) "GE Capital Affiliate" shall mean any entity which, at the time of
the applicable determination, GE Capital controls, which controls GE
Capital, or which is under common control with GE Capital, but does not
include the Ward Group or any member thereof. For the purposes of the
preceding sentence, "control" means the power, direct or indirect, to
direct or cause the direction of the management and policies of a Person
through voting securities, contract or otherwise. Without limiting the
generality of the foregoing, as of the date hereof, Kidder, Peabody Group
Inc. is a GE Capital Affiliate;
(cc) "Limitations" shall have the meaning set forth in Section 4.2;
(dd) "Management Shareholder" shall mean any Person who, in contemplation
of that Person's acquisition of shares of Common Stock executed or executes
a counterpart of, or joined in or joins in and agreed or agrees to be bound
by, the Stockholders' Agreement as a Type 1 Management Shareholder or a
Type 2 Management Shareholder, as therein defined;
(ee) Intentionally omitted;
(ee)(A) "Non-Series 3 Outstanding Amount" shall mean the Outstanding
Amount less the number of Series 3 Shares outstanding on the date of
determination;
(ff) "Option" shall mean an option to acquire Shares granted pursuant to
the Plan;
(gg) "Originally Scheduled Article III Closing Date" shall have the
meaning set forth in Section 4.1(b);
(gg)(A) "Outstanding Amount" shall mean the number of Class A Shares of
all series which are outstanding on the date of determination;
(hh) "Participant" shall mean any person who has been either granted an
Award, provided a Purchase Right and/or granted an Option by the Company
pursuant to the Plan;
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(ii) "Period" shall have the meaning set forth in Section 2.3(c);
(jj) "Permanent Disability" shall mean the total permanent disability of
a Participant who is an employee of the Ward Group, as determined in
accordance with the published policies (in effect on the applicable date)
of the Ward Group with respect to the determination of total permanent
disability;
(jj)(A) "Permanently Disabled" shall mean, with respect to any
individual, that such person has suffered a Permanent Disability;
(kk) "Permitted Transferee" shall mean:
(i) a Person, other than a Participant, to whom Shares are
Transferred pursuant to and in compliance with the provisions of
Section 2.2(b); and
(ii) a member of the Family of a Participant who has acquired Shares
by virtue of having been designated a Designated Management Optionee by
the Designator.
Each reference herein to a Permitted Transferee of a particular
Participant shall mean (x) a Permitted Transferee owning Shares which that
Participant was the last Participant to own, and (y) a member of the Family
of that Participant who has acquired Shares in a manner set forth in
subparagraph (ii) above;
(ll) "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, unincorporated organization, association,
corporation, trust, institution, public benefit corporation, entity or
government;
(mm) "Plan" shall mean the Montgomery Ward & Co., Incorporated Stock
Ownership Plan, as amended and in effect from time to time;
(nn) "Post-Termination Death" shall have the meaning set forth in Section
3.3;
(oo) "Preferred Stock" shall mean all shares of Senior Preferred Stock,
par value $1.00 per share, of the Company;
(pp) "Public Offering Termination Date" shall mean the date, if any, on
which, as a result of the public sale or issuance of shares of Common Stock
pursuant to one or more registration statements under the Act (other than
pursuant to the Plan or pursuant to a registration statement to register
shares of Common Stock primarily or exclusively for Transfer (as
hereinafter defined) upon exercise of options pursuant to Article III of
the Stockholders' Agreement or the Terms and Conditions or in connection
therewith) and/or the public sale of shares of Common Stock under Rule 144
(as herein defined), 25% or more of the outstanding shares of voting common
stock of the Company consist of shares of voting common stock of the
Company which have been so issued or sold;
(qq) "Purchase Price" shall have the meaning set forth in Section 3.5;
(rr) "Purchase Right" shall mean an option to acquire Shares granted
pursuant to the terms of the Plan, identified as such and generally to be
exercised during a shorter period of time than other Options granted
pursuant to the terms of the Plan;
(ss) "Rule 144" shall mean Rule 144, as amended, promulgated by the
Commission under the Act;
(tt) "Second Period" shall have the meaning set forth in Section 2.3(c);
(tt)(A) "Series 1 Amount" shall mean the number twenty-five million
(25,000,000);
(uu) "Shareholder" shall mean each owner of Shares;
(vv) "Shares" shall mean all shares of Class A Common Stock of the
Company, and shall include certificates of beneficial interest issued by
the Voting Trustee (as herein defined) pursuant to a Voting Trust Agreement
(as herein defined); provided, however, that (and without implication that
a contrary result was intended, but by way of clarification):
(i) for the purpose of determining the number of Shares eligible to
vote or receive distributions, there shall be no duplication as between
Shares held by the Voting Trustee, on the one hand, and certificates of
beneficial interest issued by the Voting Trustee, on the other hand;
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(ii) where the right to vote Shares or execute consents is granted or
required pursuant to the provisions of these Terms and Conditions,
except as otherwise expressly provided in Section 7.12, the term
"Shares" shall not include certificates of beneficial interest issued
by the Voting Trustee under a Voting Trust Agreement; and
(iii) these Terms and Conditions shall be interpreted in accordance
with the foregoing proviso to the extent the context so requires;
provided, further, that for the purposes of Section 1.2(ddd), the final
sentence of Section 1.6, Article II, and Sections 3.1, 3.2, 3.3, 7.1,
7.2 and 7.3 of these Terms and Conditions, a share of common stock of
the Company shall cease to be a Share at such time as such Share:
a. has been effectively registered and disposed of in accordance
with a registration statement under the Act covering it (other than
a registration statement in connection with the Plan or Article III
of the Stockholders' Agreement or the Terms and Conditions); or
b. has been sold publicly pursuant to Rule 144 after the Public
Offering Termination Date;
and the legend referred to in Section 7.1 has been removed from the
certificate representing such Share, even if such share of common stock
is subsequently acquired by a Shareholder; and provided, further, that
a share of common stock shall cease to be a Share for the purposes of
Article II at such time as such Share has been sold in a foreclosure
sale by a Person to whom said Share has been pledged pursuant to
Section 3.7, or retained by such Person in lieu of foreclosure of such
pledge;
(vv)(A) "Stockholders' Agreement" shall mean the Stockholders' Agreement
dated June 17, 1988 between the Company and certain of its stockholders, as
amended and restated and in effect from time to time;
(vv)(B) "Terms and Conditions" shall mean these Terms and Conditions and
those certain Montgomery Ward & Co., Incorporated Stock Ownership Plan
Terms and Conditions agreed to by other participants in the Plan, as such
Terms and Conditions are amended from time to time.
(ww) "Third Party Offer" shall mean a bona fide written offer to purchase
Shares;
(xx) "Trading Period" shall have the meaning set forth in Section 3.8(b);
(yy) "Transfer" shall mean any transfer, sale, assignment, pledge,
encumbrance or other disposition of Shares, or, in the case of the Company,
any issuance or sale of Shares, irrespective of whether any of the
foregoing are effected voluntarily or involuntarily, by operation of law or
otherwise, or whether inter vivos or upon death;
(zz) "Transferee" shall mean a Person who has made a Third Party Offer or
a Person named in a Transfer Notice (as herein defined) to whom a
Transferor (as herein defined) desires to Transfer Shares without
consideration;
(aaa) "Transferor" shall mean a Person who shall propose to Transfer
Shares pursuant to Article II;
(bbb) "Transfer Notice" shall mean a written notice of a proposed
Transfer;
(ccc) Intentionally omitted;
(ccc)(A) "Vesting Date" shall have the meaning set forth in Section
1.2(ddd);
(ddd) "Vested Shares" shall mean that number of Shares owned by a
Participant and his or her Permitted Transferees, as a group, equal to the
amount determined, on the date of determination ("Vesting Date") by (i)
adding the aggregate number of Shares theretofore acquired by them as a
group (other than from each other) which, at the time of acquisition by any
member of the group were Vested Shares in the hands of the person who
transferred such Shares, plus (ii) the number of Shares determined by
multiplying the total number of Shares theretofore acquired by them as a
group (other than from each other) not described in (i) above, including
the number of Shares received by them as Awards or purchased pursuant to
exercise of Purchase Rights, but excluding the number of Shares acquired
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pursuant to exercise of Options, by the "Percentage of Vesting" (as herein
defined) applicable to each of such Shares in effect on the Vesting Date,
plus (iii) the lesser of (x) the number of Shares determined by multiplying
the total number of Shares purchased or subject to purchase by them under
outstanding or previously exercised Options (whether or not exercisable) by
the "Percentage of Vesting" applicable to each Share so purchased or
subject to purchase pursuant to an Option on the Vesting Date, and (y) the
number of Shares theretofore acquired by them pursuant to exercise of
Options, and (iv) subtracting from such sum the aggregate number of Vested
Shares theretofore disposed of by them, as a group (other than to or among
each other).
For purposes hereof, the "Percentage of Vesting" shall be the following
percentage: in the event of a Participant's death or Permanent Disability
while employed with the Ward Group, 100%; in the event a Participant's
employment with the Ward Group has been terminated for Cause, 0%; and
generally in all other cases, if the Vesting Date is before the first
anniversary of the Vesting Period Commencement Date (as herein defined),
0%; on or after the first anniversary and before the second anniversary of
the Vesting Period Commencement Date, 20%; on or after the second
anniversary and before the third anniversary of the Vesting Period
Commencement Date, 40%; on or after the third anniversary and before the
fourth anniversary of the Vesting Period Commencement Date, 60%; on or
after the fourth anniversary and before the fifth anniversary of the
Vesting Period Commencement Date, 80%; and on or after the fifth
anniversary of the Vesting Period Commencement Date, 100%. Notwithstanding
the foregoing, (i) unless otherwise determined in writing by the
Designator, Shares purchased upon exercise of an Option become Vested
Shares upon such purchase and (ii) Shares acquired pursuant to an Award or
Purchase Right shall become Vested Shares in accordance with any
alternative vesting schedule provided by the Designator in writing to the
Company and to the Participant (in each of which events the formula
determining the number of Vested Shares as set forth above in the first
paragraph of this subsection (ddd) shall be appropriately adjusted to take
account of the vesting of such Shares upon purchase pursuant to exercise of
Options or pursuant to such alternative vesting schedule, as the case may
be).
The number of Vested Shares and Shares which are not Vested Shares owned
in the aggregate by a Participant and his or her Permitted Transferees
shall be allocated among them proportionately to the numbers of Shares
owned by each of them.
In the following instances the Vesting Date shall be the following date:
(i) in the case of a Transfer of Shares pursuant to Article II (other
than Section 2.2(a) or 2.2(e) thereof), the date on which a Transfer
Notice is served;
(ii) in the case of a Transfer of Shares pursuant to Section 2.2(a),
the date of approval of the proposed Transfer by the Board of
Directors;
(iii) in the case of a sale of Shares permitted by Section 2.2(e),
the date the Participant or his or her Permitted Transferee Transferred
Shares in reliance on said Section 2.2(e);
(iv) in the case of a purchase of Shares pursuant to Article III, the
date of termination of the Participant's employment with the Ward Group
for any reason whatsoever;
Notwithstanding the foregoing provisions of this paragraph (ddd):
(v) in the case of a purchase of Shares pursuant to Article III from
a Participant whose Percentage of Vesting, in accordance with the
foregoing, is less than 100%, the Board of Directors, in its
discretion, may increase the Percentage of Vesting as determined in
accordance with the foregoing, but not in excess of 100%;
(vi) in the case of termination of employment of a Participant with
the Ward Group (other than for Cause), where not all Shares owned by
that Participant and his or her Permitted Transferees were purchased in
accordance with Section 3.1, on the Article III Closing Date those
Shares not so purchased which were not Vested Shares as of the date of
termination of employment shall become Vested Shares for all purposes
of these Terms and Conditions other than Section 3.3, and for the
purposes of Section 3.3 said Shares shall not thereafter become Vested
Shares;
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(vii) in connection with any issuance or sale of Shares by the
Company, the Company may designate all or any portion of such Shares as
Vested Shares;
(viii) at any time and from time to time, after June 23, 1988, upon
written notice delivered to the Company, the Designator may increase
the Percentage of Vesting otherwise applicable to a Participant and his
or her Permitted Transferees, but not in excess of 100%; and
(ix) on the Public Offering Termination Date, except for the purposes
of Section 3.3, all Shares which are not then Vested Shares shall
become Vested Shares;
(eee) "Vesting Period Commencement Date" shall mean (i) in the case of an
Award, the date of the grant of the Award; (ii) in the case of a Purchase
Right, the date of exercise of the Purchase Right; and (iii) in the case of
an Option, the date of grant of the Option;
(fff) "Voting Trust Agreement" shall mean each of that certain Voting
Trust Agreement, dated as of June 21, 1988, among Brennan and the other
individuals who are parties thereto (the "1988 Voting Trust Agreement"),
that certain Voting Trust Agreement dated as of October , 1994 among
Brennan, the Company and the individuals who are parties thereto (the "1994
Voting Trust Agreement"), as well as all agreements adopted hereafter which
have substantially similar provisions (without giving effect to time
periods) as the 1988 Voting Trust Agreement and as the 1994 Voting Trust
Agreement and to which any shares of common stock of the Company are
subject.
(ggg) "Voting Trust Certificates" shall mean certificates of beneficial
interest issued by the Voting Trustee in exchange for Shares deposited in a
Voting Trust;
(hhh) "Voting Trustee" shall mean the Person serving as voting trustee
under the applicable Voting Trust Agreement;
(iii) "Ward" shall mean Montgomery Ward & Co., Incorporated, an Illinois
corporation;
(jjj) "Ward Group" shall mean the Company and its direct and indirect
subsidiaries.
1.3 Transferability of Certain Shares. Shares issued by the Company pursuant
to a stock dividend, stock split, reclassification, or like action, or pursuant
to the exercise of a right granted by the Company to all its stockholders to
purchase shares of Common Stock on a proportionate basis, shall be Transferred
only, and for all purposes be treated, in the same manner as, and be subject to
the same options with respect to, the Shares which were split or reclassified
or with respect to which a stock dividend was paid or rights to purchase shares
on a proportionate basis were granted. Notwithstanding the definition of
"Shares" hereunder and without implication that such definition would require a
contrary result, in the event of a merger of the Company where these Terms and
Conditions do not terminate pursuant to Section 7.2(c), shares of stock and/or
securities convertible into shares of stock issued in exchange for Shares shall
thereafter be deemed to be Shares which are subject to the terms of these Terms
and Conditions.
1.4 Duration of Certain Portions of Article II and Certain Portions of
Article III. From and after the Public Offering Termination Date:
(a) the provisions of Article II shall cease to be in effect as to any
Participant; and
(b) the provisions of Section 3.2(a) shall terminate, and all references
in Sections 3.2(b) and (c) to the 90-day period referred to in Section
3.2(a) shall be eliminated from said Sections.
1.5 Duration of Certain Portions of Article V. Anything herein to the
contrary notwithstanding, the provisions of Article V hereof, to the extent
they constitute an agreement with respect to the manner in which Shares shall
be voted, shall be in effect only until June 17, 1998, unless sooner terminated
pursuant to other provisions contained herein.
1.6 Applicability of Terms and Conditions; Continuation of Terms and
Conditions. These Terms and Conditions shall not apply to Shares which are
subject to the Stockholders' Agreement in accordance with the terms thereof and
the Stockholders' Agreement shall govern such Shares. Except as contemplated
herein,
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Shares shall not be Transferred by any Participant or any of his or her
Permitted Transferees to any Person who is not a signatory to, or bound by the
provisions of, the Stockholders' Agreement unless that Person shall have
executed and delivered such documents as are deemed reasonably necessary by the
Company, in consultation with its counsel, to evidence such Person's acceptance
of, and agreement to be bound by, the Stockholders' Agreement.
1.7 Withholding. Each Participant shall pay, or make arrangements to pay, all
federal, state and local income taxes which may be assessed upon such
Participant in connection with his or her ownership of Shares, including,
without limitation, taxes which may be imposed in connection with the lapse or
release of any restrictions set forth herein with respect to the Shares. In any
case in which any member of the Ward Group is legally required to withhold such
taxes, such payment shall be made on or before the date such withholding is
required. In the event any such payment is not made when due and any member of
the Ward Group is legally required to withhold such taxes, then, to the extent
permitted by law, the Company shall have the right to do any of the following
in its sole discretion: (i) direct the applicable Voting Trustee to sell such
number of Shares subject to a Voting Trust Agreement which are beneficially
owned by the Participant as may be necessary in order that the net proceeds of
sale will equal the member of the Ward Group's withholding obligation (with
such Shares remaining subject to such Voting Trust Agreement), and pay such net
proceeds to such member of the Ward Group; (ii) deduct the amount required to
be withheld from funds otherwise due the Participant by the Ward Group
(including, without limitation, salaries and proceeds of the sale of Shares
sold to the Company pursuant to the provisions of these Terms and Conditions),
and pay the amount so deducted to such member of the Ward Group; or (iii)
pursue any other legal or equitable right or remedy.
1.8 Shortening or Lengthening of Option Periods. Whenever in Article II or
Article III the Company, a Designated Management Optionee or a Shareholder is
given an option to purchase or sell Shares which is exercisable during a given
period of time, if the Company, that Designated Management Optionee (or the
Designator, if no persons are to be designated as Designated Management
Optionees) or that Shareholder (as the case may be) chooses not to exercise
that option, the Company, that Designated Management Optionee (or the
Designator, if no persons are to be designated as Designated Management
Optionees) or that Shareholder (as the case may be) may deliver written notice
of that fact to the Company (in the case where a Designated Management Optionee
(or the Designator, if no persons are to be designated as Designated Management
Optionees) or a Shareholder is relinquishing an option) and the Designator
(except in the case no persons are to be designated as Designated Management
Optionees). In such event, the applicable option period shall be deemed to have
ended with respect to the Company, such Designated Management Optionee (or
Designated Management Optionees, as the case may be) or such Shareholder (as
the case may be) on the date on which such notice is delivered. Any period
during which an option to purchase is exercisable may be extended by agreement
of the party subject thereto. In such event, options to purchase which are
subsequent to the option with respect to which the period is extended shall
become exercisable on the date upon which the immediately preceding option
expires.
1.9 Execution of Voting Trust Agreement. At any time in which a Voting Trust
Agreement is in effect, as a condition to any Award, grant of a Purchase Right,
or exercise of an Option, the Participant who is (or in connection therewith
becomes) subject to these Terms and Conditions shall be required to execute a
counterpart of a Voting Trust Agreement designated by the Designator, transfer
the Shares to be acquired to the applicable Voting Trustee in exchange for
certificates of beneficial interest representing a like number of Shares, and
take such other steps as may be necessary in order that the applicable Voting
Trustee shall have the sole voting power with respect to the Shares acquired by
such Participant.
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ARTICLE II
Voluntary Transfers of Shares
2.1 General Effect of Terms and Conditions. Unless a Transfer of Shares by a
Participant or his or her Permitted Transferees or by a Transferee is made in
accordance with the provisions hereof, it shall not be valid or have any force
or effect.
2.2 Certain Permitted Transfers of Shares. Anything contained herein to the
contrary notwithstanding, Shares may be Transferred:
(a) with the prior approval of the Board of Directors, by the affirmative
vote of not less than 2/3 of its members, either subject to these Terms and
Conditions or otherwise as the Board of Directors shall determine;
(b) (i) by Participant to any member of his or her Family;
(ii) by a member of the Family of a Participant to any other member
of the Family of that Participant or to that Participant;
(iii) to the personal representative of a Participant or Permitted
Transferee who is deceased or adjudicated incompetent;
(iv) subject to the provisions of Section 3.2 or 3.3 (as the case may
be), by the personal representative of a Participant or Permitted
Transferee who is deceased or adjudicated incompetent to any member of
said Participant's Family; and
(v) upon termination of a trust or custodianship which is a Permitted
Transferee, by the trustee of such trust or custodian of such
custodianship to the person or persons who, in accordance with the
provisions of said trust or custodianship, are entitled to receive the
Shares held in trust or custody;
(c) pursuant to Article III;
(d) by a Participant or by any of his or her Permitted Transferees to
Brennan;
(e) provided that such Shares are not subject to a Voting Trust
Agreement, and provided that Section 2.3 (except paragraph (d) thereof) has
been complied with as if the Transfer was being made pursuant to Sections
2.4 through 2.10, both inclusive, (i) pursuant to Rule 144 or (ii) with
respect to Shares which are not "restricted securities" within the meaning
of Rule 144, pursuant to Rule 144 or any other applicable exemption under
the Act;
(f) by a Participant to a Pledgee, as collateral security for a loan to
the Participant pursuant to the line of credit program which has been
established with certain banks under which loans are available to certain
associates of the Company, which loans are to be secured by an amount of
such associate's Shares and which loans the Company has agreed to
repurchase in the event any individual should default on his or her
repayment obligations with respect thereto (the "Line of Credit Program")
and by the Pledgee to the Company or any other member of the Ward Group
pursuant to such Line of Credit Program; provided, however, that in
connection with the exercise of any rights under such pledge (other than a
transfer to the Company or any other member of the Ward Group), including,
without limitation, any foreclosure thereof, the Pledgee (other than the
Company as assignee of or successor to the rights of a Pledgee) shall be
obligated to comply with Sections 2.4 through 2.10, both inclusive (it
being understood that following the pledge of Shares to a Pledgee, the
character of such Shares as Vested Shares or otherwise shall be determined
as if such pledge had not occurred, and for the purposes of Section
1.2(ddd), a Transfer of such Shares by the Pledgee (other than to the
pledgor or the Company or any other member of the Ward Group pursuant to
such Line of Credit Program) shall be deemed to be a Transfer of such
Shares by the pledgor); provided further that, except as otherwise provided
in this subparagraph (f), the Shares subject to such pledge shall remain in
all respects subject to the terms and provisions of these Terms and
Conditions, including, without limitation, the put and call rights set
forth
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in Article III of these Terms and Conditions and the rights of refusal set
forth in Article II of these Terms and Conditions. The Company may resell
to any person any Shares which the Company has acquired as an assignee of,
or a successor to the rights of, a Pledgee or otherwise pursuant to the
Line of Credit Program, on such terms as the Board of Directors shall
determine, and such sale shall not be subject to any of the restrictions or
rights of first refusal set forth in Article II of this Agreement; and
(g) by a Management Shareholder or a Permitted Transferee to the Company
as collateral security for a loan to the Management Shareholder or his or
her Permitted Transferee solely to finance the acquisition of Shares under
the terms of the Montgomery Ward Holding Corp. Loan Program or any such
successor program or any program with substantially the same terms (the
"MWHC Loan Program"). The Company may resell to any person any Shares which
the Company has acquired as a pledgee or otherwise pursuant to the MWHC
Loan Program, on such terms as the Board of Directors shall determine, and
such sale shall not be subject to any of the restrictions or rights of
first refusal set forth in Article II of this Agreement.
Regardless of the party to whom a Transfer of Shares is made pursuant to this
Section 2.2, the Shares so Transferred shall thereafter continue to be subject
to the terms, provisions and conditions of these Terms and Conditions;
provided, however, that (x) if the Board of Directors has so determined, Shares
Transferred pursuant to paragraph (a) hereof, and (y) Shares Transferred
pursuant to paragraph (e) hereof, shall not be subject to the terms, provisions
and conditions of these Terms and Conditions.
2.3 Certain Prohibited Transfers. Without the prior written approval of the
Board of Directors the following Transfers of Shares are prohibited:
(a) no Participant or Permitted Transferee may Transfer Shares prior to
the first to occur of (i) the third anniversary of the applicable Vesting
Period Commencement Date and (ii) the Public Offering Termination Date;
(b) no Participant or Permitted Transferee may Transfer Shares which are
not Vested Shares or which are pledged to a Pledgee pursuant to the Line of
Credit Program or to the Company pursuant to the MWHC Loan Program;
(c) during the 12-month period (the "First Period") beginning on the
first to occur of the third anniversary of the applicable Vesting Period
Commencement Date and the Public Offering Termination Date, and during the
12-month period immediately following the First Period (the "Second
Period," the First Period and the Second Period being referred to generally
as a "Period"), neither a Participant nor any Permitted Transferee may
Transfer Shares to the extent such Transfer would result in the Transfer of
more than 33 1/3% for the First Period and 50% for the Second Period of the
Vested Shares collectively owned by the Participant and all of his or her
Permitted Transferees at the beginning of the applicable Period; and
(d) no Transferor may Transfer Shares unless he or she has received a
Third Party Offer.
2.4 Notice of Transfer of Shares. Even though the requirements of Section 2.3
shall have been met, no Shares shall be Transferred by a Transferor, except as
may be required or permitted pursuant to the provisions of Section 2.2, Article
III or Article IV, unless the Transferor first serves a Transfer Notice upon
the Company, the Designator and GE Capital and complies with the remaining
provisions of this Article II.
2.5 Form of Transfer Notice. Each Transfer Notice shall specify:
(a) the number of Shares which the Transferor proposes to Transfer and
the consideration per Share to be received for said Transfer;
(b) the name, and business and residence addresses of the Transferee(s);
(c) all of the terms and conditions, including the terms and conditions
of payment, upon which the Transferor proposes to Transfer said Shares; and
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(d) the address of the Transferor to which notices of the exercise of the
options herein provided shall be sent.
The Transferor shall attach to the Transfer Notice a true and correct copy of
the Third Party Offer, and the information to be contained in the Transfer
Notice required by paragraphs (a) and (c) above shall be the corresponding
information as set forth in the Third Party Offer.
2.6 Approval of Board of Directors. The options set forth in Section 2.7
shall be exercisable, and a Transfer of Shares to a Transferee can be made,
only if the Board of Directors, within the 10-day period next following the
date of service of the Transfer Notice, shall approve the Transferee as a
prospective holder of Shares. Subject to the following sentence, the Board of
Directors shall not unreasonably withhold its approval of any Transferee, and
shall not withhold its approval if the Transferee is then a Management
Shareholder, GE Capital or a GE Capital Affiliate. However, the Board of
Directors may, in its sole discretion, withhold its approval of any Transferee
which is then engaged in a Competing Business. The Board of Directors shall be
conclusively deemed to have approved the Transferee unless, prior to the
expiration of the 10-day period, it shall notify the Transferor in writing of
its disapproval.
2.7 Options. Upon the service of a Transfer Notice, and provided that the
Transferee has been approved by the Board of Directors as set forth in Section
2.6, options to purchase the Shares described therein shall be created, and may
be exercised, as follows:
(a) the service of a Transfer Notice by a Transferor shall create:
(i) options in each of the Designated Management Optionees
(exercisable by service of written notice upon the Transferor, the
Designator, GE Capital and the Company within the 45-day period next
following the date of service of the Transfer Notice) to purchase all
or any portion of the Shares described in the Transfer Notice, at the
price and on the terms contained in the Transfer Notice;
(ii) an option in the Company (exercisable by service of written
notice upon the Transferor, the Designator and GE Capital within the
15-day period next following the date of expiration of the 45-day
period described in subparagraph (i) of this paragraph (a)) to purchase
all or any portion of the Shares described in the Transfer Notice which
the Designated Management Optionees did not elect to purchase, at the
price and on the terms contained in the Transfer Notice; and
(iii) an option in GE Capital (exercisable by service of written
notice upon the Transferor, the Designator and the Company within the
15-day period next following the date of expiration of the 15-day
period described in subparagraph (ii) of this paragraph (a)) to
purchase all or any portion of the Shares described in the Transfer
Notice which the Designated Management Optionees and the Company did
not elect to purchase, at the price and on the terms contained in the
Transfer Notice.
If the consideration desired to be received for a Transfer of Shares, as
set forth in the Transfer Notice, is other than cash to be paid at the
consummation of the Transfer or thereafter (that is, if the consideration
would constitute so-called "in kind" property), then any optionee
exercising its option under these Terms and Conditions to purchase Shares
may satisfy its payment obligations with respect to such purchase by making
cash payment(s) (in lieu of "in kind" transfer(s) of property) equal to the
fair market value of the property which would have been transferred in
kind. The determination of such fair market value shall be made, as of the
time the Transfer Notice with respect to the Transfer was served, by (x)
not less than 2/3 of the members of the Board of Directors in the good-
faith exercise of their reasonable discretion, or (y) a nationally
recognized investment banking firm retained by the Board of Directors. If
the Transferor is a member of the Board of Directors, he shall not vote on
the issue of whether the Company shall exercise its option to purchase the
Transferor's Shares.
(b) the service of a Transfer Notice by a Permitted Transferee shall
create an option in his, her or its (as the case may be) Participant
(exercisable by service of written notice upon the Transferor, the
Designator, the Company and GE Capital within the 30-day period next
following the date of service of the Transfer Notice) to purchase all or
any portion of the Shares described therein, at the price and on
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the terms therein contained. If said Participant does not exercise the
foregoing option with respect to all Shares described in the Transfer
Notice, the optionees described in paragraph (a) above shall have the
options to purchase the Shares with respect to which said Participant has
not exercised his or her foregoing option that would have been created if
said Participant had been the person desiring to Transfer the Shares and if
the Transfer Notice had been served on the last day of the 30-day period
during which said Participant could have exercised his or her option
pursuant to this paragraph (b).
2.8 Transfer if Options Not Exercised. If none of the options provided in
Section 2.7 are exercised, or if such options are exercised only in part, or if
such options are treated, pursuant to Section 2.9, as if not exercised, then,
during a period of 60 days beginning on the day following the date of
expiration of the last applicable option period, the Transferor may Transfer
all, but not less than all, Shares sought to be Transferred as to which such
options were not exercised (or treated, pursuant to Section 2.9, as if not
exercised), to the Transferee(s), at the price specified in the Transfer Notice
and on terms and conditions not less favorable to the Transferor than those
specified in the Transfer Notice. In the event said Shares are not so
Transferred, they shall remain subject in all respects to the terms hereof and
may not thereafter be Transferred except in compliance with all terms,
conditions and provisions hereof.
2.9 Exercise of Options for Less than All of the Shares. If options exercised
pursuant to Section 2.7 call for the purchase of less than all of the Shares
sought to be Transferred, then, at the election of the Transferor (exercised by
the service of written notice of such election upon the Company and each Person
exercising an option to purchase Shares within 10 days next following the
expiration of the last period in which such options may be exercised), the
exercise of all or any such options shall be deemed null and void and treated,
for purposes hereof, as if said options had not been exercised.
2.10 Closing of Exercise of Options. To the extent Shares are to be purchased
by Designated Management Optionees, the Company or GE Capital by reason of
their exercises of options under Section 2.7, the closing of all such purchases
shall take place, at the principal offices of the Company, on the 30th day next
following the date on which the last applicable option period expired.
2.11 Effect of Shares in the Hands of Third-Party Transferee. Shares which
are Transferred, pursuant to Section 2.8, to a Transferee who is not a
Participant, a Permitted Transferee or a party to the Stockholders' Agreement,
shall thereafter continue to be subject to all restrictions on Transfer and all
other agreements, provisions, terms and conditions which are contained herein,
and, without limiting the generality of the foregoing, the Transferee must
comply with:
(a) the provisions of Sections 2.4 through 2.10, both inclusive, if the
Transferee shall desire to Transfer any such Shares, as if the Transferee
was a Participant; and
(b) the voting agreement provisions of Article V, as if the Transferee
was a Participant.
2.12 Termination of GE Capital's Rights. From and after the date that GE
Capital and the GE Capital Affiliates cease to own, in the aggregate, at least
20% of the shares of Common Stock which GE Capital and the GE Capital
Affiliates purchased in June, 1988, all rights of GE Capital under Sections
2.7(a) (iii) and (b) of this Article II shall terminate.
ARTICLE III
Purchases of Shares Upon Termination of Employment
3.1 Termination of Employment of Participant. Upon the termination of a
Participant's employment with the Ward Group for any reason other than death or
Permanent Disability (including, without limitation, resignation or discharge
for or without Cause), the Company shall forthwith notify the Designator of
such termination, and:
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(a) each of the Designated Management Optionees shall have an option
(exercisable by service of written notice upon such Participant, each of
his or her Permitted Transferees, and the Designator, within the 45-day
period next following the date on which the Company has notified the
Designator that such Participant's employment has terminated), to purchase
all or any portion of the Shares owned by such Participant and each of his
or her Permitted Transferees at the time of such termination of employment;
and
(b) the Company shall have an option (exercisable by service of written
notice upon such Participant, each of his or her Permitted Transferees, and
the Designator, within the 30-day period next following the last day of the
45-day period referred to in paragraph (a)), to purchase all or any portion
of such Shares as to which the Designated Management Optionees did not
exercise their options to purchase pursuant to paragraph (a); and
(c) each of the Designated Management Optionees (it being expressly
understood and agreed that, without limiting the generality of anything
else contained herein, the Designated Management Optionees referred to in
this paragraph (c) may be different from the Designated Management
Optionees referred to in paragraph (a) next above) shall have an additional
option (exercisable by service of written notice upon such Participant,
each of his or her Permitted Transferees, and the Designator, within the
105-day period next following the date on which the Company has notified
the Designator that such participant's employment has terminated), to
purchase all or any portion of the Shares owned by such Participant and
each of his or her Permitted Transferees which were purchased upon exercise
of an Option or Purchase Right after termination of the Participant's
employment; and
(d) the Company shall have an option (exercisable by service of written
notice upon such Participant, each of his or her Permitted Transferees and
the Designator, with the 30-day period next following the last day of the
105-day period referred to in paragraph (c)), to purchase all or any
portion of the Shares subject to options created by such paragraph (c) as
to which the Designated Management Optionees did not exercise their options
to purchase pursuant to paragraph (c);
all in the manner, for the price and on the terms and conditions contained in
Sections 3.5 through 3.14, both inclusive, of this Article III.
3.2 Death or Total Permanent Disability of a Participant. Upon the death of a
Participant while such Participant is an employee of the Ward Group; or in the
event the employment of a Participant with the Ward Group shall be terminated
by reason of Permanent Disability:
(a) the personal representative of the deceased or Permanently Disabled
Participant or the Permanently Disabled Participant (as the case may be),
and each Permitted Transferee of the deceased or Permanently Disabled
Participant, shall each have the option (exercisable by written notice
delivered to the Company and the Designator not later than 90 days after
the date of death or the date of termination of the Participant's
employment with the Ward Group by reason of Permanent Disability, as the
case may be, of the Participant), to sell all or any portion of the Shares
then owned by such respective Shareholders in accordance with paragraph
(b);
(b) if the options described in paragraph (a) are exercised, the
Designated Management Optionees shall each have the option (exercisable by
written notice delivered to the Company and each Shareholder having an
option to sell Shares pursuant to paragraph (a), within the 30-day period
next following the expiration of the 90-day period described in paragraph
(a)) to purchase all or any portion of the Shares as to which the options
to sell described in paragraph (a) were exercised, and the Company shall
purchase the Shares as to which the options described in paragraph (a) to
sell were exercised which the Designated Management Optionees have not
exercised their options to purchase pursuant to this paragraph (b);
(c) if and to the extent the options described in paragraph (a) are not
exercised, the Designated Management Optionees shall have the option
(exercisable by written notice delivered to each Shareholder having an
option to sell Shares to the Company pursuant to paragraph (a) and the
Company within the
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30-day period next following the 90-day period referred to in paragraph
(a)), to purchase from such Shareholders all or any portion of the Shares
then owned by such Shareholders as to which they did not exercise their
respective options to sell as set forth in paragraph (a); and
(d) the Company shall have the option (exercisable by written notice to
each Shareholder having an option to sell Shares to the Company pursuant to
paragraph (a) within the 30-day period next following the expiration of the
30-day period referred to in paragraph (c)), to purchase from such
Shareholders all or any portion of the Shares then owned by such
Shareholders as to which they did not exercise their respective options to
sell as set forth in paragraph (a) and as to which the Designated
Management Optionees did not exercise their respective options to purchase
as set forth in paragraph (c);
all in the manner, for the price, and on the terms and subject to the
conditions contained in Sections 3.5 through 3.14, both inclusive, of this
Article III.
3.3 Death of Participant Following Termination of Employment. Upon the death
of a Participant following termination of the Participant's employment with the
Ward Group (a "Post-Termination Death"), in the case where that Participant and
his or her Permitted Transferees did not previously sell all Shares owned by
them, respectively, pursuant to Section 3.1 or Section 3.2:
(a) each of the Designated Management Optionees shall have an option
(exercisable by service of written notice upon such Participant, each of
his or her Permitted Transferees, and the Designator, within the 90-day
period next following the date on which the Company has notified the
Designator that such Participant has died), to purchase all or any portion
of the Shares owned by such Participant and each of his or her Permitted
Transferees; and
(b) the Company shall have an option (exercisable by service of written
notice upon such Participant's personal representative, each of such
Participant's Permitted Transferees, and the Designator, within the 30-day
period next following the last day of the 90-day period referred to in
paragraph (a)), to purchase all or any portion of the Shares as to which
the Designated Management Optionees did not exercise their options to
purchase pursuant to paragraph (a);
all in the manner, for the price and on the terms and conditions contained in
Sections 3.5 through 3.14, both inclusive, of this Article III.
3.4 Notice of Death. In order to effectuate the exercise of the options set
forth in Section 3.2 in the event of the death of a Participant, the personal
representative of the deceased Participant shall give written notice of such
Participant's death to the Company within 90 days after the date of such death,
regardless of whether such personal representative shall be entitled to
exercise any option granted to him or her pursuant to this Article III.
Forthwith following the receipt of such notice, the Company shall deliver a
copy thereof to the Designator. In the event such notice is not so given by the
personal representative of the deceased Participant, the period of time during
which the options set forth in Section 3.2 may be exercised shall be extended
appropriately. In addition, in order to permit the timely operation of Section
3.3 hereof, the personal representative of a deceased Participant subject to
Section 3.3 shall give written notice of such Participant's death to the
Company within 90 days of such death and the Company shall forthwith deliver a
copy of such written notice to the Designator.
3.5 Purchase Price of Shares. The aggregate purchase price ("Purchase Price")
of Shares to be purchased pursuant to Section 3.1, 3.2, or 3.3, shall be the
following:
(a) if the product of the Fair Market Value per Share (as defined below)
multiplied by the aggregate number of Shares to be purchased is equal to or
less than the aggregate Acquisition Price of the Shares to be purchased,
then the Purchase Price shall be the product of the Fair Market Value per
Share, multiplied by the aggregate number of Shares to be purchased;
(b) if paragraph (a) is not applicable, subject to paragraph (c) below,
the Purchase Price shall be equal to the sum of (x) the product of the Fair
Market Value per Share multiplied by the number of
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Vested Shares to be purchased, plus (y) the product of the Acquisition
Price multiplied by the number of Shares to be purchased which are not
Vested Shares;
(c) where options are exercised pursuant to Section 3.1 or 3.3 for less
than all of the Shares owned by a Participant and his or her Permitted
Transferees, in determining the Purchase Price in accordance with paragraph
(a) or (b), the Shares which are not Vested Shares shall be deemed to have
been purchased or sold first; and
(d) for the sole purpose of computing the Purchase Price in connection
with a purchase of Shares pursuant to Section 3.3, in computing that
portion of the Purchase Price which is allocable to Shares which are not
Vested Shares, the Acquisition Price of each of the Shares which are not
Vested Shares shall be increased by a simple interest factor of 8% per
annum calculated from the date of termination of employment to the Article
III Closing Date, but the Acquisition Price, as so increased, shall not
exceed the Fair Market Value per Share on the Article III Closing Date.
3.6 Manner of Payment. Subject to the provisions of Article IV, the Purchase
Price shall be paid in the following manner:
(a) except as otherwise provided in paragraph (c), an amount equal to 25%
of the Purchase Price of all Shares shall be paid in cash on the Article
III Closing Date;
(b) except as otherwise provided in paragraph (c), the balance of the
Purchase Price shall be paid in three equal annual installments on the
first through third anniversaries, both inclusive, of the Article III
Closing Date. The principal amount of the balance of the Purchase Price
remaining from time to time unpaid shall bear interest, payable on the same
dates as each installment of principal, at a rate per annum equal to the
lowest rate of interest which will not result in any portion of the
Purchase Price being deemed to be unstated interest or original issue
discount under the provisions of the Internal Revenue Code of 1986, as
amended. If said provisions are inapplicable for any reason, the interest
rate shall be 8% per annum;
(c) notwithstanding the preceding provisions of this Section 3.6, in the
event of a purchase of Shares following the voluntary termination of
employment of a Participant with the Ward Group (other than by reason of
normal retirement in accordance with the Ward Group's retirement policies),
or the termination of employment of such Participant with the Ward Group
for Cause, the amount which shall be paid on the Article III Closing Date
shall equal 16 2/3% of the Purchase Price, and the balance of the Purchase
Price shall be paid in five equal annual installments on the first through
fifth anniversaries, both inclusive, of the Article III Closing Date, plus
interest, payable on the same dates as each installment of principal, at
the rate determined pursuant to paragraph (b); and
(d) the Purchase Price shall be payable by the Designated Management
Optionees and the Company in proportion to their respective purchases of
Shares pursuant to this Article III.
3.7 Notes and Security. The portion of the Purchase Price which has not been
paid in cash on the Article III Closing Date shall be evidenced and secured as
follows:
(a) the portion of the Purchase Price which is not paid on the Article
III Closing Date shall be evidenced by a non-negotiable secured promissory
installment note(s) made by the Company and/or the Designated Management
Optionee(s) purchasing Shares (as the case may be). Each such note or notes
shall be in a commercially reasonable form of promissory note given to
evidence an installment indebtedness, providing for payment of the unpaid
balance of the Purchase Price, and interest thereon, all as provided in
Section 3.6. Each such promissory installment note shall provide for
acceleration in the event of non-payment after a reasonable grace period,
and shall provide that it may be prepaid at any time or from time to time,
in whole or in part, without premium, penalty or notice. All prepayments
shall be applied against installments coming due in the inverse order of
their maturity. If there is more than one seller of such Shares, a separate
note shall be issued to each seller of such Shares. Each promissory note
which is made by the Company shall provide that the obligations thereunder
are subordinated to the extent provided in, and are subject to the
provisions of, Article IV. Each note shall
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provide that a default under any note made by the party issuing it to a
Participant or his or her Permitted Transferees pursuant to this Article
III shall be a default under all notes made by that party to such
Participant and his or her Permitted Transferees pursuant to this Article
III; and
(b) each note shall be secured, at the option of the purchaser of the
Shares, by either (x) a pledge, meeting the requirements of the Illinois
Uniform Commercial Code, of a number of the Shares purchased which would
have an aggregate value, valued at their purchase price at the time of the
pledge (determined in the manner provided in Section 3.5 and in the
following sentences), equal to the original principal amount of such note,
or (y) a standby letter of credit reasonably satisfactory to the
Shareholder whose Shares are being sold. If Shares are to be pledged, for
the purposes of determining the type and number thereof, on the Article III
Closing Date the Company and the Designated Management Optionees shall be
deemed to have made payment in full for a type (Vested Shares or Shares
which are not Vested Shares, as the case may be) and number of Shares which
would have had an aggregate purchase price (determined as provided herein)
equal to the amount so paid, and the Shares which are so deemed to have
been paid for in full shall not be subject to the pledge, and only the
balance of the Shares shall be subject to the pledge. In determining the
value of the Shares which are deemed to have been paid for in full on the
Article III Closing Date in accordance with the two preceding sentences,
Shares which are not Vested Shares shall first be deemed to have been paid
for in full, until all of such Shares have been deemed to have been paid
for in full. If Shares are to be pledged, at the option of the pledgor, the
Shares to be pledged shall be held by an escrowee reasonably satisfactory
to the pledgor, pursuant to an Escrow Agreement containing terms and
provisions which are reasonably satisfactory to the pledgor.
3.8 Fair Market Value. The Fair Market Value per Share of Shares purchased
pursuant to this Article III shall be determined as follows:
(a) unless a public market for the Shares exists, the Fair Market Value
per Share of each of the Shares shall be based upon the fair market value
of the consolidated common equity of the Company for the fiscal year in
which the Article III Closing Date occurs, as adjusted herein. Subject to
the following provisions, the fair market value of the consolidated common
equity of the Company shall be determined annually by the Board of
Directors, as of the first day of the then-current fiscal year of the
Company, in its reasonable discretion and in good faith, as soon after the
commencement of each fiscal year of the Company as possible. In the event
the fair market value of the consolidated common equity of the Company, as
so determined, would exceed 150% of the consolidated common equity of the
Company (determined in accordance with the generally accepted accounting
principles applied by the Company) as of the first day of the fiscal year
for which the determination is to be made, the affirmative vote of not less
than 2/3 of the members of the Board of Directors shall be required in
order to determine the amount of the excess. The Board of Directors may in
its discretion retain an independent investment banker to make
recommendations to the Board of Directors as to the fair market value of
the consolidated common equity of the Company. Each such determination
shall be effective as of the first day of the then-current fiscal year, and
remain in effect with respect to all Article III Closing Dates occurring
during that fiscal year; provided, however, that the fair market value of
the common equity as so determined by the Board of Directors shall be
adjusted by adding:
(i) an amount equal to the aggregate Fair Market Value per Share at
the date of grant for the Shares underlying all Options and Purchase
Rights and other options or rights to acquire shares of common stock,
in each case, which are outstanding, unexercised and unexpired on the
Article III Closing Date;
(ii) the amount of cash and other consideration (including any
difference between the Fair Market Value per Share at the date of grant
and the exercise price) received or receivable by the Company during
the period commencing on the first day of the fiscal year in which the
Article III Closing Date occurs and ending on the Article III Closing
Date (the "Adjustment Period") with respect to any Options, Purchase
Rights, or other options or rights to acquire shares of common stock
which have been exercised prior to the Article III Closing Date;
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(iii) the aggregate consideration received by the Company for shares
of common stock issued during the Adjustment Period and not accounted
for in either (i) or (ii) above;
and by subtracting:
(iv) the aggregate amount of dividends paid or payable by the Company
on its common stock during the Adjustment Period; and
(v) the aggregate amount paid by the Company to redeem, repurchase or
otherwise acquire for consideration shares of its common stock during
the Adjustment Period;
and the said fair market value of the consolidated common equity of the
Company, as so adjusted, shall be the fair market value of the consolidated
common equity of the Company. The foregoing adjustments shall be made by
the Company's chief financial officer, acting reasonably and in good faith
and in accordance with the provisions of this Section 3.8. For the first
fiscal year of the Company, the parties agree that the fair market value of
the consolidated common equity of the Company as of the first day of such
first fiscal year shall be $10,000,000. Once the fair market value of the
consolidated common equity of the Company has been determined as provided
in the foregoing provisions of this paragraph (a), the Fair Market Value
per Share of each of the Shares to be purchased pursuant to this Article
III shall be determined as follows:
(vi) the Fair Market Value per Share of each of the Class A Shares
shall be the amount determined as follows:
a. First, at any time when the Fully Diluted Outstanding Amount on
the date of determination does not exceed the Series 1 Amount, the
fair market value of the consolidated common equity of the Company
shall be multiplied by a fraction the numerator of which is the
Fully Diluted Outstanding Amount and the denominator of which is the
sum of the Fully Diluted Outstanding Amount plus the number of
outstanding Class B Shares on the day immediately preceding the
Article III Closing Date; or
b. at any time when the Fully Diluted Outstanding Amount on the
date of determination exceeds the Series 1 Amount, but the Fully
Diluted Non-Series 3 Outstanding Amount does not exceed the Series 1
Amount, the amount which would be determined if the immediately
preceding Section 3.8(a)(vi)a. were applicable and the Fully Diluted
Outstanding Amount were equal to the Series 1 Amount shall be
multiplied by a fraction the numerator of which is the Fully Diluted
Outstanding Amount and the denominator of which is the sum of the
Series 1 Amount plus fifty percent (50.0%) of the excess of the
Fully Diluted Outstanding Amount over the Series 1 Amount on the day
immediately preceding the Article III Closing Date; or
c. at any time when the Fully Diluted Outstanding Amount on the
date of determination exceeds the Series 1 Amount (and Section
3.8(a)(vi)b. is not applicable), the amount which would be
determined if Section 3.8(a)(vi)a. were applicable and the Fully
Diluted Outstanding Amount were equal to the Series 1 Amount shall
be multiplied by (x) a fraction, the numerator of which is the Fully
Diluted 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 Fully Diluted Non-Series 3 Outstanding
Amount over the Series 1 Amount, and multiplied by (y) a fraction
the numerator of which is the Fully Diluted Outstanding Amount and
the denominator of which is the sum of the Fully Diluted Non-Series
3 Outstanding Amount plus fifty percent (50.0%) of the sum of the
number of Series 3 Shares outstanding plus the number of Series 3
Shares subject to purchase pursuant to Options or Purchase Rights
outstanding on the day immediately preceding the Article III Closing
Date, whether or not such Options or Purchase Rights are exercisable
on the day immediately preceding such Article III Closing Date;
d. Second, the amount determined pursuant to subparagraph a., b.
or c., as applicable, shall be divided by the aggregate number of
Class A Shares (without distinction as to series)
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outstanding on the day immediately preceding the Article III Closing
Date, with Class A Shares which are subject to purchase pursuant to
Options or Purchase Rights outstanding being treated, for the
purposes of this subparagraph d., as being outstanding Class A
Shares, whether or not such Options or Purchase Rights are
exercisable on the day immediately preceding such Article III
Closing Date;
provided, however, that no adjustment to the Fair Market Value per
Share of the Class A Shares as calculated as of the first day of the
then-current fiscal year shall be required unless such adjustment would
result in an increase or a decrease of at least 1% from the amount as
so determined as of the beginning of the then-current fiscal year;
(vii) the Fair Market Value per Share of each of the Class B Shares
shall be the amount determined by (x) subtracting from the fair market
value of the consolidated common equity of the Company the aggregate
Fair Market Value per Share of all of the Class A Shares of all series,
as determined pursuant to subparagraph (vi), and (y) dividing the
resulting number by the total number of Class B Shares which are
outstanding as of the day immediately preceding the Article III Closing
Date.
In the event the Article III Closing Date occurs prior to the date on which
the appropriate fair market value of the consolidated common equity of the
Company has been determined, the Purchase Price shall initially be
determined on the basis of the most recent determination of the fair market
value of the consolidated common equity of the Company and shall thereafter
be adjusted as soon as the fair market value of the consolidated common
equity of the Company for the current fiscal year has been determined. If
necessary in order to accomplish any such adjustment, the parties shall
immediately substitute new notes and/or exchange cash payments as soon as
practicable after the amount of such adjustment is determined, so that the
parties are placed in the same positions in which they would have been if
the appropriate fair market value of the consolidated common equity of the
Company had been known on the Article III Closing Date;
(b) if a public market for shares of common stock of the Company exists,
the Fair Market Value per Share shall be the Average Closing Price of such
shares during the period ("Trading Period") consisting of the ten trading
days ending on the day immediately preceding the Article III Closing Date.
For the purposes of the preceding sentence:
(i) if such shares are listed on any national securities exchange or
traded in the over-the-counter market and included in the NASDAQ
National Market System, the Average Closing Price shall be the
arithmetic mean of the last sale prices of such shares on each day of
the Trading Period on the national securities exchange where such
shares are principally traded if such shares are listed for trading on
such exchange, or in the over-the-counter market as reported by NASDAQ
if such shares are included in the National Market System; and
(ii) if such shares are traded over-the-counter but are not included
in the NASDAQ National Market System, the Average Closing Price shall
be the arithmetic mean of the average of the closing bid and asked
quotations on each day of the Trading Period.
3.9 Closing. Subject to the remainder of this Section 3.9 and to Section 4.1,
any purchase of Shares pursuant to this Article III shall be consummated
("Article III Closing") at the Company's principal office at 10:00 a.m.,
prevailing business time, on the 30th day next following the last day on which
the last option to purchase or sell such Shares which is granted pursuant to
this Article III is exercisable ("Article III Closing Date"), or on such
earlier day as designated by the purchaser(s) in the sole discretion of the
purchaser(s) upon not less than three days prior notice to the Participant or
his or her personal representative, as the case may be, and to the
Participant's Permitted Transferees; provided, however, that with respect to
any specific Shares which, if the Article III Closing were to occur in
accordance with the foregoing, would be acquired by the Company pursuant to
this Article III within six months of the date of acquisition (whether through
an Award, exercise of an Option or Purchase Right or otherwise) of such Shares
from the Company by either of (i) such Participant or (ii) any of such
Participant's Permitted Transferees, then the Article III
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Closing and the Article III Closing Date with respect to such specific Shares
may, at the option of the Company, be postponed until the date which is six
months and ten days following the last such acquisition of any of such Shares
from the Company by either of (i) such Participant or (ii) any of such
Participant's Permitted Transferees. If any of the foregoing dates is a
Saturday, Sunday or legal holiday, the Article III Closing shall occur at the
same time and place on the next succeeding business day. At the Article III
Closing, each person selling Shares shall deliver certificates representing the
Shares being purchased, duly endorsed, and each shall furnish such other
evidence, including applicable inheritance and estate tax waivers and releases,
as may reasonably be necessary to effect the Transfers of Shares. The Company
and/or the Designated Management Optionee(s) purchasing Shares shall make the
payments, deliver the notes, and effect the pledges, which are set forth in
Sections 3.6 and 3.7. In the event that a Designated Management Optionee fails
to make the payments, deliver the notes and effect the pledges required by such
a Designated Management Optionee (a "Non-Performing DMO") in connection with a
purchase of Shares pursuant to Sections 3.2(a) and (b), then, at the election
of the seller of such Shares, the Company shall, in place of such Non-
Performing DMO, purchase such Shares and make such payments, deliver such notes
and effect such pledges (it being understood and agreed that a replacement
Designated Management Optionee, rather than the Company, shall be entitled to
satisfy such purchase in place of such Non-Performing DMO). In the event that
the Company so purchases the Shares which were to be purchased by a Non-
Performing DMO, the Company shall be subrogated to the rights of the seller of
such Shares with respect to such Non-Performing DMO.
3.10 Priorities. In the event options to purchase Shares owned by a
Participant or a Permitted Transferee shall arise under both Article II and
Article III, as between the provisions of Article II, on the one hand, and
Article III, on the other hand, if on the date on which an option to purchase
or sell Shares arises under Article III, any option under Article II has not
been exercised, or, if exercised, the purchase to be made pursuant to said
exercise has not been closed, the priority of such Articles shall be determined
by the Designator, but if the Designator fails to make any such determination
by written notice delivered to the Company within 30 days next following the
date on which the option or obligation under Article III arose, Article III
shall have priority.
3.11 Failure to Deliver Shares. In the event the Company or any of the
Designated Management Optionees exercise one or more options to purchase Shares
pursuant to this Article III, or the Company becomes obligated to purchase
Shares pursuant to this Article III, and in the event a Participant or
Permitted Transferee whose Shares are to be purchased pursuant to this Article
III fails to deliver them on the Article III Closing Date, the Company and/or
the Designated Management Optionees purchasing Shares may elect at any time
from and after the Article III Closing Date to deposit the cash and promissory
note(s) representing the Purchase Price with the Company's general counsel
("Escrow Agent"). If the Purchase Price is so deposited within 180 days of the
Article III Closing Date, the deposit shall be deemed to have occurred on the
Article III Closing Date, and if the Purchase Price is deposited after 180 days
following the Article III Closing Date, the deposit shall be deemed to have
occurred on the actual date of such deposit. In the event the Company and/or
said Designated Management Optionees do so, the Shares shall, from the date of
such deemed deposit, be deemed for all purposes (including the right to vote
and receive payment of dividends) to have been Transferred to the purchasers
thereof, the Company or the Voting Trustee (as the case may be) shall issue new
certificates representing the Shares to the purchasers thereof, and the
certificates registered in the name of the Shareholders obligated to sell them
(or the voting trust certificates, as the case may be) shall be deemed to have
been cancelled and to represent solely a right to receive payment of the
Purchase Price, with interest (if any) earned thereon, from the escrow. If the
proceeds of sale have not been claimed by the former Shareholders whose Shares
were purchased pursuant to this Article III prior to the third anniversary of
the Article III Closing Date, the escrow deposits, and all interest (if any)
earned thereon, shall be returned to the respective depositors, and the former
Shareholders whose Shares were purchased shall look solely to the purchasers
for payment of the Purchase Price. The Escrow Agent shall not be liable for any
action or inaction taken by him in good faith, and shall have no liability
whatsoever for failure to earn interest (or with respect to the amount of
interest earned) on the escrow deposits.
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3.12 Resale of Shares. The Company may resell or redistribute by way of
Award, Purchase Right or Option or in any other manner pursuant to the Plan or
the Stockholders' Agreement, any Shares repurchased by the Company pursuant to
this Article III or Article II. At any time a Voting Trust Agreement is in
effect, the party to whom Shares are reissued shall, if not already a party to
a Voting Trust Agreement, join in and become a party thereto, the Company
shall, on behalf of said party, issue Shares to the Voting Trustee for the
benefit of said party, and the Voting Trustee shall issue to said party Voting
Trust Certificates constituting an equal number of Shares.
3.13 Modification of Options. Notwithstanding anything to the contrary
contained herein, with respect to any options exercisable pursuant to Sections
3.1 or 3.2 hereof as a result of termination of employment ("Termination") of a
person whose short-swing profits with respect to sales of Shares after such
Termination as a result of this Article III would be subject to recapture under
Section 16 of the Exchange Act ("Insider"), such options shall arise with
respect to each such Insider and his or her Permitted Transferees, only upon
the earlier of (i) six months and one day after such Termination or (ii) the
date of service of a Transfer Notice by such Insider or Permitted Transferee,
as the case may be, on or after the date of such Termination; provided,
however, that this Section 3.13 shall not apply to any Insider or Permitted
Transferee who, as of the date of such Termination, holds any Shares, with
respect to which any option under Article II has not been exercised and has not
yet expired, or, if exercised, the purchase of Shares pursuant thereto has not
been closed. All time periods contained elsewhere in this Agreement with
respect to exercise of options modified pursuant to this Section 3.13 shall be
adjusted accordingly in connection with this Section 3.13.
3.14 Offset of Purchase Price. Notwithstanding anything to the contrary
contained herein, in the event that any person selling Shares pursuant to this
Article III is, immediately prior to the Closing, indebted to the Company or
any other member of the Ward Group or any Pledgee by virtue of the Line of
Credit Program, the MWHC Loan Program or otherwise, then the Company (or any
assignee thereof) may pay and satisfy all or a portion of the Purchase Price by
forgiving or offsetting such indebtedness, such forgiveness or offset to be in
an amount not to exceed the amount of the Purchase Price to be so paid, by
causing such indebtedness to be forgiven or offset in an amount not to exceed
the amount of the Purchase Price to be so paid or by paying to the holder of
such debt on behalf of such seller an amount not to exceed the amount of the
Purchase Price to be so paid.
ARTICLE IV
Certain Limitations on Purchases of Shares
4.1 Restrictions on the Company's Right and/or Obligation to Purchase Shares.
Notwithstanding anything to the contrary contained herein, the Company: (x)
shall have the right to exercise conditionally any option arising under Article
III to purchase Shares; (y) shall not be obligated to purchase Shares; and (z)
shall not be obligated to make payments with respect to the Purchase Price of
Shares it has theretofore purchased; to the extent unconditional exercise of
such option, the purchase of such Shares or the making of such a payment, when
taken together with all other unconditional exercises of options by the
Company, all other purchases by the Company of shares of its Common Stock and
the making of all other payments by the Company on account of shares of its
Common Stock which the Company has purchased either under these Terms and
Conditions or under the Stockholders' Agreement, would result in a violation of
one of the Limitations (as herein defined). If this Section 4.1 is applicable,
the following shall govern the exercises of such options and the making of such
purchases and payments:
(a) in the event the Company has an option to purchase Shares but, by
virtue of the Limitations, is unable to purchase all Shares as to which it
desires to exercise its option to purchase, it may unconditionally exercise
its option as to the number of Shares which it may purchase without
violation of the Limitations, and shall purchase those Shares on the
Article III Closing Date, and may exercise said option as to the remaining
Shares it desires to purchase conditioned upon its being able to do so
without violation of the Limitations. In the event the Company is obligated
to purchase Shares but is
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unable, by virtue of the Limitations, to pay the full amount which is
payable by the Company on the Article III Closing Date with respect to the
Shares which it is obligated to purchase, the Article III Closing shall
take place with respect to the purchase of those Shares which the Company
is able to purchase without violation of the Limitations;
(b) with respect to those Shares which the Company was obligated, or
conditionally exercised an option, to purchase but was unable, on the
Article III Closing Date to purchase by virtue of the Limitations, the
Article III Closing Date shall be extended with respect to such Shares by
the period of such inability, but not in excess of one year from the date
on which the Article III Closing Date would have occurred with respect to
such Shares but for this Section 4.1. If said inability is cured in whole
prior to the expiration of said one year period, the Article III Closing
shall occur with respect to such Shares on the 30th day after the date on
which the inability has been cured. If as of the end of said one year
period the inability to purchase such Shares was cured in part, the Article
III Closing shall take place with respect to the Shares as to which the
inability was cured, on the 30th day after the expiration of said one-year
period. If the Article III Closing Date is extended as to any Shares
pursuant to this paragraph (b), the Purchase Price of such Shares shall be
computed as if the Article III Closing had occurred with respect to such
Shares on the date set forth in Section 3.9, without regard to this Section
4.1 (the "Originally Scheduled Article III Closing Date"). The Purchase
Price of such Shares (and interest thereon as herein provided), as so
computed, shall be reduced (with reductions applied first to accrued and
unpaid interest) by the amount of any cash dividends paid or declared and
distributions made or delivered with respect to such Shares, during the
period commencing on the Originally Scheduled Article III Closing Date and
ending on the actual Article III Closing Date with respect to such Shares,
and the portion of such Purchase Price remaining unpaid from time to time
shall bear interest for the period commencing on the Originally Scheduled
Article III Closing Date and ending on the actual Article III Closing Date,
at the rate of interest which would be applicable under Section 3.6(b) if
the Article III Closing had occurred with respect to such Shares on the
Originally Scheduled Article III Closing Date, and shall be payable on the
Article III Closing Date, and the rate of interest which is payable on the
portion of the Purchase Price which is payable in installments pursuant to
Section 3.6(b) or (c) shall be that rate of interest which would be
applicable, by virtue of the application of the provisions of Section
3.6(b) or (c), on the actual Article III Closing Date. To the extent that
after the expiration of said one year period, the Company remains unable to
purchase any of the Shares which it is otherwise obligated to purchase or
has conditionally exercised an option to purchase, the Company shall be
relieved of the obligation which it was unable to fulfill, the Company's
conditional exercise of its option to purchase such Shares shall terminate,
and the Shares which the Company was otherwise obligated, or had
conditionally exercised an option, to purchase shall thereafter remain
subject to all applicable provisions hereof;
(c) in applying the foregoing provisions of this Section 4.1, the Shares
which are not Vested Shares shall be deemed to have been purchased or sold
first;
(d) if after the Article III Closing the Company is precluded by virtue
of the Limitations from making all or any portion of an installment payment
on account of the unpaid balance of the Purchase Price, the Company's
obligation to make such payment (or portion thereof) shall be tolled until
the earlier of the date on which it is no longer precluded from making such
payment (or portion thereof) or the first anniversary of the date on which
the payment (or portion thereof) was due. During the time in which the
Company's obligation is so tolled, interest shall continue to accrue on the
payment which was due but not made, but the holder of any note made by the
Company which represents the unpaid portion of the Purchase Price of the
Shares purchased by the Company shall not take any action to collect the
payment due, or to accelerate the maturity of any payments not then due;
(e) if after the expiration of the period of time in which the Company's
obligation has been tolled pursuant to paragraph (d) the Company has not
made the payment in full of the total amount then due, the holder of the
note made by the Company shall have the right to foreclose the pledge of
the Shares pledged by the Company, or draw against the letter of credit
provided by the Company, as security
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therefor. If the holder does so, or takes other legal action to collect on
the note, the holder's right to collect the amount owed by the Company to
such holder (other than by way of foreclosure of the pledge of Shares
pledged as collateral therefor or drawing on the letter of credit furnished
by the Company in connection therewith) shall be subordinated to the
Company's obligations under its then most junior subordinated debt and all
debt which is senior thereto, and such holder's right to enforce its right
to collect such amount shall be restricted to the extent of the maximum
restriction contained in any of such debt with respect to such enforcement;
provided, however, that notwithstanding any subordination provisions which
may be contained in the instruments evidencing such debt, the holder of the
note shall be entitled to collect the amount owing from the Company on
account of the purchase of the Shares to the extent that payment of the
amount sought to be collected would not result in a violation of any
provisions of the instruments evidencing any debt of the Company which is
senior to the holder's note and which permit distributions by, and/or
intercompany dividends to, the Company in connection with its repurchases
of Shares. For the purposes of the immediately preceding sentence,
references to the Company shall be deemed to include references to Ward;
(f) if any of the Designated Management Optionees shall have exercised
options to purchase any of the Shares which are subject to purchase under
Article III, the Article III Closing shall nonetheless take place with
respect to the Shares as to which said options have been exercised, and the
provisions of this Section 4.1 shall have no effect on the Shares as to
which such options have been exercised, or on the obligations of the
Designated Management Optionees with respect to payment of the Purchase
Price thereof.
4.2 Definition of the Limitations. The Limitations shall consist of the
following:
(a) any provision of the law of the Company's state of incorporation
which restricts the Company's ability to repurchase its shares of Common
Stock or restricts payments on account of the Purchase Price thereof;
(b) any provision of any material contract to which a member of the Ward
Group is a party (including, without limitation, loan agreements), and any
provision of any Certificate of Incorporation of the Company or any of its
subsidiaries, which would be violated by the Company's repurchase of its
shares of Common Stock, the making of payments on account of the Purchase
Price thereof, or the payment of intercompany dividends or other
distributions or advances to the Company so that it can repurchase shares
of its Common Stock or make payments on account of the Purchase Price
thereof; and
(c) the Cash Payments Limitation then in effect.
4.3 Cash Payments Limitation. Except as otherwise determined by the Board of
Directors, the Cash Payments Limitation shall be, with respect to each fiscal
year of the Company, equal to the sum of $25,000,000 plus, with respect to a
fiscal year, the aggregate proceeds, collected during said fiscal year, of any
insurance on the life of a Management Shareholder whose shares of Common Stock
are to be purchased pursuant to the Stockholders' Agreement during said fiscal
year. To the extent the Cash Payments Limitation restricts the aggregate amount
which can be paid by the Company in a fiscal year with respect to repurchases
of its shares of Common Stock, obligations of the Company to make payments for
purchase of shares of Common Stock (whether under these Terms and Conditions or
the Stockholders' Agreement) shall be honored in the order in which they arose.
ARTICLE V
Corporate Governance Matters
5.1 Voting of Shares Held by Participants. At any time in which this Article
V of these Terms and Conditions is in effect and a Voting Trust Agreement is
not in effect, and, in addition, with respect to any Shares which are owned by
Participants or Permitted Transferees which for any reason are not subject to
the
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provisions of a Voting Trust Agreement, on all matters requiring a vote of the
Shareholders, all Shares held by Participants and Permitted Transferees shall
be voted, (x) as long as Brennan is the owner of any shares of Common Stock and
votes any of such shares, in the same manner that Brennan votes such shares of
Common Stock with respect to that matter, and (y) if Brennan is no longer the
owner of any shares of Common Stock or if Brennan does not vote any of his
shares of Common Stock, to effectuate the provisions of, and in accordance with
the agreements contained in, this Article V.
5.2 Election of Directors. Subject to the limitations set forth herein, and
in addition to any provisions relating to the election of directors by the
holders of Preferred Stock which are contained in the Certificate of
Incorporation and/or By-laws of the Company, at all times in which this Article
V is in effect, the By-laws of the Company shall provide, and the Participants
agree to vote, for the election of a Board of Directors consisting of eleven
members, six to be designated by the Designator and five to be designated by GE
Capital. The By-laws shall further provide, and the Participants agree, that,
disregarding any directors which may be elected by the holders of Preferred
Stock pursuant to the provisions of the Company's Certificate of Incorporation:
(a) Intentionally omitted;
(b) at such time, if any, as GE Capital and the GE Capital Affiliates
shall cease to own, in the aggregate, more than 50% of the shares of Common
Stock which GE Capital and the GE Capital Affiliates purchased on June 22,
1988, the number of members of the Board of Directors which the Designator
shall have the right to designate shall be increased by one and the number
of members of the Board of Directors which GE Capital shall have the right
to designate shall be reduced by one; and
(c) at such time, if any, as GE Capital and the GE Capital Affiliates
shall cease to own, in the aggregate, 20% or more of the shares of Common
Stock which GE Capital and the GE Capital Affiliates purchased on June 22,
1988, GE Capital shall no longer have the right to designate members of the
Board of Directors in accordance with the foregoing provisions of this
Section 5.2; and the number of directors to be elected shall be reduced to
nine, seven to be elected by the holders of Class A Shares, voting as a
class, and two to be elected by the holders of Class B Common Stock, voting
as a class; provided, however, that as long as that certain Account
Purchase Agreement, dated as of June 24, 1988, between Ward and Montgomery
Ward Credit Corporation shall be in effect and GE Capital or any GE Capital
Affiliate shall own any shares of Class B Common Stock, GE Capital shall
have the right to elect one of the two directors to be elected by the
holders of Class B Common Stock.
In the event of a vacancy on the Board of Directors, the party who had the
right to designate the director whose seat is vacant shall have the right to
designate the party who shall fill the vacancy. The party who had the right to
designate a director shall also have the right to cause that director to be
removed.
5.3 Recapitalization. In connection with any public offering of Shares (other
than pursuant to the Plan or Article III of these Terms and Conditions or the
Stockholders' Agreement), the Company shall have the right to cause a
recapitalization of the Company to occur, in order to facilitate such public
offering. Any such recapitalization, as nearly as possible, shall put the
parties in the same relative positions with respect to equity ownership and
voting control of the Company in which they were prior to the recapitalization,
after taking into account any dilution resulting from outstanding but
unexercised Purchase Rights or Options under the Plan. Each of the Participants
agrees to vote his or her Shares in favor of any recapitalization of the
Company which meets the foregoing requirements, and to treat the shares of
stock and other securities issued in such recapitalization as Shares under
these Terms and Conditions.
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ARTICLE VI
Confidential Information
6.1 No Disclosure of Confidential Information. In consideration of the
issuance of Shares to him or her, each Participant individually covenants and
agrees that during the time that he or she is employed by the Ward Group, and
thereafter following the termination of his or her employment by the Ward Group
for any reason whatsoever, he or she will not divulge to persons not employed
by the Ward Group or use for his or her own benefit or the benefit of Persons
not employed by the Ward Group, any Confidential Information.
6.2 Limitations on No Disclosure Covenant. For the purposes of Section 6.1:
(a) information which is at any time Confidential Information shall cease
to be such, and each Participant shall thereafter be under no obligations
with respect thereto, at such time that:
(i) it shall be disclosed by the Ward Group to the public; or
(ii) it shall become known by the public other than by reason of the
disclosure thereof in violation of applicable confidentiality
agreements; and
(b) notwithstanding the provisions thereof, nothing contained therein
shall be construed to prohibit any Participant from making any disclosure
of information, either to his legal counsel in connection with the defense
of any claim, under these Terms and Conditions or otherwise, made by any
member of the Ward Group, or in connection with the enforcement of any
right, under these Terms and Conditions or otherwise, existing in favor of
the Participant against any member of the Ward Group, or to any
governmental agency to the extent that the Participant is required by law
to do so.
6.3 Return of Documents. Promptly on the termination of his or her employment
with the Ward Group for any reason, each Participant (or in the event of his or
her death, his or her personal representative) shall return to the Company any
and all copies (whether prepared by such Participant or by any member of the
Ward Group), of books, records, notes, materials, memoranda and other data
pertaining to Confidential Information which are in his or her possession or
control at the time of termination of employment. Each Participant acknowledges
that he or she does not have, nor can he or she acquire, any property rights or
claims to any of such materials or the underlying data.
6.4 Enforcement. Each Participant agrees and acknowledges that his or her
violation or breach of the covenants contained in this Article VI shall cause
the Company irreparable injury and, in addition to any other right or remedy
available to the Company at law or in equity, the Company shall be entitled to
enforcement by court injunction. Notwithstanding the foregoing sentence,
nothing herein shall be construed as prohibiting the Company from also pursuing
any other rights, remedies or defenses, for such breach or threatened breach
including recovering damages and attorney's fees. In addition to the foregoing,
in the event of a breach or violation of this Article VI by a Participant which
occurs after the Company and/or the Designated Management Optionees have
purchased his or her Shares or the Shares of his or her Permitted Transferees
pursuant to Article III, to the extent that the Purchase Price of the Shares
purchased exceeds the Purchase Price which would have been paid if his or her
employment with the Ward Group had been terminated for Cause by reason of a
violation of Section 6.1, the Purchase Price shall be reduced to such latter
amount, and if at the time the Purchase Price is so reduced the Participant and
his or her Permitted Transferees shall have received payments on account of the
Purchase Price which, in the aggregate, exceed the amount to which they would
have been entitled by virtue of such reduction, they shall forthwith pay the
difference to the purchasers of such Shares. The election of any remedy shall
not be construed as a waiver on the part of the Company of any rights it might
otherwise have at law or in equity. Said rights and remedies shall be
cumulative.
26
<PAGE>
ARTICLE VII
General Matters
7.1 Legend on Certificates. All certificates evidencing Shares (other than
certificates of beneficial interest issued by the Voting Trustee under a Voting
Trust Agreement) shall bear the following legend:
"The sale, transfer and encumbrance of the shares represented by this
Certificate are subject to certain Terms and Conditions agreed to by the
Shareholder as of , 19 . A copy of said Terms and Conditions is on file
in the office of the Secretary of the corporation. No sale or other
transfer of the shares represented by this Certificate may be effected
except pursuant to provisions of such Terms and Conditions. In addition,
the right to vote the shares represented by this Certificate is restricted
in the manner provided in said Terms and Conditions. The corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof authorized to be
issued by the corporation and the qualifications, limitations or
restrictions of such preferences and/or rights."
Upon termination of these Terms and Conditions, certificates for Shares (other
than certificates of beneficial interest issued by the Voting Trustee pursuant
to a Voting Trust Agreement) may be surrendered to the Company in exchange for
new certificates without the foregoing legend.
7.2 Termination and Amendment of Terms and Conditions. These Terms and
Conditions shall be terminated:
(a) by the written consent of the holders of not less than 66 2/3% of the
Shares, subject to the consent of the Company, with the approval of its
Board of Directors;
(b) upon a sale by the Ward Group of all or substantially all of their
aggregate assets (other than an intercompany sale within the Ward Group) to
a single purchaser or a related group of purchasers in a single transaction
or a related series of transactions;
(c) upon a merger or consolidation of the Company as a result of which
the aggregate percentage of ownership of the surviving or resulting entity
by Management Shareholders (including, without limitation, the Permitted
Transferees (as defined in the Stockholders' Agreement) thereof), GE
Capital and GE Capital Affiliates and persons who were GE Capital
Affiliates at the time of purchase of shares of Common Stock is less than
50% of their aggregate percentage of ownership of the Company immediately
prior to such merger or consolidation; or
(d) upon a sale, to a single purchaser or a related group of purchasers,
in a single transaction or a related series of transactions, of not less
than 66 2/3% of the outstanding shares of each class of Common Stock of the
Company.
Termination of these Terms and Conditions shall not affect any rights or
obligations which arose prior to termination, nor shall it terminate Article
VI. Except as otherwise provided in this Section 7.2, these Terms and
Conditions may be amended by the consent of the holders of not less than 66
2/3% of the outstanding Shares, subject to the consent of the Company with the
approval of its Board of Directors, but no such amendment shall adversely
affect the method of valuation of any Participant's Shares for the purposes of
Article III without his or her specific consent. With respect to Shares subject
to a Voting Trust Agreement, the Voting Trustee, and with respect to Shares not
subject to a Voting Trust Agreement, the Designator, shall have the power, as
attorney in fact, to act for each of the Participants and each Permitted
Transferee in connection with termination, or any amendment or restatement, of
these Terms and Conditions which has been authorized by the holders of Shares
as provided in this Section 7.2. Said power shall be deemed to be coupled with
an interest and shall be irrevocable. Notwithstanding the foregoing, any
amendment to provisions of Section 5.2 of the Stockholders' Agreement which is
adopted as provided in the Stockholders' Agreement shall be deemed to
constitute a corresponding amendment to comparable provisions of Section 5.2 of
these Terms and Conditions, and, to the extent that there is any conflict
between said sections, the
27
<PAGE>
terms of the Stockholders' Agreement shall control. "Shares" as used in this
Section 7.2 shall mean Shares subject to Terms and Conditions or Shares (for
purposes of clarification, as defined herein and not as defined in the
Stockholders' Agreement) subject to the Stockholders' Agreement.
7.3 Not an Employment Agreement; Termination of Status as a Participant.
Nothing contained herein shall be deemed or construed as creating any agreement
of employment between a Participant and any member of the Ward Group or a right
of a Participant to employment by any member of the Ward Group. From and after
the date that a Participant ceases to own any Shares and ceases to hold any
Options or Purchase Rights, except for the provisions of Article VI, he shall
no longer be deemed to be a Participant for purposes of these Terms and
Conditions and all rights he may have hereunder (including, without limitation,
the right to exercise any option herein granted) shall terminate. For the
purposes of this Section 7.3, a Participant shall be deemed to own all Shares
owned by his Permitted Transferees.
7.4 Notices. All notices required hereunder shall be in writing and shall be
deemed served when delivered personally to the person for whom intended or sent
by confirmed facsimile, or two days after deposit in the United States Mail,
certified mail, return receipt requested, or two days after deposit with a
recognized national overnight courier service addressed to the persons for whom
intended at the following respective addresses:
The Company:
Montgomery Ward Plaza
Chicago, IL 60671-0042
Attention: Chairman and Chief Executive Officer
The Designator:
c/o The Company
Montgomery Ward Plaza
Chicago, IL 60671-0042
Any Participant, or
Permitted Transferee,
as the case may be:
at the last known address
of said Participant or
Permitted Transferee,
as the case may be,
as disclosed by the books
and records of the Company;
GE Capital:
260 Long Ridge Road
Stamford, CT 06902
Attention: General Manager, Corporate Finance Group
with a copy to:
Associate General Counsel, Corporate Finance Group
at the same address
and/or to such other persons and/or at such other addresses as may be
designated by written notice served in accordance with the provisions hereof.
7.5 Miscellaneous. The use of the singular or plural or masculine, feminine
or neuter gender shall not be given an exclusionary meaning and, where
applicable, shall be intended to include the appropriate number or gender, as
the case may be.
28
<PAGE>
7.6 Descriptive Headings. Title headings are for reference purposes only and
shall have no interpretative effect.
7.7 Waivers. No action taken pursuant to any provisions herein, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action. The waiver by
any party hereto of a breach of any provision of these Terms and Conditions
shall not operate or be construed as waiver of any preceding or succeeding
breach and no failure by any party to exercise any right or privilege hereunder
shall be deemed a waiver of such party's rights or privileges hereunder or
shall be deemed a waiver of such party's rights to exercise the same at any
subsequent time or times hereunder. The preceding sentence shall not apply to
the failure of a party to exercise a specific option granted to that party
pursuant to the terms hereof within the period of time provided herein. Any
waiver shall be in writing, signed by the waiving party.
7.8 Binding Effect; Enforcement. These Terms and Conditions shall be binding
upon and inure to the benefit of the parties hereto, their heirs,
representatives, successors and permitted assigns. Each Participant and each of
his or her Permitted Transferees agrees and acknowledges that its breach of any
of the provisions contained herein would cause irreparable injury and that
monetary damages would be inadequate. Accordingly, each Participant and each of
his or her Permitted Transferees agrees that, in addition to all other legal
rights and remedies, the aggrieved party shall be entitled to specific
performance of the rights granted to it hereunder.
7.9 Applicable Law. These Terms and Conditions shall be governed as to
validity, construction and in all other respects by the internal laws of the
State of Delaware.
7.10 Severability. The invalidity of any provision hereof or portion of a
provision shall not affect the validity of any other provision or the remaining
portion of the applicable provision.
7.11 Resolution of Certain Ambiguities and Conflicts. In the event of any
ambiguity or conflict in these Terms and Conditions (i) with respect to whether
any particular Shares constitute Vested Shares, (ii) the Percentage of Vesting
applicable thereto, or (iii) the application of the provisions of Article III
to any particular Participant and his or her Permitted Transferees, the
ambiguity or conflict shall be resolved by the Designator in his sole
discretion.
7.12 Authority to Give Consents, Approvals. etc. As long as a Voting Trust
Agreement shall be in effect, any votes, approvals, waivers or consents of
Shareholders whose Shares are subject to such Voting Trust Agreement shall be
made by the Voting Trustee, rather than the beneficial owners of such Shares,
except that for the purposes of Section 7.2 (a), the beneficial owner of such
Shares rather than the Voting Trustee, shall be the person to give such
approval, waiver or consent.
IN WITNESS WHEREOF, the undersigned Participant agrees to and has executed
these Terms and Conditions as of the day of , 19 .
PARTICIPANT:
-------------------------------------
signature
-------------------------------------
printed name
-------------------------------------
street address
-------------------------------------
city, state, zip code
Accepted and agreed to:
MONTGOMERY WARD HOLDING CORP.
By: _________________________________
29
<PAGE>
EXHIBIT 5
December 27, 1994
Montgomery Ward Holding Corp.
Montgomery Ward Plaza
Chicago, Illinois 60671-0042
RE: MONTGOMERY WARD HOLDING CORP.
REGISTRATION STATEMENT ON FORM S-8
(THE "REGISTRATION STATEMENT")
Gentlemen:
We have served as counsel to Montgomery Ward Holding Corp., a Delaware
corporation (the "Company"), in connection with the above-referenced
Registration Statement. We have examined the Certificate of Incorporation of
the Company, its By-laws, minutes of meetings of stockholders and directors and
such other records and documents as we consider necessary for the purpose of
rendering this opinion.
In our opinion:
1. The Company is organized and existing under the Business Corporation
Law of the State of Delaware.
2. The Company has authorized 2,400,000 shares of Class A Common Stock,
Series 3, $.01 par value (the "Series 3 Shares"), of which zero Series 3
Shares are issued and zero Series 3 Shares are outstanding.
3. The 2,000,000 Series 3 Shares covered by the Registration Statement to
be awarded or sold by the Company, when issued and delivered by the Company
in accordance with the terms of the Montgomery Ward & Co., Incorporated
Stock Ownership Plan, and the Voting Trust Certificates to be issued and
exchanged therefor, will be validly issued, fully paid, and non-assessable
when so issued.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "INTERESTS
OF NAMED EXPERTS AND COUNSEL" that is part of the Registration Statement.
Very truly yours,
Altheimer & Gray
<PAGE>
EXHIBIT 23(A)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement (Form S-8) of our report which is
included in Montgomery Ward Holding Corp.'s annual report on Form 10-K for the
year ended January 1, 1994, and to all references to our firm included in this
Registration Statement.
Arthur Andersen LLP
Chicago, Illinois,
December 23, 1994.
<PAGE>
EXHIBIT 24(A)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Bernard F. Brennan
-------------------------------------
Bernard F. Brennan, Chairman, Chief
Executive Officer and a Director
(being the principal executive
officer of the Corporation)
<PAGE>
EXHIBIT 24(B)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Bernard W. Andrews
-------------------------------------
Bernard W. Andrews, Director
<PAGE>
EXHIBIT 24(C)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Richard Bergel
-------------------------------------
Richard Bergel, Director
<PAGE>
EXHIBIT 24(D)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman and Edwin G.
Pohlmann, and each of them, his true and lawful attorneys-in-fact and agents
each with full power to execute, in his name and in each and every capacity, a
Registration Statement on Form S-8 of this Corporation in connection with the
registration of 2,000,000 shares of Class A Common Stock, Series 3, par value
$.01 per share, and Voting Trust Certificates representing such 2,000,000
shares of Class A Common Stock, and any amendments thereto, with all exhibits
thereto, and any and all documents in connection therewith, and to file the
same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Spencer H. Heine
-------------------------------------
Spencer H. Heine, Director
<PAGE>
EXHIBIT 24(E)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Myron Lieberman
-------------------------------------
Myron Lieberman, Director
<PAGE>
EXHIBIT 24(F)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ G. Joseph Reddington
-------------------------------------
G. Joseph Reddington, Director
<PAGE>
EXHIBIT 24(G)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Silas S. Cathcart
-------------------------------------
Silas S. Cathcart, Director
<PAGE>
EXHIBIT 24(H)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ David D. Ekedahl
-------------------------------------
David D. Ekedahl, Director
<PAGE>
EXHIBIT 24(I)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ Denis J. Nayden
-------------------------------------
Denis J. Nayden, Director
<PAGE>
EXHIBIT 24(J)
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the individual whose signature
appears below hereby constitutes and appoints John L. Workman, Edwin G.
Pohlmann and Spencer H. Heine, and each of them, his true and lawful attorneys-
in-fact and agents each with full power to execute, in his name and in each and
every capacity, a Registration Statement on Form S-8 of this Corporation in
connection with the registration of 2,000,000 shares of Class A Common Stock,
Series 3, par value $.01 per share, and Voting Trust Certificates representing
such 2,000,000 shares of Class A Common Stock, and any amendments thereto, with
all exhibits thereto, and any and all documents in connection therewith, and to
file the same, pursuant to the Securities Act of 1933, as amended;
AND FURTHER, the undersigned hereby grants to said attorneys-in-fact and
agents, and to each of them, full power and authority to do and perform any and
all acts and things essential or necessary to be done, as fully to all intents
and purposes as he might or could do in person, in connection with the proper
exercise of the powers granted hereunder.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 31st
day of October, 1994.
NAME AND TITLE: /s/ James A. Parke
-------------------------------------
James A. Parke, Director
