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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 (Fee Required)
For the 52-Week Period Ended Commission File
December 31, 1994 No. 0-17540
MONTGOMERY WARD HOLDING CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3571585
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Montgomery Ward Plaza, Chicago, Illinois 60671-0042
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (312) 467-2000
Securities registered pursuant to Section 12(b) of the Act
Title of each class Name of each exchange
on which registered
Not Applicable None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Series 1, $.01 Par Value
(Title of class)
Class A Common Stock, Series 2, $.01 Par Value
(Title of class)
Voting Trust Certificates representing Shares of Class A Common
Stock, Series 1, $.01 Par Value
(Title of class)
Voting Trust Certificates representing Shares of Class A Common
Stock, Series 2, $.01 Par Value
(Title of class)
Class B Common Stock, $.01 Par Value
(Title of class)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. .
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
At March 22, 1995, there were 19,204,435 shares of Class A Common
Stock and 25,000,000 shares of Class B Common Stock of the
Registrant outstanding.
Part III incorporates information by reference from the proxy
statement for the annual meeting of shareholders to be held on May
12, 1995.
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PART I
Item 1. Business.
General
Montgomery Ward Holding Corp., a Delaware corporation formerly
named BFB Acquisition Corp. (the Company or MW Holding), and its
wholly-owned subsidiary, Montgomery Ward & Co., Incorporated
(Montgomery Ward), are engaged in retail merchandising and direct
response marketing (including insurance) in the United States. See
Note 20 to the Consolidated Financial Statements for financial
information regarding these segments.
Founded in 1872 and incorporated in Illinois in 1968, Montgomery
Ward is one of the nation's largest retail merchandising
organizations. As of December 31, 1994, Montgomery Ward and its
indirectly, wholly-owned subsidiary Lechmere, Inc., a Massachusetts
corporation (Lechmere), operated 402 retail stores in 43 states
with approximately 29 million square feet of selling space. In
addition, Montgomery Ward operated 13 liquidation centers which
sell overstock merchandise, 22 distribution facilities and 112
product service centers.
Montgomery Ward offers life and health insurance, revolving
credit insurance, club products and other consumer services through
Signature Financial/Marketing, Inc., a Delaware corporation
(Signature), and through Signature's subsidiaries (collectively,
with Signature, the Signature Group). Signature is one of the
largest direct marketing companies in the United States.
Merchandising
Montgomery Ward has grown to become one of the largest privately
held retailers in the United States with over $7 billion in annual
revenues. The Company is among the largest retailers in the
country in electronics, appliances, furniture and fine jewelry. It
is also one of the largest retailers of many prominent name brands,
including Sony, Maytag, General Electric, La-Z-Boy, Sealy, Lee,
Munsingwear and Bugle Boy.
Montgomery Ward's specialty concepts combine a focus on specific
customer needs, dominant merchandise assortments, updated
presentation and aggressive marketing strategies. The specialty
categories within Montgomery Ward are the following:
Product Category Specialty Concept
Appliances and Electronics Electric Avenue and
Electric Avenue & More
Home Furnishings Home Ideas and Rooms & More
Automotive Auto Express
Apparel Apparel Store and Kids Store
Jewelry Gold 'N Gems
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Item 1. Business. (continued)
Merchandising (continued)
Each specialty strategy has its own business structure which
focuses on its specific competition, customer preferences and
merchandising, marketing and customer service priorities. However,
being a leading national retailer with multiple specialty concepts
provides the Company with significant buying and cost leverage.
Electric Avenue is a combined consumer electronics and appliance
superstore offering all major product categories, including video,
audio, home office, telephones, electronic games and kitchen,
laundry and other major appliances. Electric Avenue has a
significant national brand name assortment, including Sony, Maytag,
General Electric, Panasonic, IBM, Apple, Bose, Nintendo and Sega.
Its national brands are supplemented with proprietary brands,
exclusive to Montgomery Ward for certain electronic and appliance
categories, featuring the Bell + Howell and Admiral names under
trademark licensing agreements.
Home Ideas offers a full complement of home furnishings:
furniture, bedding, home accessories, kitchen accessories and
domestic soft goods. The Rooms & More concept offers accessorized
furniture room groupings to provide customers the convenience of
coordinated furniture pieces and accessories aggressively priced
through tiered discounts on the purchase of multiple pieces. The
broad name brand selection includes Bassett, Lane and La-Z-Boy, and
the Company is one of the few retailers to offer all four major
mattress brands (Simmons, Sealy, Serta and Spring Air). The
success of the Home Ideas and Rooms & More specialty concepts has
resulted in Montgomery Ward becoming one of the four largest
furniture retailers in the United States.
Auto Express focuses on the sale and installation of tires,
batteries, brakes and shocks. Montgomery Ward is a major retailer
of Michelin, B.F. Goodrich, Bridgestone, Monroe and NAPA products.
Auto Express supplements its dominant merchandise offering with a
strong commitment to customer service and a focus on those services
it is capable of delivering at a high performance level. Auto
Express adds creditability to its service commitment through its
marketing pledges which include price matching guarantees, service
time guarantees and a "No Excuses" refund/replacement guarantee for
30 days following service.
The Apparel Store and Kids Store offers womens', mens',
childrens' and intimate apparel as well as footwear and
accessories. Each category carries merchandise dominance and
delivers a focused, contemporary and coordinated offering which
matches middle income casual and career lifestyles. An impressive
offering of prominent name brands has been built, including Lee,
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Item 1. Business. (continued)
Merchandising (continued)
Bugle Boy, Playtex, Bestform and Converse. In addition, the
Company's creation of a product development organization has
enabled it to develop proprietary brands for certain product
categories, such as Munsingwear mens' apparel, Ship N Shore womens'
apparel and Bike athletic and activewear apparel.
Gold 'N Gems is a jewelry specialty concept which sells diamonds,
gem stones, gold and watches. Gold 'N Gems emphasizes exceptional
values through a wide range of price points. Montgomery Ward has
become one of the largest fine jewelry retailers in the country.
Montgomery Ward currently operates 340 full line stores featuring
all of the specialty concepts and 62 stores featuring a variety of
other formats, including 28 Lechmere stores and 6 Electric Avenue
& More stores. Full line Montgomery Ward stores average
approximately 75,000 square feet of selling space.
Montgomery Ward's retail business is seasonal, with one-third of
the sales traditionally occurring in the fourth quarter. The
results of Montgomery Ward's operations are also subject to changes
in consumer demand associated with general economic conditions,
which is especially true with respect to demand for durable goods
and other "big ticket" merchandise.
Montgomery Ward's retail operations are supported by its
corporate buying division which has its principal office in
Chicago, and includes foreign purchasing offices in Italy, Hong
Kong, Taiwan, Japan, Singapore and Korea. In addition to its
buying staff, the corporate buying division employs designers and
technical teams to ensure quality control of Montgomery Ward's
merchandise.
The Company considers logistics to be important to its operations
and continued to invest in logistics during 1994. A new
distribution center in Phoenix, Arizona was opened in May, 1994 to
service Montgomery Ward's western territory. The new Phoenix
facility, along with the facilities opened in Tampa in 1993,
Baltimore in 1992 and southern California in 1991, incorporates
distribution management systems which are more dynamic in tracking
merchandise and facilitating inventory planning and customer
service.
Corporate Expansion
In March 1994, Montgomery Ward acquired Lechmere, a chain of
northeast-based superstores. The Company's acquisition of Lechmere
adds substantial volume to a highly successful specialty segment of
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Item 1. Business. (continued)
Corporate Expansion (continued)
the Company's business. The addition of Lechmere to Montgomery
Ward's sales base contributed to an over 27% increase and record
volume of over $4 billion in its sales of home-oriented products
(home furnishings, home office, electronics and appliances).
Lechmere offers extensive selections of hardline merchandise and
currently operates 28 stores averaging approximately 50,000 square
feet of selling space. Lechmere has built a strong customer
franchise and is believed to be the marketshare leader in the
greater Boston area in many of the products it sells. It offers a
comprehensive selection of nationally recognized brands which are
now being supplemented with Montgomery Ward's successful
proprietary brands. Leverage opportunities from the acquisition
are being realized through added buying volume and expense
consolidation.
In 1994, Montgomery Ward opened 16 new stores (including 4
Lechmere stores), and has opened 90 new stores (including the 4
Lechmere stores referenced earlier), since 1985. The ongoing store
opening program has resulted in such stores representing a
significant portion, 22%, of the Company's total stores. Six of
the new store openings in 1994 were Montgomery Ward's newest
specialty format, Electric Avenue & More. This new retail concept
combines Montgomery Ward's most successful strategies, Electric
Avenue, Rooms & More and Gold 'N Gems, with Lechmere's strong
offering in entertainment and housewares to create a dominant home-
oriented product offering. Electric Avenue & More is designed for
mid-size markets with populations of 150,000 to 300,000 and for a
superstore format of approximately 65,000 gross square feet.
Montgomery Ward has substantial buying and operating leverage
compared to the more limited competition in these markets. Given
the favorable performance of the Electric Avenue & More stores
opened in 1994, the Company plans to increase the Electric Avenue
& More openings going forward. In addition, the Company is
planning to continue opening full line Montgomery Ward stores in
regional shopping centers and Lechmere stores in the northeast
United States.
In August 1994, Montgomery Ward introduced "The Electric Avenue
& More Program", a home shopping program carried on ValueVision, a
home-shopping television program. The test was the first
television shopping program produced for a major national retailer
of consumer electronics and appliances. "The Electric Avenue &
More Program" generated strong sales of high quality, brand name,
big ticket merchandise and offered customers the convenience of
using the Montgomery Ward credit card to finance their purchases.
In December 1994, Montgomery Ward announced its plan to purchase an
equity interest in ValueVision International, Inc., through an
agreement allowing Montgomery Ward to acquire up to 49% ownership
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Item 1. Business. (continued)
Corporate Expansion (continued)
of the company, should ValueVision achieve certain growth targets
in the number of cable homes that carry its programming.
ValueVision also reached a 7-year, non-cancelable agreement with
Time Warner Cable Company to launch ValueVision programming in 2.5
million homes. After this addition, 14 million homes will be able
to receive ValueVision programs, and 3.4 million of these will be
able to receive programming 24 hours per day. See Note 19 to the
Consolidated Financial Statements.
In July, 1994, Montgomery Ward, through a subsidiary, became a
limited partner in Merchant Partners Limited Partnership. The
purpose of this partnership is to invest in new and emerging growth
businesses and leveraged buy-outs to achieve a superior rate of
return. Montgomery Ward made a capital contribution of $1 million
to Merchant Partners Limited Partnership in 1994. Additional
funding may be required within limitations set forth in the limited
partnership agreement. The cumulative maximum capital contribution
is $40 million.
Montgomery Ward considers acquisitions, particularly those that
would generate synergies with existing businesses, to be an area of
growth for the Company and is actively seeking such opportunities.
Direct Marketing
Montgomery Ward offers life and health insurance, revolving
credit insurance, club products and other consumer services through
the Signature Group. As a recognized leader in sophisticated
segmentation scoring models, Signature is among the premier direct
marketers in the country. During 1994, Signature made 380 million
direct mail solicitations and 50 million telemarketing
presentations from its 13 telemarketing centers located throughout
the United States. At year-end 1994, Signature had 10.4 million
policyholders and club memberships, a 33% increase over year-end
1993.
The Company believes that Signature has the broadest major
product offering among direct marketers. Its legal services club
is the largest United States provider of voluntary legal services,
it operates the second largest national auto club in the country,
and it has a unique dental plan which offers discounted and free
dental services for a monthly fee. Signature has developed a
substantial network of service providers to support these clubs.
Its dispatch towing network for Auto Club members exceeds 6,500
towing companies with a fleet of over 32,000 tow trucks. Its legal
plan network includes 2,200 attorneys with thirteen years average
experience and the dental plan includes 7,900 dentists with sixteen
years average experience.
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Item 1. Business. (continued)
Direct Marketing (continued)
Signature has marketing rights to the 8.8 million promotable
accounts in the Montgomery Ward credit card file, and Montgomery
Ward credit cardholders comprise the majority of Signature's
customers. The size and customer dynamics of the Montgomery Ward
file have allowed Signature to attain economies of scale which have
lowered its marketing and operating costs. Signature also markets
its products and services to the customers of more than 50 other
entities, providing 28.3 million promotable accounts, including
some of the nation's largest financial institutions, oil companies
and retailers. Signature's major clients include Chemical Bank,
First National Bank of Chicago, Mobil, Chase, Texaco, Associates,
USAA and CUNA, and revenues from these clients have grown to 31% of
its revenues.
Following successful introduction in Chicago and Minneapolis in
1993 of Signature's newest product, Dining a la Card, the Company
expanded into 15 major markets, including the West Coast, by year-
end 1994. Dining a la Card provides cash payments and marketing
opportunities to participating restaurants in exchange for future
restaurant purchase credits. The Dining Member receives a direct
monthly cash rebate equal to 20% of their entire bill, including
taxes and gratuity, at participating restaurants. Dining a la Card
then automatically withdraws its purchase credits from the
restaurant. The Company expects to continue expanding Dining a la
Card to additional markets in 1995.
In April 1994, Signature acquired Greater California Dental Plan
Services, Inc. and National Dental Services, Inc., California-based
companies which provide dental referral services and added
approximately 250,000 members to its dental services plan. Through
acquisition of these companies, Signature will be able to expand
its customer base into new demographic and geographic markets.
In October 1994, Signature acquired the North American operations
of Credit Card Sentinel, which offers protection for lost or stolen
credit cards. Signature is now the second largest credit card
registration company in the United States and Canada.
See Note 20 to the Consolidated Financial Statements for
restrictions on dividends which may be paid by insurance
subsidiaries of Signature.
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Item 1. Business. (continued)
Specialty Catalog
In 1991, Montgomery Ward, through two newly formed subsidiaries,
became a 50% partner in Montgomery Ward Direct L.P. (MW Direct), a
specialty catalog business. The other 50% partners are subsid-
iaries of Fingerhut Companies, Inc. MW Direct generated $188
million in revenues in 1994, compared to $116 million in 1993, an
increase of 62%. These revenues are not included in the Company's
revenues. Following testing of a variety of specialty catalogs in
its first years of operation, Montgomery Ward Direct announced in
February 1995 that it will focus its marketing efforts on its most
successful specialty segment, its Home Catalog. In addition, it
will continue to produce and distribute gifts and certain seasonal
specialty merchandise catalogs which leverage Fingerhut's
resources. These changes, which would reduce revenues in the
short-term, are expected to enhance Montgomery Ward Direct's
profitability and strategically position it for future growth.
Competition and Regulation
The sale of merchandise by Montgomery Ward and Lechmere is
conducted under highly competitive conditions. Buying and selling
are each done in open competitive markets. Montgomery Ward's
stores are in competition with specialty stores, department stores
and other types of retail outlets in the areas in which they
operate. The Company believes that dominance of merchandise
assortments, brand names, competitive pricing and availability of
services such as credit, delivery, installation and repair, are the
principal factors which differentiate competitors. The Company
believes it competes effectively with respect to all of these
factors despite strong competitive pressures. To meet competition,
Montgomery Ward is continuously striving to improve the efficiency
and effectiveness of its operations and to modernize and specialize
its facilities.
Signature's insurance operations are highly regulated and
conducted under highly competitive conditions. To date, Signature
has been able to compete effectively with other companies which
offer programs similar to those provided by Signature. Signature
also competes with traditional methods of marketing that enjoy
widespread consumer acceptance, including unaffiliated dentists and
lawyers. Insurance companies operate pursuant to specific state
statues as well as rules and regulations promulgated by various
state insurance departments and are required to file reports with
such agencies at least quarterly.
Telemarketing and direct mail solicitations are regulated at
state and federal levels, and management believes that these
activities will increasingly be subject to such regulation. Such
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Item 1. Business. (continued)
Competition and Regulation (continued)
regulation may limit Signature's ability to solicit new members or
to offer more products and services to existing members and may
materially adversely affect Signature's business and revenues.
The requirements of environmental protection laws and regulations
have not had a material effect upon Montgomery Ward's operations.
Compliance may, in certain cases, lengthen the lead time of
expansion plans and could increase construction and operating
costs.
Account Purchase Agreement
Montgomery Ward extends credit to its customers under an open-end
revolving credit plan. Montgomery Ward's private label credit card
sales were 55.9% and 57.4% of total sales for 1994 and 1993,
respectively. Bankcard sales were an additional 14.9% and 13.3% of
total sales for 1994 and 1993, respectively. Prior to June 22,
1988, Montgomery Ward financed the receivables under its revolving
credit plan by the sale of such receivables to a wholly-owned
subsidiary, Montgomery Ward Credit Corporation (Montgomery Ward
Credit). On June 22, 1988, Montgomery Ward Credit became a wholly-
owned subsidiary of General Electric Capital Corporation (GE
Capital).
On June 24, 1988, Montgomery Ward and Montgomery Ward Credit
entered into an Account Purchase Agreement pursuant to which
Montgomery Ward Credit purchases receivables from time to time
from, and provides services to, Montgomery Ward. Under this
agreement, Montgomery Ward Credit has the exclusive right to
operate the Montgomery Ward private label credit card system and
the obligation to purchase for their face value (and Montgomery
Ward is obligated to sell) all the receivables generated by the
Montgomery Ward private label credit card system, including those
generated through MW Direct, up to $6 billion at any time
outstanding. If Montgomery Ward desires to sell its customer
receivables at a time when Montgomery Ward Credit owns $6 billion
or more of such receivables, alternative arrangements, such as the
sale of receivables to banks or other financial institutions, would
be required unless Montgomery Ward Credit agrees to purchase the
excess. As of December 31, 1994, there were $5.2 billion of
Montgomery Ward private label credit card receivables owned by
Montgomery Ward Credit and the average outstanding amount of such
receivables owned by Montgomery Ward Credit during 1994 was $4.9
billion.
Pursuant to the Account Purchase Agreement, Montgomery Ward
Credit bears certain credit promotion expenses, while Montgomery
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Item 1. Business. (continued)
Account Purchase Agreement (continued)
Ward retains certain specified in-store service responsibilities
with respect to credit operations. Decisions regarding certain
credit matters are determined by a management committee with
representatives from each party. Under the Account Purchase
Agreement, Montgomery Ward is required to pay Montgomery Ward
Credit the excess interest costs on a monthly basis if a blended
interest rate applicable to Montgomery Ward Credit's finance costs
with respect to the receivables exceeds 10% per annum. To date,
the blended interest rate has been less than 10%.
Under the Account Purchase Agreement, Montgomery Ward and
Montgomery Ward Credit have made certain arrangements with respect
to credit losses. Previously, credit losses were shared.
Effective January 1, 1994, Montgomery Ward bears the entire risk of
credit losses until such time as Montgomery Ward or Montgomery Ward
Credit elects to revert to the prior loss sharing arrangement.
Montgomery Ward's remaining liability for credit losses for 1991
through 1994, and its liability for credit losses for 1995 through
1997, may be deferred, and such deferred credit losses are payable
by Montgomery Ward to Montgomery Ward Credit in early 1998. To the
extent these deferred credit losses, less the deferred amount of
finance charges (other then incremental finance charges) described
below exceeds $300 million at any time, such excess is to be paid
annually in cash. The Company does not expect such amounts for the
period through 1997 to exceed the $300 million limitation.
Interest on Montgomery Ward's deferred liability for credit losses
is payable at a rate equal to rates on comparable borrowings of
Montgomery Ward.
In exchange for Montgomery Ward's agreement to allow Montgomery
Ward Credit to increase finance charge rates in selected states,
Montgomery Ward receives a share of incremental finance charges.
These incremental finance charges are deferred and payable by
Montgomery Ward Credit to Montgomery Ward in early 1998, together
with interest at the same rate as amounts owed by Montgomery Ward
to Montgomery Ward Credit. Incremental finance charges are
generated only on purchases subsequent to the date such finance
charge rates are increased. In the event that, due to the increase
in finance charge rates, certain refunds are required to be made,
Montgomery Ward and Montgomery Ward Credit have agreed to share the
financial risk. In addition, legislation has from time to time
been introduced in certain states which, if enacted, may impose
limitations on the ability to implement or maintain all or a
portion of such rate increases, in which case Montgomery Ward's
share of rate increases may be substantially reduced.
In addition to sharing incremental finance charges, beginning
in 1994, until such time as Montgomery Ward or Montgomery Ward
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Item 1. Business. (continued)
Account Purchase Agreement (continued)
Credit elects to revert to the prior loss sharing arrangements,
with respect to each fiscal year, Montgomery Ward Credit will make
a payment (subject to the deferral for 1994 through 1997) to
Montgomery Ward of a share of all finance charges in an amount
equal to (a) if credit losses are 5% or less of average gross
receivables, the lesser of 3.9% of average gross receivables or the
actual credit losses; (b) if credit losses are greater than 5% but
less than or equal to 8% of average gross receivables, 3.9% of
average gross receivables plus 50% of the amount by which actual
credit losses exceed 5% of average gross receivables; or (c) if
credit losses exceed 8% of average gross receivables, 5.4% of
average gross receivables plus the amount by which credit losses
exceed 8% of average gross receivables. Nothwithstanding the
foregoing, in certain circumstances the amounts payable to
Montgomery Ward by Montgomery Ward Credit with respect to its share
of all finance charges are limited as follows: in the event that
total finance charges billed by Montgomey Ward Credit during a
fiscal year less Montgomery Ward's share of the incremental finance
charges are less than the amount which would otherwise be payable
to Montgomery Ward by Montgomery Ward Credits as it's share of the
finance charges as computed above, the payments by Montgomery Ward
Credit to Montgomery Ward will be reduced to the amount of such
total finance charges less such incremental finance charges.
In connection with the foregoing arrangements, the Company has
executed notes for the deferred credit losses which totalled $161
million with respect to credit losses from 1991 through 1994. The
incremental finance charge amount owed by Montgomery Ward Credit to
Montgomery Ward as of the end of 1994 was $24 million. See Note 4
to the Consolidated Financial Statements.
Montgomery Ward Credit has the right of first refusal to
implement certain new financing programs proposed by Montgomery
Ward.
The Account Purchase Agreement will be in effect until December
31, 2005 and thereafter from year to year unless either party gives
to the other not less than ten years prior notice of its election
to terminate. Except upon the occurrence of certain events of
default, the Account Purchase Agreement may generally not be
terminated by either party prior to December 31, 2005. GE Capital
has guaranteed Montgomery Ward Credit's obligations under the
Account Purchase Agreement.
Under the terms of a Letter Agreement dated June 24, 1988 among
Signature, Montgomery Ward Credit and Montgomery Ward, Montgomery
Ward Credit purchases the customer accounts receivable of Signature
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Item 1. Business. (continued)
Account Purchase Agreement (continued)
on terms similar to those contained in the Account Purchase
Agreement, except for certain fees. In 1994, Signature paid
approximately $5 million to Montgomery Ward Credit for
administrative services provided by Montgomery Ward Credit in
connection with Signature products.
Associates
At December 31, 1994, Montgomery Ward and its subsidiaries
employed the equivalent of 58,600 full-time associates. During
certain seasons, temporary associates are added and peak employment
is approximately 72,600 associates during the Christmas season.
Approximately 2,650 Montgomery Ward and Lechmere associates are
covered by various collective bargaining agreements. The majority
of the agreements are currently in the process of negotiation with
the remaining contracts expiring in 1995. Montgomery Ward has
experienced no major labor-related interruption or curtailment of
operations during the last 15 years.
Item 2. Properties.
At December 31, 1994, the Company owned or leased 509 retail,
distribution and other operating facilities. The Company's
properties are located throughout the continental United States and
cover approximately 60 million square feet.
These properties are summarized as follows:
Number of Approximate
Use Locations Total Square Feet
Montgomery Ward
Retail Stores:
Full Line . . . . . . . . .340 44,215,000
Limited Line. . . . . . . 34 1,652,000
Lechmere Retail
Stores. . . . . . . . . . 28 2,543,000
Corporate Office
Complex . . . . . . . . . . 1 2,975,000
Miscellaneous Operating
Locations . . . . . . . . .106 8,256,000
Total Locations. . . . .509 59,641,000
Owned and leased retail stores include approximately 29 million
square feet of selling space and 19 million square feet devoted to
storage, office and related uses. Miscellaneous operating
locations include warehouses, office buildings and distribution
centers, but exclude vacant land parcels and properties held for
disposition. See Note 12 to the Consolidated Financial Statements
for information with respect to leased properties.
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Item 2. Properties. (continued)
The nationwide scope of Montgomery Ward's operations helps
minimize the impact of changes in the economies of specific regions
on the overall performance of its retail stores and allows
Montgomery Ward to merchandise to a variety of demographic
profiles. The regional distribution of Montgomery Ward and
Lechmere retail stores as of December 31, 1994 is indicated in the
following table:
State Total
Alabama 3
Arizona 11
Arkansas 5
California 57
Colorado 13
Connecticut 4
Florida 22
Georgia 3
Idaho 1
Illinois 36
Indiana 8
Iowa 6
Kansas 6
Kentucky 2
Louisiana 6
Maine 1
Maryland 16
Massachusetts 13
Michigan 16
Minnesota 10
Missouri 10
Montana 2
Nebraska 2
Nevada 3
New Hampshire 6
New Mexico 3
New York 18
North Carolina 4
North Dakota 1
Ohio 5
Oklahoma 5
Oregon 8
Pennsylvania 14
Rhode Island 1
South Carolina 5
Tennessee 2
Texas 45
Vermont 1
Virginia 17
Washington 3
West Virginia 5
Wisconsin 2
Wyoming 1
402
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Item 3. Legal Proceedings.
The Company and its subsidiaries are engaged in various
litigation and have a number of unresolved claims. While the
amounts claimed are substantial and the ultimate liability with
respect to such litigation and claims cannot be determined at this
time, management is of the opinion that such liability, to the
extent not provided for through insurance or otherwise, is not
likely to have a material impact on the financial condition or the
results of operations of the Company.
In 1979, a suit entitled "United States v. Midwest Solvent
Recovery, Inc., et.al." (Civil Action Number H-79-556) was
initiated by the United States Department of Justice on behalf of
the Environmental Protection Agency in the U.S. District Court for
the Northern District of Indiana, and an Amended Complaint was
filed in January 1984. This suit is against Standard T Chemical
Company, Inc., a Delaware corporation and wholly-owned subsidiary
of Montgomery Ward (Standard T), and others involving two waste
disposal sites and seeks reimbursement for the cost of surface
clean-up, investigation studies concerning possible contamination
of the soil and ground water and remedial action. In January 1990,
the United States filed a second Amended Complaint seeking inter
alia, treble damages and monetary sanctions. Standard T has signed
a consent decree, whereby it was obligated to provide a financial
assurance up to $3 million for remediation of the site and paid
civil penalties in the amount of $.1 million. The Company
currently anticipates that its obligation will not exceed those
amounts.
In 1985, the New York Environmental Protection Agency brought an
action for remediation of a site in Staten Island, New York against
the owner of the property. The owner asserted that Montgomery Ward
and Standard T, among others, generated wastes that were disposed
of at the site. Standard T is in the process of completing the
cleanup of this site and has purchased the site from the owner for
$1.45 million.
In February 1986, Standard T, along with approximately 330 other
companies, was notified by the United States Environmental
Protection Agency that the agency was mandating a remediation of
the contamination of the American Chemical Services, Inc. (A.C.S.)
site located in Griffith, Indiana, under authority vested in it by
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980. Standard T and a Montgomery Ward paint
factory were each identified as a Potentially Responsible Party
(PRP), under the terms of the Act because of their alleged status
as generators of hazardous waste ultimately disposed of at the
A.C.S. site. The Company will pay its proportionate share of the
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Item 3. Legal Proceedings. (continued)
costs of the studies, and may ultimately pay a share of the costs
of abating the contamination of the A.C.S. property. One estimate
by the EPA of future costs is $69 million with the Company alleged
to be responsible for 2 to 2 1/2% of total costs. However, these
costs cannot be estimated with any degree of accuracy at this time.
Thus, the Company is currently not in a position to estimate the
range or amount of potential exposure in this matter with a high
degree of certainty.
On or about December 10, 1990, the Company was served with a
Complaint and Notice of Opportunity for Hearing (Complaint),
alleging certain violations by the Company of the Federal Toxic
Substances Control Act (TSCA). The Complaint contains twenty-two
counts and alleges that the Company violated various regulations
concerning the use, disposal, storage and marking of
polychlorinated biphenyls (PCBs) at a warehouse facility located in
Kansas City, Missouri. The Complaint seeks a total civil penalty
of $.3 million.
Standard T and Montgomery Ward are also involved at various
stages with several other sites where Standard T and Montgomery
Ward have been notified or sued as a PRP. The potential liability
related to these sites cannot be estimated at this time.
Item 4. Submission of Matters to a Vote of Security Holders.
Pursuant to a Proxy Statement dated October 17, 1994, the
stockholders of the Company were asked to execute consents in lieu
of a special meeting of the stockholders of the Company. All of
the stockholders of record of the Company executed and returned the
consents before October 20, 1994. Pursuant to the consent, the
stockholders (i) approved a Certificate of Amendment to the
Certificate of Incorporation of the Company, authorizing 2,000,000
additional shares of Class A Common Stock, Series 3, and revising
the Certificate of Incorporation to conform the size of the Board
of Directors to its current membership; and (ii) approved an
amendment to the Montgomery Ward & Co., Incorporated Stock
Ownership Plan (the "Plan") reserving the 2,000,000 newly
authorized shares of Class A Common Stock, Series 3, of the
Company, for issuance under the Plan.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names and ages of the executive officers of
the Company as of March 17, 1995, and the positions each has held
during the past five years:
Bernard F. Brennan, 56, has been Chief Executive Officer
and a director of the Company since February 9, 1988, Chairman
since June 17, 1988 and was President from February 9, 1988 through
September 10, 1992. Mr. Brennan has been Chief Executive Officer
and a director of Montgomery Ward since May 13, 1985 and became
Chairman of Montgomery Ward on June 24, 1988. He served as
President of Montgomery Ward from May 13, 1985 through September
10, 1992. Mr. Brennan has been a director of Itel Corporation
since 1988 and a director of ANTEC Corporation since October 1993.
Richard M. Bergel, 59, has been Vice Chairman of the Company
since June 25, 1993 and a director since June 24, 1988. Prior
thereto he was Executive Vice President from June 17, 1988 through
June 24, 1993. Mr. Bergel has been Vice Chairman, Operations and
Catalog of Montgomery Ward since June 25, 1993. Prior thereto, he
was Executive Vice President and President of Specialty Catalogs of
Montgomery Ward from June 16, 1991 to June 24, 1993. He was
President of Store Operations from March 3, 1989 through June 15,
1991. Mr. Bergel has been President of MW Direct since October 21,
1991 and Chairman and Chief Executive Officer of Lechmere since
March 30, 1994.
Bernard W. Andrews, 53, has been President and a director of the
Company since January 28, 1994. Mr. Andrews has been President and
Chief Operating Officer of Montgomery Ward since January 28, 1994.
Prior thereto, he served as Executive Vice President of Operations
of Circuit City Stores, Incorporated from March 1991 to January
1994, and Executive Vice President of Marketing of Circuit City
Stores from October 1990 to February 1991. He was Executive Vice
President and President of Marketing of Montgomery Ward from May
18, 1990 through June 16, 1990 and Executive Vice President and
President of Home and Automotive Group from August 18, 1986 to May
17, 1990.
Spencer H. Heine, 52, has been an Executive Vice President,
Secretary and General Counsel of the Company since September 30,
1991 and a director since May 15, 1992. Prior thereto, he was
Senior Vice President, Secretary and General Counsel of the Company
from June 17, 1988 through September 29, 1991. Mr. Heine has been
Executive Vice President, Secretary and General Counsel of
Montgomery Ward and President-Montgomery Ward Properties since
April 12, 1994. Prior thereto, Mr. Heine served as Executive Vice
President, Legal and Financial Services of Montgomery Ward from
September 30, 1991 through April 11, 1994. He served as Senior
Vice President-Legal and Real Estate from March 28, 1990 through
<PAGE>
<PAGE>
Executive Officers of the Registrant (continued)
September 29, 1991. Mr. Heine was Chairman and Chief Executive
Officer of Signature from March 8, 1993 through April 11, 1994.
Prior thereto, he also served as President of Signature since
September 30, 1991.
Robert A. Kasenter, 48, has been an Executive Vice President of
the Company since February 21, 1992. Prior thereto, he was a
Senior Vice President of the Company from June 17, 1988 through
February 20, 1992. Mr. Kasenter has served as Executive Vice
President, Human Resources of Montgomery Ward since January 27,
1992 and was Senior Vice President-Human Resources and Customer
Satisfaction from June 23, 1988 to January 26, 1992.
Edwin G. Pohlmann, 47, has been an Executive Vice President since
September 30, 1991 and served as Chief Financial Officer of the
Company from September 30, 1991 to August 30, 1992. Prior thereto,
he was Senior Vice President and Chief Accounting Officer from May
18, 1990 to September 29, 1991, and Senior Vice President-Finance
from June 17, 1988 through May 17, 1990. Mr. Pohlmann has been
Executive Vice President, Merchandise and Store Operations of
Montgomery Ward since November 16, 1993. Prior thereto, he was
Executive Vice President, Merchandise Control from June 25, 1993
through November 15, 1993, Executive Vice President, Stores and
Finance of Montgomery Ward from January 27, 1992 to June 24, 1993
and prior thereto, Executive Vice President and Chief Financial
Officer since September 30, 1991. He served as Senior Vice
President-Store Operations of Montgomery Ward from June 16, 1991
through September 29, 1991 and was Senior Vice President-Finance of
Montgomery Ward from March 1, 1988 through June 15, 1991.
John L. Workman, 43, has been Executive Vice President, Chief
Financial Officer and Assistant Secretary of the Company since
January 28, 1994. Prior thereto, he served as Senior Vice
President, Chief Financial Officer and Assistant Secretary from
August 31, 1992 through January 27, 1994 and Vice President and
Assistant Secretary from May 15, 1992 through August 30, 1992. Mr.
Workman has been Executive Vice President and Chief Financial
Officer of Montgomery Ward since January 28, 1994 and served as
Senior Vice President and Chief Financial Officer from August 31,
1992 to January 27, 1994. Prior thereto, he served as Vice
President and Corporate Controller from January 16, 1991 through
August 30, 1992 and Corporate Controller from August 2, 1988
through January 15, 1991.
Tommy T. Cato, 53, served as an Executive Vice President of the
Company from May 15, 1992 until his current leave of absence which
began on February 4, 1994. Mr. Cato was Executive Vice President-
Logistics and Product Service of Montgomery Ward from November 8,
1990 until February 4, 1994 and was Senior Vice President-Logistics
<PAGE>
<PAGE>
Executive Officers of the Registrant (continued)
from March 3, 1989 until November 7, 1990. Mr. Cato is also on a
leave of absence from Montgomery Ward.
Richard C. Rusthoven, 54, served as an Executive Vice President
of the Company from May 15, 1992 until his current leave of absence
which began on November 1, 1992. Mr. Rusthoven was Executive Vice
President-Apparel of Montgomery Ward from February 20, 1992 through
October 31, 1992 and was Senior Vice President-Apparel from July 3,
1991 to February 19, 1992. He served as Vice President and General
Merchandise Manager, Men's Apparel, Footwear and Accessories
from June 6, 1990 to July 2, 1991. Prior thereto, he served
as President and Chief Operating Officer of Baddour, Inc., parent
company of Fred's Dollar Stores in Memphis, Tennessee from March
1990 to June 1990, and President and Chief Executive Officer,
Gentlemen's Warehouse from August 1989 to March 1990. Mr.
Rusthoven is also on a leave of absence from Montgomery Ward.
Carol J. Harms, 41, has been a Vice President and Treasurer of
the Company since January 1, 1989. Ms. Harms has been Vice
President and Treasurer of Montgomery Ward since May 1, 1988.
Robert F. Connolly, 51, has been Executive Vice President,
Apparel of Montgomery Ward since February 2, 1994. Prior thereto,
he was Senior Vice President and General Merchandise Manager,
Women's and Intimate Apparel, Accessories, Health and Beauty Aids
and Sundries of Wal-Mart Stores, Incorporated from August 1989 to
December 1993.
Gene C. McCaffrey, 49, has been Executive Vice President
Marketing, Sales Promotion and Business Development of Montgomery
Ward since November 30, 1994. Mr. McCaffrey served as Executive
Vice President-Marketing from August 4, 1992 to November 29, 1994,
Senior Vice President-Advertising from November 11, 1991 to August
3, 1992, Senior Vice President and General Merchandise Manager,
Intimates, Footwear and Accessories from September 19, 1991 to
November 10, 1991 and Senior Vice President-Merchandise Planning
from July 3, 1991 to September 18, 1991. Prior thereto, he served
as Vice President-Merchandise Planning from February 19, 1991 to
July 2, 1991, Vice President-Apparel Planning and Field
Merchandising from October 11, 1990 to February 18, 1991 and Vice
President-Apparel Planning and Product Development from July 28,
1989 to October 10, 1990.
G. Joseph Reddington, 53, has been a director of the Company and
of Montgomery Ward since September 22, 1994. Mr. Reddington has
been Chairman and Chief Executive Officer of Signature since April
12, 1994. Prior thereto, he was President of Sears Canada, Inc.
from 1989 until his retirement in December 1993. Mr. Reddington
has been a director of TransWorld Airlines since August 1993 and a
director of Loblaw Companies Ltd. since August 1994.
<PAGE>
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
There is no established public trading market for the Common
Stock of the Company. All shares are subject to restrictions on
transfers contained in the Stockholders' Agreement dated as of June
17, 1988, as amended and restated (Stockholders' Agreement), or the
Terms and Conditions (Terms and Conditions) imposed under the
Montgomery Ward & Co., Incorporated Stock Ownership Plan (Stock
Ownership Plan). It is not expected that a market will develop in
the near term.
Transfers of shares of Class A Common Stock are restricted for
a period of three years from certain applicable dates under the
Stockholders' Agreement and the Terms and Conditions. Transfers of
Class A shares purchased other than pursuant to the Stock Ownership
Plan are restricted for a period of three years from the holder's
first acquisition of any such shares, while transfers of shares
received under the Stock Ownership Plan are restricted for a period
of three years after the award of such shares, exercise of purchase
rights for such shares or grant of options with respect to such
shares, as applicable. After the applicable three-year periods,
limited transfers of such shares which have become vested in
accordance with the Stockholders' Agreement or the Terms and
Conditions, as applicable, are permitted, subject to certain rights
of first refusal. All of the Class B shares and virtually all of
the outstanding Class A shares are eligible for transfer.
Montgomery Ward declared and paid common stock dividends of $22 million
and preferred stock dividends of $2 million to the Company in 1994, which
declared and paid common stock dividends of $22 million and
preferred stock dividends of $2 million in 1994. For information
concerning limitations on the amount of dividends which Montgomery
Ward may pay, see Note 11 to the Consolidated Financial Statements.
Future payments of dividends, if any, are dependent upon future
levels of earnings and capitalization.
As of March 22, 1995, there were three holders of record of Class
A Common Stock, Series 1, one such holder of Class A, Common Stock,
Series 2, and one such holder of Class B Common Stock. No shares
of Class A Common Stock, Series 3, were outstanding as of that
date. As of March 22, 1995, there were 122 holders of record of
Voting Trust Certificates representing beneficial ownership in
shares of Class A Common Stock, Series 1, of which 946,785 shares
are pledged as collateral for notes issued to effect the repurchase
of shares. See Note 14 to the Consolidated Financial Statements.
There were 274 holders of record of Voting Trust Certificates
representing beneficial ownership in shares of Class A Common
Stock, Series 2.
<PAGE>
<PAGE>
Item 6. Selected Financial Data
The following summary of certain financial information for each
of the five fiscal years in the period ended December 31, 1994 has
been derived from the Consolidated Financial Statements of MW
Holding. Such information for each fiscal year should be read in
conjunction with the Consolidated Financial Statements and notes
thereto and the report of Arthur Andersen LLP beginning on page 27.
<TABLE>
<CAPTION>
As of and for the
52-Week 53-Week 52-Week
Period Ended Period Ended Period Ended
Dec. 29, Dec. 28, Jan. 2, Jan. 1, Dec. 31,
1990 1991 1993 1994 1994
(Dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Total
Revenues $5,595 $5,674 $5,806 $6,029 $7,038
Net Income
(a) 153 135 100 101 117
Net Income
Applicable
to Common
Share-
holders(a) 140 122 92 101 115
Net Income
per Class A
Common
Share (a) 2.79 2.40 2.01 2.29 2.68
Total
Assets 3,906 3,948 3,485 3,835 4,540
Long-Term
Debt 651 521 125 213 228
Obligations
Under
Capital
Leases 111 104 95 89 81
Total Share-
holders'
Equity 421 520 553 607 687
Redeemable
Preferred
Stock 90 90 - - 75
Cash Divi-
dends per
Common
Share - - .25 .50 .50
</TABLE>
(a) 1992 amounts are presented before cumulative effect of
changes in accounting principles. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the significant impact of
these changes.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis of results of operations
for the Company compares 1994 to 1993, as well as 1993 to 1992.
Montgomery Ward is on a 52- or 53-week fiscal year basis. As a
result, 1994 and 1993 are 52-week years, and 1992 is a 53-week
year. All dollar amounts are in millions, and all income and
expense items and gains and losses are shown before income taxes,
unless specifically stated otherwise.
The Company's retail business is seasonal, with one-third of the
sales traditionally occurring in the fourth quarter.
Results of Operations: 1994 Compared with 1993
Consolidated net income increased $16, or 16%, from the prior
year. Consolidated net income applicable to common shareholders
for 1994 was $115, which was 14% greater than the prior year.
Consolidated total revenues (net sales and direct response
marketing revenues, including insurance) were $7,038 compared with
$6,029 in 1993. Net sales increased $944, or 17%. Sales on a
comparable store basis, which reflects only the stores in operation
for both 1994 and 1993, increased 3%. Non-comparable sales include
Lechmere sales of $694. Lechmere was acquired on March 30, 1994.
Non-comparable sales also include the sales of six "Electric Avenue
& More" stores opened during 1994. This new specialty power format
combines the appliances/electronics (Electric Avenue), furniture
(Rooms & More) and fine jewelry (Gold 'N Gems) specialty formats.
The stores, which include an expanded assortment, contain
Montgomery Ward's and Lechmere's most successful merchandise
categories in a format designed for mid-sized markets.
Direct response marketing revenues increased $65, or 16%, to
$465. The increase was primarily due to increased clubs membership
and insurance policyholder levels.
Gross margin (net sales less cost of goods sold) dollars,
including Lechmere, were $1,484, an increase of $111, or 8%, from
1993. This increase was due to the gross margin impact of the
increased sales ($273), partially offset by the decrease in the
margin rate on sales ($107), increased occupancy costs related to
new store openings ($40) and increased buying and other expenses
($15). The decrease in the margin rate was impacted by a heavier
emphasis in appliances and electronics and the lower margin rates
that accompany these businesses (which includes Lechmere) and
continued competitive pressures.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Results of Operations: 1994 Compared with 1993 (continued)
Operating, selling, general and administrative expenses increased
$142, or 9%, from the prior year. Excluding Lechmere's expenses,
operating, selling, general and administrative expenses increased
by $37. The increase was due to the impact of new store openings
of $48 and increased benefits and losses of direct response
operations of $9, partially offset by increased income generated
from the sale of product service contracts of $18 (See Note 9 to
the Consolidated Financial Statements) and decreased other
operating and administrative costs of $2.
Net interest expense increased $15, or 35%, from the prior year.
The increase is due to a combination of increased borrowings,
primarily due to the acquisition of Lechmere, as well as increased
rates in 1994.
Income tax expense was $62, or 34% of income before income taxes,
for 1994 as compared to $59, or 37% of income before income taxes,
for 1993. The decrease in the effective income tax rate was caused
by an income tax adjustment due to the settlement of issues with
the Internal Revenue Service for the 1988 through 1990 tax years.
Results of Operations: 1993 Compared with 1992
Net income applicable to common shareholders before applying the
cumulative impact of accounting changes on retained earnings as of
December 29, 1991 increased by $9, or 10%. Consolidated net income
in 1993 was $101, an increase of $41, or 68%, from the prior year.
Net income for 1992 reflects a charge of $40 for the cumulative
effect of changes in accounting principles as a result of adoption
of Financial Accounting Standards Board (FASB) Statements No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
and No. 109, "Accounting for Income Taxes". Income tax expense of
$59 increased $9, or 18%, from 1992, of which $2 was due to the
impact of the increase in the Federal income tax rate from 34% to
35%.
Consolidated total revenues were $6,029, compared with $5,806 in
1992. Net sales increased $202, or 4%, over 1992, with an increase
of $303, or 6%, from prior year net of the impact of the 53rd week
in 1992. Apparel sales increased 1%, and hardlines sales
experienced increases of 6%. Net of the impact of the 53rd week in
1992, apparel sales increased 2%, and hardlines sales increased 8%.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Results of Operations: 1993 Compared with 1992 (continued)
Management believes merchandise sales increases reflect the
positive impact of new strategic programs implemented throughout
Montgomery Ward. Sales on a comparable store basis, which reflect
only the stores in operation for 1993 and 1992, increased 2%.
Direct response marketing revenues increased $21, or 6%, to $400.
The increase was primarily due to increased clubs membership
levels.
Gross margin dollars were $1,373, a decrease of $7, or 1%, from
last year. This decrease was primarily due to the decrease in the
margin rate on sales ($57) and increased occupancy costs primarily
as a result of new store openings ($10) and increased buying and
other expenses ($2), partially offset by the gross margin impact
of the increased sales ($62). The strong sales increase in
Electric Avenue of 11% had an impact on the overall Company margin
rate as Electric Avenue generally has lower margin rates than other
merchandise categories.
Operating, selling, general and administrative expenses increased
$6 from the prior year. This increase was attributable to the
impact of new store openings of $33, increased provision for
estimated costs to be incurred in connection with the Account
Purchase Agreement of $17, increased payroll and operating costs of
$10. These increases were partially offset by decreased health
care and insurance costs of $21, decreased advertising and other
promotional costs of $19, increased product service income of $10,
and decreased benefits and losses of direct response operations of
$4.
Net interest expense of $43 decreased $2, or 4%, from the prior
year. The decrease in interest expense due to lower interest rates
on borrowings was offset by decreased investment income due to
lower investment balances and rates.
There was no preferred stock dividend requirement in 1993, as
there was no preferred stock outstanding during 1993.
Discussion of Financial Condition
Montgomery Ward is the only direct subsidiary of MW Holding and
therefore Montgomery Ward and its subsidiaries are MW Holding's
sole source of funds.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Discussion of Financial Condition (continued)
Montgomery Ward has entered into a Long Term Credit Agreement
(Long Term Agreement) dated as of September 15, 1994 with various
lenders. The Long Term Agreement, which expires September 15,
1999, provides for a revolving facility in the principal amount of
$603. As of December 31, 1994, no borrowings were outstanding
under the Long Term Agreement. Concurrently, Montgomery Ward also
entered into a Short Term Credit Agreement (Short Term Agreement)
dated as of September 15, 1994 with various lenders. The Short
Term Agreement, which expires September 14, 1995, provides for a
revolving facility in the principal amount of $297. As of December
31, 1994, $144 was outstanding under the Short Term Agreement.
Proceeds from borrowings under the Long Term Agreement and the
Short Term Agreement (collectively, the Agreements) were used to
pay all borrowings outstanding under an Amended and Restated Credit
Agreement dated as of September 22, 1992 (Long Term Credit
Agreement), a Short Term Credit Agreement dated as of September 22,
1992 (Short Term Credit Agreement) and a Term Loan Agreement (Term
Loan Agreement) dated as of November 24, 1993 with various banks
and the agreements were terminated.
Under the Agreements, Montgomery Ward may select among several
interest rate options, including a rate negotiated with one or more
of the various lenders. The interest rates for the aforementioned
bank borrowings are based on market rates, and significant
increases in market interest rates will increase interest payments
required. A commitment fee is payable based upon the unused amount
of each facility, although under certain circumstances, an
additional fee may be payable to lenders not participating in a
negotiated rate loan.
During the fourth quarter of 1994, Montgomery Ward entered into
interest rate exchange and cap agreements with various banks to
offset the market risk associated with an increase in interest
rates under both the Long Term Agreement and the Short Term
Agreement. The aggregate notional principal amounts under the
interest rate exchange agreements are $100 in 1994, $175 in 1995
through 1997 and $75 in 1998 and 1999. Under the terms of the
interest rate exchange agreements, Montgomery Ward pays the banks
a weighted average fixed rate of 7.2% in the fourth quarter of
1994, 7.4% from 1995 through 1997 and 7.6% from 1998 through
1999 and will receive the one-month daily average London Inter-
bank Offered (LIBO) rate in each case multiplied by the notional
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Discussion of Financial Condition (continued)
principal amount. The average aggregate notional principal amounts
under the various cap agreements are $63 in the fourth quarter of
1994, $154 in 1995, $158 in 1996 and $113 in 1997. Under the terms
of the cap agreements, Montgomery Ward receives payments from the
banks when the one-month daily average LIBO rate exceeds the 5.0%
cap strike rate in 1994, 5.5% cap strike rate in 1995, 6% cap
strike rate in 1996 and 7.0% cap strike rate in 1997. Such
payments will equal the amount determined by multiplying the
notional principal amount by the excess of the percentage rate, if
any, of the one-month daily average LIBO rate over the cap strike
rate.
The Agreements and the Note Purchase Agreements impose various
restrictions on Montgomery Ward, including the satisfaction of
certain financial tests which include restrictions on payments of
dividends. Under the terms of the Agreements, which are currently
the most restrictive of the financing agreements as to dividends,
distributions and redemptions, Montgomery Ward may not pay
dividends or make any other distributions to the Company or redeem
any common stock in excess of (1) $63 on a cumulative basis, plus
(2) 50% of Consolidated Net Income of Montgomery Ward (as defined
in the Agreements) after January 1, 1994, plus (3) any repayment by
the Company of any loan or advance made by Montgomery Ward to the
Company which was received after January 1, 1994, plus (4) capital
contributions received by Montgomery Ward after January 1, 1994,
plus (5) net proceeds received by Montgomery Ward from (a) the
issuance of capital stock including treasury stock but excluding
Debt-Like Preferred Stock (as defined in the Agreements), or (b)
any indebtedness which is converted into shares of capital stock
other than Debt-Like Preferred Stock of Montgomery Ward or the
Company, after January 1, 1994, plus (6) an adjustment of $45 for
1994 through 1996, $30 in 1997 and $15 in 1998. At December 31,
1994, Montgomery Ward could pay dividends and make other
distributions to the Company of $124 pursuant to the terms of the
Agreements. To date, Montgomery Ward has been in compliance with
all such financial tests.
On April 27, 1994, the Company issued 750 shares of a new series
of Senior Preferred Stock (Senior Preferred Stock) to GE Capital in
exchange for $75 in cash. The Company used the proceeds to acquire
750 shares of a new issue of Senior Preferred Stock of Montgomery
Ward (Montgomery Ward Preferred) for $75 and Montgomery Ward used
the proceeds to reduce short-term borrowings. The Montgomery Ward
Preferred constitutes Debt-Like Preferred Stock for purposes of the
dividend restrictions under the Agreements.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Discussion of Financial Condition (continued)
Montgomery Ward acquired in a merger transaction all the stock
of LMR Acquisition Corporation (LMR), which owns 100% of the stock
of Lechmere, Inc. (Lechmere) on March 30, 1994. The aggregate
purchase price was comprised of an estimated price of $113 and a
contingent purchase price of up to $20 in cash and the issuance of
up to 400,000 shares of Class A Common Stock, Series 1 (or at the
option of Montgomery Ward, up to 400,000 shares of Class A Common
Stock, Series 3). The contingent price is dependent on Lechmere
achieving or exceeding a specified gross margin amount during the
period commencing February 27, 1994 and ending February 25, 1995.
Management believes that no payment of the contingent purchase
price will be required.
The closing price included a $10 promissory note (the Note) of
Montgomery Ward, which bears interest at a rate of 4.87% per annum.
Seventy-five percent of the accrued interest on and principal of
the Note are payable 540 days after the date of the Note and the
balance is payable three years after the date of the Note. The
Note, which is secured by a standby letter of credit, is to be
reduced upon the occurrence of certain specified circumstances.
As part of the closing, Montgomery Ward advanced approximately
$88 and assumed $3 of obligations to enable Lechmere to retire its
outstanding bank debt and subordinated debt. The purchase of and
advances to Lechmere were financed by the proceeds from borrowings
under the Short Term Credit Agreement, Long Term Credit Agreement
and the Term Loan Agreement.
The Company has repurchased 4,187,550 shares held by certain
former officers of the Company, Montgomery Ward and Signature and
their permitted transferees by making cash payments and issuing
installment notes in the aggregate of approximately $62. As of
December 31, 1994, the outstanding balance of these notes was $26.
See Note 14 to the Consolidated Financial Statements. These
installment notes bear interest at varying rates, are payable over
multi-year periods (generally three to five years) and are secured
by shares of Common Stock, the fair market value of which is equal
to the outstanding principal amount under each note. Under the
Agreements, Montgomery Ward expects to be able to advance the
Company sufficient funds to allow the Company to make the required
installment payments in 1995.
Currently available external sources of funds include $900 in
multi-year revolving loan commitments which were obtained in
September 1994 of which $297 will expire on September 14, 1995 and
$603 will expire on September 15, 1999. During 1994, the average
daily balance of borrowings under these commitments was $361.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Discussion of Financial Condition (continued)
Under the laws and regulations applicable to insurance companies,
some subsidiaries of Signature are limited in the amount of
dividends they may pay. For information concerning limitations on
the amount of dividends Signature may pay, see Note 20 to the
Consolidated Financial Statements. During 1994, Signature paid
dividends aggregating $22.
Future cash needs are expected to be satisfied by ongoing
operations, the sale of customer receivables to Montgomery Ward
Credit, borrowings under the Agreements, and the disposition of
capital assets related to facility closings. See "Business -
Account Purchase Agreement" for a discussion of the terms of the
sales of customer receivables by Montgomery Ward to Montgomery Ward
Credit.
Montgomery Ward and Lechmere's capital expenditures of $184 for
1994 were primarily related to opening 16 new stores, closing 2
stores, relocating 2 stores and implementing conversion strategies
in conventional retail stores and various merchandise fixture and
presentation programs. Montgomery Ward regularly reviews
opportunities for acquisitions and joint ventures and regards such
transactions as a possible source for future growth.
1994 1993 1992
Total Capital Expenditures . . .$ 184 $ 142 $ 146
Capital appropriations
authorized during the year . .$ 247 $ 149 $ 154
Cancellations of prior
year's appropriations. . . . .$(25) $(23) $(62)
Unexpended capital
appropriations at year-end . .$ 181 $ 143 $ 159
Montgomery Ward and Lechmere are not contractually committed to
spend all of the capital appropriations unexpended at December 31,
1994, but generally expect to do so.
On May 20, 1994, the Board of Directors declared a cash dividend
of $.50 per common share to shareholders of record on June 15,
1994, for a total of $22. This dividend was paid on June 23, 1994.
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (continued)
Discussion of Financial Condition (continued)
Effective January 2, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments In Debt and Equity Securities" (FAS No. 115). Under FAS
No. 115, all debt securities are classified as "available-for-sale"
and are stated at fair market value with all changes in unrealized
gains or losses included in Shareholders' Equity. The adoption of
FAS No. 115 increased Investments of insurance operations by $20,
Deferred income taxes by $7 and Unrealized gain on marketable
securities by $13 as of January 2, 1994 and had no impact on the
results of operations of the Company.
Item 8. Financial Statements.
Page
Report of Independent Public
Accountants . . . . . . . . . . . . . . . 28
Consolidated Balance Sheet at
December 31, 1994 and
January 1, 1994 . . . . . . . . . . . . . 31
For the 52-Week Periods Ended
December 31, 1994 and January 1,
1994 and the 53-Week Period
Ended January 2, 1993
Consolidated Statement of
Income. . . . . . . . . . . . . . . . . 29
Consolidated Statement of
Shareholders' Equity. . . . . . . . . . 32
Consolidated Statement of
Cash Flows. . . . . . . . . . . . . . . 35
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . . . . 37
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Montgomery Ward Holding Corp.:
We have audited the accompanying consolidated balance sheet of
MONTGOMERY WARD HOLDING CORP. (a Delaware Corporation) AND
SUBSIDIARY as of December 31, 1994 and January 1, 1994, and the
related consolidated statements of income, shareholders' equity and
cash flows for the fiscal years ended December 31, 1994, January 1,
1994 and January 2, 1993. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Montgomery Ward Holding Corp. and Subsidiary as of
December 31, 1994 and January 1, 1994 and the results of their
operations and their cash flows for the fiscal years ended December
31, 1994, January 1, 1994 and January 2, 1993, in conformity with
generally accepted accounting principles.
As discussed in Notes 6 and 8 to the consolidated financial
statements, effective December 29, 1991, the Company changed its
methods of accounting for postretirement benefits other than
pensions and income taxes.
Arthur Andersen LLP
Chicago, Illinois,
February 14, 1995
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars)
<TABLE>
<CAPTION>
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
<S> <C> <C> <C>
Revenues
Net sales, including
leased and licensed
department sales. . . . $6,573 $5,629 $5,427
Direct response
marketing revenues,
including insurance . . 465 400 379
Total Revenues . . . . 7,038 6,029 5,806
Costs and Expenses
Cost of goods sold,
including net
occupancy and
buying expense. . . . . 5,089 4,256 4,047
Operating, selling,
general and adminis-
trative expenses,
including benefits
and losses of direct
response operations
(Note 16) . . . . . . . 1,712 1,570 1,564
Interest expense
(Note 17) . . . . . . . 58 43 45
Total Costs and
Expenses. . . . . . . 6,859 5,869 5,656
Income Before
Income Taxes . . . . . . 179 160 150
Income Tax Expense
(Note 8) . . . . . . . . 62 59 50
Net Income before
cumulative effect
of changes in
accounting principles. . 117 101 100
Cumulative Effect of
Changes in Accounting
Principles:
Income Taxes
(Note 8) . . . . . . . - - 50
Postretirement
Benefits, net
(Note 6) . . . . . . . - - (90)
Net Income . . . . . . . . 117 101 60
Preferred Stock
Dividend Requirements
(Note 13). . . . . . . . 2 - 8
Net Income Applicable to
Common Shareholders. . . $ 115 $ 101 $ 52
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF INCOME (Continued)
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
<S> <C> <C> <C>
Net Income Per Class A
Common Share before
cumulative effect of
changes in accounting
principles . . . . . . . .$2.68 $2.29 $2.01
Cumulative effect of
changes in accounting
principles . . . . . . . .$ - $ - $(.88)
Net Income per Class A
Common Share
(Note 14) . . . . . . . . .$2.68 $2.29 $1.13
Net Income Per Class B
Common Share before
cumulative effect of
changes in accounting
principles . . . . . . . .$2.30 $2.04 $ 1.87
Cumulative effect of
changes in accounting
principles . . . . . . . .$ - $ - $(.82)
Net Income per Class B
Common Share
(Note 14) . . . . . . . .$2.30 $2.04 $1.05
Cash Dividends declared
per Common Share
Class A . . . . . . . . $ .50 $ .50 $ .25
Class B . . . . . . . . $ .50 $ .50 $ .25
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED BALANCE SHEET
(Millions of dollars)
ASSETS
<TABLE>
<CAPTION>
December 31, January 1,
1994 1994
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . $ 33 $ 98
Short-term investments . . . . . . . . . . 3 19
Investments of insurance operations
(Note 3) . . . . . . . . . . . . . . . . 314 296
Total Cash and Investments . . . . . . . 350 413
Trade and other accounts receivable. . . . . 112 62
Accounts and notes receivable from
affiliates (Note 4). . . . . . . . . . . 6 4
Total Receivables. . . . . . . . . . . . 118 66
Merchandise inventories (Note 5) . . . . . .1,625 1,242
Prepaid pension contribution (Note 6). . . . 324 310
Properties, plants and equipment,
net of accumulated depreciation
and amortization (Note 7). . . . . . . . .1,399 1,263
Direct response and insurance
acquisition costs. . . . . . . . . . . . . 322 295
Other assets . . . . . . . . . . . . . . . 402 246
Total Assets . . . . . . . . . . . . . . . $4,540 $3,835
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt (Note 11). . . . . . . . . $ 144 $ -
Trade accounts payable . . . . . . . . . . .1,719 1,358
Federal income taxes payable (Note 8) . . . 14 7
Accrued liabilities and other
obligations (Notes 2, 4, 6, 9
and 14). . . . . . . . . . . . . . . . . 1,234 1,197
Insurance policy claim reserves
(Note 10). . . . . . . . . . . . . . . . . 236 237
Long-term debt (Note 11) . . . . . . . . . . 228 213
Obligations under capital leases
(Note 12). . . . . . . . . . . . . . . . 81 89
Deferred income taxes (Note 8) . . . . . . 122 127
Total Liabilities. . . . . . . . . . . .3,778 3,228
Commitments and Contingent
Liabilities (Notes 11 and 18)
Redeemable Preferred Stock (Note 13) . . . . 75 -
Shareholders' Equity
Common stock (Note 14) . . . . . . . . . . - -
Capital in excess of par value . . . . . . 23 19
Retained earnings. . . . . . . . . . . . . 751 658
Unrealized gain on marketable
equity securities . . . . . . . . . . . 2 3
Less: Treasury stock, at cost . . . . . (89) (73)
Total Shareholders' Equity . . . . . . 687 607
Total Liabilities and
Shareholders' Equity . . . . . . . . . . $4,540 $3,835
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Class A Class B Capital
Common Common in
Stock Stock Excess Treasury Total
$ .01 $ .01 of Unre- Stock, Share-
Par Par Par Retained alized at holders'
Value Value Value Earnings Gains Cost Equity
(Number of shares
in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December
29,1991
as re-
stated 21,190 25,000 $13 $499 $ 2 $(34) $480
Net income
before
cumulative
effect of
changes in
accounting
principles - - - 100 - - 100
Cash divi-
dends paid - - - (19) - - (19)
Tax benefit
of stock
option exer-
cises and
other share
exchanges - - 2 - - - 2
Change in
unrealized
gain on mar-
ketable
equity
securities - - - - 1 - 1
Shares repur-
chased as
Treasury
stock (777) - - - - (12) (12)
Shares
issued
upon exer-
cise of
options 256 - 1 - - - 1
Shares
issued
upon exer-
cise of
conversion
rights 3 - - - - - -
Balance,
January
2,1993 20,672 25,000 $16 $580 $ 3 $(46) $553
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Class A Class B Capital
Common Common in
Stock Stock Excess Treasury Total
$ .01 $ .01 of Unre- Stock, Share-
Par Par Par Retained alized at holders'
Value Value Value Earnings Gains Cost Equity
(Number of shares
in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January
2,1993 20,672 25,000 $16 $580 $ 3 $(46) $553
Net
income - - - 101 - - 101
Cash
dividends
paid - - - (23) - - (23)
Tax benefit
of stock
option exer-
cises and
other share
exchanges - - 2 - - - 2
Shares repur-
chased as
Treasury
stock (1,258) - - - - (27) (27)
Shares
issued
upon exer-
cise of
options 193 - 1 - - - 1
Shares
issued
upon exer-
cise of
conversion
rights 3 - - - - - -
Balance,
January
1,1994 19,610 25,000 19 658 3 (73) 607
Cumulative
effect of
change in
accounting
principle - - - - 13 - 13
Balance,
January 1,
1994, as
restated 19,610 25,000 $19 $658 $16 $(73) $620
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)
(Millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Class A Class B Capital
Common Common in
Stock Stock Excess Treasury Total
$ .01 $ .01 of Unre- Stock, Share-
Par Par Par Retained alized at holders'
Value Value Value Earnings Gains Cost Equity
(Number of shares
in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
1994, as
restated 19,610 25,000 $19 $658 $16 $(73) $620
Net
income - - - 117 - - 117
Cash
dividends
paid - - - (24) - - (24)
Tax benefit
of stock
option exer-
cises - - 1 - - - 1
Change in
unrealized
gain on
marketable
securities - - - - (14) - (14)
Shares repur-
chased as
Treasury
stock (629) - - - - (16) (16)
Shares
issued
upon exer-
cise of
options 297 - 3 - - - 3
Shares
issued
upon exer-
cise of
conversion
rights 2 - - - - - -
Balance,
December
31,1994 19,280 25,000 $23 $751 $ 2 $(89) $687
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
<TABLE>
<CAPTION>
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income before
cumulative effect of
changes in accounting
principles . . . . . . . $ 117 $ 101 $ 100
Adjustments to reconcile
net income to net cash
provided by operations:
Depreciation and
amortization. . . . . . 109 98 97
Deferred income taxes . . 29 25 32
Changes in operating
assets and liabilities,
net of businesses
acquired:
(Increase) decrease in:
Trade and other accounts
receivable (38) (9) 9
Accounts and notes
receivable from
affiliates (2) 14 (1)
Merchandise
inventories. . . . . . (243) (204) (38)
Prepaid pension
contribution . . . . . (15) (19) (18)
Other assets. . . . . . (51) (50) 57
Increase (decrease) in:
Accounts and notes
payable to affiliates. . - - (30)
Trade accounts
payable. . 291 148 (17)
Accrued liabilities
and other
obligations. . . . . . . (37) 33 21
Federal income taxes
payable, net . . . . . . 5 (1) (34)
Insurance policy
claim reserves . . . . (1) (4) (21)
Deferred income taxes (8) - -
Net cash provided
by operations. . . . . 156 132 157
Cash flows from investing
activities:
Acquisition of Lechmere
net of cash acquired . . (109) - -
Acquisition of Smilesaver,
net of cash acquired . . . (11) - -
Purchase of short-term
investments. . . . . . . (231) (248) (1,221)
Purchase of investments
of insurance
operations . . . . . . . (691) (688) (707)
Sale of short-term
investments. . . . . . . . 247 240 1,367
Sale of investments
of insurance
operations . . . . . . . . 671 669 698
Disposition of
properties, plants
and equipment, net . . . . 4 3 7
Capital expenditures. . . (184) (142) (146)
Net cash used for
investing
activities . . . . . . $(304) $(166) $ (2)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
(Millions of dollars)
<TABLE>
<CAPTION>
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
<S> <C> <C> <C>
Cash flows from financing
activities:
Proceeds from issuance
of short-term
debt . . . . . . . . . $11,160 $7,718 $1,823
Payments of short-term
debt . . . . . . . . . (11,016) (7,718) (1,823)
Proceeds from issuance
of long-term
debt . . . . . . . . . 168 100 -
Payments of Montgomery
Ward long-term
debt . . . . . . . . . . (179) (12) (396)
Payments of Lechmere
long-term debt . . . . . (88) - -
Payments of obligations
under capital leases . . (8) (6) (7)
Proceeds from issuance
of common stock. . . . . 3 1 1
Proceeds from issuance
of preferred stock . . . 75 - -
Payments to redeem
preferred stock. . . . . - - (90)
Cash dividends paid . . . (24) (23) (19)
Purchase of treasury
stock, at cost . . . . . (9) (11) (7)
Tax benefit of stock
options exercised
and other share
exchanges. . . . . . . 1 2 2
Net cash provided
by (used for)
financing
activities. . . . . . 83 51 (516)
Increase (Decrease) in cash
and cash equivalents . . . (65) 17 (361)
Cash and cash equivalents
at beginning of period . . 98 81 442
Cash and cash equivalents
at end of period . . . . . $ 33 $ 98 $ 81
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions)
1. Major Accounting Policies
Business Segments
Montgomery Ward Holding Corp. (the Company or MW Holding) and its
subsidiaries are engaged in retail merchandising and direct
response marketing (including insurance) in the United States.
Retail merchandising operations are conducted through Montgomery
Ward and Montgomery Ward's indirectly, wholly-owned subsidiary
Lechmere, Inc. (Lechmere), while direct response marketing
operations are conducted primarily through Signature
Financial/Marketing, Inc. (Signature), a wholly-owned subsidiary of
Montgomery Ward. Signature markets consumer club products and
insurance products through its subsidiaries. See Note 20 for
information regarding these segments.
Principles of Consolidation; Use of Estimates
The consolidated financial statements include the Company and all
subsidiaries. Certain prior period amounts have been reclassified
to be comparable with the current period presentation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, time deposits and
highly liquid debt instruments with a maturity of three months or
less from the date of purchase. The carrying amount reported in
the financial statements for cash and cash equivalents approximates
the fair value of these assets.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
1. Major Accounting Policies (continued)
Following is a summary of cash payments for interest and income
taxes and non-cash financing and investing activities:
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Cash paid for:
Income taxes . . . . . . $ 33 $ 46 $ 53
Interest . . . . . . . . $ 56 $ 55 $ 50
Non-cash financing
activities:
Notes issued for
purchase of
Treasury stock. . . . $ 7 $ 16 $ 5
Non-cash investing
activities:
Change in unrealized
gain on marketable
securities. . . . . . $(14) $ - $ 1
Like-kind exchange of
assets. . . . . . . . $ 5 $ 6 $ -
The net cumulative effect of changes in accounting principles of
$13 in 1994 and $40 in 1992 has no cash impact.
Investments
Effective January 2, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments In Debt and Equity Securities" (FAS No. 115). Under FAS
No. 115, all debt securities are classified as "available-for-sale"
and are stated at fair market value with all changes in unrealized
gains or losses included in Shareholder's Equity. The adoption of
FAS No. 115 increased Investments of insurance operations by $20,
Deferred income taxes by $7 and Unrealized gain on marketable
securities by $13 as of January 2, 1994 and had no impact on the
results of operations of the Company.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
1. Major Accounting Policies (continued)
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or
market, using the retail last-in, first-out (LIFO) method.
Depreciation, Amortization and Repairs
Depreciation is computed on a straight-line basis over the
estimated useful lives of the properties, with annual rates ranging
between 2% and 3% for buildings and between 12% and 25% for
fixtures and equipment. Leasehold improvements and assets under
capital leases are amortized on a straight-line basis over no
longer than the primary term of the lease. Upon retirement or
disposition, the cost and the related depreciation or amortization
are removed from the accounts, with the gains or losses included in
income.
Interest relating to construction in progress is capitalized and
amortized over the useful life of the property. Pre-operating
expenditures which are not capital in nature are charged against
income in the year the store is opened. Normal maintenance and
repairs are expensed as incurred. Major repairs that materially
extend the lives of properties are capitalized, and the assets
replaced, if any, are retired.
Direct Response Marketing Revenues
Life and accident and health insurance premiums, which are
recognized as revenue when due from policyholders, are associated
with related benefits and expenses to result in the recognition of
profit over the terms of the policies. Property-liability
insurance premiums and club membership dues are deferred and earned
on a pro-rata basis over the terms of the policies and memberships.
Unearned premiums and club memberships of $63 and $53 at December
31, 1994 and January 1, 1994, respectively, are included in Accrued
liabilities and other obligations.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
1. Major Accounting Policies (continued)
Direct Response and Insurance Acquisition Costs
Costs allocated to the insurance and club memberships in force at
June 24, 1988, as well as the costs of acquiring new club
memberships and insurance business (primarily marketing expenses),
are included in Direct response and insurance acquisition costs.
Costs of acquiring new business have been deferred when considered
recoverable.
Acquisition costs are amortized in proportion to the revenue
recognized. Amortization charged to income was $124, $111 and $106
for 1994, 1993 and 1992, respectively, and is included in
Operating, selling, general and administrative expenses.
Interest Rate Exchange and Cap Agreements
Amounts paid or received pursuant to interest rate exchange and
cap agreements are deferred and amortized as interest expense or
income over the remaining life of the applicable agreement.
Insurance Policy Claim Reserves
Liabilities for future policy benefits have been determined
principally by the net level premium method. These amounts have
been computed by using assumptions that include provisions for risk
of adverse deviation. The assumptions developed for interest rates
(average 6%-8%) and withdrawal rates are based on the experience of
Montgomery Ward Life Insurance Company, a wholly-owned subsidiary
of Signature. The principal mortality tables used to develop the
assumed mortality rates are the 1960 Commissioners' Standard Group
Table, the 1955-1960 and 1965-1970 Basic Mortality Tables and the
1969-1971 U.S. Life Tables. The reserve for claims and related
adjustment expenses is based on estimates of the costs of
individual claims reported and incurred but not reported prior to
year-end. While management believes the reserve for claims and
related adjustment expenses is adequate, the reserve is continually
reviewed and as adjustments become necessary, they are reflected in
current operations.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
1. Major Accounting Policies (continued)
Federal Income Tax
The Company and its subsidiaries file a consolidated Federal
income tax return. Insurance subsidiaries which had previously
filed separate Federal income tax returns are expected to be
included in the consolidated return to be filed for the 1994 tax
year.
Prior to 1992, the Company determined its income tax expense and
related deferred federal income taxes in accordance with Statement
of Financial Accounting Standards No. 96, "Accounting for Income
Taxes" (FAS 96). Effective December 29, 1991, the Company adopted
the provisions of FAS 109, "Accounting for Income Taxes". See Note
8 for discussion of the impact on financial position and results of
operations resulting from the adoption of FAS 109.
2. Acquisition of Lechmere, Inc.
Montgomery Ward acquired in a merger transaction all the stock of
LMR Acquisition Corporation (LMR), which owns 100% of the stock of
Lechmere, on March 30, 1994. The aggregate purchase price was
comprised of an estimated price of $113 and a contingent purchase
price of up to $20 in cash and the issuance of up to 400,000 shares
of Class A Common Stock, Series 1 (or at the option of Montgomery
Ward, up to 400,000 shares of Class A Common Stock, Series 3). The
contingent price is dependent on Lechmere achieving or exceeding a
specified gross margin amount during the period commencing February
27, 1994 and ending February 25, 1995. Management believes that no
payment of the contingent purchase price will be required.
The closing price included a $10 promissory note (the Note) of
Montgomery Ward, which bears interest at a rate of 4.87% per annum.
The Note is included in accrued liabilities and other obligations
at December 31, 1994. Seventy-five percent of the accrued interest
on and principal of the Note are payable 540 days after the date of
the Note, and the balance is payable three years after the date of
the Note. The Note, which is secured by a standby letter of
credit, is to be reduced upon the occurrence of certain specified
circumstances.
As part of the closing, Montgomery Ward advanced approximately
$88 and assumed $3 in obligations to enable Lechmere to retire its
outstanding bank debt and subordinated debt.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
2. Acquisition of Lechmere, Inc. (continued)
The acquisition was accounted for as a purchase. The purchase
price has been allocated to Lechmere's net assets based upon
preliminary results of asset valuations and liability and
contingency assessments. Actual adjustments may differ based on
the results of further evaluations of the fair value of the
acquired assets and liabilities. Any differences between
preliminary and actual adjustments are not expected to have a
material impact on the consolidated financial statements.
The preliminary allocation is summarized as follows:
Inventory . . . . . . . . . . . . . . . . . . . . $140
Properties, Plants & Equipment. . . . . . . . . . 57
Goodwill . . . . . . . . . . . . . . . . . . . . 124
Other Assets. . . . . . . . . . . . . . . . . . . 50
Due to Montgomery Ward. . . . . . . . . . . . . . (88)
Accounts Payable and other Liabilities. . . . . .(170)
$113
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
3. Investments of Insurance Operations
Following is a summary of Investments of insurance operations
in securities other than related party investments. The fair
values for marketable debt and equity securities are based on
quoted market prices.
December 31, 1994
Gross Gross
Type of Unrealized Unrealized Market
Investment Cost Gains Losses Value
Fixed maturities
Bonds:
United States
Govern-
ment and
government
agencies
and author-
ities. . . . . $ 51 $ - $ 2 $ 49
Public
utilities. . . . 73 6 - 79
All other
corporate
bonds. . . . . 26 1 1 26
Mortgage-backed
securities. . . 115 - 6 109
Total
fixed
maturi-
ties. . 265 7 9 263
Equity
securities:
Common
stock. . . . . 8 5 - 13
Total
equity
securi-
ties. . 8 5 - 13
Policy
loans. . . . . . . 7 - - 7
Short-term
investments. . . 31 - - 31
Total
Invest-
ments . $311 $12 $ 9 $314
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
3. Investments of Insurance Operations (continued)
January 1, 1994
Amount
at Which
Gross Gross Shown in
Type of Unrealized Unrealized Market Balance
Investment Cost Gains Losses Value Sheet
Fixed maturities
Bonds:
United States
Govern-
ment and
government
agencies
and author-
ities. . . $ 67 $ 3 $ - $ 70 $67
Public
utilities. 80 16 - 96 80
All other
corporate
bonds. . . 26 1 - 27 26
Mortgage-
backed
securities. 64 - - 64 64
Total
fixed
maturi-
ties. 237 20 - 257 237
Equity
securities:
Common
stock. . . 8 5 - 13 13
Total
equity
securi-
ties. 8 5 - 13 13
Policy
loans. . . . 7 - - 7 7
Short-term
investments. 39 - - 39 39
Total
Invest-
ments $291 $25 $ - $316 $296
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
3. Investments of Insurance Operations (continued)
The amounts of fixed maturities as of December 31, 1994 are as
follows:
Amortized Market
Cost Value
Due in 1995. . . . . . . . . . . . . . . . .$ 12 $ 12
Due in 1996 through 2000 . . . . . . . . . . 109 111
Due in 2001 through 2005 . . . . . . . . . . 28 30
Due in 2006 and beyond . . . . . . . . . . . 1 1
Mortgage-backed securities . . . . . . . . . 115 109
$265 $263
Realized capital gains before income tax and changes in
unrealized gains (losses) after income tax on fixed maturities,
mortgage loans and equity securities are as follows:
Fixed
Maturities
and Mortgage Equity
Loans Securities
52-Week Period Ended December 31, 1994
Realized. . . . . . . . . . . . . . . . . .$ - $ -
Unrealized. . . . . . . . . . . . . . . . $(2) $ 4
52-Week Period Ended January 1, 1994
Realized. . . . . . . . . . . . . . . . . .$ 1 $ -
Unrealized. . . . . . . . . . . . . . . . .$ - $ 3
53-Week Period Ended January 2, 1993
Realized. . . . . . . . . . . . . . . . . .$ 1 $ -
Unrealized. . . . . . . . . . . . . . . . .$ - $ 3
4. Accounts and Notes Receivable from Affiliates
Montgomery Ward and Montgomery Ward Credit Corporation
(Montgomery Ward Credit), a subsidiary of GE Capital Corporation
(GE Capital) have entered into an Account Purchase Agreement
pursuant to which Montgomery Ward Credit purchases receivables from
time to time and provides services to Montgomery Ward. Under this
agreement, Montgomery Ward Credit has the exclusive right to
operate the Montgomery Ward private label credit card system and
the obligation to purchase for their face value (and Montgomery
Ward is obligated to sell) all the receivables generated by the
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
4. Accounts and Notes Receivable from Affiliates (continued)
Montgomery Ward private label credit card system, including those
generated through MW Direct, up to $6,000 at any time
outstanding. Montgomery Ward accounts for the transfer as a sale
of the applicable receivables. Sales of receivables to
Montgomery Ward Credit were $4,092, $3,991 and $3,489 for 1994,
1993 and 1992, respectively. At December 31, 1994 and January 1,
1994, there were $5,221 and $4,947 of Montgomery Ward credit card
receivables owned by Montgomery Ward Credit, respectively.
Amounts receivable from Montgomery Ward Credit pursuant to the
sale of such receivables are included in Accounts and notes
receivable from affiliates.
Montgomery Ward is exposed to both market risk and credit risk
under the Account Purchase Agreement. Under the Account Purchase
Agreement, Montgomery Ward is required to pay Montgomery Ward
Credit the excess interest costs on a monthly basis if a blended
interest rate applicable to Montgomery Ward Credit's finance costs
with respect to the receivables exceeds 10% per annum. To date,
the blended interest rate has been less than 10%.
Should Montgomery Ward Credit or its guarantor, GE Capital, fail
to perform its obligations under the Account Purchase Agreement,
Montgomery Ward would suffer an accounting loss up to the amount of
Montgomery Ward's share of finance charges (as described below),
net of applicable reserves carried by Montgomery Ward Credit.
Montgomery Ward estimates that any accounting loss would be
immaterial at December 31, 1994. Montgomery Ward Credit's
obligations under the Account Purchase Agreement are not
collateralized.
Effective January 1, 1994, Montgomery Ward bears the entire risk
of credit losses. Previously credit losses were shared.
Montgomery Ward's remaining liability for credit losses for 1991
through 1994 are payable to Montgomery Ward Credit in early 1998.
In addition, the amounts payable by Montgomery Ward for credit
losses for 1995 through 1997 may be deferred, and such deferred
credit losses are also payable at Montgomery Ward's election in
early 1998. Interest on Montgomery Ward's liability for credit
losses is payable at a rate equal to rates on comparable borrowings
of Montgomery Ward.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
4. Accounts and Notes Receivable from Affiliates (continued)
In exchange for Montgomery Ward's agreement to allow Montgomery
Ward Credit to increase finance charge rates in selected states,
Montgomery Ward receives a share of incremental finance charges
resulting from such increases which is available for offset as
previously discussed and earns interest at the same rate.
Incremental finance charges are generated only on purchases
subsequent to the date such finance charge rates are increased.
In the event that, due to the increase in finance charge rates,
any
refunds are required to be made, Montgomery Ward and Montgomery
Ward Credit have agreed to share the financial risk. Legislation
has from time to time been introduced in certain states which, if
enacted, may require rescinding all or a portion of such rate
increases, in which case, Montgomery Ward's share of rate
increases may be substantially reduced.
In addition to sharing incremental finance charges, with respect
to each fiscal year, Montgomery Ward Credit will make a payment to
Montgomery Ward of a share of all finance charges in an amount
equal to (a) if credit losses are 5% or less of average gross
receivables, the lesser of 3.9% of average gross receivables or the
actual credit losses; (b) if credit losses are greater than 5% but
less than or equal to 8% of average gross receivables, 3.9% of
average gross receivables plus 50% of the amount by which actual
credit losses exceed 5% of average gross receivables; or (c) if
credit losses exceed 8% of average gross receivables, 5.4% of
average gross receivables plus the amount by which credit losses
exceed 8% of average gross receivables. In the event that finance
charges billed during a fiscal year less the incremental finance
charges referred to below are less than the amount computed above,
the payments will be reduced to the amount of the finance charge
less the incremental finance charge.
The Company has executed notes for the credit losses which
totalled $161 with respect to credit losses through 1994. The
finance charge offset as of the end of 1994 was $24. Under the
agreement, the notes payable to Montgomery Ward Credit are limited
to $300 at any time, with any excess to be paid currently in cash.
The Company does not expect credit losses for the period through
1997 to exceed the $300 limitation.
The Account Purchase Agreement will be in effect until December
31, 2005, and thereafter from year to year unless either party
gives ten years prior notice of its election to terminate.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
5. Merchandise Inventories
Merchandise inventories are valued using the retail LIFO method,
which matches current costs with current sales. If inventories had
been valued using the first-in, first-out (FIFO) method, they would
have been $133, $117 and $104 higher than those reported as of
December 31, 1994, January 1, 1994 and January 2, 1993,
respectively.
6. Retirement Plans
Retirement plans of a contributory nature cover a majority of
full-time associates of Montgomery Ward and its subsidiaries.
Retirement benefits are provided by a defined benefit pension plan
as well as by a savings and profit sharing plan. Montgomery Ward
and its subsidiaries contribute to the defined benefit pension plan
to cover any excess of defined minimum benefits over the benefits
available from the savings and profit sharing plan attributable to
the accumulated value of associate contributions.
The components of the pension credit were as follows:
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Service cost-benefits
earned during the
period. . . . . . . . . .$(13) $(11) $(9)
Interest cost on
projected benefit
obligation. . . . . . . . (46) (45) (44)
Actual return on
assets. . . . . . . . . . 4 101 (20)
Deferral of unantici-
pated investment
performance . . . . . . . 72 (26) 91
Amortization of
unrecognized
net loss. . . . . . . . . (2) - -
Net pension credit . . . .$ 15 $ 19 $18
Assumptions:
Discount rate . . . . . . 7.5% 8.5% 9.0%
Increase in future
compensation . . . . . . 6.0% 6.0% 6.0%
Rate of return
on plan assets . . . . . 9.5% 9.5% 9.0%
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
6. Retirement Plans (continued)
The funded status of the defined benefit pension plan was as
follows:
December 31, January 1,
1994 1994
Actuarial present value of
accumulated benefit
obligation:
Vested . . . . . . . . . . . . . . . . $576 $565
Nonvested. . . . . . . . . . . . . . . 4 4
Accumulated benefit obligation . . . . . 580 569
Additional amounts related
to projected increases in
compensation levels . . . . . . . . . . 23 9
Projected benefit obligation . . . . . . 603 578
Plan assets at fair value,
primarily in equity and
fixed income securities . . . . . . . . 789 863
Plan assets in excess of projected
benefit obligation. . . . . . . . . . . $186 $285
Consisting of:
Unrecognized net loss
since initial
application of FAS 87. . . . . . . . $(140) $(28)
Unrecognized prior
service cost since
initial application
of FAS 87. . . . . . . . . . . . . . $ 2 $ 3
Prepaid pension contribution . . . . $324 $ 310
The projected benefit obligation was determined using an assumed
discount rate of 8.5% at December 31, 1994 and 7.5% at January 1,
1994 and an assumed rate of increase in future compensation levels
of 6% for 1994 and 1993. Unrecognized net gains and losses and
prior service costs are amortized over the average future service
period.
The savings and profit sharing plan includes a voluntary savings
feature for eligible associates and matching company contributions
based on a fixed percentage of certain associates' contributions.
The company matching expense was $6 for each of 1994, 1993 and
1992.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
6. Retirement Plans (continued)
Substantially all associates who retire after participation in
the retirement plan for ten years and who are members of the health
care plan for the year prior to retirement are eligible for certain
health care and life insurance benefits, the cost of which is
shared with the retirees. In 1992, the Company established a limit
on its future annual contributions on behalf of retirees at a
maximum of 125% of the projected 1992 company contributions.
In the fourth quarter of 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" as of December 29, 1991.
This statement requires the accrual of the cost of providing
postretirement benefits, including medical and life insurance
coverage, during the active service period of the associate. The
Company elected to immediately recognize the accumulated
postretirement liability. This resulted in a one-time, after-tax
charge of $90 (after reduction for income taxes of $59). The
effect of this change on 1992 earnings was not material. Prior to
1992, the Company recognized expense in the year the benefits were
provided.
The components of the net periodic postretirement benefit cost
were as follows:
1994 1993 1992
Service Cost. . . . . . . . . . . . . $ 2 $ 2 $ 2
Interest cost on accumulated
postretirement benefit
obligation . . . . . . . . . . . . . 11 12 12
Net periodic postretirement
benefit cost . . . . . . . . . . . . $13 $14 $14
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
6. Retirement Plans (continued)
The status of the Company's liability for postretirement benefits
at December 31, 1994 and January 1, 1994, which are included in
Accrued liabilities and other obligations is as follows:
1994 1993
Accumulated postretirement
benefit obligation:
Retirees. . . . . . . . . . . . . . . . . .$104 $120
Fully eligible active associates. . . . . . 18 20
Other active associates . . . . . . . . . . 26 25
Total accumulated
postretirement benefit
obligation. . . . . . . . . . . . . . . . 148 165
Unrecognized loss. . . . . . . . . . . . . . (4) (22)
Accrued postretirement
benefit obligation. . . . . . . . . . . . .$144 $143
The weighted average discount rate used in measuring the
accumulated postretirement benefit obligation was 8.5% at December
31, 1994 and 7.5% at January 1, 1994. The assumed health care cost
trend rate and the impact of a 1% increase in the medical trend
rate on the accumulated postretirement benefit obligation, service
cost and interest cost are not applicable due to caps established
on current cost levels.
The Company continues to evaluate ways in which it can better
manage retiree benefits and control the costs. Any changes in the
plan or revisions to assumptions that affect the amount of expected
future benefits may have a significant effect on the amount of the
reported obligation and annual expense.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
7. Properties, Plants and Equipment
The details of the properties, plants and equipment accounts are
shown below at cost:
December 31, January 1,
1994 1994
Land . . . . . . . . . . . . . . $ 197 $ 177
Buildings. . . . . . . . . . . . . . 860 778
Leasehold improvements . . . . . . . 319 289
Fixtures and equipment . . . . . . . 503 401
Assets under capital leases. . . . . 111 113
Less accumulated depreciation
and amortization. . . . . . (591) (495)
Properties, Plants, and
Equipment, net. . . . . . . $1,399 $1,263
Gains or (losses) on the sale of properties were $1, $0 and $(2)
for 1994, 1993 and 1992, respectively. Accumulated amortization on
capital lease assets was $49 and $43 for 1994 and 1993,
respectively.
8. Income Taxes
In the fourth quarter of 1992, the Company adopted FAS 109,
"Accounting for Income Taxes", as of December 29, 1991. The
cumulative effect on prior years' net income of the adoption of
this statement was a credit of $50.
The Company has alternative minimum tax (AMT) credits of $24, $31
and $31 as of December 31, 1994, January 1, 1994 and January 2,
1993, respectively, available to offset future Federal income tax
liabilities. The Company also has targeted jobs tax credit
carryforwards of $9 available as of December 31, 1994, which expire
beginning in 2007.
The approximate tax effects of temporary differences and
carryforwards that give rise to the deferred tax liability are as
follows:
December 31, January 1,
1994 1994
Accrued liabilities. . . . . . . . . . . . . . . .$(169) $(222)
Postretirement benefits. . . . . . . . . . . . . . (56) (56)
Insurance reserves . . . . . . . . . . . . . . . . (61) -
Other deferred tax assets. . . . . . . . . . . . . (23) (27)
Total deferred tax assets . . . . . . . . . . . . (309) (305)
Prepaid pension contribution . . . . . . . . . . . 128 121
Direct response and insurance
acquisition costs . . . . . . . . . . . . . . . . 127 114
Property, plants and equipment . . . . . . . . . . 133 133
Other deferred tax liabilities . . . . . . . . . . 47 68
Total deferred tax liabilities. . . . . . . . . . 435 436
AMT and other credit carryforwards . . . . . . . . (36) (31)
Valuation allowance. . . . . . . . . . . . . . . . 32 27
Net deferred tax liability. . . . . . . . . . . . $ 122 $ 127
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
8. Income Taxes (continued)
Income tax expense consists of:
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Federal
Currently payable . . . .$25 $28 $15
Deferred. . . . . . . . . 29 25 32
State, local
and foreign . . . . . . . 8 6 3
Total income
tax expense . . . . . . .$62 $59 $50
A reconciliation of the statutory to effective federal income tax
rate is as follows:
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Federal income
tax rate. . . . . . . . .35% 35% 34%
State taxes, net
of reduction of
Federal tax . . . . . . . 3 2 1
Targeted Jobs
Tax Credit. . . . . . . .(3) (1) (2)
Impact of increase
in statutory rate . . . . - 1 -
Permanent differences. . (1) - -
Effective income
tax rate. . . . . . . . 34% 37% 33%
Permanent differences include the 1994 settlement of income tax
assessments for the taxable years ending December 31, 1988 through
December 29, 1990. Montgomery Ward had previously provided for
these assessments and the related deferred income taxes were
adjusted in 1994 to reflect the impact of this settlement.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
9. Deferred Service Contract Revenue
The Company sells product service contracts on its own behalf,
and beginning in 1994, on behalf of Virginia Surety Company, Inc.
(VSC). The Company recognizes the revenue related to sales of
Montgomery Ward service contracts in proportion to the costs
expected to be incurred in performing services under the contracts.
Deferred service contract revenue of $231 and $239 at December 31,
1994 and January 1, 1994, respectively, is included in Accrued
liabilities and other obligations. The Company recognizes the
revenue, net of the fixed payment due to VSC on sales of VSC
contracts at time of the sale. VSC insured contracts comprised 17%
of sales of service contracts to Montgomery Ward customers in 1994.
Montgomery Ward has contracted with VSC to provide repair services
to VSC.
10. Insurance Policy Claim Reserves
The Company's insurance subsidiaries are involved in both the
cession and assumption of reinsurance with other companies. Risks
are reinsured with other companies to permit the recovery of a
portion of the direct losses. Policy related liabilities and
accruals, including incurred but not reported claims, are included
in the financial statements as Insurance policy claim reserves, and
reinsurance ceded is reflected as a component of Other assets. The
Company remains liable to the extent the reinsuring companies
cannot meet their obligations under these reinsurance treaties.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
10. Insurance Policy Claim Reserves (continued)
Premium revenues, which are included in Direct response marketing
revenues, are as follows:
Percentage
Ceded To Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount To Net
52-Week Period
Ended Decem-
ber 31, 1994:
Life insurance
in force . . $5,729 $ 93 $ - $5,636 0.0%
Premiums
Life
insurance . $ 50 $ 1 $ 3 $ 52 5.8%
Accident and
health
insurance . . 76 - 11 87 12.6%
Property and
liability
insurance . 62 9 - 53 0.0%
Total. . . $ 188 $ 10 $ 14 $ 192 7.3%
52-Week Period
Ended Janu-
ary 1, 1994:
Life insurance
in force . . $5,438 $102 $ - $5,336 0.0%
Premiums
Life
insurance . $ 45 $ 1 $ 3 $ 47 6.4%
Accident and
health
insurance . . 67 - 13 80 16.3%
Property and
liability
insurance . 51 8 - 43 0.0%
Total. . . $ 163 $ 9 $16 $ 170 9.4%
53-Week Period
Ended Janu-
ary 2, 1993:
Life
insurance
in force . . $5,325 $114 $ - $5,211 0.0%
Premiums
Life
insurance . $ 45 $ 1 $ 3 $ 47 6.4%
Accident and
health
insurance . . 66 - 16 82 19.5%
Property and
liability
insurance . 49 8 - 41 0.0%
Total. . . $ 160 $ 9 $19 $ 170 11.2%
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
11. Short-Term and Long-Term Debt
The long-term debt of Montgomery Ward and its subsidiaries is as
follows:
December 31, January 1,
1994 1994
Montgomery Ward
Note Purchase Agreements; Senior Notes
Series A to Series G due in 1998
to 2005 at 7.07% to 8.18% interest
rates. . . . . . . . . . . . . . . . . . $100 $100
Economic Development Revenue Bonds,
due in 1994 at 9.5% interest rate. . . . . - 5
Commercial Development Revenue Bonds,
due in 2013 at 4.15% interest rate,
adjusted at three-year intervals . . . . 5 5
Other . . . . . . . . . . . . . . . . . . . 2 2
Montgomery Ward Real Estate Subsidiaries
4 3/4% Secured Notes, due serially
to January 15, 1995. . . . . . . . . . . . 1 2
11 1/2% Secured Note, due serially
to September 1, 2001 . . . . . . . . . . 15 17
7 1/2% Secured Note, due serially
to November 30, 2002 . . . . . . . . . . . 6 7
9.45% Secured Notes, due serially
to November 30, 2003 . . . . . . . . . . . 18 19
7 3/4% Secured Notes, due serially
to August 31, 2004 . . . . . . . . . . . . 20 22
7 7/8% Secured Notes, due serially
to December 15, 2005 . . . . . . . . . . . 9 10
9% Secured Notes, due serially to
January 1, 2006. . . . . . . . . . . . . . 13 14
Other . . . . . . . . . . . . . . . . . . . 10 10
Lechmere
9.65% Secured Mortgage Notes, due
October 31, 1996 . . . . . . . . . . . . . 24 -
Other . . . . . . . . . . . . . . . . . . . 5 -
Total long-term debt. . . . . . . . . .$228 $213
The amounts of long-term debt that become due during the fiscal
years 1995 through 1999 are as follows: 1995--$8, 1996--$33,
1997--$10, 1998--$20 and 1999--$10.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
11. Short-Term and Long-Term Debt (continued)
Montgomery Ward has entered into a Long Term Credit Agreement
(Long Term Agreement) dated as of September 15, 1994 with various
lenders. The Long Term Agreement, which expires September 15,
1999, provides for a revolving facility in the principal amount of
$603. As of December 31, 1994, no borrowings were outstanding
under the Long Term Agreement. Concurrently, Montgomery Ward also
entered into a Short Term Credit Agreement (Short Term Agreement)
dated as of September 15, 1994 with various lenders. The Short
Term Agreement, which expires September 14, 1995, provides for a
revolving facility in the principal amount of $297. As of December
31, 1994, $144 was outstanding under the Short Term Agreement.
Proceeds from borrowings under the Long Term Agreement and the
Short Term Agreement (collectively, the Agreements) were used to
pay all borrowings outstanding under an Amended and Restated Credit
Agreement dated as of September 22, 1992, a Short Term Credit
Agreement dated as of September 22, 1992 and a Term Loan Agreement
dated as of November 24, 1993 and the agreements were terminated.
Under the Agreements, Montgomery Ward may select among several
interest rate options, including a rate negotiated with one or more
of the various lenders. The interest rates for the aforementioned
bank borrowings are based on market rates and significant increases
in market interest rates will increase interest payments required.
A commitment fee is payable based upon the unused amount of each
facility, although under certain circumstances, an additional fee
may be payable to lenders not participating in a negotiated rate
loan. The weighted average interest rate paid under the Agreements
was 4.9% for 1994.
During the fourth quarter of 1994, Montgomery Ward entered into
interest rate exchange and cap agreements with various banks to
offset the market risk associated with an increase in interest
rates under both the Long Term Agreement and Short Term Agreement.
The aggregate notional principal amounts under the interest rate
exchange agreements is $100 in 1994, $175 in 1995 through 1997 and
$75 in 1998 through 1999. Under the terms of the interest rate
exchange agreements, Montgomery Ward pays the banks a weighted
average fixed rate of 7.2% in 1994, 7.4% from 1995 through 1997 and
7.6% from 1998 through 1999 and will receive the one-month daily
average London Interbank Offered (LIBO) rate in each case
multiplied by the notional principal amount. The average aggregate
notional principal amounts under the various cap agreements is $63
in the fourth quarter of 1994, $154 in 1995, $158 in 1996 and $113
in 1997. Under the terms of the cap agreements, Montgomery Ward
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
11. Short-Term and Long-Term Debt (continued)
receives payments from the banks when the one-month daily average
LIBO rate exceeds the 5.0% cap strike in 1994, 5.5% cap strike
rate in 1995, 6% cap strike rate in 1996 and 7.0% cap strike rate
in 1997. Such payments will equal the amount determined by
multiplying the notional principal amount by the percentage, if
any, by which the one-month daily average LIBO rate exceeds the
cap strike rate. Montgomery Ward is exposed to credit risk in
the event of nonperformance by the other parties to the interest
rate exchange and cap agreements; however, Montgomery Ward
anticipates full performance by the counterparties. The fair
market value of the exchange and cap agreements at December 31,
1994 was $11. Fair value is estimated based upon the amount that
Montgomery Ward would receive or pay to terminate the agreements
as of the reporting date, utilizing quoted prices for comparable
contracts.
The Agreements and the Note Purchase Agreements impose various
restrictions on Montgomery Ward, including the satisfaction of
certain financial tests which include restrictions on payments of
dividends. Under the terms of the Agreements, which are currently
the most restrictive of the financing agreements as to dividends,
distributions and redemptions, Montgomery Ward may not pay
dividends or make any other distributions to the Company or redeem
any Common Stock in excess of (1) $63 on a cumulative basis, plus
(2) 50% of Consolidated Net Income of Montgomery Ward (as defined
in the Agreements) after January 1, 1994, plus (3) any repayment by
the Company of any loan or advance made by Montgomery Ward to the
Company which was received after January 1, 1994, plus (4) capital
contributions received by Montgomery Ward after January 1, 1994,
plus (5) net proceeds received by Montgomery Ward from (a) the
issuance of capital stock including treasury stock but excluding
Debt-Like Preferred Stock (as defined in the Agreements), or (b)
any indebtedness which is converted into shares of capital stock
other than Debt-Like Preferred Stock of Montgomery Ward or the
Company, after January 1, 1994, plus (6) an adjustment of $45 for
1994 through 1996, $30 in 1997 and $15 in 1998. The Montgomery
Ward Preferred discussed in Note 13 constitutes Debt-Like Preferred
Stock for purposes of the dividend restrictions under the
Agreements. At December 31, 1994, Montgomery Ward could pay
dividends and make other distributions to the Company of $124
pursuant to the terms of the Agreements. To date, Montgomery Ward
has been in compliance with all such financial tests.
Montgomery Ward has outstanding Commercial Development Revenue
Bonds, which are adjusted to the market rate of interest at
three-year intervals. The rate was adjusted to 4.15% in 1992.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
11. Short-Term and Long-Term Debt (continued)
The Secured Notes of the real estate subsidiaries and the secured
Mortgage Notes of Lechmere are secured by mortgage liens and/or
assignments of rental agreements whereby the real estate
subsidiaries have assigned to trustees certain monies payable under
leases with Montgomery Ward. At December 31, 1994, assets with a
net book value of approximately $228 represented collateral for
certain of these secured notes.
The market value of the Company's long-term debt of $212 is
estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of
borrowing arrangements.
12. Leases
The Company leases real and personal property principally through
noncancelable capital and operating leases, which generally provide
for the payment of minimum rentals and, in certain instances,
executory costs and additional rentals based upon a percentage of
sales. The terms of the real estate leases typically contain
renewal options for additional periods.
At December 31, 1994, the minimum lease payments under all
noncancelable operating leases with an initial term of more than
one year, not including $17 of future sublease rentals, and under
capital leases are as follows:
Capital Operating
Leases Leases
1995 . . . . . . . . . . . . . . . . . . . .$ 15 $113
1996 . . . . . . . . . . . . . . . . . . . . 14 105
1997 . . . . . . . . . . . . . . . . . . . . 13 95
1998 . . . . . . . . . . . . . . . . . . . . 13 87
1999 . . . . . . . . . . . . . . . . . . . . 12 79
Later Years. . . . . . . . . . . . . . . . . 57 807
Total Minimum Lease Payments. . . . . . . .$124 $1,286
Less Executory Costs, principally
real estate taxes to be paid
by the lessor . . . . . . . . . . . . . . . (5)
Less Imputed Interest. . . . . . . . . . . .(38)
Present Value of Net Minimum
Capital Lease Payments
Including Portion due within
one year of $7 . . . . . . . . . . . . . .$ 81
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
12. Leases (continued)
Net rent expense charged to earnings was $130 for 1994, $104 for
1993 and $101 for 1992 after deducting rentals from subleases of
$9 in 1994, $9 in 1993 and $10 in 1992. Rent expense includes
contingent lease rentals for capital and operating leases of $13
for 1994, $11 for 1993 and $11 for 1992. These contingent lease
rentals are generally based on sales revenues.
Some rental agreements contain escalation provisions that may
require higher future rent payments. Rent expense incurred under
rental agreements which contain escalation clauses is recognized on
a straight-line basis over the life of the lease.
13. Redeemable Preferred Stock
Effective September 30, 1992, Montgomery Ward declared a dividend
payable to the Company and the Company redeemed all of its
outstanding shares of Preferred Stock, including 500 shares of
Senior Preferred Stock, par value $1.00 per share, and 400 shares
of Junior Preferred Stock, par value $1.00 per share, all of which
were held by GE Capital. The aggregate redemption prices for the
Senior Preferred Stock and the Junior Preferred Stock were $50 and
$40, respectively, and accrued dividends thereon were $3.
Dividends had been paid quarterly at an annual rate of $11,500 per
share and $12,000 per share for the Senior Preferred Stock and
Junior Preferred Stock, respectively.
On April 27, 1994, the Company's Certificate of Incorporation was
amended to authorize the issuance of a new series of senior
preferred stock (Senior Preferred Stock). On that date, the
Company issued all of the 750 shares of Senior Preferred Stock
authorized by the Certificate of Incorporation to General Electric
Capital Corporation in exchange for $75 in cash. The Company used
the proceeds to acquire 750 shares of a new issue of senior
preferred stock of Montgomery Ward (Montgomery Ward Preferred) for
$75 and Montgomery Ward used the proceeds to reduce short-term
borrowings.
Dividends on the Senior Preferred Stock are payable quarterly at
an annual rate of $4,850 per share. The Company is required to
redeem all or any portion of the Senior Preferred Stock upon four
months' written notice by the holders on or after April 28, 1999.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions, except per share amounts)
14. Common Stock
The Company has the following authorized classes of common stock:
Class A Common Stock, Series 1; $.01 par value; 25,000,000
shares authorized; 19,074,118 shares issued and outstanding,
net of 5,925,882 shares held in treasury.
Class A Common Stock, Series 2; $.01 par value; 5,412,000
shares authorized; 206,364 shares issued and outstanding, net
of 678,982 shares held in treasury.
Class A Common Stock, Series 3; $.01 par value; 2,400,000
shares authorized; no shares issued or outstanding.
Class B Common Stock; $.01 par value; 25,000,000 shares
authorized, issued and outstanding; all owned by GE Capital.
The Company has repurchased 4,187,550 shares held by certain
former officers of the Company, Montgomery Ward and Signature and
their permitted transferees by making cash payments and issuing
installment notes in the aggregate of approximately $62. As of
December 31, 1994, the outstanding balance of these notes was $26.
These installment notes bear interest at varying rates, are payable
over multi-year periods (generally three to five years) and are
secured by shares of Common Stock, the fair market value of which
is equal to the outstanding principal amount under each note. The
notes are classified as Accrued liabilities and other obligations.
Under all of the Agreements, Montgomery Ward expects to be able to
advance the Company sufficient funds to allow the Company to make
the required installment payments in 1995.
Each share of Class B Common Stock entitles the holder thereof
to one vote. All shares of Class A Common Stock entitle the
holders to a total of 25,000,000 votes, or one vote per share if
the total number of Class A shares issued and outstanding is less
than 25,000,000.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions, except per share amounts)
14. Common Stock (continued)
Net income per common share is computed as follows:
52-Week Period Ended
December 31, 1994
Class A Class B
Earnings available for Common Share-
holders, after deducting preferred
stock dividend requirements. . . . . $57 $58
Weighted average number of common
and common equivalent shares
(stock options) outstanding. . . . . 21,407,379 25,000,000
Earnings per share . . . . . . . . . . $2.68 $2.30
52-Week Period Ended
January 1, 1994
Class A Class B
Earnings available for Common
Shareholders . . . . . . . . . . . . $50 $51
Weighted average number of common
and common equivalent shares
(stock options) outstanding. . . . . 21,805,203 25,000,000
Earnings per share . . . . . . . . . . $2.29 $2.04
53-Week Period Ended
January 2, 1993
Class A Class B
Earnings available for Common Share-
holders, after deducting preferred
stock dividend requirements and
cumulative effect of changes in
accounting principles. . . . . . . . $26 $26
Weighted average number of common
and common equivalent shares
(stock options) outstanding. . . . . 22,537,539 25,000,000
Earnings per share . . . . . . . . . . $1.13 $1.05
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions, except per share amounts)
15. Stock Ownership Plan
The Montgomery Ward & Co., Incorporated Stock Ownership Plan was
adopted effective July 19, 1988. A total of 1,000,000 Class A
Common Stock, Series 1, 5,412,000 shares of Class A Common Stock,
Series 2, and 2,000,000 shares of Class A Common Stock, Series 3,
have been reserved for issuance under the plan. Key associates of
Montgomery Ward and its subsidiaries are eligible to participate
and may receive awards, purchase rights and options. Awards are
grants of shares for no consideration. Options for 2,926,286 and
1,484,302 of Class A Common Stock, Series 2 shares were exercisable
at December 31, 1994 and January 1, 1994, respectively.
Following is a summary of activity under the plan.
Option Price
Options Range
Outstanding December 28, 1991 . . . . 2,944,967 $0.20-$14.79
Granted, 1992 . . . . . . . . . . . . 1,377,478 $15.11-$18.75
Exercised, 1992 . . . . . . . . . . . (256,367) $0.20-$15.11
Cancellations, 1992 . . . . . . . . . (469,170) $0.20-$18.75
Outstanding January 2, 1993 . . . . . 3,596,908 $0.20-$18.75
Granted, 1993 . . . . . . . . . . . . 1,979,105 $18.75-$22.50
Exercised, 1993 . . . . . . . . . . . (192,864) $0.20-$18.75
Cancellations, 1993 . . . . . . . . . (520,083) $0.20-$22.50
Outstanding January 1, 1994 . . . . . 4,863,066 $0.20-$22.50
Granted, 1994 . . . . . . . . . . . . 2,010,236 $12.50-$26.50
Exercised, 1994 . . . . . . . . . . . (297,415) $0.20-$22.50
Cancellations, 1994 . . . . . . . . . (890,285) $0.20-$26.50
Outstanding, December 31, 1994. . . . 5,685,602 $0.20-$26.50
During 1991, the Board of Directors approved the Directors Plan.
The Directors Plan was established to, among other things, allow
outside directors to receive all or any portion of the fees for
their services as directors of the Company and Montgomery Ward via
conversion rights in Series 1 or Series 2 shares. In 1994, 1993
and 1992, 2,489, 3,466 and 3,332 Series 1 shares were issued from
treasury as payment for directors fees, respectively.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
16. Benefits and Losses
Operating, selling, general and administrative expenses include
benefits and losses related to direct response marketing operations
of $102, $93 and $97 for the 52-week periods ended December 31,
1994 and January 1, 1994 and the 53-week period ended January 2,
1993, respectively.
17. Interest Expense, Net of Investment Income
Net interest expense is as follows:
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Interest on short-term
borrowings. . . . . . . . .$19 $ 12 $ 4
Interest on long-term
debt and obligations
under capital leases. . . . 30 24 41
Miscellaneous interest,
net . . . . . . . . . . . . 11 8 6
Investment income. . . . . (2) (1) (6)
Total interest expense,
net of investment
income. . . . . . . . . . .$58 $43 $45
18. Litigation and Other Proceedings
MW Holding, Montgomery Ward and its subsidiaries are engaged in
various litigation and have a number of unresolved claims. While
the amounts claimed are substantial and the ultimate liability with
respect to such litigation and claims cannot be determined at this
time, management is of the opinion that such liability, to the
extent not provided for through insurance or otherwise, is not
likely to have a material impact on the financial condition and the
results of operations of the Company.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions, except per share amounts)
19. Related Party Transactions
Substantially all shares of Class A Series 1 and Series 2
Common Stock, except those held by the Chairman and Chief Executive
Officer of the Company and a trust established for the benefit of
his children, are held by a Voting Trust which was created in 1988.
In 1994, a second voting trust was created to hold shares of Class
A Series 3 Common Stock. A Voting Trustee (currently the Chairman
and Chief Executive Officer of the Company) has sole voting power
and control of all shares held by both Voting Trusts. The 1988
Voting Trust will expire June 21, 1998 or upon the occurrence of
certain specified events in accordance with the Voting Trust
Agreement. The 1994 Voting Trust has no expiration date but may
expire upon the occurrence of certain specified events in
accordance with the Voting Trust Agreement.
The Company engages in various transactions with GE Capital as
described in Notes 4, 13 and 14.
In December, 1994, Montgomery Ward signed a letter of intent to
acquire an equity interest in ValueVision International, Inc.
(ValueVision). ValueVision provides television programming within
the emerging home shopping industry. Under the proposed agreement,
Montgomery Ward will purchase 1,280,000 unregistered shares of
common stock of ValueVision at $6.25 per share, which represents
approximately 4.7% of the issued and outstanding shares of common
stock of ValueVision. Montgomery Ward will also receive warrants
to purchase an additional 25 million shares of common stock of
ValueVision with exercise prices ranging from $6.50 to $17.00 per
share, with an average exercise price of $9.16 per share. The
warrants vest over time, subject to the vesting termination and
acceleration provisions in the agreement.
In July, 1994, Montgomery Ward, through a subsidiary, became a
limited partner in Merchant Partners Limited Partnership. The
purpose of this partnership is to invest in new and emerging growth
businesses and leveraged buy-outs to achieve a superior rate of
return. Montgomery Ward made a capital contribution of $1 in
1994. Per the terms of the agreement, additional funding may be
required within limitations set forth in the agreement. The
cumulative maximum capital contribution is $40.
In October 1991, the Company entered into a joint venture, MW
Direct L.P. (MW Direct), formed through a partnership between
subsidiaries of Montgomery Ward and subsidiaries of Fingerhut
Companies, Inc., a Minneapolis-based specialty catalog marketer.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
19. Related Party Transactions (continued)
Montgomery Ward made a $5 initial capital contribution in 1992.
Per the terms of the agreement, no further capital contributions
are required.
Montgomery Ward paid on behalf of those associates and past
associates of Montgomery Ward and certain of its subsidiaries who
purchased stock in the Company in 1988, the legal fees and related
costs and expenses in connection with certain deficiencies in tax
assessed by the Internal Revenue Service, and certain Tax Court
cases. All assessments were settled in 1994. Montgomery Ward paid
approximately $4 in 1993 and $1 in 1992 for services rendered in
connection with the aforementioned matters.
In November 1991, the Board of Directors approved a line of
credit program for certain associates, including directors who are
associates and executive officers of the Company (Line of Credit
Program). Under the Line of Credit Program, the Company arranged
with banks (Program Banks) for lines of credit of up to $10 in the
aggregate for all participants in the Line of Credit Program. As
of December 31, 1994, an aggregate of $5 was available under the
Line of Credit Program. Any associate who borrows money from the
Program Banks under the Line of Credit Program is required to
pledge to such Program Banks as collateral a number of shares owned
by such associate, the fair market value of which is equal to twice
the amount the associate borrows. In the event any associate
should default upon his or her repayment obligations, the Company
anticipates that it will repurchase that individual's note from the
Program Banks, together with the Banks' security interest in the
pledged stock, at the face amount of the note plus up to one year's
interest. At December 31, 1994, the borrowings outstanding under
the Line of Credit Program were less than $1.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
20. Business Segments
Montgomery Ward and its subsidiaries are engaged in retail
merchandising and direct response marketing, including insurance,
in the United States. Following is information regarding revenues,
earnings and assets of the Company by segment.
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Total Revenues
Retail Merchandising. . $6,573 $5,629 $5,427
Direct Response
Marketing. . . . . . . 465 400 379
Total . . . . . . . . $7,038 $6,029 $5,806
Operating Earnings
Retail Merchandising. . $ 208 $ 171 $ 198
Direct Response
Marketing. . . . . . . . 60 54 52
Corporate and Other . . (89) (65) (100)
Total. . . . . . . . . $ 179 $ 160 $ 150
Identifiable Assets
Retail Merchandising. . $3,317 $ 2,627 $2,391
Direct Response
Marketing. . . . . . . . 789 753 702
Corporate and Other. . 434 455 392
Total . . . . . . . . $4,540 $3,835 $3,485
Depreciation and
Amortization
Retail Merchandising. . $ 105 $ 95 $ 94
Direct Response
Marketing. . . . . . . 4 3 3
Total . . . . . . . . $ 109 $ 98 $ 97
Capital Expenditures
Retail Merchandising. . $ 180 $ 139 $ 141
Direct Response
Marketing. . . . . . . 4 3 5
Total . . . . . . . . $ 184 $ 142 $ 146
Under the laws and regulations applicable to insurance companies,
certain subsidiaries of Signature are limited in the amount of
dividends they may pay without the approval of the Illinois
Insurance Department and are prohibited from making any loans and
advances to Montgomery Ward and its affiliates. Under these laws,
the restricted subsidiaries, which had aggregate retained earnings
of $141, and aggregate total shareholders equity of $192, can pay
dividends of $41 during 1995 subject to the availability of earned
surplus as determined on a statutory basis. Dividends received
from insurance subsidiaries were $22, $35 and $27 for 1994, 1993
and 1992.
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
21. Parent Company Financial Information
Following is the MW Holding balance sheet as of December 31, 1994
and January 1, 1994 and the statements of income and cash flows for
the 52-week periods ended December 31, 1994 and January 1, 1994 and
the 53-week period ended January 2, 1993.
MONTGOMERY WARD HOLDING CORP.
BALANCE SHEET
ASSETS
December 31, January 1,
1994 1994
Federal Income Taxes Receivable . . . . . .$ 4 $ 4
Investment in Montgomery Ward . . . . . . . 766 671
Redeemable Preferred Stock of
Montgomery Ward. . . . . . . . . . . . . . 75 -
Total Assets . . . . . . . . . . . . . . .$845 $675
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable to Montgomery Ward . . . .$ 57 $ 35
Accrued Liabilities . . . . . . . . . . . . 26 33
Total Liabilities. . . . . . . . . . . . . 83 68
Redeemable Preferred Stock. . . . . . . . . 75 -
Common Stock. . . . . . . . . . . . . . . - -
Capital in excess of par value. . . . . . . 23 19
Retained Earnings . . . . . . . . . . . . . 751 658
Unrealized gain on marketable equity
securities . . . . . . . . . . . . . . . . 2 3
Less: Treasury stock, at cost. . . . . . .(89) (73)
Total Shareholders' Equity . . . . . . . . 687 607
Total Liabilities and
Shareholders' Equity . . . . . . . . . . .$845 $675
STATEMENT OF INCOME
52-Week 53-Week
Period Ended Period Ended
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
Miscellaneous Costs . . . .$(2) $(1) $(2)
Total Costs and
Expenses. . . . . . . . . (2) (1) (2)
Tax Benefits. . . . . . . . - - -
Net Loss Before
Earnings of
Montgomery Ward. . . . . . (2) (1) (2)
Equity in Net Income
of Montgomery Ward,
net of cumulative
effect of
accounting changes . . . . 119 102 62
Net Income. . . . . . . . . 117 101 60
Preferred Stock Dividend
Requirements . . . . . . . 2 - 8
Net Income Available
for Common
Shareholders . . . . . . .$115 $101 $ 52
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions)
21. Parent Company Financial Information (continued)
STATEMENT OF CASH FLOWS
December 31, January 1, January 2,
1994 1994 1993
Net Income. . . . . . . . . .$117 $101 $ 60
Adjustments to reconcile
net income to net cash
provided:
Change in undis-
tributed earnings
of subsidiary . . . . . .(96) (79) 48
Decrease (increase) in:
Federal income taxes
receivable . . . . . . . - - (1)
Other assets. . . . . . . - 1 -
Increase (decrease) in:
Accounts payable to
Montgomery Ward. . . . . 22 12 10
Accrued liabilities . . (14) (4) (4)
Net cash provided
before financing
activities . . . . . . . . (29) 31 113
Cash flows from financing
activities:
Proceeds from issuance
of common stock . . . . . 3 1 1
Proceeds from issuance
of preferred stock. . . . 75 - -
Purchase of Montgomery
Ward preferred
stock. . . . . . . . . . .(75) - -
Cash dividends paid . . . .(24) (23) (19)
Payments to redeem
preferred stock . . . . . - - (90)
Purchase of treasury
stock, at cost. . . . . . (9) (11) (7)
Tax benefit of stock
options exercise
and other stock
exchanges . . . . . . . 1 2 2
Net cash used for
financing activities . . . (29) (31) (113)
Cash at end of period . . . $ - $ - $ -
Non-cash investing
activities:
Change in unrealized
gain on investments . . . $ (1) $ - $ 1
Non-cash financing
activities:
Notes issued for
purchase of
treasury stock. . . . . . $ 7 $ 16 $ 5
<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollar amounts in millions, except per share amounts)
22. Quarterly Financial Data (unaudited)
The quarterly operations of MW Holding are summarized as follows:
Quarter
First Second Third Fourth Year
52-Week Period Ended
December 31, 1994
Net sales. . . . . . .$1,216 $1,520 $1,574 $2,263 $6,573
Cost of goods sold . . . 930 1,183 1,234 1,742 5,089
Net Income . . . . . . . .10 28 15 64 117
Net Income per Class A
Common Share. . . . . .23 .62 .33 1.51 2.68
Net Income per Class B
Common Share. . . . . .20 .53 .29 1.28 2.30
52-Week Period Ended
January 1, 1994
Net sales. . . . . . .$1,160 $1,283 $1,327 $1,859 $5,629
Cost of goods sold . 876 963 1,009 1,408 4,256
Net Income . . . . . 10 27 14 50 101
Net Income per Class A
Common Share. . . . .21 .61 .33 1.16 2.29
Net Income per Class B
Common Share. . . . .19 .56 .29 1.01 2.04
<PAGE>
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Company
Information as to executive officers required by this item is
included under the caption "Executive Officers of the Registrant"
beginning on page 15. Information as to directors required by this
item is incorporated herein by reference, pursuant to General
Instruction G(3) to Form 10-K, from the Registrant's definitive
proxy statement, for the annual meeting of shareholders to be held
on May 12, 1995, to be filed within 120 days of the end of the
Registrant's fiscal year.
Item 11. Executive Compensation
Incorporated herein by reference, pursuant to General Instruction
G(3) to Form 10-K, from the Registrant's definitive proxy
statement, for the annual meeting of shareholders to be held on May
12, 1995, to be filed within 120 days of the end of the
Registrant's fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Incorporated herein by reference, pursuant to General Instruction
G(3) to Form 10-K, from the Registrant's definitive proxy
statement, for the annual meeting of shareholders to be held on May
12, 1995, to be filed within 120 days of the end of the
Registrant's fiscal year.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference, pursuant to General Instruction
G(3) to Form 10-K, from the Registrant's definitive proxy
statement, for the annual meeting of shareholders to be held on May
12, 1995, to be filed within 120 days of the end of the
Registrant's fiscal year.
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) 1. Financial Statements.
Page
Report of Independent Public Accountants. . . . . . . . .28
Consolidated Balance Sheet at December 31, 1994
and January 1, 1994 . . . . . . . . . . . . . . . . . .31
For the 52-Week Periods Ended December 31, 1994
and January 1, 1994 and the 53-Week Period
Ended January 2, 1993
Consolidated Statement of Income. . . . . . . . . . . .29
Consolidated Statement of Shareholders' Equity. . . .32
Consolidated Statement of Cash Flows. . . . . . . . .35
Notes to Consolidated Financial Statements. . . . . . . .37
2. Financial Statement Schedules.
Schedules have been omitted because they are not applicable, not
required, not material, or the required information is given in the
financial statements or notes thereto or combined with the
information presented in other schedules or exhibits.
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits
2.(i)(A) Agreement and Plan of Merger dated March 17, 1994
by and among Montgomery Ward & Co., Incorporated,
MW Merger Corp., LMR Acquisition Corporation,
Lechmere, Inc. and stockholders of LMR Acquisition
Corporation executing counterparts of this
agreement, incorporated by reference to Exhibit
2.(i)(A) of the Company's Annual Report on Form 10-
K for the fiscal year ended January 1, 1994.
2.(i)(A)(1) First Amendment to Agreement and Plan of Merger
dated June 15, 1994, by and among Montgomery Ward
& Co., Incorporated, LMR Acquisition Corporation,
and the Stockholders' Committee, incorporated by
reference to Exhibit 2.(i)(A)(1) of the Company's
Quarterly Report on Form 10-Q for the fiscal
quarterly period ended July 2, 1994.
2.(ii) Agreement of Purchase and Sale of Stock
dated February 24, 1994 among Signature Financial/
Marketing, Inc., Greater California Dental Services
Plan, Inc. and National Dental Services, Inc.,
incorporated by reference to Exhibit 2.(i)(A) of
the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 1994.
3.1 Third Restated Certificate of Incorporation of
Registrant, filed June 28, 1994, incorporated by
reference to Exhibit 3.2(ii) of the Company's
Registration Statement on Form S-1 (Registration
No. 33-33252).
3.1(i) Certificate of Amendment to Certificate of
Incorporation of Montgomery Ward Holding Corp.
dated October 25, 1994, incorporated by reference
to Exhibit 3.2(iv) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period
ended October 1, 1994.
3.3 Amended and Restated By-laws of Registrant, dated
as of April 15, 1994, incorporated by reference to
Exhibit 3.3(i) of the Company's Registration
Statement on Form S-1 (Registration No. 33-33252).
3.3(i) Amendment No. 1 to Restated By-laws of Montgomery
Ward Holding Corp. dated September 21, 1994,
incorporated by reference to Exhibit 3.3(i) of the
Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended October 1, 1994.
9. Voting Trust Agreement dated as of June 21, 1988,
incorporated by reference to Exhibit 3(a) of the
Company's Registration Statement on Form S-1
(Registration No. 33-23403).
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits (continued)
9.(i) Voting Trust Agreement dated as of October 21,
1994, incorporated by reference to Exhibit
9.(i) of the Company's Quarterly Report on Form
10-Q for the fiscal quarterly period ended
October 1, 1994.
10.(i)(A)(1) Stockholders' Agreement dated as of June 17,
1988, as amended and restated as of August 1,
1994, incorporated by reference to Annex 1 of
the Prospectus contained in the Company's
Registration Statement on Form S-1
(Registration No. 33-33252).
10.(iv)(A)(1)(a) Amendment No. 14 to Stockholders' Agreement
dated September 22, 1994, incorporated by
reference to Exhibit 10.(iv)(A)(1)(a) of the
Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended October 1, 1994.
10.(i)(A)(3) Montgomery Ward & Co., Incorporated Stock
Ownership Plan Terms and Conditions, as amended
and restated, as of August 1, 1994,
incorporated by reference to Exhibit
10.(iv)(A)(v) of the Company's Registration
Statement on Form S-1 (Registration No.
33-41161).
10.(i)(A)(4) Amendment No. 10 to Montgomery Ward & Co.,
Incorporated Stock Ownership Plan Terms and
Conditions dated September 22, 1994,
incorporated by reference to Exhibit
10.(iv)(A)(5) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period
ended October 1, 1994.
10.(i)(B) Stock Purchase Agreement dated March 6, 1988
between Mobil Corporation, Marcor Inc. and BFB
Acquisition Corp. incorporated by reference to
Exhibit 10.(i)(B) of the Company's Registration
Statement on Form S-1 (Registration No.
33-23403).
10.(i)(F) Note Purchase Agreements dated March 1, 1993
between Montgomery Ward & Co., Incorporated and
various lenders, incorporated by reference to
Exhibit 10.(i)(F) of the Company's Annual
Report on Form 10-K for the fiscal year ended
January 2, 1993.
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits (continued)
10.(i)(H) Long Term Credit Agreement dated as of September
15, 1994 among Montgomery Ward & Co., Incorporated,
various banks, The First National Bank of Chicago,
as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent,
incorporated by reference to Exhibit 10.(i)(G) of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended October 1, 1994.
10.(i)(I) Short Term Credit Agreement dated as of September
15, 1994 among Montgomery Ward & Co., Incorporated,
various banks, The First National Bank of Chicago,
as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National
Trust and Savings Association, as Advisory Agent,
incorporated by reference to Exhibit 10.(i)(H) of
the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended October 1, 1994.
10.(ii)(A) Stock Purchase Agreement dated June 22, 1988
between General Electric Capital Corporation and
Montgomery Ward & Co., Incorporated, incorporated
by reference to Exhibit 10.(ii)(A) of the Company's
Registration Statement on Form S-1 (Registration
No. 33-23403).
10.(ii)(B) Account Purchase Agreement dated June 24, 1988 by
and between Montgomery Ward Credit Corporation and
Montgomery Ward & Co., Incorporated, incorporated
by reference to Exhibit 10.(ii)(B) of the Company's
Registration Statement on Form S-1 (Registration
No. 33-23403).
10.(ii)(B)(1) Letter Agreement dated April 21, 1989, by and
between Montgomery Ward Credit Corporation and
Montgomery Ward & Co., Incorporated (amending the
Account Purchase Agreement which is Exhibit
10.(ii)(B) hereto), incorporated by reference to
Exhibit 10.(ii)(B)(1) of the Company's Registration
Statement on Form S-1 (Registration No. 33-33252).
10.(ii)(B)(2) Amendment to Account Purchase Agreement dated
December 26, 1989 by and between Montgomery Ward
Credit Corporation and Montgomery Ward & Co.,
Incorporated, incorporated by reference to Exhibit
10.(ii)(B)(2) of the Company's Registration
Statement on Form S-1 (Registration No. 33-33252).
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits (continued)
10.(ii)(B)(3) Letter Agreement dated April 24, 1990, by and
between Montgomery Ward Credit Corporation and
Montgomery Ward & Co., Incorporated, incorporated
by reference to Exhibit 10.(ii)(B)(3) of the
Company's Registration Statement on Form S-1
(Registration No. 33-33252).
10.(ii)(C) Letter Agreement dated June 24, 1988 among
Signature Financial/Marketing, Inc., Montgomery
Ward Credit Corporation and Montgomery Ward & Co.,
Incorporated, incorporated by reference to Exhibit
10.(ii)(C) of the Company's Registration Statement
on Form S-1 (Registration No. 33-23403).
10.(ii)(D) Letter Agreement dated December 26, 1990, by and
between Montgomery Ward Credit Corporation and
Montgomery Ward & Co., Incorporated, incorporated
by reference to 10.(ii)(D) of the Company's Annual
Report on Form 10-K for the fiscal year ended
December 29, 1990.
10.(ii)(E) Fifth Amendment to Account Purchase Agreement dated
May 23, 1992 by and between Montgomery Ward & Co.,
Incorporated and Montgomery Ward Credit
Corporation, incorporated by reference to Exhibit
10.(ii)(E) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended
June 27, 1992.
10.(ii)(F) Amendment dated May 23, 1992 to Letter Agreement
dated June 24, 1988 (Signature Credit Agreement) by
and among Signature Financial/Marketing, Inc.,
Montgomery Ward & Co., Incorporated and Montgomery
Ward Credit Corporation, incorporated by reference
to Exhibit 10.(ii)(F) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period
ended June 27, 1992.
10.(ii)(G) Letter Agreement dated December 29, 1992 by and
between Montgomery Ward & Co., Incorporated and
Montgomery Ward Credit Corporation, incorporated by
reference to Exhibit 10.(ii)(G) of the Company's
Annual Report on Form 10-K for the fiscal year
ended January 2, 1993.
10.(ii)(G)(1) Letter Agreement dated April 29, 1993, by and
between Montgomery Ward Credit Corporation and
Montgomery Ward & Co., Incorporated, incorporated
by reference to Exhibit 10.(ii)(H) of the Company's
Quarterly Report on Form 10-Q for the fiscal
quarterly period ended April 3, 1993.
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits (continued)
10.(ii)(G)(2) Letter Agreement dated September 15, 1993, by and
between Montgomery Ward Credit Corporation and
Montgomery Ward & Co., Incorporated, incorporated
by reference to Exhibit 10.(ii)(G)(2) of the
Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1994.
10.(ii)(H) Ninth Amendment to Account Purchase Agreement dated
February 16, 1994 by and between Montgomery Ward &
Co., Incorporated and Montgomery Ward Credit
Corporation, incorporated by reference to Exhibit
10.(ii)(H) of the Company's Annual Report on form
10-K for the fiscal year ended January 1, 1994.
10.(ii)(I) Tenth Amendment to Account Purchase Agreement dated
June 16, 1994, by and between Montgomery Ward
Credit Corporation and Montgomery Ward & Co.,
Incorporated, incorporated by reference to Exhibit
10.(ii)(B)(11) of the Company's Registration
Statement on Form S-1 (No. 33-33252).
10.(ii)(J) Second Amendment dated June 16, 1994 to Signature
Credit Agreement by and among Signature
Financial/Marketing, Inc., Montgomery Ward & Co.,
Incorporated and Montgomery Ward Credit
Corporation, incorporated by reference to Exhibit
10.(ii)(C)(2) of the Company's Registration
Statement on Form S-1 (No. 33-33252).
10.(ii)(K) Eleventh Amendment to the Account Purchase
Agreement dated January 1, 1994, by and between
Montgomery Ward Credit Corporation and Montgomery
Ward & Co., Incorporated.
10.(iv)(A) Montgomery Ward & Co., Incorporated Stock Ownership
Plan, amended and restated as of May 20, 1994,
incorporated by reference to Exhibit
10.(iv)(A)(ii)(A) of the Company's Registration
Statement on Form S-1 (No. 33-33252).
10.(iv)(A)(1) Amendment No. 1 to the Amended and Restated
Montgomery Ward & Co. Stock Ownership Plan dated
October 20, 1994, incorporated by reference to
Exhibit 10.(iv)(A)(iii) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period
ended October 1, 1994.
10.(iv)(B) Montgomery Ward & Co., Incorporated Long Term
Incentive Plan, incorporated by reference to
Exhibit 10.(iv)(B) of the Company's Registration
Statement on Form S-1 (Registration No. 33-23403).
10.(iv)(B)(i) Montgomery Ward & Co., Incorporated Executive Long-
Term Incentive Plan, incorporated by reference to
Exhibit 10.(iv)(B)(1) of the Company's Registration
Statement on Form S-1 (No. 33-33252).
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits (continued)
10.(iv)(C) Montgomery Ward & Co., Incorporated Performance
Management Program, incorporated by reference to
Exhibit 10.(iv)(C) of the Company's Registration
Statement on Form S-1 (Registration No. 33-23403).
10.(iv)(C)(i) Montgomery Ward & Co., Incorporated Senior
Executive Performance Management Program,
incorporated by reference to Exhibit 10.(iv)(C)(i)
of the Company's Registration Statement on Form S-1
(No. 33-33252).
10.(iv)(D) Montgomery Ward & Co., Incorporated Retirement
Security Plan (as amended and restated effective as
of January 1, 1994).
10.(iv)(E) Montgomery Ward & Co., Incorporated Supplemental
Retirement Plan, incorporated by reference to
Exhibit 10.(iv)(E) of the Company's Registration
Statement on Form S-1 (Registration No. 33-23403).
10.(iv)(F) Montgomery Ward Holding Corp. Directors Fee and
Stock Ownership Plan, incorporated by reference to
Exhibit 10.(iv)(F) of the Company's Registration
Statement on Form S-1 (Registration No. 33-41161).
10.(iv)(G) Montgomery Ward Holding Corp. Senior Officer
Severance Plan, incorporated by reference to
Exhibit 10.(iv)(G) of the Company's Annual Report
on Form 10-K for the fiscal year ended January 2,
1993.
10.(iv)(H) Montgomery Ward & Co., Incorporated Savings and
Profit Sharing Plan (as amended and restated as of
January 1, 1994).
10.(iv)(I) Montgomery Ward & Co., Incorporated Success Plan,
incorporated by reference to Exhibit 10.(iv)(I) of
the Company's Registration Statement on Form S-1
(No. 33-33252).
10.(vi) Employment Agreement effective January 14, 1994
between Montgomery Ward & Co., Incorporated and
Bernard W. Andrews, incorporated by reference to
Exhibit 10.(vi) of the Company's Annual Report on
Form 10-K for the fiscal year ended January 1,
1994.
10.(vii) Agreement effective October 21, 1991 between
Montgomery Ward & Co., Incorporated and Fingerhut
Companies, Inc., incorporated by reference to
Exhibit 10.(vii) of the Company's Annual Report on
Form 10-K for the fiscal year ended December 28,
1991.
<PAGE>
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
3. Exhibits (continued)
10.(viii) Line of Credit Agreement effective November 19,
1991 between Montgomery Ward & Co., Incorporated
and The Northern Trust Company and The First
National Bank of Chicago, incorporated by reference
to Exhibit 10.(viii) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 28,
1991.
10.(i x) Employment Agreement effective December 31, 1993
between Montgomery Ward & Co., Incorporated and
Robert F. Connolly, incorporated by reference to
Exhibit 10.(ix) of the Company's Annual Report on
Form 10-K for the fiscal year ended January 1,
1994.
10.(xi) Employment Agreement dated March 1, 1994 between
Montgomery Ward & Co., Incorporated and Richard
Bergel, incorporated by reference to Exhibit
10.(xi)(A) of the Company's Registration Statement
on Form S-1 (No. 33-33252).
10.(xii) Employment Agreement effective April 12, 1994
between Montgomery Ward & Co., Incorporated, and G.
Joseph Reddington.
11. Statement regarding computation of per share
earnings.
12. Not applicable.
13. Not applicable.
16. Not applicable.
18. Not applicable.
19. Not applicable.
21. Subsidiaries of the Registrant, incorporated by
reference to Exhibit 21 of the Company's
Registration Statement on Form S-1 (Registration
No. 33-33252).
22. Not applicable.
23. Consent of independent public accountants.
24. Powers of attorney executed by directors and
officers authorizing execution of Annual Report on
Form 10-K.
27. Financial data schedule.
28. Not applicable.
(b) Reports on Form 8-K.
On December 15, 1994, the Registrant filed a Form 8-K to
communicate its intention to enter into an equity and license
service agreement with ValueVision International, Inc. The letter
of intent by and between Montgomery Ward & Co., Inc. and
ValueVision International, Inc. dated December 4, 1994 and the
press release issued by the Registrant jointly with ValueVision
International, Inc. on December 5, 1994 were included as exhibits
thereto.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant, Montgomery Ward
Holding Corp., has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
REGISTRANT MONTGOMERY WARD HOLDING CORP.
BY JOHN L. WORKMAN
NAME AND TITLE John L. Workman, Executive Vice President,
Chief Financial Officer and Assistant Secretary
DATE March 30, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.
BY SPENCER H. HEINE
NAME AND TITLE Bernard F. Brennan*, Director, Chairman of the
Board and Principal Executive Officer
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE Bernard W. Andrews*, President and Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE Richard Bergel*, Vice Chairman and Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE Spencer H. Heine, Executive Vice President,
Secretary, General Counsel and Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE G. Joseph Reddington*, Director
DATE March 30, 1995
<PAGE>
<PAGE>
SIGNATURES
BY JOHN L. WORKMAN
NAME AND TITLE John L. Workman, Executive Vice President,
Chief Financial Officer and Assistant Secretary
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE Myron Lieberman*, Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE Silas S. Cathcart*, Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE David D. Ekedahl*, Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE Denis J. Nayden*, Director
DATE March 30, 1995
BY SPENCER H. HEINE
NAME AND TITLE James A. Parke*, Director
DATE March 30, 1995
* by power of attorney
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------- ----------------------
2.(i)(A) Agreement and Plan Incorporated by
of Merger dated March reference to
17, 1994 by and among Exhibit 2.(i)(A) of the
Montgomery Ward Company's Annual Report
& Co., Incorporated, on Form 10-K for the
MW Merger Corp., LMR fiscal year ended
Acquisition Corporation, January 1, 1994.
Lechmere, Inc. and
stockholders of LMR
Acquisition Corporation
executing counterparts
of this agreement.
2.(i)(A)(1) First Amendment to Incorporated by
Agreement and Plan of reference to
Merger dated June 15, Exhibit 2.(i)(A)(1)
1994, by and among of the Company's
Montgomery Ward & Co., Quarterly Report
Incorporated, LMR on Form 10-Q for
Acquisition Corporation, the fiscal quarterly
and the Stockholders' period ended July 2,
Committee. 1994.
2.(ii) Agreement of Purchase Incorporated by
and Sale of Stock reference to
dated February 24, 1994 Exhibit 2.(i)(A)
by and among Signature of the Company's
Financial/Marketing, Annual Report on
Inc., Greater California Form 10-K for the
Dental Services Plan, fiscal year ended
Inc. and National January 1, 1994.
Dental Services, Inc.
3.1 Third Restated Incorporated by
Certificate of reference to
Incorporation of Exhibit 3.2(ii) of the
Registrant, filed Company's Registration
June 28, 1994. Statement on Form S-1
(Registration No.
33-33252).
3.1(i) Certificate of Incorporated by
Amendment to reference to Exhibit
Certificate of 3.2(iv) of the Company's
Incorporation of Quarterly Report on
Montgomery Ward Holding Form 10-Q for the fiscal
Corp. dated October quarterly period ended
25, 1994. October 1, 1994.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- ----------------------
3.3 Amended and Restated Incorporated by
By-laws of Registrant, reference to Exhibit
dated as of April 15, 3.3(i) of the Company's
1994. Registration Statement
on Form S-1 (Registration
No. 33-33252).
3.3(i) Amendment No. 1 to Incorporated by
Restated By-laws of reference to Exhibit
Montgomery Ward Holding 3.3(i) of the Company's
Corp. dated September Quarterly Report on
21, 1994. Form 10-Q for the fiscal
quarterly period ended
October 1, 1994.
9. Voting Trust Incorporated by
Agreement dated as reference to
of June 21, 1988. Exhibit 3(a) of the
Company's Registration
Statement on Form S-1
(Registration No.
33-23403).
9.(i) Voting Trust Agreement Incorporated by
dated as of October 21, reference to Exhibit
1994. 9.(i) of the Company's
Quarterly Report on
Form 10-Q for the fiscal
quarterly period ended
October 1, 1994.
10.(i)(A)(1) Stockholders' Agreement Incorporated by
dated June 17, 1988, reference to Annex 1
as amended and of the Prospectus
restated as of contained in the
August 1, 1994. Company's Registration
Statement on Form S-1
(Registration No.
33-33252).
10.(iv)(A)(1)(a)Amendment No. 14 Incorporated by
to Stockholders' reference to Exhibit
Agreement dated 10.(iv)(A)(1)(a) of
September 22, the Company's Quarterly
1994. Report on Form 10-Q for
the fiscal quarterly
period ended October 1,
1994.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- ----------------------
10.(i)(A)(3) Montgomery Ward Incorporated by
& Co., Incorporated reference to Exhibit
Stock Ownership 10.(iv)(A)(v) of the
Plan Terms and Company's Registration
Conditions, as Statement on Form S-1
amended and (Registration No.
restated, as of 33-41161).
August 1, 1994.
10.(i)(A)(4) Amendment No. 10 Incorporated by
to Montgomery Ward reference to Exhibit
& Co., Incorporated 10.(iv)(A)(5) of the
Stock Ownership Plan Company's Quarterly
Terms and Conditions Report on Form 10-Q
dated September 22, for the fiscal
1994. quarterly period
ended October 1, 1994.
10.(i)(B) Stock Purchase Incorporated by
Agreement dated reference to Exhibit
March 6, 1988 10.(i)(B) of the
between Mobil Company's Registration
Corporation, Statement on Form S-1
Marcor Inc. and (Registration No.
BFB Acquisition 33-23403).
Corp.
10.(i)(F) Note Purchase Incorporated by
Agreements dated reference to Exhibit
March 1, 1993 10.(i)(F) of the
between Montgomery Company's Annual
Ward & Co., Incor- Report on Form 10-K
porated and various for the fiscal year
lenders. ended January 2, 1993.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- ----------------------
10.(i)(H) Long Term Credit Incorporated by
Agreement dated as of reference to Exhibit
September 15, 1994 10.(i)(G) of the
among Montgomery Ward Company's Quarterly
& Co., Incorporated, Report on Form 10-Q
various banks, The for the fiscal quarterly
First National Bank period ended October 1,
of Chicago, as Docu- 1994.
mentary Agent, The
Bank of Nova Scotia,
as Administrative
Agent, The Bank of
New York, as Negotiated
Loan Agent and Bank of
America National Trust
and Savings Association,
as Advisory Agent.
10.(i)(I) Short Term Credit Incorporated by
Agreement dated as of reference to Exhibit
September 15, 1994 10.(i)(H) of the
among Montgomery Ward Company's Quarterly
& Co., Incorporated, Report on Form 10-Q
various banks, The for the fiscal quarterly
First National Bank period ended October 1,
of Chicago, as Docu- 1994.
mentary Agent, The Bank
of Nova Scotia, as
Administrative Agent,
The Bank of New York,
as Negotiated Loan
Agent and Bank of
America National Trust
and Savings Association,
as Advisory Agent.
10.(ii)(A) Stock Purchase Incorporated by
Agreement dated reference to Exhibit
June 22, 1988 10.(ii)(A) of the
between General Company's Registration
Electric Capital Statement on Form S-1
Corporation and (Registration No.
Montgomery Ward 33-23403).
& Co., Incorporated.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- ----------------------
10.(ii)(B) Account Purchase Incorporated by
Agreement dated reference to Exhibit
June 24, 1988 10.(ii)(B) of the
by and between Company's Registration
Montgomery Ward Statement on Form S-1
Credit Corporation (Registration No.
and Montgomery 33-23403).
Ward & Co.,
Incorporated.
10.(ii)(B)(1) Letter Agreement Incorporated by
dated April 21, reference to Exhibit
1989 by and between 10.(ii)(B)(1) of the
Montgomery Ward Company's Registration
Credit Corporation Statement on Form S-1
and Montgomery (Registration No.
Ward & Co., Incor- 33-33252).
porated (amending
the Account Purchase
Agreement which is
Exhibit 10.(ii)(B)
hereto).
10.(ii)(B)(2) Amendment to Incorporated by
Account Purchase reference to Exhibit
Agreement dated 10.(ii)(B)(2) of the
December 26, 1989 by Company's Registration
and between Statement on Form S-1
Montgomery Ward (Registration No.
Credit Corporation 33-33252).
and Montgomery Ward &
Co., Incorporated.
10.(ii)(B)(3) Letter Agreement Incorporated by
dated April 24, reference to Exhibit
1990, by and between 10.(ii)(B)(3) of the
Montgomery Ward Company's Registration
Credit Corporation Statement on Form S-1
and Montgomery Ward (Registration No.
& Co., Incorporated. 33-33252).
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- ----------------------
10.(ii)(C) Letter Agreement Incorporated by
dated June 24, reference to Exhibit
1988 among Signa- 10.(ii)(C) of the
ture Financial/ Company's Registration
Marketing, Inc., Statement on Form S-1
Montgomery Ward (Registration No.
Credit Corpora- 33-23403).
tion and Montgomery
Ward & Co., Incor-
porated.
10.(ii)(D) Letter Agreement Incorporated by
dated December 26, reference to Exhibit
1990, by and between 10.(ii)(D) of the
Montgomery Ward Company's Annual
Credit Corporation Report on Form 10-K
and Montgomery for the fiscal year
Ward & Co., Incor- ended December 29,
porated. 1990.
10.(ii)(E) Fifth Amendment to Incorporated by
Account Purchase reference to Exhibit
Agreement dated 10.(ii)(E) of the
May 23, 1992 by and Company's Quarterly
between Montgomery Report on Form 10-Q
Ward & Co., Incor- for the fiscal
porated and Mont- quarterly period ended
gomery Ward Credit June 27, 1992.
Corporation.
10.(ii)(F) Amendment dated Incorporated by
May 23, 1992 to reference to Exhibit
Letter Amendment 10.(ii)(F) of the
dated June 24, Company's Quarterly
1988 (Signature Report on Form 10-Q
Credit Agreement) for the fiscal
by and among quarterly period ended
Signature Financial/ June 27, 1992.
Marketing, Inc.,
Montgomery Ward
& Co., Incorporated
and Montgomery Ward
Credit Corporation.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- -----------------------
10.(ii)(G) Letter Agreement Incorporated by
dated December 29, reference to Exhibit
1992 by and between 10.(ii)(G) of the
Montgomery Ward Company's Annual
& Co., Incorporated Report on Form 10-K
and Montgomery for the fiscal year
Ward Credit Corpora- ended January 2,
tion. 1993.
10.(ii)(G)(1) Letter Agreement Incorporated by
dated April 29, reference to
1993, by and Exhibit 10.(ii)(H)
between Montgomery of the Company's
Ward Credit Corpora- quarterly report on
tion and Montgomery Form 10-Q for the
Ward & Co., Incor- fiscal quarterly
porated. period ended April 3,
1993.
10.(ii)(G)(2) Letter Agreement Incorporated by
dated September 15, reference to
1993, by and Exhibit 10.(ii)(G)(2)
between Montgomery of the Company's
Ward Credit Corpora- Annual Report on
tion and Montgomery Form 10-K for the
Ward & Co., Incor- fiscal year ended
porated. January 1, 1994.
10.(ii)(H) Ninth Amendment to Incorporated by
Account Purchase reference to
Agreement dated Exhibit 10.(ii)(H)
February 16, 1994 of the Company's
by and between Annual Report on
Montgomery Ward & Form 10-K for the
Co., Incorporated fiscal year ended
and Montgomery January 1, 1994.
Ward Credit
Corporation.
10.(ii)(I) Tenth Amendment to Incorporated by
Account Purchase reference to Exhibit
Agreement dated June 10.(ii)(B)(11) of the
16, 1994, by and Company's Registration
between Montgomery Statement on Form S-1
Ward Credit Corporation (No. 33-33252).
and Montgomery Ward &
Co., Incorporated.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- -----------------------
10.(ii)(J) Second Amendment Incorporated by
dated June 16, 1994 reference to Exhibit
to Signature Credit 10.(ii)(C)(2) of the
Agreement by and Company's Registration
among Signature Statement on Form S-1
Financial/Marketing, (No. 33-33252).
Inc., Montgomery Ward
& Co., Incorporated
and Montgomery Ward
Credit Corporation.
10.(ii)(K) Eleventh Amendment to
the Account Purchase
Agreement dated
January 1, 1994, by
and between Montgomery
Ward Credit Corporation
and Montgomery Ward &
Co., Incorporated.
10.(iv)(A) Montgomery Ward Incorporated by
& Co., Incorporated reference to Exhibit
Stock Ownership 10.(iv)(A)(ii)(A) of
Plan, amended and the Company's
restated as of Registration Statement
May 20, 1994. on Form S-1 (No. 33-33252).
10.(iv)(A)(1) Amendment No. 1 to Incorporated by
the Amended and reference to Exhibit
Restated Montgomery 10.(iv)(A)(iii) of the
Ward & Co. Stock Company's Quarterly
Ownership Plan dated Report on Form 10-Q
October 20, 1994. for the fiscal quarterly
period ended October 1,
1994.
10.(iv)(B) Montgomery Ward Incorporated by
& Co., Incorporated reference to Exhibit
Long Term Incentive 10.(iv)(B) of the
Plan. Company's Registration
Statement on Form S-1
(Registration No.
33-23403).
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- -----------------------
10.(iv)(B)(i) Montgomery Ward & Co., Incorporated by
Incorporated Executive reference to Exhibit
Long-Term Incentive 10.(iv)(B)(1) of the
Plan. Company's Registration
Statement on Form S-1
(Registration No.
33-33252).
10.(iv)(C) Montgomery Ward Incorporated by
& Co., Incorporated reference to Exhibit
Performance 10.(iv)(C) of the
Management Program. Company's Registration
Statement on Form S-1
(Registration
No. 33-23403).
10.(iv)(C)(i) Montgomery Ward & Co., Incorporated by
Incorporated Senior reference to Exhibit
Executive Performance 10.(iv)(C)(i) of the
Management Program. Company's Registration
Statement on Form S-1
(Registration No.
33-33252).
10.(iv)(D) Montgomery Ward
& Co., Incorporated
Retirement Security
Plan (as amended
and restated
effective as of
January 1, 1994).
10.(iv)(E) Montgomery Ward Incorporated by
& Co., Incorporated reference to Exhibit
Supplemental 10.(iv)(E) of the
Retirement Plan. Company's Registration
Statement on Form S-1
(Registration No.
33-23403).
10.(iv)(F) Montgomery Ward Incorporated by
Holding Corp. reference to Exhibit
Directors Fee 10.(iv)(F) of the
and Stock Owner- Company's Registration
ship Plan. Statement on Form S-1
(Registration No.
33-41161).
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- -----------------------
10.(iv)(G) Montgomery Ward Incorporated by
Holding Corp. reference to Exhibit
Senior Officer 10.(iv)(G) of the
Severance Plan. Company's Annual
Report on Form 10-K
for the fiscal year
ended January 2, 1993.
10.(iv)(H) Montgomery Ward & Co.,
Incorporated Savings
and Profit Sharing
Plan (as amended and
restated as of January
1, 1994).
10.(iv)(I) Montgomery Ward & Co., Incorporated by reference
Incorporated Success to Exhibit 10.(iv)(I) of
Plan. the Company's Registration
Statement on Form S-1
(No. 33-33252).
10.(vi) Employment Agreement Incorporated by
effective January reference to Exhibit
14, 1994 between 10.(vi) of the Company's
Montgomery Ward Annual Report on Form
& Co., Incorporated 10-K for the fiscal
and Bernard W. year ended January 1,
Andrews. 1994.
10.(vii) Agreement effective Incorporated by
October 21, 1991 reference to Exhibit
between Montgomery 10.(vii) of the
Ward & Co., Incor- Company's Annual
porated and Finger- Report on Form 10-K
hut Companies, Inc. for the fiscal year
ended December 28,
1991.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- -----------------------
10.(viii) Line of Credit Incorporated by
Agreement effective reference to Exhibit
November 19, 1991 10.(viii) of the
by and among Mont- Company's Annual
gomery Ward & Co., Report on Form 10-K
Incorporated, The for the fiscal year
Northern Trust ended December 28,
Company and The 1991.
First National
Bank of Chicago.
10.(ix) Employment Agreement Incorporated by
effective December reference to Exhibit
31, 1993 between 10.(ix) of the Company's
Montgomery Ward & Annual Report on Form
Co., Incorporated 10-K for the fiscal year
and Robert F. Connolly. ended January 1, 1994.
10.(xi) Employment Agreement Incorporated by
effective March reference to Exhibit
1, 1994 between 10.(xi)(A) of the
Montgomery Ward & Company's Registration
Co., Incorporated Statement on Form S-1
and Richard Bergel. (No. 33-33252).
10.(xii) Employment Agreement
effective April 12, 1994
between Montgomery Ward
& Co., Incorporated, and
G. Joseph Reddington.
11. Statement regarding
computation of per
share earnings.
12. Not applicable.
13. Not applicable.
16. Not applicable.
18. Not applicable.
19. Not applicable.
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT SUBMISSION MEDIA
------------- -----------------------
21. Subsidiaries of Incorporated by
the Registrant. reference to Exhibit
21 of the Company's
Registration Statement
on Form S-1
(Registration No.
33-33252).
22. Not applicable.
23. Consent of
independent
public accountants.
24. Powers of attorney
executed by direc-
tors and officers
of Registrant
authorizing execu-
tion of Annual
Report on Form 10-K.
27. Financial Data Schedule.
28. Not applicable.
EXHIBIT 10.(ii)(K)
ELEVENTH AMENDMENT TO THE ACCOUNT PURCHASE AGREEMENT
AMENDMENT, made and entered into as of January 1, 1994,
by and between MONTGOMERY WARD & CO., INCORPORATED ("Seller"), an
Illinois corporation with its chief executive offices located at
619 West Chicago Avenue, Chicago, Illinois 60671, and MONTGOMERY
WARD CREDIT CORPORATION ("MWCC"), a Delaware corporation with its
chief executive offices located at 3720 Howard Hughes Parkway,
Las Vegas, Nevada 89109.
W I T N E S S E T H:
WHEREAS, Seller and MWCC are parties to an Account
Purchase Agreement dated as of June 24, 1988, as amended by a
letter agreement dated April 21, 1989 (the "First Amendment"), an
agreement dated December 26, 1989 (the "Second Amendment"), a
letter agreement dated April 24, 1990 (the "Third Amendment"), a
letter agreement dated as of December 26, 1990 (the "Fourth
Amendment"), an agreement dated May 23, 1992 (the "Fifth
Amendment"), a letter agreement dated December 29, 1992 (the
Sixth Amendment"), a letter agreement dated April 29, 1993 (the
"Seventh Amendment"), a letter agreement dated September 15, 1993
(the "Eighth Amendment"), an amendment dated as of February 16,
1994 (the "Ninth Amendment"), and an amendment dated as of June
16, 1994 (the "Tenth Amendment") (collectively, the "Purchase
Agreement"), pursuant to which Seller has agreed to sell and has
sold Accounts and Indebtedness to MWCC and MWCC agreed to
purchase, establish and add and has purchased, established and
added Accounts and Indebtedness upon the terms and subject to the
conditions of the Purchase Agreement; and
WHEREAS, Seller and MWCC desire to amend the Purchase
Agreement to provide that, as of January 1, 1994 and thereafter
until the Reversion Date if it occurs, all Indebtedness
purchased, established or added by MWCC, which, as of that date,
has not become Defaulted Indebtedness, shall be deemed to have
been, and all Indebtedness purchased, established or added
thereafter shall be purchased, established or added on a recourse
basis; and
WHEREAS, Seller and MWCC desire further to amend the
Purchase Agreement to provide that in consideration for Seller's
assumption of the entire bad debt risk until the Reversion Date
if it occurs, with respect to Indebtedness which is not Defaulted
Indebtedness as of January 1, 1994 and Indebtedness purchased,
established or added by MWCC thereafter, MWCC will pay Seller,
with respect to the period until the Reversion Date if it occurs,
as specified herein, an amount equal to a portion of the finance
charges which MWCC receives in connection with its ownership of
the Indebtedness; and
WHEREAS, Seller and MWCC desire that if the Reversion
Date occurs, all Indebtedness purchased, established or added by
MWCC which, as of that date, has not become Defaulted
Indebtedness, shall be deemed to have been, and all Indebtedness
purchased, established or added thereafter, shall be purchased,
established or added on a non-recourse basis as specified herein;
and
WHEREAS, it is the mutual desire of Seller and MWCC
that the Purchase Agreement be amended in accordance with the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and
subject to the terms and conditions hereinafter set forth, the
parties hereto hereby agree as follows:
1. Capitalized terms used herein which are not otherwise
defined shall have the same meaning as in the Purchase Agreement.
2. The following definition shall be added after the
definition of "Aggregate Incremental Finance Charge Amount" in
Section 1:
"Aggregate Participation in Finance Charge Amount"
shall mean the aggregate of the amounts owed by MWCC to
Seller pursuant to Section 5.5(17) for the Fiscal Years
1994, 1995, 1996 and 1997 or, if the Reversion Date
occurs prior to the end of the 1997 Fiscal Year, the
aggregate of the amounts owed by MWCC to Seller
pursuant to Section 5.5(17) for the period from January
1, 1994, to the Reversion Date."
3. The fourth sentence of the definition of "Annual
Commercial Paper Rate" is deleted and the following sentence is
added in lieu thereof:
Where a Seller Note or Seller Recourse Note is paid
prior to maturity or an amount as to which the Annual
Commercial Paper Rate is to be applied is paid earlier
than otherwise provided in Sections 5.5(6) and 5.5(18)
hereof, and such Annual Commercial Paper Rate is to be
applied for a period of less than twelve (12) months,
such Annual Commercial Paper Rate shall be calculated
using the methodology described above, based on amounts
for the time beginning on the first day of the
applicable Fiscal Year and ending on the last day of
the GE Capital fiscal quarter immediately preceding the
date of such payment; provided, that where an Annual
Commercial Paper Rate is to be applied for a period
ending on or prior to the last day of the first GE
Capital fiscal quarter of a Fiscal Year, the Annual
Commercial Paper Rate shall be the Annual Commercial
Paper Rate for the immediately preceding Fiscal Year.
4. The definition of "Net Aggregate Defaulted Indebtedness
Amount" is deleted and substituted in its place is the following:
"Net Aggregate Defaulted Indebtedness Amount" shall
mean, prior to the application of the Offset Amount
pursuant to Section 4.6(2) hereof, (x) the aggregate of
(i) Thirty-Six Million Dollars ($36,000,000.00), (ii)
the amount paid or owed by Seller to MWCC pursuant to
Section 4.4(2) hereof (excluding any interest paid or
payable thereon), (iii) the amount, if any, owed by
Seller to MWCC pursuant to Section 4.1 for Fiscal Year
1997, (iv) the amount, if any, paid or owed to MWCC
pursuant to Section 4.5(2) (excluding any payments for
Recoveries), in respect of each of Fiscal Years 1994,
1995, 1996, and 1997, less (y) the aggregate of (i) the
amount of cash paid by Seller to MWCC pursuant to
Section 4.4(1)(a) hereof, (ii) the amount of cash paid
by Seller to MWCC in lieu of Seller Notes or Seller
Recourse Notes pursuant to Sections 4.4(2) or 4.5(2)
(excluding any payments for Recoveries) or 4.6(3)
hereof, and (iii) the amount of cash, if any, paid by
Seller to MWCC in pre-payment of Seller Notes or Seller
Recourse Notes (excluding any interest paid or payable
thereon).
5. The following definition shall be added after the
definition of "Net Aggregate Defaulted Indebtedness Amount" in
Section 1:
"Net Amount" shall have the meaning set forth in
Section 5.5(21).
6. The definition of "Offset Amount" is deleted and
substituted in its place is the following:
"Offset Amount" shall have the meaning set forth in
Section 4.6(2) hereof.
7. The following definition shall be added after the
definition of "Quarterly Balance Sheet" in Section 1:
"Recoveries" shall have the meaning assigned to it in
Section 5.3(7).
8. The following definition shall be added after the
definition of "Retailer Department" in Section 1:
"Reversion Date" shall mean the beginning of the first
day of the Fiscal Year in which the earlier of the
following election or event occurs during such Fiscal
Year: (a) an election by either MWCC or Seller to have
the Reversion Date occur which election shall be
effective ninety (90) days after the party making the
election gives notice to the other party of the
election, or (b) a Seller Default.
9. The following definition shall be added after the
definition of "Seller Notes" in Section 1:
"Seller Recourse Notes" shall have the meaning set
forth in Section 4.5(2) hereof.
10. Section 3.1(5) is deleted and substituted in its place
is the following:
(5) Except as otherwise provided in this Section or in
Sections 3.4 and 4, all Accounts and/or
Indebtedness sold to, or established and added by,
MWCC pursuant to this Section 3.1 shall be sold
to, or established and added by, MWCC on a non-
recourse basis and without a guaranty of
collection. Commencing as of the opening of
business on January 1, 1994 and until the
Reversion Date, if it occurs, Seller shall have a
recourse obligation as provided in Section 4.5
with respect to (i) all Indebtedness owned by MWCC
which was not Defaulted Indebtedness at January 1,
1994, and (ii) all Indebtedness which MWCC
purchases, establishes or adds on or after January
1, 1994. Indebtedness which became Defaulted
Indebtedness on or after January 1, 1994 shall be
purchased by Seller as provided in Section 4.5.
After the Reversion Date if it occurs, Section 4.5
shall not apply to any Indebtedness which becomes
Defaulted Indebtedness after the Reversion Date,
and (i) all Indebtedness owned by MWCC which was
not Defaulted Indebtedness at that time, and (ii)
all Indebtedness which MWCC purchases, establishes
or adds after that time shall be on a non-recourse
basis and without a guaranty of collection except
as otherwise provided in Sections 3.4 and 4.
11. Section 3.3(2)(ii) is deleted and substituted in its
place is the following:
(ii) "Net Receivable Balance" means for the day in
question the amount by which (A) the gross
accounts receivable of MWCC and its Assignees
(including the portion thereof comprised of
finance and other credit charges), as of the close
of business of such day, resulting from its
purchase, establishment or addition of Accounts,
as computed pursuant to MWCC's Accounting
Practices exceeds (B) the amount of MWCC's
allowance for bad debts with respect to such
accounts receivable as though there were no
recourse obligation to the extent provided in
Sections 3.1(5) and 4.5, as of the close of
business on such day, also as computed pursuant to
MWCC's Accounting Practices.
12. In Section 3.4, a new second sentence is added
providing as follows and the present second sentence shall be the
third sentence and the remainder of the paragraph shall continue:
The right of MWCC, as specified in the preceding
sentence, to require Seller to purchase from MWCC
Ineligible Indebtedness for the face value
thereof, excluding any finance or, if agreed to by
the parties hereto, other credit charges, shall
include Ineligible Indebtedness purchased by
Seller as Defaulted Indebtedness and Seller shall
pay MWCC with respect to such Indebtedness the
amount specified in the previous sentence.
13. In Section 4.1(1), the line beginning; "1993 and
thereafter" is deleted, and substituted in its place is the
following:
Fiscal Years Percentages
1993 and Fiscal 0% through 3.9% of
Years in which the Average Indebtedness
Reversion Date occurs
and thereafter if it
occurs
14. In Section 4.1(1), the last two sentences are deleted,
and substituted in its place is the following:
"Net Defaulted Indebtedness" shall mean the amount of
Defaulted Indebtedness first becoming Defaulted
Indebtedness during the Fiscal Year in question less
the gross amount (without deduction for attorneys' fees
or other collection costs) of cash recoveries ("Gross
Recoveries") received during the Fiscal Year in
question under Section 5.3(7) or otherwise in respect
of (a) Defaulted Indebtedness (regardless of when such
Defaulted Indebtedness occurred), or (b) Indebtedness
written off prior to the Stated Time. It is understood
that Gross Recoveries would include payments made to
MWCC by Seller (i) on Defaulted Indebtedness pursuant
to Section 5.3(5), (ii) as proceeds of credit
insurance, and (iii) in respect of Ineligible
Indebtedness which was Defaulted Indebtedness
previously included in the calculations pursuant to
Section 4.1 or purchased by Seller.
15. In Section 4.1(2), the line beginning "1993 and
thereafter" is deleted and substituted in its place is the
following:
Fiscal Years Percentages
1993 and Fiscal Over 3.9% through 5.0% of
Years in which Average Indebtedness
the Reversion Date
occurs and thereafter
if it occurs
16. Section 4.1(3) is deleted and substituted in its place
is the following:
(3) Through Fiscal Year 1993 and as to Fiscal Years in
which the Reversion Date occurs and thereafter if
it occurs, MWCC and Seller shall share equally the
yearly total of Net Defaulted Indebtedness over
five percent (5%) and up to and including eight
percent (8%) of Average Indebtedness.
17. Section 4.1(4) is deleted and substituted in its place
is the following:
(4) Through Fiscal Year 1993 and as to Fiscal Years in
which the Reversion Date occurs and thereafter if
it occurs, MWCC shall bear one hundred percent
(100%) of the yearly total of Net Defaulted
Indebtedness in excess of eight percent (8%) of
Average Indebtedness.
18. Section 4.3 is deleted and substituted in its place is
the following:
4.3 When Determined; Payment. A State-by-State report
of the amount of Net Defaulted Indebtedness for each
Settlement Period of each Fiscal Year shall be provided
by MWCC to Seller in writing no later than the last day
of the month following each such Settlement Period,
commencing with the first Settlement Period after the
execution of this Amendment, and an estimate of the
total amount of Net Defaulted Indebtedness and Average
Indebtedness for such Fiscal Year, shall be provided by
MWCC to Seller in writing no later than the last day of
Seller's fiscal year coinciding with a Fiscal Year,
provided however that if in a Fiscal Year the Reversion
Date occurs and thereafter, MWCC in lieu of the
foregoing need provide Seller in writing no later than
the last day of Seller's fiscal year coinciding with a
Fiscal Year a State-by-State report of the amount of
Net Defaulted Indebtedness for the first eleven (11)
months of each Fiscal Year, and an estimate of the
total amount of Net Defaulted Indebtedness and Average
Indebtedness for such Fiscal Year. In addition, upon
request of Seller which may be made once for each
Fiscal Year, MWCC shall provide a list by specific
Account of each Account comprising the Net Defaulted
Indebtedness for such Fiscal Year by the January 31st
after the close of each Fiscal Year. The amount of Net
Defaulted Indebtedness and Average Indebtedness shall
be calculated by MWCC not later than January 31
following the end of the Fiscal Year in question and a
statement on a state-by-state basis showing sufficient
detail as reasonably requested by Seller shall be sent
to Seller on or before said January 31. In connection
with each such report and such statement, MWCC shall
provide, as reasonably requested by Seller, information
to Seller to assist Seller in estimating the amount of
Net Defaulted Indebtedness constituting finance
charges, insurance charges and other credit charges;
provided, that it is understood that MWCC shall have no
liability to Seller arising in connection with such
information, and Seller shall protect, indemnify, and
hold harmless MWCC, its Affiliates, the employees,
officers, directors, shareholders, partners, attorneys
and agents of MWCC and its Affiliates, and all of the
respective heirs, legal representatives, successors and
permitted assigns of the foregoing against any and all
liabilities, costs and expenses (including reasonable
attorneys' fees and expenses), judgments, damages,
claims, demands, offsets, defenses, counterclaims,
actions, or proceedings, by whomsoever asserted,
including, without limitation, Account Debtors with
respect to Accounts, and any Person who prosecutes or
defends any actions or proceedings, whether as
representative of or on behalf of a class or interested
group or otherwise, arising out of, connected with, or
resulting from MWCC's provision of such information to
Seller and/or Seller's use thereof in accordance with
the provisions of Section 11 hereof. Any payment due
to MWCC from Seller shall be paid by Seller, subject to
the provisions of Sections 4.4 and 4.5 hereof, on the
next following February 28 after the delivery of such
statement ("Payment Date"). Payments due under this
Section 4 for 1988 shall be calculated for the separate
stub period after the Stated Time, not taking into
account any Net Defaulted Indebtedness that arose prior
to the Stated Time, and the percentages used in this
Section 4.1 other than one hundred percent (100%) shall
be prorated based on the number of days in the stub
period divided by three hundred sixty-five (365). If
the final Fiscal Year to which this Section 4 applies
is less than a full Fiscal Year, the calculations
hereunder shall similarly not be done for the entire
Fiscal Year in question but shall be done for the short
stub year utilizing a calculation of Average
Indebtedness and Net Defaulted Indebtedness only for
the stub period, and the percentages used in this
Section 4.1 other than one hundred percent (100%) shall
be prorated based on the number of days in the stub
period divided by three hundred sixty-five (365).
19. Section 4.4, together with all the subsections thereof,
are deleted and substituted in its place is the following:
4.4 Seller Obligation. Notwithstanding the foregoing,
with respect to obligations of the parties hereto under
this Section 4 for Defaulted Indebtedness for the three
(3) Fiscal Years 1991, 1992, 1993 and for such of
Fiscal Years 1994, 1995, 1996 and 1997 in which a
Reversion Date occurs and such Fiscal Years thereafter
if a Reversion Date occurs:
(1) With respect to Fiscal Year 1991, Seller shall owe
MWCC Thirty-Six Million Dollars ($36,000,000.00),
which shall be the full amount of Seller's
obligations (which shall include, without
limitation, any obligations of Signature Financial
Marketing, Inc. relating thereto) pursuant to
Section 4.1 hereof for Fiscal Year 1991. Seller
shall give MWCC, on the first Tuesday after the
date of execution of the Fifth Amendment, (a)
Eighteen Million Dollars ($18,000,000.00) in cash,
and (b) a note for an additional Eighteen Million
Dollars ($18,000,000.00) due on February 28, 1998,
in the form attached as Exhibit B hereto. Such
note shall bear interest at the Annual Commercial
Paper Rate applicable to each Annual Interest
Earning Year, plus one percent (1%), per annum,
for the period such note remains unpaid prior to
maturity. Accrued interest shall be paid on each
February 28 that such note is outstanding.
(2) With respect to each of the Fiscal Years 1992 and
1993, and for such of Fiscal Years 1994, 1995 and
1996 in which a Reversion Date occurs and such
Fiscal Years thereafter if it occurs, if Seller
owes amounts to MWCC pursuant to Section 4.1
hereof for such Fiscal Year, or part thereof,
Seller shall, as of the Payment Date with respect
to such Fiscal Year, pay such amount to MWCC or
give MWCC a note for the amount due. Each such
note shall be due on February 28, 1998, and shall
be in the form attached as Exhibit B hereto (such
notes, as well as the note described in Section
4.4(1) above, as such notes come into existence,
being collectively referred to hereinafter as the
"Seller Notes"). Each Seller Note shall bear
interest from the applicable Payment Date, at the
Annual Commercial Paper Rate applicable to each
Annual Interest Earning Year, plus one percent
(1%), per annum, for the period such note remains
unpaid prior to maturity. Accrued interest shall
be paid on each February 28 that each Seller Note
is outstanding.
(3) On February 28, 1998, Seller shall pay to MWCC the
principal and accrued but unpaid interest on
Seller Notes, as well as the payment required
under Section 4.5(3).
(4) The determination of Defaulted Indebtedness under
this Section 4 with respect to Fiscal Year 1991
and thereafter shall include, without limitation,
any and all Indebtedness which would have been
Defaulted Indebtedness under the so-called recency
method but not under the Contractual Method in or
prior to Fiscal Year 1990, but which became
Defaulted Indebtedness under the Contractual
Method in Fiscal Year 1991 or thereafter. The
amount set forth in Section 4.4(1) hereof
constitutes a compromise of all disputes between
the parties hereto with respect to the proper
amount due from Seller to MWCC pursuant to this
Section 4 with respect to Fiscal Year 1991.
20. The following new Section 4.5 shall be added:
4.5 Recourse Against Seller.
(1) Commencing with Fiscal Year 1994, and for each
Fiscal Year thereafter during the term of this
Agreement (except as provided in Section 15.2) for
which there is Defaulted Indebtedness, Seller
shall purchase from MWCC Indebtedness which
becomes Defaulted Indebtedness during such Fiscal
Year, by paying the purchase price in accord with
Section 4.5(2); provided that Seller shall not
purchase and shall not be deemed to have purchased
under this Section 4.5 Indebtedness which becomes
Defaulted Indebtedness in any Fiscal Year in which
a Reversion Date occurs and thereafter. Subject
to the Liens granted to MWCC pursuant to Section
7.1 hereof, upon any such purchase, MWCC hereby
assigns Seller all of its rights, title, and
interest in and to such Indebtedness, free and
clear of any and all Liens created by MWCC or
Assignees except those Liens with respect to
securitizations, but such assignment is without
any other warranty, and the ownership interest of
MWCC in such Indebtedness shall be terminated to
the extent of that interest. Subject to the first
sentence of this Section 4.5(1), such purchases
shall be made on credit monthly during each such
Fiscal Year and the purchase price shall be paid
annually as provided in Section 4.5(2); it being
understood, however, that MWCC has been granted a
Lien in and to such purchased Indebtedness, as
further set forth in Section 7.1 hereof. Any
obligation of Seller to purchase Defaulted
Indebtedness shall be unconditional and shall not
be waived, released or affected by any settlement,
extension, compromise, variation in terms,
forbearance or other indulgence or agreement made
or granted by MWCC with or to any Account Debtor
or other Persons obligated for an Account. Seller
hereby expressly waives notice of nonpayment and
nonperformance, demand, protest, notice of
presentment, dishonor, default, maturity, release,
compromise, settlement, extension, renewal, notice
of intent to accelerate and notice of acceleration
of any or all Accounts and guarantees at any time
held by MWCC and all other rights and notices to
which it may be entitled in connection therewith
to the fullest extent permitted by applicable law.
Seller does hereby ratify whatever action MWCC may
take with respect thereto. The assignment of
rights, title and interest in and to the
Indebtedness purchased by Seller hereunder is
subject to ownership of Accounts by third parties
in connection with securitizations and, with
respect to Defaulted Indebtedness in such
securitizations, MWCC conveys whatever rights it
has with respect to such Defaulted Indebtedness to
Seller.
(2) The purchase price for Defaulted Indebtedness
purchased by Seller during a Fiscal Year shall be
paid annually on the Payment Date with respect to
such Fiscal Year, provided that if a Reversion
Date occurs during a Fiscal Year no payment under
Section 4.5(2) shall be made with respect to that
Fiscal Year and Fiscal Years thereafter and Seller
shall not be deemed to have purchased Defaulted
Indebtedness under Section 4.5(1) with respect to
that Fiscal Year and Fiscal Years thereafter, but
Seller shall be obligated to make payment for such
Fiscal Year and Fiscal Years thereafter to the
extent provided in Sections 4.1 and 4.4. The
purchase price payable for Defaulted Indebtedness
for each Fiscal Year purchased by Seller pursuant
to Section 4.5 shall be the amount of the Net
Defaulted Indebtedness for that Fiscal Year, plus
Recoveries during that Fiscal Year which
Recoveries MWCC shall keep after they have been
collected in satisfaction of Seller's obligation
to make payment in respect of such Recoveries as
specified in Sections 4.5(2) and 5.3(7).
Notwithstanding the foregoing, with respect to
each of the Fiscal Years 1994, 1995 and 1996
during which a purchase of Defaulted Indebtedness
occurs under Section 4.5(1), Seller shall, as of
the Payment Date with respect to such Fiscal Year,
pay MWCC the amount Seller owes to MWCC pursuant
to this Section 4.5(2), excluding Recoveries, or
give MWCC a note for such amount due. Each such
note shall be due on February 28, 1998, and shall
be in the form attached as Exhibit B hereto (such
notes, being collectively referred to hereinafter
as the "Seller Recourse Notes"). Each Seller
Recourse Note shall bear interest from the
applicable Payment Date, at the Annual Commercial
Paper Rate applicable to each Annual Interest
Earning Year, plus one percent (1%), per annum,
for the period such note remains unpaid prior to
maturity. Accrued interest shall be paid on each
February 28 that each Seller Recourse Note is
outstanding.
(3) On February 28, 1998, Seller shall pay to MWCC (a)
the principal and accrued but unpaid interest on
Seller Recourse Notes, and (b) the amount owed by
Seller to MWCC for Fiscal Year 1997 with respect
to Net Defaulted Indebtedness.
21. The following new Section 4.6 shall be added:
4.6 Payments Related To Notes And Other Obligations.
(1) In the event a payment is not made under one or
more Seller Notes, Seller Recourse Notes or as
otherwise required under Sections 4.5(2) and
4.5(3) when due, whether before or after maturity,
each such Seller Note, Seller Recourse Note, or
other unpaid amount shall bear interest at the
Default Rate, and the aggregate principal amount
of each such Seller Note, Seller Recourse Note or
other unpaid amount shall be deemed to be
increased monthly by an amount equal to the unpaid
interest thereon.
(2) With respect to amounts to be paid by Seller
pursuant to Sections 4.4(3) and 4.5(3) hereof,
Seller shall be entitled to an offset in an amount
equal to the Offset Amount. The "Offset Amount"
shall be defined as Eighty Seven Million Dollars
($87,000,000.00) (i) increased by the excess of
(a) the sum of the Aggregate Incremental Finance
Charge Amount and the Aggregate Participation in
Finance Charge Amount over (b) Eighty Seven
Million Dollars ($87,000,000.00) or (ii) decreased
by the excess of (a) Eighty Seven Million Dollars
($87,000,000.00) over (b) the sum of the Aggregate
Incremental Finance Charge Amount and the
Aggregate Participation in Finance Charge Amount.
Seller shall not be entitled under this Section
4.6(2) to any payment from MWCC if the Offset
Amount is greater than the amount to be paid by
Seller to MWCC pursuant to Sections 4.4(3) and
4.5(3) hereof, but may be entitled to a payment by
MWCC if the condition set forth in Section 5.5(10)
has been met. An example of payments pursuant to
this Section 4.6(2) is attached as Exhibit C
hereto.
(3) Notwithstanding the foregoing provisions of
Sections 4.4 and 4.5, to the extent the aggregate
outstanding principal amount of the sum of Seller
Notes and Seller Recourse Notes with respect to
any, some or all of Fiscal Years 1991, 1992, 1993,
1994, 1995 and 1996, less the amount owed by MWCC
to Seller pursuant to Section 5.5(17) with respect
to those Fiscal Years for which the calculation
described in this Section 4.6(3) is made, would
exceed Three Hundred Million Dollars
($300,000,000.00), Seller shall pay such excess to
MWCC in cash on the Payment Date with respect to
any such applicable Fiscal Year, and the amount of
the Seller Note or Seller Recourse Note which
would otherwise be required to be given with
respect to the Fiscal Year for which such payment
is made shall be reduced by such amount paid in
cash.
22. Section 5.1(2) is deleted and substituted in its place
is the following:
(2) MWCC shall take reasonable efforts to collect, or
cause to be collected, the Indebtedness owned by
it and Assignees, as well as Defaulted
Indebtedness purchased or to be purchased by
Seller pursuant to Section 4.5, including
collection of amounts from Seller pursuant to
Section 5.3(5), and in connection therewith, MWCC
shall conduct, or cause to be conducted,
collection activities in such a manner and use, or
cause to be used, such technology as is consistent
with the consumer credit collection industry.
23. The first paragraph of Section 5.3(5) is deleted and
substituted in its place is the following:
(5) In no event shall Seller be required (except to
the extent explicitly provided for below) to
repossess or dispose of Merchandise in connection
with the collection of Indebtedness. Upon the
request of MWCC, Seller shall pay MWCC for
Merchandise which is tangible personal property
which was purchased through Indebtedness then
owned by MWCC or Defaulted Indebtedness purchased
by Seller, and which was repossessed by or at the
direction of MWCC at its sole expense. Such
payment shall be applied to reduce the
Indebtedness in question or shall be deemed to be
a Recovery if the Indebtedness was counted as
Defaulted Indebtedness purchased by Seller. MWCC
shall, at its sole expense, deliver such
Merchandise to locations as from time to time
specified by Seller. Upon such delivery MWCC
shall assign, with any required documentation,
title to such Merchandise, free and clear of all
Liens, to Seller unless the Indebtedness was
previously purchased by Seller, and Seller will
make the required payment to MWCC within thirty
(30) days after receipt by Seller of such
Merchandise. The required payment will be
calculated in accordance with the following:
24. The following new Section 5.3(7) shall be added:
(7) With respect to any Defaulted Indebtedness
purchased by Seller under Section 4.5, Seller
hereby grants to MWCC the exclusive right to
collect such Defaulted Indebtedness. Any funds
collected from or with respect to Account Debtors
with respect to such Defaulted Indebtedness,
without deduction for attorneys fees or other
collection costs, shall be deemed "Recoveries".
Seller shall be obligated to pay any funds it
directly receives with respect to Recoveries to
MWCC. Recoveries shall be accounted for as
specified in Section 4.5 and after the term of
this Agreement shall be kept by MWCC and MWCC
shall continue to have the right to collect with
respect to Defaulted Indebtedness and keep
Recoveries.
25. Section 5.4(2) is deleted and substituted in its place
is the following:
(2) MWCC shall directly incur, credit promotion
expenses for mutually approved specific programs
during each Fiscal Year during the term of this
Agreement (except as provided in Section 15.2) in
the amount of thirty-nine hundredths percent
(.39%) of such current Fiscal Year's Credit Sales
(or, as to 1988 as provided in (4) below, and as
to the last Fiscal Year of this Agreement, the
Credit Sales for the partial year if the
termination occurs before the close of the Fiscal
Year), provided that programs shall be mutually
approved if they reasonably meet the criteria set
forth below. MWCC, with respect to expending
funds pursuant to this Section 5.4, shall provide
to the Seller reasonable detail of such
expenditures. Each such program is subject to the
following criteria:
(i) The primary purpose of each such program
shall be to increase credit sales and/or
open new Accounts. Programs will also
be permitted which will encourage
Account Debtors to increase their
existing Indebtedness if such programs
are coupled with an extra value or
incentive offer to Account Debtors
provided by Seller at its own expense.
(ii) There shall be sufficient lead time for
each such program to receive reasonably
adequate planning, support and integra-
tion to achieve its desired objectives.
Semi-annually MWCC will account for payments
required under this Section 5.4(2) with respect to
each six (6) months of a Fiscal Year.
26. Section 5.4(5) is deleted and substituted in its place
is the following:
(5) In addition to the credit promotion expenses that
MWCC is obligated directly to incur, during each
Fiscal Year, pursuant to Section 5.4(2) hereof,
commencing with the 1991 Fiscal Year and each
Fiscal Year thereafter, MWCC shall, as reasonably
requested by Seller, directly incur additional
amounts for credit promotion; provided, that such
amounts shall not exceed Six Million Dollars
($6,000,000.00) during the 1991 Fiscal Year, or
Five Million Dollars ($5,000,000.00) during any
subsequent Fiscal Year; and provided, further,
that Seller shall incur, pay to MWCC or spend no
less than the additional amount incurred or spent
by MWCC during each such Fiscal Year pursuant to
this Section 5.4(5). Semi-annually the parties
will account for and make the payments required
under this Section 5.4(5) with respect to each six
(6) months of a Fiscal Year.
27. Section 5.5(2) is amended by deleting the date of
September 1, 1993, where it appears in that Section and replacing
it with the date of June 1, 1995.
28. Section 5.5(9)(a)(ii) is deleted and substituted in its
place is the following:
(ii) with respect to each Fiscal Year in which Net
Defaulted Indebtedness is over 5% of Average
Indebtedness, (x) (I) fifty percent (50%) of (II)
the following amount, if any, for each State in
which there is a Designated Incremental Yield
Percentage: the product of (A) the Designated
Incremental Yield Percentage for such State for
each such Fiscal Year, multiplied by (B) the
Average Billed Indebtedness for such State for
such Fiscal Year, minus (y) an amount equal to (i)
fifty percent (50%) of the amount by which Net
Defaulted Indebtedness exceeds five percent (5%)
of Average Indebtedness but is less than or equal
to eight percent (8%) of Average Indebtedness,
plus (ii) the amount by which Net Defaulted
Indebtedness exceeds eight percent (8%) of Average
Indebtedness; provided, that in no event shall the
amount calculated pursuant to this Section
5.5(9)(a)(ii)(y) be greater than the amount
calculated pursuant to Section 5.5(9)(a)(ii)(x)
hereof.
29. Section 5.5(9)(b) is deleted and substituted in its
place is the following:
(b) In respect of a partial Fiscal Year, the
calculation of Average Indebtedness and Net
Defaulted Indebtedness shall be only for the
partial Fiscal Year, and the "5%" referred to
in Section 5.5(9)(a)(i) and (ii) above and
the percentages referred to in Section
5.5(9)(a)(ii)(y), other than the reference to
fifty percent (50%), shall be prorated based
on the number of days in the partial Fiscal
Year divided by three hundred sixty-five
(365).
30. Section 5.5(10) is deleted and substituted in its place
is the following:
(10) If the Aggregate Incremental Finance Charge Amount
plus the Aggregate Participation in Finance Charge
Amount, if any, exceeds the Net Aggregate
Defaulted Indebtedness Amount, MWCC shall pay such
excess to Seller on February 28, 1998. Except
with respect to the provisions of Sections 5.5(6)
and 5.5(19), Seller shall not otherwise be
entitled to any payments or credits from MWCC with
respect to the Aggregate Incremental Finance
Charge Amount and the Aggregate Participation in
Finance Charge Amount.
31. The reference in Section 5.5(11) to Section 4.4(4)(ii)
is deleted and in its place a reference to Section 4.6(2)(ii) is
made.
32. Section 5.5(15) is deleted and substituted in its place
is the following:
(15) In the event a payment is not made of any amount
due pursuant to Sections 5.5(5), (6), (7), (8),
(9), (10), (17) and/or (18) hereof when due, such
amount shall bear annual interest at the Default
Rate, and the aggregate principal amount shall be
deemed to be increased monthly by an amount equal
to the unpaid interest.
33. Section 5.5(16) is deleted and substituted in its place
is the following:
(16) An example of payments pursuant to this Section
5.5(1) through 5.5(15) is attached as Exhibit F
hereto.
34. The following new Sections 5.5(17), 5.5(18), 5.5(19),
5.5(20) and 5.5(21) are added:
(17) Commencing with Fiscal Year 1994, with respect to
each Fiscal Year during the term of this Agreement
during which there is Defaulted Indebtedness
(except as provided in Section 15.2), MWCC shall
owe Seller on the Payment Date for such Fiscal
Year (except as provided in Section 5.5(18)) an
amount equal to: (a) if Net Defaulted Indebtedness
is five percent (5.0%) or less of Average
Indebtedness, the lesser of (i) the Net Defaulted
Indebtedness or (ii) three and nine tenths percent
(3.9%) of Average Indebtedness; (b) if Net
Defaulted Indebtedness is over five percent (5%)
but not in excess of eight percent (8%) of Average
Indebtedness, (i) three and nine-tenths percent
(3.9%) of Average Indebtedness, plus (ii) fifty
percent (50%) of the amount by which Net Defaulted
Indebtedness exceeds five percent (5%) of Average
Indebtedness; or (c) if Net Defaulted Indebtedness
is over eight percent (8%) of Average
Indebtedness, (i) three and nine-tenths percent
(3.9%) of Average Indebtedness, plus (ii) fifty
percent (50%) of the amount by which Net Defaulted
Indebtedness exceeds five percent (5%) of Average
Indebtedness but is less than or equal to eight
percent (8%) of Average Indebtedness, plus (iii)
the amount by which Net Defaulted Indebtedness
exceeds eight percent (8%) of Average
Indebtedness; provided that MWCC shall not owe
Seller any amounts under this Section 5.5(17) for
such Fiscal Year in which the Reversion Date
occurs and thereafter if it occurs. In applying
the provisions hereof, the same Indebtedness may
not become Defaulted Indebtedness more than one
time. In the event finance charges billed during
a Fiscal Year, minus the portion of the finance
charge owed to Seller under Sections 5.5(5),
5.5(7), 5.5(8) and 5.5(9), as applicable, of this
Agreement are less than the amount owed by MWCC to
Seller under the first sentence of this Section
5.5(17), MWCC shall owe Seller pursuant to this
Section 5.5(17) on the Payment Date for such
Fiscal Year an amount equal to the finance charges
billed during such Fiscal Year, minus the portion
of finance charge owed to Seller under Sections
5.5(5), 5.5(7), 5.5(8) and 5.5(9), as applicable,
of the Agreement. In respect of a partial Fiscal
Year, the calculation of Average Indebtedness and
Net Defaulted Indebtedness shall be only for the
partial Fiscal Year, and the percentages referred
to in this Section 5.5(17), except the reference
to fifty percent (50%), shall be prorated based on
the number of days in the partial Fiscal Year
divided by three hundred and sixty-five (365).
(18) Amounts calculated under Section 5.5(17), if any,
for Fiscal Years 1994, 1995, 1996 and 1997 shall
be due on February 28, 1998. Amounts calculated
under Section 5.5(17), if any, for each Fiscal
Year after 1997 shall be due on the Payment Date
for that Fiscal Year.
(19) Amounts calculated under Section 5.5(17) for
Fiscal Years 1994, 1995 and 1996, shall bear
interest from the Payment Date for such Fiscal
Year at the Annual Commercial Paper Rate
applicable to each Annual Interest Earning Year,
plus one percent (1%) per annum, for the period
such amount remains unpaid prior to the date when
due. Accrued interest shall be paid by MWCC on
each February 28 that such amount remains
outstanding.
(20) An example of payments pursuant to this Section
5.5(17) is attached as Exhibit H hereto.
(21) Notwithstanding anything otherwise provided in
Sections 4.3, 4.4(3), 4.5(2), 4.5(3), 4.6(3),
5.5(5), 5.5(6), 5.5(7), 5.5(8), 5.5(9), 5.5(10),
5.5(17), 5.5(18), 16.3(3) and 16.4(3), all
obligations due Seller by MWCC under such Sections
and all obligations due MWCC by Seller under such
Sections shall be netted against each other,
provided however that such netting is not intended
to affect the accrual of interest with respect to
obligations of the parties hereto. After giving
effect to such netting calculation, the resulting
net amount (the "Net Amount") shall be paid by the
party responsible therefor when due. The parties
expressly understand, acknowledge and agree that
neither party hereto shall be obligated at any
point in time (whether on a Payment Date, upon an
acceleration or any other date on which a payment
is due) to make any payment in respect of any such
Sections until a netting calculation as described
above is given effect such that only the Net
Amount shall be due and payable.
35. Section 5.9(2) shall be amended to delete the last
sentence and substituted in its place is the following:
(2) If there is a change in credit policies pursuant
to this Agreement that could have an impact on the
percentages set forth in Sections 4.1,
5.5(9)(a)(ii) or 5.5(17), the percentages therein
may be appropriately modified as mutually approved
by Seller and MWCC.
36. Section 7.1. is deleted and substituted in its place is
the following:
7.1. Security Interest. The parties hereto intend that
the transactions contemplated by Section 3.1(1) shall
be treated as a purchase and sale of Accounts and
Indebtedness for all purposes and that the transactions
contemplated by Section 3.1(2) hereof shall be treated
as an extension of credit under Lender Credit Card
Agreements to Account Debtors who wish to obtain
financing to purchase Merchandise. The parties do not
intend that the transactions contemplated by Section
3.1 of this Agreement be deemed a loan from MWCC to
Seller. In recognition of the applicability of Article
9 of the Code to some of the contemplated transactions,
and without conceding any such applicability to all of
the property and interests specified herein, and as
additional security for the payment of and performance
by Seller of any and all obligations whatsoever to
MWCC, Seller, to the extent of its interest, hereby
grants to MWCC continuing first priority Liens in and
to all Accounts and Indebtedness either purchased from
Seller by MWCC or established and added by MWCC and in
and to all Accounts and Indebtedness purchased by
Seller from MWCC pursuant to Section 4.5 (all subject
to the Morgan Lien, if any, and Liens resulting from an
act or omission of MWCC or Assignees) which Liens are
granted to secure the Obligations, together with an
assignment to MWCC (subject to the Morgan Lien, if any)
of Liens, if any, in and to all Merchandise purchased
by Account Debtors pursuant to Accounts then owned by
MWCC, to the extent of the Liens of Seller thereon;
provided, however, that such Liens shall not include
Liens, if any, on Merchandise purchased pursuant to
Accounts after such Merchandise has been returned to
Seller until such time as such Merchandise may again be
sold pursuant to an Account creating Indebtedness then
owned by MWCC. In addition, Seller grants to MWCC a
continuing first priority Lien in and to the
Liquidation Account, to the extent Seller has an
interest in such Liquidation Account, as provided in
Section 6.3(5).
37. Section 7.5 is amended to add a new sentence at the end
to read as follows:
MWCC may appoint GE Capital and/or its Affiliates to
carry out in Seller's name the tasks in this Section.
38. Section 7.12 is deleted and substituted in its place is
the following:
Right of Setoff. Except as specifically provided in
Sections 3.2 and 3.4, and except during the period that
the other party has committed an unremedied Seller
Default or MWCC Default, as the case may be, or an
unremedied act has occurred or event is continuing
which with the giving of notice or the passage of time
or both, would be a Seller Default or MWCC Default, as
the case may be, neither Seller nor MWCC shall have,
and they each hereby waive, the right to set-off, and
to appropriate and apply to the payment of amounts
owing to it in connection with this Agreement, any and
all money or property of the other then held by it;
provided however that nothing in this Section 7.12
shall limit or otherwise affect the offset provided in
Section 4.6(2) and the netting calculation required by
Section 5.5(21).
39. Section 8.9 is deleted and substituted in its place is
the following:
Accounts. Each item of Indebtedness on an Account
owned by MWCC (and, to the extent applicable, each
Account pursuant to which such Indebtedness is
incurred) at the time of a purchase, establishment or
addition and after purchased by Seller from MWCC
pursuant to Section 4.5: (a) is free and clear of any
and all Liens, other than Liens resulting from an act
or omission of MWCC or Assignees, in favor of any
Person other than MWCC and the Morgan Lien (if any);
(b) arises in connection with a bona fide sale and
delivery of Merchandise by Seller, its Affiliates, or
the Licensees, or the predecessors of any of the
foregoing, to an Account Debtor; and (c) is for a
liquidated amount as stated in the Account
Documentation relating thereto, subject to returns,
allowances and other adjustments in the ordinary course
of business.
40. Section 11.1 shall be amended to delete the word "or"
before "(f)" and add new subparts as follows:
(g) the reporting of credit losses and/or sales taxes
to federal, state or local governments or governmental
units and payments made or due to or from the Seller to
such governments or governmental units involving,
relating to, or based in whole or in part on credit
losses and/or sales taxes, or (h) any act or failure to
act by a Person involved in selling or facilitating the
sale of Merchandise on Accounts, including such Persons
as Valuevision International, Inc., to the extent such
act or failure to act arises out of, occurs, is
connected with, or results from a sale or attempt to
sell Merchandise on an Account or a solicitation or
application for an Account, including failure of such a
Person (i) to act in accordance with instructions given
by MWCC to the extent permitted or contemplated by this
Agreement or (ii) to perform Seller's obligations under
this Agreement, provided, however, Seller shall have no
liability under this subpart (h), if the act or failure
to act is the result of MWCC's failure to comply with
this Agreement.
41. Section 15.2(2)(iii). The sixth sentence in Section
15(2)(iii) is deleted and substituted in its place is the
following:
(2)(iii) Anything in Sections 4, 5.4 and 5.5(17) to
the contrary notwithstanding, during the
period that this subsection (iii) is
operative, Seller shall have no obligation to
pay any amounts accruing pursuant to Section
4 of this Agreement and MWCC shall have no
obligation to pay any amounts accruing
pursuant to Section 5.5 (17) of this
Agreement, and the provisions of Section 5.4
shall not apply, including, without
limitation, any obligation of MWCC to pay any
amounts accruing thereunder during such period.
42. Section 15.2(7) is amended by adding a reference to
Section 5.3(7) as a Section surviving termination of this
Agreement in subparts (ii), (iii), (v), (vi), (vii) and (viii) of
Section 15.2(7); provided however that if Seller or its designee
purchases all existing Accounts and Indebtedness as provided in
Section 15, Section 5.3(7) shall not survive such purchase by
Seller or its designee.
43. Sections 15.2(7)(ii) and 15.2(7)(v) are amended by
changing the reference to "5.5" to read "5.5, except Sections
5.5(17), (18) and (19).
44. Section 15.3 is amended by deleting the third sentence
and substituting in its place the following:
Sections 4.5 and 15.2 are to be read so as to be
in harmony with the rights of and obligations to
third parties in connection with securitizations.
45. Section 16.1(10) is deleted and substituted in its
place is the following:
(10) Seller shall fail to make any payment of principal
of, or interest on or any amount owing in respect
of, any one or more Seller Notes or Seller
Recourse Notes and/or Seller's obligations
pursuant to Sections 4.3, 4.4(3), 4.5(2), 4.5(3),
4.6(3), 5.3(7) and/or 5.5(13) hereof, when due and
payable or declared due and payable, and the same
shall remain unremedied for a period of ten (10)
Business Days after MWCC shall have made written
demand therefor, or, subject to the provisions of
Section 7.11 hereof, such longer period as may be
required to resolve any good faith dispute with
respect to Seller's obligations pursuant to
Sections 4.3, 4.4(3), 4.5(2), 4.5(3), 4.6(3),
5.3(7) and/or 5.5(13), as to whether any such
amount is owed hereunder.
46. Section 16.2(10) is deleted and substituted in its
place is the following:
(10) MWCC shall fail to make any payment of any amount,
including interest, owing in respect of Sections
5.5(5), (6), (7), (8), (9), (10), (17) and/or (18)
hereof when due and payable or declared due and
payable, and the same shall remain unremedied for
a period of ten (10) Business Days after Seller
shall have made written demand therefor, or,
subject to the provisions of Section 7.11 hereof,
such longer period as may be required to resolve
any good faith dispute with respect to MWCC's
obligations pursuant to Sections 5.5(5), (6), (7),
(8), (9), (10), (17) and/or (18) as to whether any
such amount is owed hereunder.
47. Section 16.3(3) is deleted and substituted in its place
is the following:
(3) MWCC may, without notice, declare Seller Notes,
Seller Recourse Notes and Seller's obligations
under Sections 4.3, 4.4(3), 4.5(2), 4.5(3),
4.6(3), 5.3(7) and 5.5(13) hereof to be forthwith
due and payable, whereupon such Seller Notes,
Seller Recourse Notes and obligations shall become
due and payable, without presentment, demand,
protest, or further notice of any kind, all of
which are expressly waived by Seller, in which
case MWCC shall have the right, at any time and
from time to time thereafter, in its discretion,
without notice thereof to Seller, to enforce
payment of the Seller Notes, Seller Recourse Notes
and/or such obligations.
48. Section 16.4(3) is deleted and substituted in its place
is the following:
(3) Seller may declare amounts under Sections 5.5(5),
(6), (7), (8), (9), (10), (17) and/or (18) hereof
to be forthwith due and payable, whereupon such
amounts shall become due and payable, in which
case Seller shall have the right, at any time and
from time to time thereafter, in its discretion,
without notice thereof to MWCC, to enforce payment
of such amounts.
49. The reference to "February 27" or to "February 27,
1998", as applicable, in the following Sections shall be changed
to "February 28" or to "February 28, 1998" respectively:
a. Section 1 - definition of "Annual Interest Earning
Year".
b. Section 5.5(7).
c. Section 5.5(13)(vi)
50. The title and first paragraph of Exhibit B is deleted
and substituted in its place is the following:
EXHIBIT B
FORM OF SELLER NOTE AND SELLER RECOURSE NOTE
NOTE
U.S. $ Dated: ,
FOR VALUE RECEIVED, the undersigned, MONTGOMERY WARD &
CO., INCORPORATED, an Illinois corporation (the
"Obligor"), HEREBY PROMISES TO PAY to the order of
MONTGOMERY WARD CREDIT CORPORATION (the "Obligee") the
principal sum of _______________ United States Dollars
($ ), on February 28, 1998 (the "Maturity
Date"). Capitalized terms used herein and not
otherwise defined herein shall have the meaning set
forth in the Account Purchase Agreement, dated as of
June 24, 1988, by and between the Obligor and the
Obligee, as amended (the "Purchase Agreement").
Payment of the principal amount of this Note shall be
subject to an offset, pursuant to the provisions of
Sections 4.6(2) and 5.5(21) of the Purchase Agreement.
51. Exhibit C is deleted and substituted in its place is
the attached Exhibit C.
52. This ELEVENTH Amendment shall become effective as of
the date hereof only if MWCC is provided with an executed opinion
in the form attached hereto as Exhibit I.
53. Except as specifically provided herein, the terms and
conditions of the Purchase Agreement shall continue in full force
and effect and shall be fully binding on the parties hereto.
Upon the execution of this Amendment, each reference in the
Purchase Agreement to "this Agreement", "hereunder", "hereof", or
words of like import, shall mean and be a reference to the
Purchase Agreement as amended hereby. In the event of any
conflict between the terms of the Purchase Agreement and the
terms of this Amendment, the terms of this Amendment shall
prevail.
54. Seller shall pay all reasonable expenses of MWCC and
its Affiliates with respect to the systems and finance
administrative cost of implementing changes required by this
ELEVENTH Amendment, as well as the fees and expenses of their
counsel, Weil, Gotshal & Manges, in connection with the
preparation and execution of this ELEVENTH Amendment.
55. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same amendatory instrument, and any of the parties hereto
may execute this Amendment by signing any such counterpart.
56. Notwithstanding anything otherwise provided herein,
this Eleventh Amendment to the Account Purchase Agreement shall
not apply to or encompass Starter Card Accounts as specified in
the Third Amendment to the Account Purchase Agreement and such
Accounts shall continue to be governed by such Third Amendment.
IN WITNESS WHEREOF, Seller and MWCC have executed this
Amendment as of the date first set forth above.
MONTGOMERY WARD & CO., INCORPORATED
By:________________________________
Name:_____________________________
Title:_____________________________
MONTGOMERY WARD CREDIT CORPORATION
By:
Name:
Title:
General Electric Capital Corporation, as guarantor of MWCC's
obligations under the Purchase Agreement, hereby acknowledges the
terms of this Amendment, and agrees that its Guaranty is neither
invalidated by the amendments heretofore made nor by this
Eleventh Amendment to the Purchase Agreement and that its
Guaranty continues in full force and effect in accordance with
its terms with respect to the Purchase Agreement as so amended.
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
EXHIBIT 10.(iv)(D)
MONTGOMERY WARD & CO., INCORPORATED
RETIREMENT SECURITY PLAN
(As amended and restated effective
as of January 1, 1994)
<PAGE>
TABLE OF CONTENTS
PREAMBLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I Background Information. . . . . . . . . . . . . . . . . . 3
1.1 Purpose of Plan . . . . . . . . . . . . . . . . . . . . . 3
1.2 Application of Restatement and Determination of
Retirement Benefits . . . . . . . . . . . . . . . . . . . 4
1.3 Other Effective Dates . . . . . . . . . . . . . . . . . . 6
ARTICLE II Definitions . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 "Accrued Benefit" . . . . . . . . . . . . . . . . . . . . 6
2.2 "Actuarial Equivalent" or "Equivalent Actuarial
Value". . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 "Actuary" . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4 "Administrative Director" . . . . . . . . . . . . . . . . 11
2.5 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . 11
2.6 "Beneficiary" . . . . . . . . . . . . . . . . . . . . . . 11
2.7 "Board" . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 "Break in Service". . . . . . . . . . . . . . . . . . . . 11
2.9 "Cash Balance Account". . . . . . . . . . . . . . . . . . 12
2.10 "Code". . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 "Committee" . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 "Company" . . . . . . . . . . . . . . . . . . . . . . . . 12
2.13 "Credited Service". . . . . . . . . . . . . . . . . . . . 12
2.14 "Direct Rollover" . . . . . . . . . . . . . . . . . . . . 13
2.15 "Distributee" . . . . . . . . . . . . . . . . . . . . . . 14
2.16 "Effective Date". . . . . . . . . . . . . . . . . . . . . 14
2.17 "Eligible Retirement Plan". . . . . . . . . . . . . . . . 14
2.18 "Eligible Rollover Distribution". . . . . . . . . . . . . 14
2.19 "Employee" or "Associate" . . . . . . . . . . . . . . . . 15
2.20 "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.21 "High Three-Year Pay" . . . . . . . . . . . . . . . . . . 15
2.22 "Hours of Service". . . . . . . . . . . . . . . . . . . . 15
2.23 "Immediate Cash Balance Account Annuity". . . . . . . . . 16
2.24 "Interest Credit(s)". . . . . . . . . . . . . . . . . . . 16
2.25 "Investment Manager". . . . . . . . . . . . . . . . . . . 16
2.26 "IRS" . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.27 "Jefferson Stores Plan" . . . . . . . . . . . . . . . . . 16
2.28 "Labor Department". . . . . . . . . . . . . . . . . . . . 16
2.29 "Lechmere Plan" . . . . . . . . . . . . . . . . . . . . . 16
2.30 "Long-Term Disability Plan" . . . . . . . . . . . . . . . 16
2.31 "Optional Retirement Benefit" . . . . . . . . . . . . . . 16
2.32 "Participant" . . . . . . . . . . . . . . . . . . . . . . 17
2.33 "Participating Company" . . . . . . . . . . . . . . . . . 17
2.34 "PBGC". . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.35 "Plan". . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.36 "Prior Plans" . . . . . . . . . . . . . . . . . . . . . . 17
2.37 "Regulations" . . . . . . . . . . . . . . . . . . . . . . 18
2.38 "Required Contributions". . . . . . . . . . . . . . . . . 18
2.39 "Retirement" or "Retire". . . . . . . . . . . . . . . . . 18
2.40 "Retirement Benefit". . . . . . . . . . . . . . . . . . . 18
2.41 "Retirement Security Plan". . . . . . . . . . . . . . . . 18
2.42 "Savings Plan". . . . . . . . . . . . . . . . . . . . . . 18
2.43 "Service" . . . . . . . . . . . . . . . . . . . . . . . . 18
2.44 "Surviving Spouse". . . . . . . . . . . . . . . . . . . . 19
2.45 "Total Earnings". . . . . . . . . . . . . . . . . . . . . 20
2.46 "Transferred Contribution Account". . . . . . . . . . . . 22
2.47 "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.48 "Trust Agreement" . . . . . . . . . . . . . . . . . . . . 22
2.49 "Trust Fund". . . . . . . . . . . . . . . . . . . . . . . 22
2.50 "Trustees". . . . . . . . . . . . . . . . . . . . . . . . 22
2.51 "Vest", "Vested" or "Vesting" . . . . . . . . . . . . . . 22
2.52 "Ward". . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.53 "Year". . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.54 "Year of Credited Service". . . . . . . . . . . . . . . . 23
2.55 "Year of Service" . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III Effective Date. . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV Eligibility . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V Participation . . . . . . . . . . . . . . . . . . . . . . 25
5.1 Enrollment. . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 Suspension of Participation . . . . . . . . . . . . . . . 25
5.3 Break in Service. . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI Contributions . . . . . . . . . . . . . . . . . . . . . . 26
6.1 Cessation of a Participant's Contributions. . . . . . . . 26
6.2 Company Contributions . . . . . . . . . . . . . . . . . . 26
6.3 Actuarial Assumptions . . . . . . . . . . . . . . . . . . 26
ARTICLE VII Cash Balance Account. . . . . . . . . . . . . . . . . . . 27
7.1 In General. . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Interest Credits. . . . . . . . . . . . . . . . . . . . . 28
7.3 Immediate Cash Balance Account Annuity. . . . . . . . . . 28
ARTICLE VIII Retirement Dates. . . . . . . . . . . . . . . . . . . . . 29
8.1 Normal Retirement Date. . . . . . . . . . . . . . . . . . 29
8.2 Early Retirement Date . . . . . . . . . . . . . . . . . . 29
8.3 Postponed Retirement Date . . . . . . . . . . . . . . . . 30
ARTICLE IX Amount of Retirement Benefit. . . . . . . . . . . . . . . 30
9.1 Retirement Benefit Payable upon Retirement at
Normal Retirement Date. . . . . . . . . . . . . . . . . . 30
9.2 Retirement Benefit Payable upon Retirement at
Early Retirement Date . . . . . . . . . . . . . . . . . . 31
9.3 Retirement Benefit Payable upon Retirement at
Postponed Retirement Date . . . . . . . . . . . . . . . . 32
9.4 Offset of Retirement Benefit. . . . . . . . . . . . . . . 32
9.5 Cessation of Benefit Payments Following
Reemployment After Retirement . . . . . . . . . . . . . . 33
9.6 Retirement Benefit Payable upon Retirement
Following Reemployment after Termination of
Service . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Maximum Amount of Retirement Benefit. . . . . . . . . . . 33
ARTICLE X Eligibility for Retirement Benefit. . . . . . . . . . . . 37
10.1 Eligibility for Retirement Benefit at Normal
Retirement Date . . . . . . . . . . . . . . . . . . . . . 37
10.2 Eligibility for Retirement Benefit at Early
Retirement Date . . . . . . . . . . . . . . . . . . . . . 37
10.3 Eligibility for Retirement Benefit at Postponed
Retirement Date . . . . . . . . . . . . . . . . . . . . . 38
10.4 Long-Term Disability Benefits . . . . . . . . . . . . . . 38
ARTICLE XI Methods of Payment. . . . . . . . . . . . . . . . . . . . 38
11.1 Qualified Joint and Survivor Benefit. . . . . . . . . . . 38
11.2 Optional Methods of Payment . . . . . . . . . . . . . . . 39
11.3 Election of Optional Method of Payment. . . . . . . . . . 42
11.4 Rules Regarding Distribution of Benefits. . . . . . . . . 43
11.5 Written Explanations of Survivor Benefit. . . . . . . . . 45
11.6 Cash Out. . . . . . . . . . . . . . . . . . . . . . . . . 45
11.7 Direct Rollover . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XII Death Benefits. . . . . . . . . . . . . . . . . . . . . . 46
12.1 Pre-Retirement Death Benefit. . . . . . . . . . . . . . . 46
12.2 Designation of Beneficiary. . . . . . . . . . . . . . . . 47
ARTICLE XIII Termination of Service. . . . . . . . . . . . . . . . . . 48
13.1 Termination of Service by Non-Vested Participant. . . . . 48
13.2 Termination of Service by Vested Participant. . . . . . . 48
13.3 Termination of Service without a Break in Service . . . . 49
13.4 Termination of Service Following Reemployment . . . . . . 49
ARTICLE XIV Non-Assignability . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XV Administration. . . . . . . . . . . . . . . . . . . . . . 51
15.1 In General. . . . . . . . . . . . . . . . . . . . . . . . 51
15.2 Appointment of Trustees . . . . . . . . . . . . . . . . . 51
15.3 Appointment of Administrative Director. . . . . . . . . . 52
15.4 Specific Responsibilities and Authority of the
Committee . . . . . . . . . . . . . . . . . . . . . . . . 52
15.5 Rules of Procedure. . . . . . . . . . . . . . . . . . . . 54
15.6 Trust Fund. . . . . . . . . . . . . . . . . . . . . . . . 54
15.7 Claims Procedure. . . . . . . . . . . . . . . . . . . . . 56
15.8 Payment of Expenses . . . . . . . . . . . . . . . . . . . 58
15.9 Notices, etc. . . . . . . . . . . . . . . . . . . . . . . 58
15.10 Filing of Information . . . . . . . . . . . . . . . . . . 59
15.11 Claims Against Trust Fund . . . . . . . . . . . . . . . . 60
15.12 Agent for Service of Process. . . . . . . . . . . . . . . 60
ARTICLE XVI Termination of Participating Company's
Participation . . . . . . . . . . . . . . . . . . . . . . 60
16.1 Right to Terminate. . . . . . . . . . . . . . . . . . . . 60
16.2 Effect of Termination and Payment of Distributable
Reserve . . . . . . . . . . . . . . . . . . . . . . . . . 61
16.3 Transfer of Assets to Successor Plan. . . . . . . . . . . 62
ARTICLE XVII Amendment and Termination . . . . . . . . . . . . . . . . 62
17.1 Power to Amend. . . . . . . . . . . . . . . . . . . . . . 62
17.2 Retroactive Amendments. . . . . . . . . . . . . . . . . . 63
17.3 Notices of Amendments . . . . . . . . . . . . . . . . . . 64
17.4 Effect of Termination . . . . . . . . . . . . . . . . . . 64
17.5 Distribution of Assets If No ERISA Termination. . . . . . 64
17.6 Distribution of Assets Upon Termination . . . . . . . . . 65
17.7 Distribution of Assets Upon Termination Where
Assets Not Sufficient . . . . . . . . . . . . . . . . . . 68
17.8 Effect of Partial Termination . . . . . . . . . . . . . . 68
ARTICLE XVIII Limitations in the Event of Early Discontinuance. . . . . 69
18.1 Application . . . . . . . . . . . . . . . . . . . . . . . 69
18.2 Restriction of Benefits . . . . . . . . . . . . . . . . . 69
18.3 Payment of Benefits . . . . . . . . . . . . . . . . . . . 70
18.4 Additional Reserves . . . . . . . . . . . . . . . . . . . 71
ARTICLE XIX Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 71
19.1 In General. . . . . . . . . . . . . . . . . . . . . . . . 71
19.2 Coordination of Payment of Benefits with Other
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 72
19.3 Incapacity. . . . . . . . . . . . . . . . . . . . . . . . 72
19.4 Inability to Locate Benefit Recipient . . . . . . . . . . 72
19.5 Benefit Provided by Insurance . . . . . . . . . . . . . . 73
19.6 Credit for Prior Employment . . . . . . . . . . . . . . . 73
19.7 Construction. . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XX Top Heavy Provisions. . . . . . . . . . . . . . . . . . . 74
20.1 In General. . . . . . . . . . . . . . . . . . . . . . . . 74
20.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . 74
20.3 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . 75
20.4 Distributions to Participants . . . . . . . . . . . . . . 76
20.5 Top Heavy Plan Years. . . . . . . . . . . . . . . . . . . 77
20.6 Duplication of Benefits . . . . . . . . . . . . . . . . . 77
ARTICLE XXI Transfer of Amounts Attributable to Contributions
Under The Jefferson Stores Plan . . . . . . . . . . . . . 79
21.1 Transfer of Accrued Benefit . . . . . . . . . . . . . . . 79
21.2 Transfer Held in Trust. . . . . . . . . . . . . . . . . . 79
21.3 Payment of Benefits . . . . . . . . . . . . . . . . . . . 79
ARTICLE XXII Transfer of Amounts Attributable to Contributions
Under the Lechmere Plan . . . . . . . . . . . . . . . . . 80
22.1 Transfer of Accrued Benefit . . . . . . . . . . . . . . . 80
22.2 Transfer Held in Trust. . . . . . . . . . . . . . . . . . 80
22.3 Payment of Benefits . . . . . . . . . . . . . . . . . . . 80
<PAGE>
PREAMBLES
WHEREAS, the Retirement Security Plan first became effective
on February 1, 1957 and was thereafter from time to time amended;
and
WHEREAS, effective January 1, 1975, Ward amended and
restated the Retirement Security Plan to provide greater
retirement security for eligible associates of Ward and
Participating Companies; and
WHEREAS, the Profit-Sharing Plan was merged into the
Retirement Security Plan effective as of January 1, 1975; and
WHEREAS, effective as of January 1, 1976, Ward amended the
Retirement Security Plan to satisfy the requirements of ERISA;
and
WHEREAS, effective January 1, 1979, the Retirement Security
Plan was amended and restated to reflect certain corporate
reorganization changes, assure continued compliance with ERISA
and the final regulations issued thereunder, satisfy the
requirements of the 1978 amendments to the Age Discrimination in
Employment Act of 1967 and include administrative and clarifying
amendments; and
WHEREAS, Ward further amended and restated the Retirement
Security Plan for service on or after January 1, 1981 as a
separate and distinct retirement benefit plan for management,
administrative and supervisory associates, and to establish
distinct and separately funded retirement benefit plans for
timecard associates and for represented associates, with three
separate trust accounts commingled for investment purposes; and
WHEREAS, Ward amended and restated the Plan, effective April
1, 1983, so that amounts attributable to associate contributions
made to the Plan after December 31, 1980 and the Profit-Sharing
Plan Balances hereunder shall be transferred to the Montgomery
Ward & Co., Incorporated Savings and Profit Sharing Plan (the
"Savings Plan"), adopted by Ward effective April 1, 1983, for the
benefit of eligible associates, to eliminate associate
contributions under the Plan, to require eligible associates to
authorize salary reduction or payroll deduction contributions to
the Savings Plan in order to be eligible for continued benefit
accruals under the Plan, and to offset and reduce the benefits
provided under the Plan by the benefits, if any, that are or
could be provided by the Savings Plan funds attributable to the
transferred associate contributions and the required salary
reduction or payroll reduction contributions authorized by
associates under the Savings Plan; and
WHEREAS, Ward further amended the Plan, effective January 1,
1984, to provide a guaranteed minimum pension benefit for
associates, to satisfy the requirements of the Tax Equity and
Fiscal Responsibility Act of 1982, to comply with certain
requirements regarding actuarial computations, and to make other
technical changes; and
WHEREAS, Ward further amended the Plan effective January 1,
1985, to merge the Retirement Plan for Employees of Jefferson
Stores, Inc. into the Plan, to transfer amounts attributable to
contributions under the Jefferson Stores Plan to the Plan for the
benefit of eligible associates, to satisfy the requirements of
the Deficit Reduction Act of 1984 and the Retirement Equity Act
of 1984, and to make other technical changes;
WHEREAS, Ward amended and restated the Plan, effective
January 1, 1989, to merge the: (i) Montgomery Ward & Co.,
Incorporated Management Retirement Security Plan; (ii) Montgomery
Ward & Co., Incorporated Timecard Retirement Security Plan; and
(iii) Montgomery Ward & Co., Incorporated Represented Retirement
Security Plan, to satisfy the requirements of the Tax Reform Act
of 1986, and to make other technical changes;
WHEREAS, Ward desires to amend and restate the Plan,
effective January 1, 1994, to merge the Lechmere Plan into the
Plan, effective as of August 1, 1994, to transfer amounts
attributable to contributions under the Lechmere Plan to the Plan
for the benefit of eligible associates, to satisfy the
requirements of recent changes to the Code, and to make other
technical changes;
NOW, THEREFORE, the Plan is hereby amended and restated to
read as follows:
ARTICLE
I
Background Information
1.1 Purpose of Plan. The purpose of the Montgomery Ward &
Co., Incorporated Retirement Security Plan is to provide
retirement benefits for eligible associates of Ward and
Participating Companies and to thereby encourage such associates
to make and continue careers with Ward and Participating
Companies. The Plan, as amended and restated herein, and the
Trust is intended to qualify as a plan and trust which continue
to meet the requirements of Sections 401(a) and 501(a) of the
Code.
1.2 Application of Restatement and Determination of
Retirement Benefits. This Restatement applies to Associates who
are in the Service of the Company on any date after the Effective
Date. Any benefits payable to a participant who retired or
terminated service prior to January 1, 1981 without resuming
service thereafter, or whose normal retirement date occurred on
or before January 1, 1981, and the benefits payable to any
Associate who was in the Service of the Company on December 31,
1980 but who has not enrolled in the Plan thereafter, will be
paid from the Trust, but will be governed solely by the terms of
the Retirement Security Plan. The total benefits payable from
the Trust for any Participant enrolled in the Plan on any date
after December 31, 1980 will be calculated in three parts or such
lesser number of parts as may be applicable to the Participant:
(i) the Participant's benefits determined as of December 31, 1980
under the Retirement Security Plan; provided that, in making such
determination, Service after December 31, 1980 shall apply only
for purposes of Vesting under the Retirement Security Plan, (ii)
the Participant's Supplemental Retirement Benefit determined as
of the date of the Participant's Retirement or termination of
Service under the Retirement Security Plan, and (iii) the
Participant's benefits determined under the Plan with respect to
participation after December 31, 1980. Notwithstanding the
foregoing, in the event of the death of any Participant who was
enrolled in the Retirement Security Plan on December 31, 1980 and
who became a Participant in the Plan on January 1, 1981, (i) if
such Participant's Surviving Spouse is eligible to receive a
Pre-Retirement Death Benefit, such Surviving Spouse shall be
entitled to elect, in accordance with procedures established by
the Committee, to receive in one lump sum the amounts
attributable to associate contributions made prior to January 1,
1981 to the Retirement Security Plan, plus interest (determined
in accordance with the Code and Regulations), and the amount of
the Pre-Retirement Death Benefit payable to such Surviving Spouse
shall be reduced by the Equivalent Actuarial Value of the lump
sum payment if such election is made, and (ii) the Retirement
Benefit, and form in which benefits, if any, will be paid, shall
be determined solely under the terms of the Plan as in effect on
the date of the Participant's termination of employment or
retirement, unless such person is thereafter reemployed and again
becomes a Participant. Benefits for all other Participants shall
be determined under the terms of the Plan as in effect on the
date of the Participant's termination of employment or
retirement, unless such person is thereafter reemployed and again
becomes a Participant.
1.3 Other Effective Dates. The Plan, as set forth herein,
constitutes a restatement of the Plan through January 1, 1994.
Although this restatement is generally effective January 1, 1994,
the inclusion of amendments to conform with the Tax Reform Act of
1986 and other applicable laws necessitates different effective
dates for certain Plan provisions. Accordingly, notwithstanding
the general effective date of this restatement, the following
Plan sections as amended, shall be effective as indicated below.
Sections Effective Date
8.1 and 9.7 January 1, 1987
2.14, 2.15, 2.17, January 1, 1993
2.18 and 11.7
Article VII July 1, 1994
2.2 August 1, 1994
ARTICLE II
Definitions
The following terms shall have the following meanings:
2.1 "Accrued Benefit" means the amount of annual
Retirement Benefit determined under Articles IX and X payable as
a straight life annuity beginning at a Participant's Normal
Retirement Date or, if applicable, the Participant's Postponed
Retirement Date as determined in accordance with Article IX. The
Accrued Benefit payable at Normal Retirement Date shall not be
less than the Accrued Benefit of such Participant determined on
the date preceding the Effective Date under the terms of the Plan
or the terms of the Lechmere Plan determined on June 30, 1994.
2.2 "Actuarial Equivalent" or "Equivalent Actuarial
Value" means, unless otherwise specified in the Plan, a benefit
of equivalent value when computed on the basis of the actuarial
tables and interest rates as set forth below; provided, however,
that the interest rate used to determine whether the Equivalent
Actuarial Value of a Retirement Benefit exceeds $3,500 for
purposes of the Plan or to determine the Equivalent Actuarial
Value of a lump sum option provided under Section 11.6 shall not
be greater than:
(a) For distributions prior to January 1, 1995:
(i) the applicable interest rate if the accrued
benefit (using such rate) is not in excess
of $25,000; or
(ii) 120% of the applicable interest rate if the
accrued benefit exceeds $25,000 (as
determined under subparagraph (i) above).
In no event shall the present value
determined under subparagraph (ii) be less
than $25,000.
The rate set forth in subparagraphs (i) and (ii) above
may be referred to as the PBGC Rate. For purposes of
subparagraphs (i) and (ii) above and Subsection (c) below, the
applicable interest rate shall mean the interest rate or rates
which would be used as of the first day of the calendar year in
which the distribution commences by the PBGC for purposes of
determining the present value of the Participant's benefits under
the Plan if the Plan had terminated on the date distribution
commences with insufficient assets to provide benefits guaranteed
by the PBGC on that date ("PBGC Rate").
(b) For distributions after December 31, 1994, the
annual rate of interest on 30-year Treasury securities ("30-Year
Treasury Rate") for the month before the date of distribution or
such other time as the Secretary of Treasury may by regulations
prescribe.
For purposes of determining whether the Equivalent
Actuarial Value of a Retirement Benefit exceeds $3,500 for the
purposes of the Plan or to determine the Equivalent Actuarial
Value of a lump sum option provided under Section 11.6, to the
extent the Administrative Director or Committee determines it is
legally permissible, the 30-Year Treasury Rate shall be
determined for the month before the first day of the calendar
year in which the distribution commences. Until the
Administrative Director or Committee makes the determination set
forth in the preceding sentence, the Administrative Director or
Committee will set the 30-Year Treasury Rate for distributions
during the calendar year at a rate which it believes will be
lower than the 30-Year Treasury Rate for the December of the
preceding calendar year and each of the first eleven months of
the calendar year through November of such calendar year or for
such other period it determines appropriate. Pursuant to the
preceding sentence, the 30-Year Treasury Rate set for the 1995
calendar year until a determination is made effective pursuant to
the first sentence of this paragraph shall be 7%.
(c) Subject to the other provisions of this Section
2.2, for purposes of distributions prior to January 1, 1995 of
the Retirement Benefit other than that portion attributable to
the Lechmere Frozen Benefit, as defined in Section 9.1(c), and
the Immediate Cash Balance Annuity, "Actuarial Equivalent" or
"Equivalent Actuarial Value" means the sex-neutral option factors
listed below:
Annuity Form Mortality Interest Rate
Qualified Joint 1971 GAT 7.5%
and Survivor (60% male/40% female)
Annuity
100%, 75% or 50% 1971 GAT 7.5%
Contingent Annuity (60% male/40% female)
10 Year Certain 1971 GAT 7.5%
and Life Annuity (60% male/40% female)
Level Income 1971 GAT 7.5%
Annuity (60% male/40% female)
Lump Sum Option 1983 GAM Applicable
(males) Interest Rate
(d) Subject to the other provisions of this Section 2.2,
for purposes of distributions prior to January 1, 1995 of the Lechmere
Frozen Benefit, as defined in Section 9.1(c), and the Immediate Cash
Balance Annuity, "Actuarial Equivalent" or "Equivalent Actuarial Value"
means the sex-neutral option factors listed below:
Annuity Form Mortality Interest Rate
100%, 75% or 50% 1983 GAM 7.5%
Contingent Annuity (males)
10 Year Certain 1983 GAM 7.5%
and Life Annuity (males)
Level Income 1983 GAM 7.5%
Annuity (males)
Lump Sum Option 1983 GAM PBGC Rate
(males)
(e) Subject to the other provisions of this Section 2.2,
for distributions after December 31, 1994, "Actuarial Equivalent" of
"Equivalent Actuarial Value" means the sex-neutral option factors
listed below:
Annuity Form Mortality Interest Rate
100%, 75% or 50% 1983 GAM 7.5%
Contingent Annuity (50% male/50% female)
10 Year Certain 1983 GAM 7.5%
and Life Annuity (50% male/50% female)
Level Income 1983 GAM 7.5%
Annuity (50% male/50% female)
Lump Sum Option 1983 GAM 30-Year Treasury
(50% male/50% female) Rate
(f) The lump sum value of a Participant's Cash Balance
Account as of a determination date shall be an amount equal to the
accumulated balance in such Cash Balance Account as of such
determination date. For purposes of converting the Cash Balance
Account to an annuity form of payment, the 1983 GAM (males) mortality
table and the PBGC immediate interest rate as in effect on the first
day of the Plan Year in which the annualization occurs shall be used
for distributions prior to January 1, 1995 and the 1983 GAM (50%
male/50% female) mortality table and the 30-Year Treasury Rate as set
forth in subparagraph (b) shall be used for distributions after
December 31, 1994.
(g) In no event shall the amount of any benefit or annuity
determined hereunder exceed the maximum benefit under Section 415 of
the Code.
2.3 "Actuary" means the enrolled actuary, within the
meaning of ERISA, engaged by the Committee.
2.4 "Administrative Director" means the Administrative
Director of the Plan appointed by the Committee in accordance with
Section 15.3 hereof.
2.5 "Affiliate" means any corporation controlling,
controlled by, or under common control with (within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the applicable
Regulations), the Company or such successor, directly or indirectly
through one or more intermediaries.
2.6 "Beneficiary" means the person or persons designated
by a Participant or the Beneficiary of a Participant to receive the
amount, if any, payable under the Plan in the event of the death of
such Participant or Beneficiary, as the case may be.
2.7 "Board" means the Board of Directors of Ward.
2.8 "Break in Service" means (a) after January 1, 1976,
the Year during which or immediately after which an associate
terminates Service and does not perform Service during at least 12
weeks or (b) prior to January 1, 1976, a break in service under the
rules then in effect under the Retirement Security Plan.
Notwithstanding the preceding sentence, after January 1, 1976, any
Associate who actually performs at least 500 Hours of Service during
any Year shall not be considered as having incurred a Break in Service.
Effective with respect to absences commencing on or after January 1,
1985, solely for purposes of determining whether a Break in Service has
occurred, an individual shall be credited with the Hours of Service
which such individual would have completed but for a maternity or
paternity absence, as determined by the Committee in accordance with
the Code and Regulations; provided, however, that the total Hours of
Service so credited shall not exceed 501 hours and that the individual
timely provide the Committee with such information as it shall require.
Hours of Service credited for a maternity or paternity absence shall be
credited entirely (i) in the Plan Year in which the absence began if
such Hours of Service are necessary to prevent a Break in Service in
such year, or (ii) in the following Plan Year. For purposes of this
Section 2.8, maternity or paternity absence shall mean an absence from
work by reason of the individual's pregnancy, the birth of the
individual's child or the placement of a child with the individual in
connection with adoption of the child by such individual, or for
purposes of caring for a child for the period immediately following
such birth or placement.
2.9 "Cash Balance Account" means the notional amount
described in Section 7.1 and maintained for Participants who previously
participated in the Lechmere Plan.
2.10 "Code" means the Internal Revenue Code of 1986, as
amended, and any successor provisions thereto.
2.11 "Committee" means the Benefit Plans Committee of Ward.
2.12 "Company" means Ward and any Participating Company or
any of them.
2.13 "Credited Service" means an Associate's Service as a
Participant, excluding any authorized leave of absence, military leave,
layoff or suspension in accordance with Subsections 2.43(a)-2.43(d)
hereof. Credited Service shall not include any period of Service
during which a Participant fails to make any contributions required
prior to the Effective Date for participation in the Plan or fails to
authorize Required Contributions to be made under the Savings Plan on
or after the Effective Date. Beginning January 1, 1989, Credited
Service shall include any period of disability leave of absence
provided that the Associate was a Participant immediately prior to such
leave or became eligible while on such leave and further provided that
the Participant is receiving Long-Term Disability benefits from a plan
sponsored by the Company. Credit under the Plan for the period of
disability leave of absence during which the Participant is receiving
long-term disability benefits from a plan sponsored by the Company
shall be limited to (i) the duration of the disability leave of
absence; (ii) the period prior to the Participant's Normal Retirement
Date; (iii) one year if the Participant has less than ten years of
continuous service, or (iv) two years if the Participant has ten or
more years of continuous service prior to such disability leave of
absence, whichever is less. Associates who were in Service of the
Company as of January 1, 1988, and had completed at least one Hour of
Service in 1988, and made investable basic contributions as defined in
the Montgomery Ward & Co., Incorporated Savings and Profit Sharing Plan
other than Associates employed by Signature Financial/Marketing Inc.,
accrued benefits for those contributions retroactive to their
enrollment date in the Savings and Profit Sharing Plan.
With respect to each Participant who was an associate of
Jefferson Stores, Inc., Credited Service shall not include any period
of Service prior to July 1, 1983.
2.14 "Direct Rollover" shall mean a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
2.15 "Distributee" shall mean an Associate or former
Associate. In addition, the Associate's or former Associate's
surviving Spouse and the Associate's or former Associate's Spouse or
former Spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
Distributees with regard to the interest of the Spouse or former
Spouse.
2.16 "Effective Date" means the date of effectiveness of
this amendment and restatement, as provided in Article III hereof.
2.17 "Eligible Retirement Plan" means an individual
retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code,
an annuity plan described in Section 403(a) of the Code, or a qualified
trust described in Section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover Distribution. However, in the case of
an Eligible Rollover Distribution to the surviving Spouse, an Eligible
Retirement Plan is an individual retirement account or individual
retirement annuity.
2.18 "Eligible Rollover Distribution" shall mean any
distribution of all or any portion of the balance to the credit of
the Distributee, except that an Eligible Rollover Distribution does
not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee
or the joint lives (or joint life expectancies) of the Distributee
and the Distributee's designated Beneficiary, or for a specified
period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
2.19 "Employee" or "Associate" means any individual
who is employed by the Company, as determined by the Committee,
excluding (a) any associate who is included in a unit of associates
covered by a negotiated collective bargaining agreement which does
not provide for the associate's membership in the Plan, (b) any
associate of a division of the Company which the Committee has
determined to treat as though it is an Affiliate which is not a
Participating Company, and (c) any non-resident alien.
2.20 "ERISA" means the Employee Retirement Income
Security Act of 1974, as from time to time amended.
2.21 "High Three-Year Pay" means a Participant's
average annual amount of total taxable remuneration paid or payable
by the Company or any Affiliate for the three consecutive calendar
years for which he receives or received Credited Service and during
which years such remuneration was the highest; provided that such
remuneration for the last calendar year shall be annualized.
2.22 "Hours of Service" means each hour during which
an Associate performs Service (or is treated as performing Service
under Section 2.43) and for which he is paid, or entitled to
payment for the performance of duties for the Company (including
back pay irrespective of mitigation of damages). In addition,
Hours of Service shall also include up to 501 hours of non-working
time during any single continuous period of absence which does not
otherwise constitute Service, but for which an associate is
directly or indirectly paid or entitled to payment. The
determination of Hours of Service to be credited hereunder shall be
made by the Committee in accordance with the Regulations, including
Section 2530.200b-2(b) and (c) of the Labor Department Regulations.
2.23 "Immediate Cash Balance Account Annuity" means an
annuity as described in Section 7.3 with respect to a Participant
who was a participant in the Lechmere Plan.
2.24 "Interest Credit(s)" means the interest amount
credited to the Cash Balance Account of a Participant who was a
participant in the Lechmere Plan.
2.25 "Investment Manager" means an Investment Manager,
as that term is defined in ERISA, appointed by the Trustees.
2.26 "IRS" means the United States Internal Revenue
Service.
2.27 "Jefferson Stores Plan" means the Retirement Plan
for Employees of Jefferson Stores, Inc. amended effective as of
January 1, 1984.
2.28 "Labor Department" means the United States
Department of Labor.
2.29 "Lechmere Plan" means the Lechmere, Inc. Personal
Retirement Account Plan, amended and restated effective January 1,
1992.
2.30 "Long-Term Disability Plan" means the Montgomery
Ward & Co., Incorporated Long-Term Disability Plan, as from time to
time in effect.
2.31 "Optional Retirement Benefit" means an
alternative form of Retirement Benefit provided for in Section 11.2
hereof, which a Participant may elect to receive upon Retirement
and which is the Actuarial Equivalent of a Retirement Benefit.
2.32 "Participant" means each Associate or former
Associate who is enrolled for participation in the Plan or is
entitled to receive or receiving benefit payments hereunder.
2.33 "Participating Company" means any company which
is an Affiliate, designated by the Board as such, the board of
directors or equivalent governing body of which shall adopt the
Plan by appropriate action and the Associates of which shall be
eligible to participate in the Plan in the manner and to the extent
determined by the Board so long as that company remains so
designated. Any such company so designated and which adopts the
Plan shall be deemed thereby to appoint Ward, the Committee, the
Administrative Director and the Trustees its exclusive agents to
exercise on its behalf all of the powers conferred hereby or by the
Trust Agreement upon the Company, the Committee, the Administrative
Director and the Trustees, respectively, and shall make its
allocable contributions to the Plan. The authority of the Company,
the Committee, the Administrative Director and the Trustees,
respectively, to act as such agent shall continue until the Plan
has terminated as to such company and the relevant Trust Fund
assets have been distributed by the Trustees as provided in Article
XVI hereof.
2.34 "PBGC" means the Pension Benefit Guaranty
Corporation.
2.35 "Plan" means this Retirement Security Plan, as
herein set forth, and as from time to time in effect.
2.36 "Prior Plans" means the Management Retirement
Security Plan, the Timecard Retirement Security Plan and the
Represented Retirement Security Plan, each as in effect on December
31, 1988.
2.37 "Regulations" means the applicable proposed,
temporary or final regulations issued under the Code or ERISA by
the IRS, the PBGC, the Labor Department or any other governmental
authority and any temporary rulings and questions and answers
promulgated by such authorities pending the issuance of such
regulations.
2.38 "Required Contributions" means contributions
authorized by Participants to be made to the Savings Plan pursuant
to Section 4.1 thereof.
2.39 "Retirement" or "Retire" means or refers to such
time as a Participant is eligible to receive currently and elects
to receive currently a Retirement Benefit or an Optional Retirement
Benefit upon or after the Participant's termination of Service.
2.40 "Retirement Benefit" means a single life annuity
determined upon a Participant's Retirement in accordance with the
relevant Section of Article IX hereof, payable in accordance with
the relevant Section of Article XI hereof.
2.41 "Retirement Security Plan" means the Montgomery
Ward & Co., Incorporated Retirement Security Plan as amended
through December 31, 1980.
2.42 "Savings Plan" means the Montgomery Ward & Co.,
Incorporated Savings and Profit Sharing Plan, effective as of April
1, 1983, and as amended from time to time.
2.43 "Service" means employment with the Company or
with any Affiliate, excluding service performed by an individual
prior to January 1, 1976, if such periods would have been
disregarded under the break in service rules then in effect under
the Retirement Security Plan or prior to January 1, 1985, if such
periods would have been disregarded under the break in service
rules then in effect under the Plan, and excluding Service which is
disregarded under the Break in Service rules of the Plan, the Prior
Plans, the Jefferson Stores Plan or the Lechmere Plan. Service
shall include the following:
(a) Any authorized leave of absence under rules
determined by the Committee, which are uniformly applicable to all
associates similarly situated and in accordance with the
Regulations (including Sections 2530.200b-2(b) and (c) of the Labor
Department Regulations and Sections 825.214 through 825.216 of the
Family and Medical Leave Act ("FMLA") Regulations); provided the
associate returns to active Service within the period authorized
for such leave;
(b) Service in any of the United States Armed
Forces, if and to the extent required by the Military Selective
Service Act, as amended, the FMLA, the Uniformed Services
Employment and Reemployment Rights Act of 1994 or any other federal
law, or as otherwise recognized by the Committee;
(c) Any period of layoff not in excess of
12 months during which the associate retains reemployment rights
and provided that the associate reports to work within three
working days after recall; and
(d) Any period of suspension of participation,
as provided for in Section 5.2 hereof.
2.44 "Surviving Spouse" means the survivor of a
deceased Participant to whom such deceased Participant was legally
married, as determined by the Committee on the earlier of, (a) the
date of the Participant's Retirement, or (b) for at least one year
on the date of such Participant's death.
2.45 "Total Earnings" means the total of an
Associate's compensation, including salary, wages, overtime
premium, commissions, holiday pay, vacation pay, bonuses, cash
incentives other than from contests, and salary continuance paid or
payable by the Company and any Affiliates for Service during a
calendar year prior to the earlier of the Associate's date of
termination of Service or the Associate's Normal Retirement Date
or, if applicable, Early Retirement Date, but excluding (a) amounts
paid under the 1970 Marcor Stock Price Plan, under any stock option
plan or stock award plan and under any other plans maintained
exclusively for management Associates of Ward or of Ward and
Affiliates which the Committee determines to exclude from Total
Earnings, (b) amounts contributed by the Associate's employer to
the Trust pursuant to the provisions of the Plan or paid or
contributed to any group insurance plan or other employee benefit
plan established or maintained by the Associate's employer or in
which the Associate's employer participates, other than amounts
contributed on behalf of a Participant under Section 4.1 of the
Savings Plan, (c) amounts paid to the Associate from Jefferson
Stores, Inc. while he was a participant under the Jefferson Stores
Plan, (d) amounts paid during any period during which a Participant
fails to make any contributions required prior to the Effective
Date for participation in the Plan or fails to authorize Required
Contributions to be made under the Savings Plan, and (e) amounts
paid in a calendar year in excess of $200,000 (adjusted for cost of
living to the extent permitted by the Code and Regulations).
Effective for calendar years beginning after December 31, 1993,
Total Earnings shall exclude amounts paid in a calendar year in
excess of $150,000 (adjusted for cost of living in accordance with
Section 401(a)(17) of the Code). In determining Total Earnings and
applying the $150,000 limitation for a highly compensated employee
(as defined in Section 414(q) of the Code) ("Highly Compensated
Associate") who is either a 5% owner of the Company or one of the
10 most highly paid Highly Compensated Associates and is therefore
subject to the family aggregation rules of Section 414(q)(6) of the
Code, the Highly Compensated Associate's family unit shall be
treated as a single employee with one Total Earnings. The term
"family" shall include the Highly Compensated Associate and any
Associate who is the Highly Compensated Associate's spouse or any
lineal descendants of the Highly Compensated Associate who have not
attained age 19 before the close of the Plan Year. If, as a result
of applying the family aggregation rules, the adjusted $150,000
limitation is exceeded, then the adjusted $150,000 limitation will
be allocated among the members of the family unit in proportion to
each such member's Total Earnings as determined prior to the
application of the $150,000 limitation. In the case of a
Participant for whom long-term disability benefits are being paid
under the Long-Term Disability Plan pursuant to the provisions of
said plan, the Participant's Total Earnings for the period during
which such benefits are being accrued by this Plan shall be deemed
to continue at the same rate as the Participant's Total Earnings
immediately prior to such disability.
2.46 "Transferred Contribution Account" means the
account, established and maintained as part of a Participant's
account under the Savings Plan to reflect amounts transferred with
respect to a Member's Benefit derived from Associate Contributions,
pursuant to Section 6.2 of the Savings Plan.
2.47 "Trust" means the Trust established by Ward as a
part of the Plan.
2.48 "Trust Agreement" means the agreement with the
Trustees establishing the Trust.
2.49 "Trust Fund" means all the assets held by the
Trustees pursuant to the Trust Agreement.
2.50 "Trustees" means the trustees under the Trust
Agreement appointed by the Committee in accordance with Section
15.2 hereof.
2.51 "Vest", "Vested" or "Vesting" means the
acquisition by a Participant or the Participant's Beneficiary of a
nonforfeitable right to a Retirement Benefit, except in the event
of the Participant's death prior to the time prescribed for payment
of such Retirement Benefit. For purposes of the Plan, Vesting
occurs after five Years of Service with the fifth year being the
completion of five months of service or upon Normal Retirement Date
pursuant to the provisions hereof, whichever occurs first. In
determining whether a Participant is Vested, the Years of Service
prior to any Break in Service shall be disregarded if he was not
then Vested and the number of consecutive Years in which he
incurred a Break in Service equals or exceeds the greater of 5 or
the aggregate number of the Participant's Years of Service prior to
such Break in Service (excluding any Years of Service prior to
January 1, 1976 which were disregarded under the break in service
rules then in effect under the Retirement Security Plan, and
excluding any Years of Service which are disregarded under the
Break in Service rules of the Plan, the Prior Plans, the Jefferson
Stores Plan or the Lechmere Plan).
2.52 "Ward" means the present Illinois corporation by
the name of Montgomery Ward & Co., Incorporated and any successor
to all or substantially all of its business and assets.
2.53 "Year" means the 12 consecutive month period
beginning on the date an Associate's Service commenced or
recommenced after a Break in Service (determined under the rules of
the Plan, the Prior Plans, the Jefferson Stores Plan or the
Lechmere Plan), as determined by the Committee, or an anniversary
date thereof. Effective January 1, 1994, if the Associate does not
complete 1,000 Hours of Service during the first 12 consecutive
month period, the determining period shall be any 12 consecutive
month period beginning with the first day of the calendar year
beginning on or after the date of employment.
2.54 "Year of Credited Service" means a Year of
Service for which an Associate receives Credited Service. Partial
Years of Credited Service shall be taken into account on the basis
of 1/12 Year's credit for each month of Service.
2.55 "Year of Service" means a Year in which an
Associate performs Service and completes 1,000 Hours of Service.
Any Associate who actually performs 1,000 Hours of Service during
any Year shall be considered as having performed a Year of Service.
ARTICLE III
Effective Date
The Effective Date of this amendment and restatement
shall be January 1, 1994.
ARTICLE IV
Eligibility
Each Associate who, immediately prior to the Effective
Date, was a Participant shall continue to be a Participant on and
after the Effective Date. Each other Associate who was in Service
immediately prior to the Effective Date, but who was not then a
Participant of the Plan shall be eligible for participation in the
Plan on the later of the Effective Date or the first day of the
month following the date on which he satisfies the requirements for
participation in the Plan as in effect on December 31, 1993;
provided, however, that any such Associate who does not submit an
enrollment form on the earliest date prescribed by the Committee
must satisfy the requirements for participation under this
amendment and restatement before again being eligible for
participation in the Plan. Each other Associate who was or is
employed by the Company shall become eligible to participate in the
Plan on the first day of the month following the later of (a) the
date on which he attains age 21; or (b) the date on which he
completes one Year of Service. Notwithstanding the foregoing, each
participant of the Lechmere Plan on June 30, 1994 shall become a
Participant on July 1, 1994.
ARTICLE V
Participation
5.1 Enrollment. Each Associate who becomes eligible
to become a Participant under the Savings Plan shall become a
Participant on the first day of the month following the Associate's
submission of an enrollment form prescribed by the Committee. The
Committee shall take any necessary or appropriate action to enroll
each Associate who becomes eligible to become a Participant
pursuant to this Section 5.1 and, if it is determined that an
eligible Associate has not been enrolled in the Plan due to error,
such Associate may be retroactively enrolled if the Committee
receives notice of the error within a reasonable period of time
following such error.
5.2 Suspension of Participation. No Participant may
continue participation in the Plan in the event the Participant
ceases to be an Associate or is transferred from the Company to an
Affiliate which is not designated a Participating Company or who is
on a leave of absence, except, to the extent provided in this Plan,
for those Associates receiving long-term disability benefits from a
plan sponsored by the Company. A Participant who becomes
ineligible to participate in the Plan because of the application of
the preceding sentence shall be suspended from further
participation during the period of such ineligibility without
forfeiting any benefits accrued prior to the date such Participant
became ineligible to participate, unless the Committee shall
determine, in accordance with rules established by the Committee
which are uniformly applicable to all Associates similarly
situated, that such Participant shall be deemed to have terminated
the Participant's employment for purposes of participation in the
Plan pursuant to Article XIII hereof. Such action shall not be
applicable to any Participant who is transferred to an Affiliate.
Credited Service shall exclude any such period of suspension, as
provided in Section 2.13 hereof, but Service for purposes of
Vesting and eligibility shall include such period. Notwithstanding
any of the provisions of the Plan to the contrary, each Participant
shall be entitled to the benefits provided under Sections 21.3 and
22.3, if applicable.
5.3 Break in Service. If a Participant's employment
terminates and he is later rehired, he shall again be eligible to
participate in the Plan as of the date of rehire.
ARTICLE VI
Contributions
6.1 Cessation of a Participant's Contributions. No
Participant shall be required or permitted to contribute to the
Plan on or after April 1, 1983.
6.2 Company Contributions. Subject to the provisions
of Articles XVI and XVII hereof, Ward and each Participating
Company shall contribute to the Trust, not less frequently than
quarterly during each Plan Year, the amounts recommended by the
Actuary to the Committee as necessary to maintain the Plan on a
sound actuarial basis, consistent with the requirements of ERISA
and the Code. The Committee shall arrange for such funding
standard accounts as are required by ERISA in accordance with the
recommendations of the Actuary.
6.3 Actuarial Assumptions. The Committee shall adopt
and may change from time to time, in accordance with the provisions
of ERISA and the Code, such actuarial assumptions and methods as
are recommended by the Actuary for the purpose of actuarial
valuations of the Plan. The Actuary shall make an annual actuarial
valuation of the Plan and shall estimate the contributions required
under Section 6.2 hereof on the basis thereof. At least once a
year, the Actuary shall make an actuarial study of the mortality
and other actuarial assumptions, service and compensation
experience of the Participants in the Plan, the investment
experience and any other relevant experience gains and losses under
the Plan, including such calculations as may be necessary to
determine whether the Plan is adequately funded, and shall report
the results of its study to the Committee. Prior to termination of
the Plan, forfeitures of benefits arising from termination of
Service, death or any other reason under the Plan shall not be
applied to increase the benefits that any Participants would
otherwise be entitled to receive under the Plan, but may be
anticipated in estimating costs under the Plan and shall be applied
to reduce the Company's contributions under the Plan.
ARTICLE VII
Cash Balance Account
7.1 In General. A notional account (hereinafter
referred to as the Cash Balance Account) shall be established and
maintained for each Participant who was a participant in the
Lechmere Plan. The initial Cash Balance Account for each
Participant shall equal such Participant's Cash Balance Account
under the Lechmere Plan as of June 30, 1994. Such Participant's
Cash Balance Account shall be credited with Interest Credits in
accordance with Section 7.2.
7.2 Interest Credits. Interest Credits equal to the
rate of interest specified in this Section 7.2 multiplied by the
amount of the Participant's Cash Balance Account as of the first
day of each calendar year shall be added to each Participant's Cash
Balance Account as of the last day of the calendar year. For any
calendar year in which a distribution is made from the Plan on
behalf of a Participant, interest shall be credited on the amount
of the Participant's Cash Balance Account as of the first day of
such year for the period from the first day of such year to the
date of benefit distribution. The rate of interest used to
determine the Interest Credit for a calendar year, shall be the 12-
month average rate for six month Treasury Bills as of December 31
of the prior calendar year. In no event will the annual Interest
Credit be less than 5.75% or more than 10.0%.
7.3 Immediate Cash Balance Account Annuity. The
amount of annual retirement income payable with respect to the Cash
Balance Account of a Participant is equal to the Immediate Cash
Balance Account Annuity. The Immediate Cash Balance Account
Annuity is the annual amount of retirement income payable as a
Single Life Benefit as defined in Section 11.2(a). The annual
amount of retirement income is determined as:
(a) The Participant's Cash Balance Account
divided by;
(b) The immediate annuity factor for one dollar
of annual benefit under the Single Life
Benefit form of payment defined in Section
11.2(a), based on the Participant's age as
of the Retirement Date.
The immediate annuity factor referenced in Section 7.3 above shall
be based on the actuarial assumptions described in Section 2.2.
ARTICLE VIII
Retirement Dates
8.1 Normal Retirement Date. A Participant's Normal
Retirement Date shall be the first day of any month following the
Participant's 65th birthday. Benefits accrued to a Participant
under the Plan shall be nonforfeitable upon the attainment of age
65.
Any Participant who, for at least two years before the
Participant's Normal Retirement Date, is employed in an executive
or other policy-making position and who, as of the Participant's
Normal Retirement Date, is entitled to an aggregate anticipated
annual retirement benefit, including benefits not provided under
the Plan, of $44,000 or more, when expressed as a Single Life
Benefit as defined in Subsection 11.2(a) hereof, all as determined
by the Committee under uniform rules and in accordance with
applicable law and Regulations, shall retire on the Participant's
Normal Retirement Date, unless the Participant's employment
thereafter has been approved by the Board or unless a state or
federal law requires that such Participant be permitted to continue
employment beyond his Normal Retirement Date.
8.2 Early Retirement Date. A Participant's Early
Retirement Date may be the first day of any month following the
Participant's termination of Service prior to the Participant's
Normal Retirement Date, provided such Participant (a) has attained
age 55, (b) has completed five Years of Service (except that this
requirement shall not apply to an Associate of the Company or an
Affiliate on December 31, 1968), and (c) has prior to such date
elected to Retire on such date pursuant to rules adopted by the
Committee in accordance with the Regulations.
8.3 Postponed Retirement Date. A Participant's
Postponed Retirement Date shall be the first day of any month
following termination of Service after Normal Retirement Date,
pursuant to Section 8.1 hereof.
ARTICLE IX
Amount of Retirement Benefit
9.1 Retirement Benefit Payable upon Retirement at
Normal Retirement Date. Subject to the provisions of this Article,
in the event of the Retirement of a Participant on his Normal
Retirement Date, the amount of the Retirement Benefit shall be the
sum of (a), (b), (c) and (d) below:
(a) the Participant's Retirement Benefit determined
as of December 31, 1993; and
(b) 1.5% of the Participant's Total Earnings while a
participant during each year of Credited Service after the
Effective Date; and
(c) the Participant's Lechmere Plan frozen benefit as
of June 30, 1994, excluding the benefit attributable to the
Participant's Immediate Cash Balance Annuity ("Lechmere Frozen
Benefit"); and
(d) the Participant's Immediate Cash Balance Annuity,
if any.
The Retirement Benefit will be accrued each calendar
year on the basis of the Participant's Credited Service and Total
Earnings during such calendar year and, with respect to a
Participant's Cash Balance Account, on the basis of Interest
Credits. In no event shall a Participant's Retirement Benefit
decrease after any date which could have been the Participant's
Early Retirement Date. The minimum Retirement Benefit payable upon
Retirement at Normal Retirement Date, including any benefit payable
with respect to a Participant's credited service under the
Retirement Security Plan prior to January 1, 1981, and any benefit
payable under the Plan on or after such date, shall be $1,200 after
an aggregate of 20 Years of Service during which the Participant
received either Credited Service or credited service under the
Retirement Security Plan, the Prior Plans or the Plan, with an
additional $60 for each of the first five such Years of Service in
excess of 20 and an additional $125 for each such Year of Service
in excess of 25, but in no event shall such minimum benefit exceed
$2,125, ending with Credited Service as of December 31, 1988.
9.2 Retirement Benefit Payable upon Retirement at
Early Retirement Date. In the event of a Participant's Retirement
on an Early Retirement Date, the amount of the Retirement Benefit
payable, including the annual minimum, shall be the amount provided
for in Section 9.1 hereof, provided that, in the event the
Participant's Early Retirement Date occurs prior to the first day
of the month following the Participant's 63rd birthday, the portion
of the Retirement Benefit derived from Sections 9.1(a) and 9.1(b)
shall be reduced by 5/12 of 1% for each month by which the
Participant's Early Retirement Date precedes such first day and
provided that in the event the Participant's Early Retirement Date
occurs prior to the first day of the month following the
Participant's 65th birthday, the portion of the Retirement Benefit
derived from Section 9.1(c) hereof shall be reduced by 5/9 of 1%
for each of the first 60 months by which the Participant's Early
Retirement precedes such first day and 5/18 of 1% for each of the
next 60 months.
9.3 Retirement Benefit Payable upon Retirement at
Postponed Retirement Date. In the event of a Participant's
Retirement on a Postponed Retirement Date, the amount of the
Retirement Benefit payable, including the annual minimum, shall be
the same amount which the Participant was entitled to receive on
the Participant's Normal Retirement Date, as provided in Section
9.1 hereof, with additional credit for Service after such date.
9.4 Offset of Retirement Benefit. Notwithstanding
any other provision of the Plan, the amount of the Retirement
Benefit payable, including the minimum Retirement Benefit, to any
Participant shall be reduced by the current annuity rates of a
legal reserve life insurance company chosen by the Committee of
that portion of the annuity which could be purchased for the
Participant under the Savings Plan with the amount, if any, in the
Participant's Transferred Contribution Account and the amount, if
any, in the Participant's Account attributable to Required
Contributions as determined by the Committee as of the date of the
Participant's Retirement. Notwithstanding anything provided
herein, effective January 1, 1984, the Retirement Benefit of
associates of Montgomery Ward Insurance Company and its
subsidiaries shall not be offset by benefits provided under the
Savings Plan and effective October 1, 1984, the Retirement Benefit
of associates of Signature Financial/Marketing, Inc. and its
subsidiaries shall not be offset by the benefits provided under the
Savings Plan except as set forth herein. In addition, effective as
of such dates, associates of the aforesaid companies will accrue
benefits under the Plan although they have not authorized payroll
deduction contributions under the Savings Plan. The Retirement
Benefit payable to associates of Montgomery Ward Insurance Company
shall be reduced by Equivalent Actuarial Value of that portion of
the annuity that could be purchased with the Transferred
Contributions and their contributions made prior to January 1, 1984
(or October 1, 1984 for certain associates) under the Savings and
Profit Sharing Plan.
9.5 Cessation of Benefit Payments Following
Reemployment After Retirement. Upon reemployment of a former
Associate who previously Retired hereunder, all benefit payments
being made to the Associate which are permitted to be suspended
under Regulations shall cease.
9.6 Retirement Benefit Payable upon Retirement
Following Reemployment after Termination of Service. If a
Participant who incurs a Break in Service is for any reason
reemployed by the Company, then, upon the Participant's subsequent
Retirement, the Participant's Retirement Benefit shall be based on
the Participant's Credited Service after the Participant's
reemployment plus the Retirement Benefit (after applying the
offset) previously accrued as of the Participant's separation from
Service.
9.7 Maximum Amount of Retirement Benefit.
(a) The provisions of this Section shall govern
the benefits to which it is applicable notwithstanding any other
provision of the Plan to the contrary. The benefits to which this
Section is applicable are: (i) any annuity payable to a
Participant for life as a part of a Qualified Joint and Survivor
Benefit or as a part of an Optional Retirement Benefit elected by
the Participant under Section 11.2 hereof and having the effect of
a qualified joint and survivor annuity within the meaning of
Section 417(b) of the Code (excluding in either case any
post-Retirement Surviving Spouse benefit); (ii) any Single Life
Benefit elected by a Participant under Subsection 11.2(a) hereof;
and (iii) any other Optional Retirement Benefit elected by a
Participant under Section 11.2 hereof (including both the annuity
payable to the Participant and any other annuity or benefit payable
thereunder). This Section shall not limit the amount of any
Supplemental Retirement Benefit, if any, which is payable by reason
of the prior maintenance of the Profit-Sharing Plan, which benefit
represents benefits under a "defined contribution plan", as that
term is defined in ERISA.
(b) The benefits to which this Section is
applicable may not exceed the limitations set forth in Section 415
of the Code, which are incorporated by reference herein. For these
purposes, the "limitation year" means the Plan Year. If a
Participant also participates in any defined contribution plan (as
defined in Sections 414(i) and 415(k) of the Code) maintained by
the Company or any Affiliate, in the event that in any Plan Year
the sum of the Participant's defined benefit fraction (as defined
in Section 415(e)(2) of the Code) and the Participant's defined
contribution fraction (as defined in Section 415(e)(3) of the Code)
would otherwise exceed 1.0, then the benefit payable under this
Plan shall be reduced so that the sum of such fractions in respect
of that Member will not exceed 1.0. If the above reduction does
not ensure that the limitation set forth in this Section is not
exceeded, then the annual additions (as defined in Section
415(c)(2) of the Code) to any defined contribution plan maintained
by the Company or any Affiliate in which the Participant
participates, shall be reduced in accordance with the provisions of
that plan, but only to the extent necessary to ensure that such
limitation is not exceeded. If a Participant also participates in
another defined benefit plan (as defined in Sections 414(j) and
415(k) of the Code) maintained by the Company or any Affiliate, in
the event that in any Plan Year such Participant's aggregated
accrued benefit under such plans exceeds the applicable limits
under Section 415 of the Code, the benefit payable under such other
plan shall be reduced to the extent necessary to comply with such
limits.
(c) For purposes of this Section, the benefits
to which this Section is applicable shall be determined without
regard to any amounts transferred from the Jefferson Stores Plan
and the Lechmere Plan pursuant to Section 21.2.
(d) In the case of any Associate who was a
Participant under the Retirement Security Plan prior to October 3,
1973, the benefits to which this Section is applicable may not
exceed the greater of (i) the limitations contained in Subsection
9.7(b) hereof, adjusted as described therein, or (ii) either (A)
the Actuarial Equivalent of a Single Life Benefit, as described in
Section 11.2 hereof, equal to 100% of the Participant's Total
Earnings on October 2, 1973, or, if earlier, the date of his
termination of Service, or (B) the Actuarial Equivalent of the
benefits which would have been provided under the Retirement
Security Plan as in effect on October 2, 1973, without taking into
account any increases in the Associate's Total Earnings after such
date.
(e) The Committee shall, to the extent required
by ERISA and in accordance with Regulations, apply the limitations
contained in this Section, after giving due consideration to the
wishes of the Participant, by taking into account the Supplemental
Retirement Benefit, if any, and the benefits payable and the
contributions made under any other plans maintained by Ward or any
Affiliate which are qualified under Section 401(a) of the Code. If
such other plan is a defined contribution plan, then the sum of the
defined benefit plan fraction and the defined contribution plan
fraction (each as described in Section 415(e) of the Code) shall
not exceed 1.0.
(f) Notwithstanding the foregoing provisions of
this Section, the maximum limitation on Retirement Benefits, with
respect to any person who was a Participant prior to December 31,
1982 and whose Retirement Benefit (determined without regard to any
changes in the Plan after July 1, 1982 and without regard to cost-
of-living adjustments, if any, occurring after July 1, 1982) as of
December 31, 1982, exceeds the limitations set forth in Section
9.7(b), shall be such Participant's Retirement Benefit as of
December 31, 1982; provided that, such Participant's Retirement
Benefit did not exceed the maximum limitation thereon as of
December 31, 1982.
(g) Notwithstanding the foregoing provisions of
this Section, the maximum limitation on Retirement Benefits, with
respect to any person who was a Participant on or prior to December
31, 1994 and whose Retirement Benefit as of December 31, 1994
exceeds the limitations set forth in Section 9.7(b), shall not be
less than such Participant's Retirement Benefit as of December 31,
1994; provided that, such Participant's Retirement Benefit did not
exceed the maximum limitation thereon as of December 31, 1994.
ARTICLE X
Eligibility for Retirement Benefit
10.1 Eligibility for Retirement Benefit at Normal
Retirement Date. Except as otherwise provided in Article IX hereof
and Section 11.4, a Participant who Retires on the Participant's
Normal Retirement Date shall be eligible for the Retirement Benefit
provided for in Section 9.1 hereof or a benefit of Equivalent
Actuarial Value thereto as provided for herein payable from and
after the Participant's Normal Retirement Date.
10.2 Eligibility for Retirement Benefit at Early
Retirement Date. Except as otherwise provided in Article IX
hereof, a Participant who Retires on an Early Retirement Date shall
be eligible for the Retirement Benefit provided for in Section 9.2
hereof or a benefit of Equivalent Actuarial Value thereto as
provided for herein payable from and after the Participant's Early
Retirement Date. A Participant who has attained age 55 and
terminates Service prior to the Participant's Normal Retirement
Date with five Years of Service shall be eligible for the
Retirement Benefit provided for in Section 9.1(c) or a benefit of
Equivalent Actuarial Value.
Notwithstanding any other provisions of the Plan, no
distribution of any amounts attributable to contributions paid on
behalf of a Participant while he was a 5% owner shall be made to a
Participant who is or has been a 5% owner prior to such
Participant's attaining age 59 1/2, for any reason other than such
Participant's death or disability. For purposes of this Section
10.2, a 5% owner shall mean a 5% owner of such Participant's
employer as defined in Section 416(i)(1)(B)(i) of the Code.
10.3 Eligibility for Retirement Benefit at Postponed
Retirement Date. Except as otherwise provided in Article IX hereof
and Section 11.4, a Participant who Retires on a Postponed
Retirement Date shall be eligible for the Retirement Benefit
provided for in Section 9.3 hereof or a benefit of Equivalent
Actuarial Value thereto as provided for herein payable from and
after the Participant's Postponed Retirement Date.
10.4 Long-Term Disability Benefits. During any period
when benefits would otherwise be payable under the Long-Term
Disability Plan, no benefits shall be paid under this plan unless a
Participant ceases to receive benefits under the Long-Term
Disability Plan.
ARTICLE XI
Methods of Payment
11.1 Qualified Joint and Survivor Benefit. If a
Participant is legally married, as determined by the Committee, on
the date of the Participant's Retirement, the Equivalent Actuarial
Value of any Retirement Benefit, to which such Participant is
entitled under the Plan shall, except as otherwise provided in this
Section or in Section 11.2 hereof, be payable in the form of a
Qualified Joint and Survivor Benefit. The term "Qualified Joint
and Survivor Benefit" means a benefit providing an annuity for the
life of the Participant, ending with the payment due on the first
day of the month in which the Participant's death occurs, and, if
the Participant dies leaving a Surviving Spouse, a survivor annuity
for the life of such Surviving Spouse, commencing on the first day
of the month following the date of the Participant's death and
ending with the payment due on the first day of the month in which
such Surviving Spouse's death occurs. The survivor annuity payable
to the Surviving Spouse shall be in an amount equal to one-half of
the annuity payable for the life of the Participant under the
Participant's Qualified Joint and Survivor Benefit. If a
Participant is not legally married, as determined by the Committee,
on the date of the Participant's Retirement, the Participant's
Retirement Benefit shall, except as otherwise provided in Section
11.2 hereof, be payable to the Participant in the form provided for
in Subsection 11.2(a) hereof.
11.2 Optional Methods of Payment. In lieu of the
Qualified Joint and Survivor Benefit, a Participant may elect,
subject to Sections 11.3 and 11.4 hereof, to receive the Actuarial
Equivalent of the Retirement Benefit to which the Participant is
entitled under the Plan in accordance with any one of the following
options:
(a) Single Life Benefit. An annuity for the
Participant's life, ending with the payment due on the first day of
the month in which the Participant's death occurs, with no monthly
annuity payable to a beneficiary.
(b) Contingent Annuitant Benefit. An annuity
for life and an annuity for 100%, 75% or 50% of such amount after
the Participant's death on or after the Participant's Normal
Retirement Date or Early Retirement Date, if applicable, to the
Participant's Beneficiary for the life of the Beneficiary (the
"Contingent Annuitant Benefit" or "Joint and Survivor Benefit").
In no event shall the effect of the selection of a Contingent
Annuitant Benefit in which the Beneficiary is not the Participant's
spouse cause the benefit payable to the Participant to be reduced
to a level less than 50% of the benefit to which the Participant
would have been entitled if the Participant had not elected the
Contingent Annuitant Benefit. The conditions governing the
Contingent Annuitant Benefit shall be:
(i) The effective date of the Contingent
Annuitant Benefit (the "Option Effective Date") shall be
the Participant's Retirement Date.
(ii) The election shall be made in writing,
dated the day the election is made, on the prescribed
form and shall specify the 100%, 75% or 50% Contingent
Annuitant Benefit and the name, social security number,
sex and date of birth of the Participant's Beneficiary.
(iii) Retirement income under the Contingent
Annuitant Benefit shall commence effective the first day
of the month following Retirement.
(iv) The Contingent Annuitant Benefit shall
become inoperative in the event the Participant cancels
the benefit prior to the Option Effective Date or if
either the Participant or the Beneficiary should die
prior to the Option Effective Date. On the Option
Effective Date, the Contingent Annuitant Benefit shall
become noncancellable and the Beneficiary selection
binding, and, if either the Participant or the
Beneficiary should die after the Option Effective Date,
the benefit shall nevertheless continue to be operative.
(c) Level Income Benefit. Benefit from the Plan
up to the earliest date age 62 that the Participant will be
entitled to receive a retirement benefit from social security and a
smaller benefit, or no benefit if so actuarially determined, from
the Plan commencing after such date (the "Level Income Benefit").
If the Participant dies prior to age 62 or if benefits continue
after age 62, the Annuity ceases with the payment due on the fist
date of the month in which the Participant's death occurs. The
Plan benefits payable both before and after the retirement benefit
from social security as estimated for age 62 commencement becomes
payable, in combination, are to have the Equivalent Actuarial Value
of the reduced amount of Retirement Benefit provided for in Section
9.2 hereof commencing on the Early Retirement Date.
(d) Ten Years Certain and Continuous Benefit.
An annuity for life with the provision that, if the Participant
should die before having received 120 monthly payments, the
Participant's Beneficiary shall receive the balance of such
payments (the "Ten Years Certain and Continuous Benefit"). The
conditions governing the Ten Years Certain and Continuous Benefit
shall be the same as those governing the Contingent Annuitant
Benefit, except that the election form need not specify the social
security number, sex and date of birth of the Participant's
Beneficiary and the Participant may change the Participant's
Beneficiary at any time before or after the Option Effective Date
upon written notice to the Committee.
(e) Lump Sum Benefit. For Participants who were
participating in the Lechmere Plan as of June 30, 1994, to the
extent that the Equivalent Actuarial Value of a Participant's
Accrued Benefit from the Lechmere Plan determined as of June 30,
1994 is less than or equal to $7,000, the Participant or the
Participant's Surviving Spouse may elect to receive such Accrued
Benefit in one lump sum payment; or to the extent that a
Participants' Accrued Benefit age 55 or older is $50.00 or less,
the Participant may elect to receive the Equivalent Actuarial Value
of such Accrued Benefit in one lump sum payment.
11.3 Election of Optional Method of Payment. Except
as otherwise provided in Sections 11.2 and 11.5 hereof, any
election or revocation of an election under this Article shall be
made by the Participant at any time prior to the date that benefit
payments to the Participant commence pursuant to the provisions of
the Plan. If a Participant has elected a Contingent Annuitant
Benefit or 10 Years Certain and Continuous Benefit in accordance
with Section 11.2 and dies prior to the date payment of the
Participant's Retirement Benefit commences without leaving a
surviving Spouse, then such form of benefit shall become payable to
the Participant's Beneficiary in the same amount, if any, that
would have been payable to such Beneficiary if the payments
thereunder had commenced to the Participant on the last day of the
month coincident with or preceding the date of the Participant's
death. If such a Participant dies prior to the date payment of the
Participant's Retirement Benefit commences, leaving a Surviving
Spouse and without having made a valid election under Section
12.1(b), then the election under Section 11.2, if any, shall be
null and void, and the Surviving Spouse shall receive the Pre-
Retirement Death Benefit in accordance with Section 12.1(a).
11.4 Rules Regarding Distribution of Benefits.
(a) Notwithstanding any other provision of the
Plan, unless otherwise provided by law, any benefit payable to a
Participant shall commence no later than the April 1st of the
calendar year following the calendar year in which such Participant
attains age 70 1/2; provided, however, if a Participant attained
age 70 1/2 prior to January 1, 1988, except as otherwise provided
in Subsection 11.4(e), any benefit payable to such Participant
shall commence no later than the April 1st of the calendar year
following the later of (i) the calendar year in which the
Participant attains age 70 1/2 or (ii) the calendar year in which
the Participant retires. Such benefit shall be paid, in accordance
with the Regulations, over a period not extending beyond the life
expectancy of such Participant and the Participant's Beneficiary.
Life expectancy for purposes of this Section shall not be
recalculated annually in accordance with the Regulations. Any
additional Retirement Benefit Accrued beyond the Retirement Benefit
Commencement date shall be paid in a lump sum.
(b) If distribution of a Participant's benefit
has commenced prior to a Participant's death, and such Participant
dies before the Participant's entire benefit is distributed to the
Participant, distribution of the remaining portion of the
Participant's benefit to the Participant's Beneficiary shall be
made at least as rapidly as under the method of distribution in
effect on the date of the Participant's death.
(c) If a Participant dies before distribution of
the Participant's benefit has commenced, distributions to any
Beneficiary shall be made on or before the December 31st of the
calendar year which contains the 5th anniversary of the date of
such Participant's death; provided, however, that any distribution
to a Beneficiary designated under Section 12.2 may be made over the
life of such Beneficiary or a period not extending beyond the life
expectancy of such Beneficiary. Such distribution shall commence
not later than the December 31st of the calendar year immediately
following the calendar year in which the Participant died, or, in
the event such Beneficiary is the Participant's Surviving Spouse,
not later than the date of which such Participant would have
attained age 70 1/2, if later (or, in either case, on any later
date prescribed by Regulations). If such Participant's Surviving
Spouse dies after such Participant's death but before distributions
to such Surviving Spouse commence, this Section 11.4(c) shall be
applied to require payment of any further benefits as if such
Surviving Spouse were the Participant.
(d) Pursuant to Regulations, any benefits paid
to a child shall be treated as if paid to a Participant's Surviving
Spouse if such amount will become payable to such Surviving Spouse
on the child's attaining majority, or other designated event
permitted by Regulations.
(e) If a Participant who is 5% owner attained
age 70 1/2 before January 1, 1988, any benefit payable to such
Participant shall commence no later than the April 1st of the
calendar year following the later of (i) the calendar year in which
the Participant attained age 70 1/2 or (ii) the earlier of (A) the
calendar year within which the Participant becomes a 5% owner or
(B) the calendar year in which the Participant retires. For
purposes of this Subsection (e), a 5% owner shall mean a 5% owner
of such Participant's employer as defined in Section 416(i) of the
Code at any time during the Plan Year in which such owner attains
age 66 1/2 or any subsequent Plan Year.
11.5 Written Explanations of Survivor Benefit. The
Committee shall furnish or cause to be furnished to each married
Participant explanations of the Qualified Joint and Survivor
Benefit and the Pre-Retirement Death Benefit in Section 12.1(a)
under procedures developed by the Committee in accordance with the
Code and Regulations. A Participant may with the written consent
of the Participant's spouse (unless the Committee makes a written
determination in accordance with the Code and Regulations that no
such consent is required), elect in writing to receive the
Participant's Retirement Benefit in one of the optional forms
described in Section 11.2 in lieu of a Qualified Joint and Survivor
Benefit within the 90-day period ending on the date payment of the
Participant's Retirement Benefit commences. Any such election may
be revoked by a Participant, without spousal consent, at any time
within which such election could have been made. Such an election
or revocation must be made in accordance with procedures developed
by the Committee in accordance with the Code and Regulations, or
both.
11.6 Cash Out. Payments of any Retirement Benefit
with an Equivalent Actuarial Value of $3,500 or less will be made
in a lump cash sum in full settlement of the Plan's liability
therefor, provided, however, that in the case of a married
Participant, no such lump-sum payment shall be made after benefits
have commenced without the consent of the Participant and the
Participant's spouse or, if the Participant has died, the
Participant's Surviving Spouse.
11.7 Direct Rollover. Notwithstanding any provision
of the Plan to the contrary, a Distributee may elect, at the time
and in the manner prescribed by the Committee, to have any portion
of an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover.
ARTICLE XII
Death Benefits
12.1 Pre-Retirement Death Benefit. A Vested
Participant who is in Service or who terminated Service but whose
effective date of payment of Retirement Benefits has not yet
occurred is entitled to a Pre-Retirement Death Benefit. The term
"Pre-Retirement Death Benefit" means a benefit providing that, in
the event of the Participant's death before the effective date of
payment of the Participant's Retirement Benefit, the Participant's
Surviving Spouse, if any, shall be entitled to receive a survivor
annuity equal to one-half of the annuity which would have been
payable for the life of the Participant under a Qualified Joint and
Survivor Benefit, if payments thereunder had commenced on the first
day of the month following the later of (i) the Participant's death
or (ii) the Participant's attainment of age 55. Such Pre-
Retirement Death Benefit shall become payable to the Surviving
Spouse on the first day of the month coincident with or following
the later of (i) the date of the Participant's death, or (ii) the
day on which the Participant would have attained age 55 had he
lived.
12.2 Designation of Beneficiary. Each Participant
shall file with the Committee a written designation of one or more
persons as the Beneficiary who, subject to Section 11.5, shall be
entitled to receive the amount, if any, payable to the
Participant's Beneficiary upon the death of the Participant. The
designation of a Beneficiary for purposes of the Contingent
Annuitant Benefit or Ten Years Certain and Continuous Benefit shall
be deemed to be a Beneficiary designation for all purposes under
the Plan unless otherwise specified by the Participant. Each
Beneficiary of a Participant may file with the Committee a written
designation of one or more persons as the Beneficiary who shall be
entitled to receive the amount, if any, payable to such Beneficiary
of the Beneficiary of the Participant upon the death of the
Participant's Beneficiary. A Participant or the Beneficiary of a
Participant may from time to time revoke or change his Beneficiary
designation without the consent of any prior Beneficiary by filing
a new designation with the Committee. The last Beneficiary
designation received by the Committee shall be controlling;
provided that, no designation, or change or revocation thereof,
shall be effective unless received by the Committee prior to the
death of the Participant or the Beneficiary of the Participant, as
the case may be, or be effective as of the date prior to the date
of such receipt. If no Beneficiary designation is in effect at the
time of a Participant's death or if no Beneficiary survives the
Participant, payment of the amount, if any, payable upon the death
of the Participant shall be made to the Participant's estate. If
no Beneficiary designation is in effect at the time of the death of
the Beneficiary of a Participant or if no Beneficiary survives the
Beneficiary of a Participant, payment of the amount, if any,
payable upon the death of the Beneficiary of the Participant shall
be made to the estate of the Beneficiary of the Participant. If
the Committee is in doubt as to the right of any person to receive
an amount payable pursuant to this Section, the Committee may
direct the Trustees to retain such amount, without liability for
any interest thereon, until the rights thereto are determined, or
the Committee may direct the Trustees to pay such amount to any
court of competent jurisdiction, which payment shall be a complete
discharge of the liability under the Plan and of the Trust
therefor.
ARTICLE XIII
Termination of Service
13.1 Termination of Service by Non-Vested Participant.
If the Service of a Participant who is not and does not at the time
thereof become Vested terminates, no Retirement Benefit shall be
payable to the Participant under the Plan.
13.2 Termination of Service by Vested Participant. If
the Service of a Participant who is Vested terminates prior to
Retirement, such Participant may elect, subject to Sections 10.2
and 11.4, any of the following:
(a) To receive a Retirement Benefit commencing
upon the Participant's Normal Retirement Date, including the annual
minimum if the Service requirement therefor is satisfied, based on
the Participant's Years of Credited Service prior to the
Participant's termination of Service and determined in accordance
with Section 9.1 hereof; or
(b) If such Participant is ineligible for
benefits under the Long-Term Disability Plan (or has voluntarily
elected to forego receipt of benefits otherwise payable
thereunder), such Participant may elect to receive the benefits
provided for in Section 9.2 hereof, including the annual minimum if
the Service requirement therefor is satisfied, based on the
Participant's Years of Service prior to the Participant's
termination of Service, commencing on the first day of the month
following attainment of age 55 or the first day of any subsequent
month prior to the Participant's Normal Retirement Date, where such
Participant has prior to such date elected to receive such benefits
on such date pursuant to rules adopted by the Committee in
accordance with the Regulations.
13.3 Termination of Service without a Break in
Service. In the event the Service of a Participant terminates and
he is reemployed without having incurred a Break in Service, such
Participant's enrollment in the Plan shall be reinstated as of the
effective date of the Participant's re-enrollment; the Retirement
Benefit payable shall be the prior accrued Retirement Benefit
reduced by the prior annuity offset plus any additional Retirement
Benefit accruals of the amount previously paid to the Participant
from the Trust Fund.
13.4 Termination of Service Following Reemployment.
Notwithstanding the foregoing provisions of this Article, if the
Service of a Participant who was reemployed following a termination
of Service shall subsequently be terminated for any reason, the
benefits payable to the Participant pursuant to the provisions of
the Plan shall be reduced by the Equivalent Actuarial Value of all
amounts theretofore paid to the Participant pursuant to the Plan.
ARTICLE XIV
Non-Assignability
Except insofar as applicable law may otherwise require
or pursuant to the terms of a Qualified Domestic Relations Order,
no amount payable at any time under the Plan and Trust shall be
subject in any manner to alienation by anticipation, sale,
transfer, assignment, bankruptcy, pledge, attachment, charge or
encumbrance of any kind, and any attempt to alienate, sell,
transfer, assign, pledge, attach, charge or otherwise encumber any
such amount, whether presently or hereafter payable, shall be void.
The Plan and Trust shall not be liable for or subject to the debts
or liabilities of any person entitled to any amounts payable under
the Plan. If any person shall attempt to, or shall, alienate,
sell, transfer, assign, pledge or otherwise encumber any amount
payable under the Plan and Trust, or any part thereof, or if by
reason of the Participant's bankruptcy or other event happening at
such time such amount would not be enjoyed by the Participant, then
the Committee, if it so elects, may direct that such amount be
withheld and shall hold or apply it to or for the benefit of such
person, the Participant's spouse, children or other dependents, or
any of them, in such manner and proportion as the Committee may
deem proper. For purposes of the Plan, a Qualified Domestic
Relations Order means any judgment, decree, or order (including
approval of a property settlement agreement) which has been
determined by the Committee in accordance with procedures
established under the Plan, to constitute a qualified domestic
relations order within the meaning of Section 414(p)(1) of the
Code.
ARTICLE XV
Administration
15.1 In General. The Committee shall have authority
and responsibility for the administration and interpretation of the
Plan, and, for purposes of ERISA, shall be the "administrator" of
the Plan and its "named fiduciary" with respect to matters for
which it is responsible; provided that the Board shall have the
sole authority to amend, suspend or terminate the Plan, except as
otherwise provided in Subsection 15.4(c) hereof. The Committee
shall consist of not less than three persons, who need not be
directors of Ward, as from time to time appointed by the Board.
Any Committee member may resign and the Board may remove any
Committee member, with or without cause, at any time. To the
maximum extent permitted by ERISA, every action and determination
of the Committee in accordance with this Section shall be final and
binding upon each Participant, Beneficiary, other Associate and
every other person entitled to or claiming participation in the
Plan or benefits from the Plan. No member of the Committee shall
be entitled to act on or decide any matter relating solely to the
Participant or to any of the Participant's rights or benefits under
the Plan.
15.2 Appointment of Trustees. The Committee shall
appoint the Trustees, and may remove any Trustees in accordance
with the Trust Agreement. Upon acceptance of their appointments,
the Trustees shall have exclusive authority to manage and control
the Trust Fund, subject to the provisions of the Plan and the Trust
Agreement and, for purposes of ERISA, shall be the "named
fiduciary" of the Plan with respect to matters for which they are
responsible; provided that, as provided in the Trust Agreement, the
Trustees may appoint one or more Investment Managers and may
delegate authority to the Investment Managers so appointed as
provided therein and permitted by ERISA.
15.3 Appointment of Administrative Director. The
Committee shall appoint an Administrative Director and may from
time to time allocate or delegate to any subcommittee or member of
the Committee, the Administrative Director and others, not
necessarily Associates, such duties relative to compliance with the
reporting and disclosure obligations of ERISA and the
administration and interpretation of the Plan as it deems necessary
or appropriate including matters involving the exercise of
discretion. The Administrative Director may from time to time
delegate to others, not necessarily Associates, such of the
Administrative Director's duties as the Administrative Director
deems necessary or appropriate. The Committee may remove, with or
without cause, at any time the Administrative Director and any
person to whom duties are delegated by the Committee or the
Administrative Director in accordance with this Section.
15.4 Specific Responsibilities and Authority of the
Committee. In furtherance of, and not by way of limitation on, the
responsibilities and authority conferred on the Committee in
Section 15.1 hereof, the Committee shall administer the Plan in
accordance with its terms and provisions and shall have the
following specific responsibilities and authorities:
(a) to construe and interpret the Plan and
determine all questions arising in its operation;
(b) to develop and from time to time review a
policy for funding the Plan recommended by the Actuary, which shall
be consistent with the objectives of the Plan and the actuarial
tables and interest rate assumptions from time to time recommended
by the Actuary for the Plan in accordance with the Regulations and
to advise the Trustees of such policy and of any changes therein
from time to time;
(c) to make such amendments in the Plan and the
Trust Agreement as it deems necessary or appropriate in order to
enable the Plan to comply with ERISA and any other applicable legal
requirements; provided that such amendments would not significantly
affect the cost of the Plan;
(d) to receive reports from the Trustees and
from the Administrative Director on the discharge of their duties
and authority with respect to the Plan, including in the case of
the Administrative Director the preparation, distribution and
maintenance of all documents necessary or appropriate for
compliance with the reporting, disclosure and recordkeeping
requirements contained in ERISA, as well as such other records or
data as may be necessary or appropriate for the proper
administration of the Plan;
(e) to employ the Actuary and such certified
public accountants, legal counsel and other persons as may be
required by ERISA or as it shall otherwise deem necessary or
appropriate in connection with the operation of the Plan;
(f) to adopt such rules and procedures as the
Committee deems necessary or appropriate in order to fulfill its
responsibilities with respect to the Plan; provided that such rules
and procedures are uniformly and consistently applied to persons in
similar circumstances;
(g) to hold regular meetings designed to insure
the discharge of its responsibilities hereunder, and to maintain an
accurate written record of all such meetings; and
(h) to furnish the Board with reports, including
subjects reported upon to it by the Trustees and the Administrative
Director.
15.5 Rules of Procedure. Subject to the by-laws of
the Company and the resolutions of the Board, the Committee shall
establish its own rules of procedure and the time and place of its
meetings. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the act of
a majority of the Committee members at a meeting at which a quorum
is present shall be the act of the Committee. Any action which may
be taken at a meeting of the Committee may be taken without a
meeting if a consent, in writing, setting forth the action so
taken, shall be signed by all of the members of the Committee.
15.6 Trust Fund. The Company has entered into the
Trust Agreement with the Trustees providing for the administration
and management of the Trust Fund. All benefits and other amounts
payable hereunder shall be paid exclusively from the Trust Fund,
and neither the Company, the Committee, any Trustee, the
Administrative Director, nor any director, officer, Associate or
agent of the Company assumes any responsibility or liability
therefor. The Trust Fund may be commingled for investment purposes
with like separate trust funds of any other plans and trusts of
Ward or any Affiliate which meet the requirements of Sections
401(a) and 501(a) of the Code. Each Participant, each Beneficiary
or each other person who shall claim the right to any payment under
the Plan shall look exclusively to the Trust Fund therefor and
shall not have any right or claim therefor against the Company, the
Committee, any Trustee, the Administrative Director or any
director, officer, Associate or agent of the Company. Except as
otherwise required by ERISA, neither the Company, the Committee,
the Administrative Director, nor any director, officer, Associate
or agent of the Company shall be required to inquire into or be
responsible for any act or failure to act of any Trustee or any
Participant. To the maximum extent permitted by ERISA and
applicable state law, each member of the Committee, each Trustee,
the Administrative Director and each director and officer of the
Company, and each Associate who performs services on behalf of the
Plan or the Trust, shall be indemnified and saved harmless by the
Company out of its own assets (including the proceeds of any
insurance policy the premiums of which are paid by the Company)
from and against any and all losses, costs and expenses (including
any amounts paid in settlement of a claim with the Committee's
approval) to which any of them may be subjected by reason of any
act done or omitted to be done in good faith in their official
capacities with respect to the Plan or the Trust Agreement,
including all expenses reasonably incurred in their defense.
15.7 Claims Procedure.
(a) Any claim for benefits shall be submitted on
a prescribed claim form to the claimant's local personnel
department. If the claim is wholly or partially denied, written
notice of the denial shall be furnished within 90 days after
receipt of the claim; provided that, if special circumstances
require an extension of time for processing the claim, an
additional 90 days from the end of the initial period shall be
allowed for processing the claim, in which event the claimant shall
be furnished with a written notice of the extension prior to the
termination of the initial 90-day period indicating the special
circumstances requiring an extension. The written notice denying
the claim shall set forth the reasons for the denial, including
specific reference to pertinent provisions of the Plan on which the
denial is based, a description of any additional information
necessary to perfect the claim and information regarding review of
the claim and its denial.
(b) All disputed claims for benefits shall be
submitted within 60 days after receipt by the claimant of the
written notice of denial to, and decided within a reasonable period
of time by, the Administrative Director or one member of the
Committee designated by its Chairman. Written notice of the
decision on each such claim shall be furnished to the claimant
within 60 days after receipt by the Administrative Director of a
request for review, unless special circumstances require an
extension of time for processing, in which event an additional 60
days shall be allowed for review and the claimant shall be so
notified in writing. If the claim is wholly or partially denied,
such written notice shall set forth an explanation of the specific
findings and conclusions on which such denial is based. A claimant
may review all pertinent documents and may request a review by the
Committee of such a decision denying the claim. Such a request
shall be made in writing and filed with the Committee within 60
days after delivery to the claimant of written notice of the
decision. Such written request for review shall contain all
additional information which the claimant wishes the Committee to
consider. The Committee may hold a hearing or conduct an
independent investigation, and the decision on review shall be made
as soon as possible after the Committee's receipt of the request
for review, but in no event later than the third regularly
scheduled meeting of the Committee after the Committee's receipt of
the request for review. Written notice of the decision on review
shall be promptly furnished to the claimant and shall include
specific reasons for the decision. For all purposes under the
Plan, such decision on claims (where no review is requested) and
decision on review (where review is requested) shall be final,
binding and conclusive on all interested persons as to
participation and benefits eligibility, the amount of benefits and
as to any other matter of fact or interpretation relating to the
Plan. In the case of a Participant covered by a collective
bargaining agreement, a disputed claim for benefits shall be
governed by the grievance and arbitration procedures established
under such agreement; provided, however, that, if such agreement
permits, the Committee will review such a claim before it is
referred to formal grievance procedures.
15.8 Payment of Expenses. Except as otherwise
provided in the Plan or the Trust Agreement, all expenses and
charges incurred in the administration and operation of the Plan
and the Trust Agreement shall be paid out of the Trust Fund. No
compensation shall be paid by the Plan to any member of the
Committee, any Trustee or the Administrative Director if employed
by the Company or any Affiliate, but said persons may be reimbursed
for their reasonable expenses incurred in carrying out their
duties, responsibilities and authority hereunder, and the
compensation, or a properly allocable portion thereof, paid to
other Associates who are involved in the administration of the Plan
and all other properly allowable expenses shall, to the extent not
paid by the Company, be treated as administrative expenses. No
bond shall be required of the members of the Committee, the
Trustees or the Administrative Director, except as otherwise
required by law.
15.9 Notices, etc. Any notice, election, application,
instruction, designation or other form of communication required to
be given or submitted by any Participant, other Associate or
Beneficiary shall be in such form as is prescribed from time to
time by the Committee, sent by first class mail or delivered in
person to the Administrative Director of the Plan, 8-3, Montgomery
Ward & Co., Incorporated, Montgomery Ward Plaza, Chicago, Illinois
60671, and shall be deemed to be duly given only upon actual
receipt thereof by the Administrative Director. Any notice,
statement, report and other communication from the Company, the
Committee or the Administrative Director to any Participant, other
Associate or Beneficiary required or permitted by the Plan shall be
deemed to have been duly given when delivered to such person or
mailed by first class mail to such person at the person's address
last appearing on the records of the Company. Each person entitled
to receive a payment under the Plan shall file in accordance
herewith the person's complete mailing address and each change
therein. A check or communication mailed to any person at such
person's address on file with the Administrative Director shall be
deemed to have been received by such person for all purposes of the
Plan, and neither the Committee, the Administrative Director nor
any Associate or agent of the Company shall be obliged to search
for or ascertain the location of any such person except as required
by ERISA. If the Administrative Director shall be in doubt as to
whether payments are being received by the person entitled thereto,
it may, by registered mail addressed to such person at the person's
address last known to the Administrative Director, notify such
person that all future payments will be withheld until such person
submits to the Administrative Director the person's proper mailing
address and such other information as the Administrative Director
may reasonably request.
15.10 Filing of Information. Each Participant shall
file with the Committee such pertinent information concerning the
Participant and the Participant's Beneficiary, and each Beneficiary
shall file with the Committee such information concerning the
Beneficiary, as the Committee or the Administrative Director may
specify, and in such manner and form as the Committee or
Administrative Director may specify or provide, and no Participant
or Beneficiary shall have any right or be entitled to any benefits
or further benefits under the Plan unless such information is filed
by the Participant or Beneficiary or on behalf of the Participant
or Beneficiary.
15.11 Claims Against Trust Fund. If the Committee
receives notification from the Trustees of any trust fund
established by the Company as a part of an employee benefit plan
other than the Trust Fund that such Trustees have a claim against
the Trust Fund by reason of overpayment or otherwise, then the
Committee may direct the Trustees to withhold further payments
under the Plan, pay the amount of such claim to any court of
competent jurisdiction or take any other action which the Committee
shall deem appropriate.
15.12 Agent for Service of Process. The agent for the
service of legal process of the Plan shall be the Secretary of
Ward.
ARTICLE XVI
Termination of Participating Company's Participation
16.1 Right to Terminate. Any Participating Company
may terminate its participation in the Plan by giving the Committee
prior written notice specifying a termination date which shall be
the last day of the month at least 60 days subsequent to the date
such notice is received by the Committee. The Committee may
terminate any Participating Company's participation in the Plan, as
of any termination date specified by the Committee, for the failure
of the Participating Company to make proper contributions or to
comply with any other provision of the Plan.
16.2 Effect of Termination and Payment of
Distributable Reserve. To the maximum extent permitted by ERISA,
any rights of Participants no longer employed by the Participating
Company, former Participants and their Beneficiaries, Surviving
Spouses and other eligible survivors under the Plan shall be
unaffected by a termination of the Plan as to any Participating
Company. Subject to the provisions of Section 16.8, the benefits
provided under the Plan with respect to each Participant in Service
with such Participating Company as of the termination date will be
paid or forfeited in accordance with the Plan as if such
termination had not occurred except that the Committee may direct
the Trustees to segregate such portion of the assets of the Trust
(the "Distributable Reserve") as the Actuary shall determine to be
properly allocable in accordance with ERISA to the active
Associates of such Participating Company and direct the Trustees to
apply the Distributable Reserve for the benefit of the Participants
employed by the Participating Company as of the termination date in
such manner as the Committee shall determine including, without
limitation, payment to such Participants in lump cash sums, cash
installments, or the purchase of immediate or deferred annuities, a
transfer to a successor employee benefit plan which is qualified
under Section 401(a) of the Code, or any combination thereof;
provided, however, that in the event of any transfer of assets to a
successor employee benefit plan the provisions of Section 16.3 will
apply. Any such payments or transfers of the Distributable Reserve
shall constitute a complete discharge of all liabilities under the
Plan with respect to such Participating Company's participation in
the Plan and any Participant then employed by such Participating
Company. To the maximum extent permitted by ERISA, the termination
of the Plan as to any Participating Company shall not in any way
affect any other Participating Company's participation in the Plan.
16.3 Transfer of Assets to Successor Plan. No
transfer of the Plan's assets and liabilities to a successor
employee benefit plan (whether by merger or consolidation with such
successor plan or otherwise) shall be made unless each Participant
would, if either the Plan or such successor plan then terminated,
receive a benefit immediately after such transfer which (after
taking account of any distributions or payments to them as part of
the same transaction) is equal to or greater than the benefit he
would have been entitled to receive immediately before such
transfer if the Plan had then been terminated. The Committee may
also request appropriate indemnification from the employer or
employers maintaining such successor plan before making such a
transfer.
ARTICLE XVII
Amendment and Termination
17.1 Power to Amend.
(a) Subject to the provisions of Subsection
15.4(c) hereof, the Board reserves the right at any time to amend,
suspend, discontinue or terminate the Plan, any contributions
thereunder, the Trust or any contract issued by an insurance
carrier forming a part of the Plan, in whole or in part and for any
or no reason and without the consent of any Participating Company,
Participant or Beneficiary; and the Committee may adopt amendments
necessary or appropriate to qualify or maintain the Plan, the Trust
and any contract with an insurance carrier which may form a part of
the Plan as a plan and trust meeting the requirements of Sections
401(a) and 501(a) of the Code or any other applicable section of
law, including ERISA, as now in effect or hereafter amended or
adopted and the Regulations.
Each Participating Company by its adoption of the Plan
shall be deemed to have delegated this authority to the Board and
the Committee, respectively.
(b) No amendment or modification shall be made
which would (i) retroactively impair any right to any benefit under
the Plan which any Participant or Beneficiary would otherwise have
had at the date of such amendment by reason of the contributions
theretofore made, except to such extent as may be necessary or
appropriate to qualify or maintain the Plan, the Trust and any
contract with an insurance carrier which may form a part of the
Plan as a plan and trust meeting the requirements of Sections
401(a) and 501(a) of the Code or any other applicable section of
law, including ERISA, as now in effect or hereafter amended or
adopted and the Regulations or (ii) make it possible for any part
of the funds of the Plan (other than such part as is required to
pay taxes, if any, and administrative expenses as provided in
Section 15.8 hereof) to be used for or diverted to any purposes
other than for the exclusive benefit of Participants and their
Beneficiaries prior to the satisfaction of all liabilities with
respect thereto.
17.2 Retroactive Amendments. Subject to the
provisions of Section 17.1 hereof, any amendment, modification,
suspension or termination of any provisions of the Plan may be made
retroactively if necessary or appropriate to qualify or maintain
the Plan, the Trust and any contract with an insurance company
which may form a part of the Plan as a plan and trust meeting the
requirements of Sections 401(a) and 501(a) of the Code or any other
applicable section of law, including ERISA, as now in effect or
hereafter amended or adopted and the Regulations.
17.3 Notices of Amendments. Notice of any amendment,
modification, suspension or termination of the Plan shall be given
by the Board or the Committee, whichever adopts the amendment, to
the other and to the Trustees and all Participating Companies and,
where and to the extent required by law, to Participants and other
interested parties.
17.4 Effect of Termination. Upon termination of the
Plan, no amount shall thereafter be payable under the Plan to or in
respect of any Participant except as provided in this Article, and,
to the maximum extent permitted by ERISA, transfers or
distributions of the assets of the Plan as provided in this Article
shall constitute a complete discharge of all liabilities under the
Plan. The Committee shall remain in existence, and all of the
provisions of the Plan which in the opinion of the Committee are
necessary for the execution of the Plan and the distribution or
transfer of the assets of the Plan shall remain in force. All
distributions and notifications referred to in this Article shall
be in form and substance satisfactory to counsel for the Plan.
17.5 Distribution of Assets If No ERISA Termination.
If the Committee receives a determination from the PBGC that the
termination of the Plan does not constitute a plan termination for
purposes of Title IV of ERISA, then, upon receipt by the Committee
of IRS approval of such termination, the assets of the Plan shall
be applied for the benefit of Participants and Beneficiaries in
such manner as the Committee shall determine, provided that, in the
event of any transfer of assets to a successor employee benefit
plan, the provisions of Section 16.3 hereof will apply.
17.6 Distribution of Assets Upon Termination.
(a) If the termination of the Plan does not
constitute a plan termination for purposes of Title IV of ERISA,
then the rights of all Participants (including any person or
persons whose benefits are paid from the Trust regardless of the
plan under which the benefits are calculated) to their Retirement
Benefits accrued to the date of such termination shall thereupon be
nonforfeitable, but only to the extent that such Retirement
Benefits have then been funded by contributions made prior to such
termination and that funds are available to provide such Retirement
Benefits upon the allocations hereinafter provided in this Section.
(b) Upon receipt by the Committee of (i) all
necessary PBGC regulatory approvals that the assets of the Plan are
sufficient to discharge when due all obligations thereunder with
respect to benefits which are guaranteed by the PBGC under Title IV
of ERISA and (ii) IRS approval of such termination, the assets of
the Plan which remain after reservation of an amount sufficient to
apply all expenses of final administration shall be allocated, to
the extent sufficient, in the following order of priority:
(A) To provide for the benefits which are
payable to or in respect of Participants who
Retired or died, who could have Retired, or who,
having terminated Service, either began receiving
payments of such benefits or could have begun
receiving such payments at least three years
prior to the termination date, determined in each
case on the basis of the provisions of the Plan
at any time during the five-year period ending on
the termination date when such benefits were or
would have been the lowest and without regard to
any increases in such benefits which accrued less
than three years prior to the termination date;
then
(B) To provide all other benefits under the
Plan which are guaranteed by the PBGC under Title
IV of ERISA or which would be guaranteed if
Sections 4022(b)(5) and 4022(b)(6) were not
applicable, but which have not been allocated
under Clause (A) of this Section; then
(C) To provide all other benefits which had
become nonforfeitable under the Plan prior to the
termination date but which have not been
allocated under Clause (A) or (B) of this
Section; then
(D) To provide all other benefits which had
accrued under the Plan prior to the termination
date but which have not been allocated under
Clause (A), (B) or (C) of this Section; then
(E) Any surplus assets of the Plan
remaining after the payment of all expenses of
final administration and after the satisfaction
of all liabilities accrued to the termination
date with respect to Participants and their
Beneficiaries shall, upon receipt of the IRS
approval therefor, revert ratably to each
Participating Company in such manner and in such
proportion as the Committee, upon the advice of
the Actuary, shall determine. The foregoing
allocations shall be made by the Committee in
accordance with the determinations of the Actuary
pursuant to the Regulations. If the balance
remaining for allocation under any of the
foregoing Clauses is insufficient to provide in
full the allocations under such Clause,
individual allocations shall be reduced pro rata
(except that, under Clause (C) only, such balance
shall first be allocated to provide the benefits
described therein determined on the basis of the
provisions of the Plan which were in effect at
the beginning of the five-year period ending on
the termination date and then, if the balance
remaining for allocation is sufficient, to
provide the benefits described therein which
result from each successive amendment to the Plan
during such five-year period under the first such
amendment as to which such balance is
insufficient before reducing such allocation pro
rata), and no allocations shall be made under
subsequent clauses. The assets of the Plan
allocated in accordance with Clauses (A), (B),
(C) and (D) of this Section shall be distributed
in such manner as the Committee shall determine,
including without limitation, lump-sum payments,
cash installments, the purchase of immediate or
deferred annuities or any combination of the
foregoing.
17.7 Distribution of Assets Upon Termination Where
Assets Not Sufficient. Notwithstanding the provisions of Section
17.6 hereof, if the PBGC notifies the Committee that it is unable
to determine whether the assets of the Plan are sufficient or that
such assets are insufficient to discharge when due all obligations
thereunder with respect to benefits which are guaranteed by the
PBGC under Title IV of ERISA, then the assets of the Plan shall be
allocated and distributed only as a court having competent
jurisdiction of the Plan or Trust or a trustee appointed by such
court shall direct or permit or as otherwise provided in an
agreement satisfactory to the Committee.
17.8 Effect of Partial Termination. In the event that
any governmental authority, including without limitation the IRS
and PBGC, determines that a partial termination, within the meaning
of ERISA, of the Plan has occurred as to any Participating Company,
then (i) the rights of all Participants affected thereby to their
Retirement Benefits accrued to the date of such partial termination
shall thereupon be nonforfeitable, but only to the extent that such
Retirement Benefits have then been funded by such portion of the
assets of the Trust as are determined to be properly allocable to
such Participants and that such portion of assets is available to
provide such Retirement Benefits upon the allocations provided in
Section 17.6 hereof, and (ii) the provisions of Sections 17.2,
17.3, 17.4, 17.6, and 17.7 hereof and Section 16.3 hereof which in
the opinion of the Committee are necessary for the execution of the
Plan and the allocation and distribution of the assets of the Plan
shall apply. To the maximum extent permitted by ERISA, if any
liability arises as a result of such partial termination, only the
Participating Company as to which the partial termination of the
Plan has occurred shall be liable to the PBGC for any insufficiency
of assets.
ARTICLE XVIII
Limitations in the Event of Early Discontinuance
18.1 Application. In order to qualify the Plan and
the Trust as a qualified plan and trust under the Code, the
benefits to be provided to certain Participants will be subject to
the limitations set forth in this Article XVIII.
18.2 Restriction of Benefits.
(a) In the event the Plan is terminated, the benefit
of any active or former Participant who was a Highly Compensated
Associate (as defined in Section 414(q) of the Code) shall be
limited to that benefit that is nondiscriminatory under Section
401(a)(4) of the Code.
(b) The annual payments to a Participant described in
(c) below are restricted to an amount equal to the payments that
would be made on behalf of that Participant under a straight life
annuity that is the Actuarial Equivalent of the Participant's
Accrued Benefit under the Plan. The restrictions in this Section
18.2 do not apply, however, if:
(i) After payment to a Participant
described in (c) below of all benefits described in (d)
below, the value of Plan assets equals or exceeds 110%
of the value of current liabilities (as defined in
Section 412(1)(7) of the Code), or
(ii) The value of the benefits described in
(d) below for a Participant described in (c) below is
less than 1% of the value of current liabilities, or
(iii) The value of benefits described in (d)
below for a Participant described in (c) below does not
exceed the amount described in Section 411(a)(11)(A) of
the Code.
(c) The Participants whose benefits are restricted
pursuant to this Article XVIII on distribution are the 25 Highly
Compensated Associates and former Highly Compensated Associates (as
defined in Section 414(q) of the Code) with the greatest
compensation in the current or any prior year. Plan provisions
defining or altering the group of Participants whose benefits are
restricted under this Section 18.2 may be amended at any time
without violating the requirements of Section 411(d)(6) of the
Code.
(d) For purposes of this Section 18.2, the term
"benefit" includes loans in excess of the amounts set forth in
Section 72(p)(2)(A) of the Code, any periodic income, any
withdrawal values payable to a living Participant and any death
benefits not provided for by insurance on the Participant's life.
18.3 Payment of Benefits. The limitations established
under this Article XVIII shall not restrict either the payment of
any monthly benefit due prior to the termination of the Plan or the
payment of benefits to a Participant's Beneficiary or Surviving
Spouse under the Plan at any time, if such payment commenced prior
to the date of such termination. If the foregoing limitations
would otherwise become applicable the Committee may, if it so
elects, nevertheless pay full benefits to or in respect of any
Participant who executes an agreement with the Trustees, in form
and in substance satisfactory to the Committee, which is adequately
secured and which guarantees the repayment of any payment subject
to such limitations.
18.4 Additional Reserves. Any additional reserves
arising by the application of the foregoing limitations shall be
used and applied for the benefit of the other Participants and
their Beneficiaries and Surviving Spouses under the Plan; provided,
however, that if sufficient funds are available to provide in full
for the benefits accrued for all such other Participants and their
Beneficiaries and Surviving Spouses under the Plan, then such
additional reserves shall be used, to the extent available, to
provide the benefits under the Plan of the Participants whose
benefits would otherwise have been restricted by operation of this
Article XVIII.
ARTICLE XIX
Miscellaneous
19.1 In General. Any and all rights or benefits
accruing to any person under the Plan shall be subject to all terms
and conditions of the Plan and the Trust Agreement. The adoption
and maintenance of the Plan shall not constitute a contract between
the Company and any associate or be a consideration for, or an
inducement or condition of, employment of any associate. Neither
participation nor anything contained in the Plan shall give any
associate the right to be retained in the employ of the Company,
nor shall it interfere with the right of the Company to discharge
any associate at any time.
19.2 Coordination of Payment of Benefits with Other
Plans. Notwithstanding any other provision of this Plan, the
payment of benefits to Participants and their Beneficiaries,
Surviving Spouses and other eligible survivors under the Plan shall
be paid as a part of and concomitantly with any benefits to which
he is entitled in accordance with the terms of the Prior Plans.
19.3 Incapacity. If the Committee shall find that any
person to whom any amount is payable under the Plan is unable to
care for such person's affairs because of illness or accident, is a
minor or has died, then any payment due to the person or the
person's estate (unless a prior claim therefor has been made by a
duly appointed legal representative) may be paid to the spouse, a
child, a relative, an institution maintaining or having custody of
such person or any other person deemed by the Committee to be a
proper recipient on behalf of such person otherwise entitled to
payment. Any such payment shall be a complete discharge of the
liabilities of the Plan and Trust Fund.
19.4 Inability to Locate Benefit Recipient. If the
Committee cannot ascertain the whereabouts of any person to whom an
amount is payable under the Plan, and if, after five years from the
date such payment is due, a notice of such payment due is mailed to
the last known address of such person as shown on the records of
the Company and within three months after such mailing such person
has not made a written claim therefor, the Committee, if it so
elects and after receiving advice from counsel to the Plan, may
assume that such person is deceased and direct that such payment be
made in accordance with the applicable provisions of Article XI
hereof.
19.5 Benefit Provided by Insurance. If the payment of
any benefit under the Plan is provided as an annuity benefit under
a contract with an insurance company, the payment of such benefit
shall be subject to all the provisions of such contract.
19.6 Credit for Prior Employment. Upon such terms and
conditions as the Committee and the Internal Revenue Service may
approve, credit may be given for service and benefits provided
under the Plan to a Participant with respect to any period of the
Participant's prior employment by an organization, and such credit
and benefits may be provided for in whole or in part by funds
transferred, directly or indirectly (including a rollover from an
individual retirement account, or an individual retirement annuity
as described in Section 408 of the Code), to the Trust Fund from an
employee benefit plan of such organization which qualifies under
Section 401(a) of the Code.
19.7 Construction. To the maximum extent permitted by
ERISA, the Plan shall be construed in accordance with the laws of
the State of Illinois. As used herein, the masculine form shall,
where appropriate, include the feminine and neuter genders. All
Article and Section headings herein have been inserted for
convenience only and shall not affect the meaning of the language
contained herein.
ARTICLE XX
Top Heavy Provisions
20.1 In General. The Plan will be considered a Top
Heavy Plan for any Plan Year if its determined to be a Top Heavy
Plan as of the last day of the preceding Plan Year. For purposes
of determining whether the Plan is a Top Heavy Plan, uniform
actuarial assumptions which reflect interest rate, as prescribed in
Section 2.1, shall be used. The present value of a Participant's
Retirement Benefit shall be determined as of the last valuation
date used for computing Plan costs for minimum funding purposes
which occurs within the Plan Year in which the determination is
being made, and shall include amounts distributed to or on behalf
of the Participants within the four preceding Plan Years.
Notwithstanding any other provisions in the Plan, the provisions of
this Article XX shall apply and supersede all other provisions of
the Plan with respect to a Plan Year with respect to which the Plan
is determined to be a Top Heavy Plan.
20.2 Definitions. For purposes of this Article XX and
as otherwise used in this Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean any entity affiliated
with the Company within the meaning of Section 414(b),
414(c) or 414(m) of the Code, except that for purposes
of applying the provisions hereof with respect to the
limitation on benefits, Section 415(h) of the Code shall
apply.
(b) "Aggregation Group" shall mean the group
composed of each qualified retirement plan of the
company or an Affiliate in which a Key Associate is a
participant and each other qualified retirement plan of
the Company or an Affiliate which enables a plan of the
Company or an Affiliate in which a Key Associate is a
participant to satisfy Sections 401(a)(4) and 410 of the
Code with such plan being taken into account.
(c) "Key Associate" shall mean a "Key Employee"
as defined in Section 416(i)(1) and (5) of the Code and
Regulations promulgated thereunder.
(d) "Top Heavy Plan" shall mean a "Top Heavy
Plan" as defined in Sections 416(g) of the Code and
Regulations promulgated thereunder.
20.3 Vesting. (a) If a Plan is a Top Heavy Plan with
respect to any Plan Year, a Participant's nonforfeitable right to
the Participant's Retirement Benefit derived from the Company's
contributions shall not be less than the amount determined in
accordance with the following vesting schedule:
Years of Service Percentage
Less than 3 0%
3 or more 100%
(b) In the event the vesting schedule provided
in Section 2.51 is amended, or changed on account of the Plan
becoming or ceasing to be a Top Heavy Plan, any Participant who has
completed at least 5 Years of Service for purposes of determining a
Participant's nonforfeitable right to the Participant's Retirement
Benefit derived from the Company's contributions under Sections
2.51 and 20.3 may elect to have the Participant's nonforfeitable
percentage determined under the Plan without regard to such
amendment or change by notifying the Committee in writing within
the election period hereinafter described. The election period
shall begin on the date such amendment is adopted or the date such
change is effective, as the case may be, and shall end no earlier
than the latest of the following dates.
(1) The date which is 60 days after the day
such amendment is adopted;
(2) The date which is 60 days after the day
such amendment or change becomes effective; or
(3) The date which is 60 days after the day
the Participant is given written notice of such
amendment or change by the Committee. Any election made
pursuant to this Section 20.3(b) shall be irrevocable.
20.4 Distributions to Participants.
(a) Subject to Section 20.5, for each Plan Year
that the Plan is a Top Heavy Plan, the Retirement
Benefit for each Participant who has completed a Year of
Service and who is not a Key Associate shall not be less
than such Participant's Average Compensation, multiplied
by the lesser of (i) 2% multiplied by the number of
Years of Service with the Company or (ii) 20%. For
purposes of the preceding sentence, Years of Service
shall not include any Year of Service completed prior to
the Plan Year beginning prior to January 1, 1984, or any
Year of Service if the Plan was not a Top Heavy Plan for
any Plan Year ending during such Year of Service.
(b) For purposes of this Section 20.4, "Average
Compensation" shall mean the average of a Participant's
compensation (as described in Section 415 of the Code)
for the period of 5 consecutive years (or, if the
Participant does not have 5 consecutive years, the
Participant's actual number of consecutive years) during
which the Participant had the greatest aggregate
compensation. Compensation earned during a Plan Year
beginning before January 1, 1984, or during a Plan Year
which begins after the last Plan Year in which the Plan
was not a Top Heavy Plan shall be disregarded for
purposes of determining Average Compensation.
20.5 Top Heavy Plan Years. (a) For each Plan Year
that the Plan is a Top Heavy Plan, 1.0 shall be substituted for
1.25 as the multiplicand of the dollar limitation in determining
the denominator of the defined benefit plan fraction and of the
defined contribution plan fraction for purposes of Section 415(e)
of the Code.
(b) If, after substituting 90% for 60% wherever
the latter appears in Section 416(g) of the Code, the Plan is not
determined to be a Top Heavy Plan, the provisions of paragraph (a)
shall not be applicable if the Retirement Benefit for each
Participant who is not a Key Associate is determined in accordance
with Section 20.4(a), substituting "3%" for "2%" in Section 20.4(a)
and increasing "20%" in Section 20.4(a) by 1 for each Plan Year
described in the last sentence of Section 20.4(a), but not beyond
"30%".
20.6 Duplication of Benefits. The Committee shall, to
the extent permitted by the Code and in accordance with
Regulations, apply the provisions of this Article XX by taking into
account the benefits payable and the contributions made under any
other plans maintained by the Company or any of its subsidiaries or
affiliated or associated entities which are qualified under Section
401(a) of the Code to prevent inappropriate omissions or
duplication of minimum benefits or contributions.
<PAGE>
ARTICLE XXI
Transfer of Amounts Attributable
to Contributions Under
The Jefferson Stores Plan
21.1 Transfer of Accrued Benefit. Each Participant
who was a participant of the Jefferson Stores Plan on December 31,
1984 had an amount equal to the Participant's accrued retirement
benefit under the Jefferson Stores Plan, if any, transferred from
the trust established as part of the Jefferson Stores Plan to the
Trust.
21.2 Transfer Held in Trust. The Committee shall
establish and maintain or cause to be established and maintained,
as part of the Trust, such accrued benefits which are allocable to
the amounts transferred pursuant to Section 21.1, if any, and all
relevant data pertaining thereto. All such transferred amounts
shall be held by the Trustee for the exclusive benefit of such
Participants in accordance with the terms of the Plan, to be
commingled, managed, invested and reinvested with the other assets
of the Plan. Upon such transfer, and except as otherwise provided
in the Jefferson Stores Plan, the Trustees of the Jefferson Stores
Plan shall have no further liability whatsoever with respect to
such transferred amounts or the benefits which had been based
thereon, and the Participant shall look solely to the Plan for any
payment or other benefit in respect of the amount so transferred.
21.3 Payment of Benefits. The accrued benefit
attributable to any amounts transferred from the Jefferson Stores
Plan, if any, shall be nonforfeitable and shall be paid from the
Trust Fund to the Participant or the Participant's Beneficiary or
Surviving Spouse at the same time and in the same manner as any
payment made in accordance with Articles XI, XII or XIII.
ARTICLE XXII
Transfer of Amounts Attributable to
Contributions Under the Lechmere Plan
22.1 Transfer of Accrued Benefit. Each Participant
who was a participant of the Lechmere Plan on June 30, 1994 had an
amount equal to the Participant's accrued retirement benefit under
the Lechmere Plan, if any, transferred from the trust established
as part of the Lechmere Plan to the Trust.
22.2 Transfer Held in Trust. The Committee shall
establish and maintain or cause to be established and maintained,
as part of the Trust, such accrued benefits which are allocable to
the amounts transferred pursuant to Section 22.1, if any, and all
relevant data pertaining thereto. All such transferred amounts
shall be held by the Trustees for the exclusive benefit of such
Participants in accordance with the terms of the Plan, to be
commingled, managed, invested and reinvested with the other assets
of the Plan. Upon such transfer, and except as otherwise provided
in the Lechmere Plan, the Participant shall look solely to the Plan
for any payment or other benefit in respect of the amount so
transferred.
22.3 Payment of Benefits. The accrued benefit
attributable to any amounts transferred from the Lechmere Plan, if
any, shall be nonforfeitable and shall be paid from the Trust Fund
to the Participant or the Participant's Beneficiary or Surviving
Spouse at the same time and in the same manner as any payment made
in accordance with Articles XI, XII or XIII.
<PAGE>
EXHIBIT 10.(iv)(H)
Montgomery Ward & Co., Incorporated
Savings and Profit Sharing Plan
(Amended and Restated Effective as of January 1, 1994)
<PAGE>
<PAGE>
Montgomery Ward & Co., Incorporated
Savings and Profit Plan
TABLE OF CONTENTS
Section Page
1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3 Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4 Required Basic Contributions . . . . . . . . . . . . . . . . . . . . 21
5 Pre-Tax Supplemental Contributions
and After-Tax Supplemental Contributions . . . . . . . . . . . . . . 22
6 Company Contributions. . . . . . . . . . . . . . . . . . . . . . . . 31
7 Transfer of Amounts Attributable to Members'
Contributions and Profit-Sharing Plan Balances
Under the Retirement Security Plan . . . . . . . . . . . . . . . . . 41
8 Transfer of Amounts Attributable to Members'
Account Balance Under the Lechmere Plan. . . . . . . . . . . . . . . 43
9 Investment of Contributions. . . . . . . . . . . . . . . . . . . . . 45
10 Valuations and Maintenance of Members' Accounts. . . . . . . . . . . 48
11 Eligibility for Benefits . . . . . . . . . . . . . . . . . . . . . . 51
12 Method of Payment of Benefits. . . . . . . . . . . . . . . . . . . . 58
13 Maximum Amount of Allocation . . . . . . . . . . . . . . . . . . . . 64
14 Designation of Beneficiaries . . . . . . . . . . . . . . . . . . . . 66
15 Loans to Members . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16 Administration of the Plan . . . . . . . . . . . . . . . . . . . . . 73
17 Termination of Employer Participation. . . . . . . . . . . . . . . . 84
18 Amendment or Termination of the Plan and Trust . . . . . . . . . . . 87
19 General Limitations and Provisions . . . . . . . . . . . . . . . . . 90
20 Top Heavy Provisions . . . . . . . . . . . . . . . . . . . . . . . . 95
<PAGE>
SECTION 1. PURPOSE
1.1 The purpose of the Montgomery Ward & Co.,
Incorporated Savings and Profit Sharing Plan is to encourage
associates to make and continue careers with Montgomery Ward &
Co., Incorporated and its participating subsidiaries and other
participating companies by providing eligible associates with a
convenient way to save on a regular and long-term basis, all as
set forth herein, and in the Trust Agreement adopted as a part of
this Plan. This Plan is an amendment and restatement of the
Montgomery Ward & Co., Incorporated Savings and Profit Sharing
Plan as in effect on December 31, 1993. This Plan also reflects
the merger of the Lechmere, Inc. Supplemental Retirement and
Savings Plan (the "Lechmere Plan") into the Plan as of August 1,
1994.
The benefits provided under this Plan are supplemented
by the transfer to the Trust of amounts attributable to associate
contributions under this Plan made after December 31, 1980 and
before April 1, 1983, by amounts attributable to the Profit-
Sharing Plan Balances under certain defined benefit pension plans
maintained by the Company for the benefit of eligible associates,
and by the transfer to the Trust of account balances under the
Lechmere Plan. This Plan, and the Trust established thereunder,
are intended to qualify as a plan and trust which meet the
requirements of Sections 401(a), 401(k), 401(m) and 501(a),
respectively, of the Internal Revenue Code of 1986, as now in
effect or hereafter amended, or any other applicable provisions
of law including, without limitation, the Employee Retirement
Income Security Act of 1974, as now in effect or hereafter
amended. The rights of any person who terminated employment or
who retired on or before the effective date of a particular
amendment, including his eligibility for benefits and the time
and form in which benefits, if any, will be paid, shall be
determined solely under the terms of the Plan as in effect on the
date of his termination of employment or retirement, unless such
person is thereafter reemployed and again becomes a Member.
1.2 Although this restatement is generally effective
January 1, 1994, the inclusion of amendments to conform with the
Tax Reform Act of 1986 and other applicable laws necessitates
different effective dates for certain Plan provisions.
Accordingly, notwithstanding the general effective date of this
restatement, the following Plan sections as amended shall be
effective as indicated below.
Sections Effective Date
7 June 30, 1994
11.2 July 1, 1994
12.1(d) January 1, 1993
<PAGE>
SECTION 2. DEFINITIONS
When used herein the following terms shall have the
following meanings:
2.1 "Account" means the Account established and
maintained in respect of a Member pursuant to Section 3.7.
2.2 "Administrative Director" means the
Administrative Director of the Plan appointed by the Committee in
accordance with Section 16.3 hereof.
2.3 "Affiliate" means any corporation which is a
member of a controlled group of corporations, as determined in
accordance with Section 414(b) of the Code, which includes the
Company; any trade or business (whether or not incorporated)
which, as defined in Section 414(c) of the Code is under common
control with the Company, any organization (whether or not
incorporated) which is a member of an affiliated service group as
defined in Section 414(m) of the Code, which includes the
Company; and any other entity required to the aggregated with the
Company pursuant to Regulations under Section 414(o) of the Code.
For purposes of Section 13, Section 414(b) and (c) of the Code
shall be applied as modified by Section 415(h) of the Code.
2.4 "After-Tax Supplemental Contribution" and
"After-Tax Supplemental Contribution Account" mean those Member
contributions made on or before June 30, 1994 pursuant to Section
5.1(c) and that portion of the Member's Account to which such
contributions are credited.
2.5 "Annual Net Profit" means the amount of net
profit of a Participating Company or any Affiliate for a
particular taxable year, calculated in accordance with generally
accepted accounting principles by the Company's chief of
accounting or fiscal officer, and certified by the independent
auditor or auditors engaged by the Committee. For purposes of
said calculation, there shall be excluded from gross earnings any
investment income and any gains realized on the sale or other
disposition of capital or depreciable assets, and there shall be
deducted from gross earnings all costs, expenses and charges,
including contributions made under any group insurance or other
benefit plan, except that no deduction shall be made for
contributions to this Plan or for Federal income and state and
local franchise, gross receipts or income taxes.
2.6 "Basic Contribution" and "Basic Contribution
Account" mean those Member contributions made pursuant to Section
4.1 and that portion of the Member's Account to which such
contributions are credited. For purposes of Sections 9.2, 9.3,
9.4, 9.5, 9.6, 11.6(c) and 12, the Basic Contributions made while
an Associate of Signature/Financial Marketing, Inc. shall be
treated as either After-Tax Supplemental Contributions or Pre-Tax
Supplemental Contributions, as appropriate.
2.7 "Beneficiary" means the beneficiary or
beneficiaries designated by a Member pursuant to Section 14 to
receive the amount, if any, payable under the Plan upon the death
of such Member.
2.8 "Benefit Derived from Associate Contributions"
means the Benefit Derived from Associate Contributions as
determined by enrolled actuaries under the Retirement Security
Plan as of March 31, 1983.
2.9 "Board of Directors" means the Board of
Directors of Ward.
2.10 "Break in Service" means the year during which
or immediately after which an Associate terminates Service and
does not perform Service during at least 12 weeks.
Notwithstanding the preceding sentence, any Associate who
actually performs at least 500 Hours of Service during any Plan
Year, as determined by the Committee in accordance with the
Regulations, shall not be considered as having incurred a Break
in Service. Effective with respect to absences commencing on or
after January 1, 1985, solely for purposes of determining whether
a Break in Service has occurred, an individual shall be credited
with the Hours of Service which such individual would have
completed but for a maternity or paternity absence, as determined
by the Committee in accordance with this Section 2.10 and the
Code and Regulations, provided, however, that the total Hours of
Service so credited shall not exceed 501 hours and that the
individual timely provide the Committee with such information as
it shall require. Hours of Service credited for a maternity or
paternity absence shall be credited entirely (i) in the Plan Year
in which the absence began if such Hours of Service are necessary
to prevent a Break in Service in such year, or (ii) in the
following Plan Year. For purposes of this Section 2.10,
maternity or paternity absence shall mean an absence from work by
reason of the individual's pregnancy, the birth of the
individual's child or the placement of a child with the
individual in connection with adoption of the child by such
individual, or for purposes of caring for a child for the period
immediately following such birth or placement.
2.11 "Code" means the Internal Revenue Code of 1986,
as now in effect or as hereafter amended. All citations to
sections of the Code are to such sections as they may from time
to time be amended or renumbered.
2.12 "Committee" means the Benefit Plans Committee
provided for in Section 16. For purposes of ERISA, the members
of the Benefit Plans Committee shall be the named fiduciaries
(with respect to the matters for which they are hereby made
responsible under the Plan) of the Plan, and shall be the
administrator of the Plan.
2.13 "Company" means Montgomery Ward & Co.,
Incorporated and each other Participating Company, or any of
them.
2.14 "Compensation" means for each Plan Year, an
Associate's first $150,000 (adjusted for cost of living to the
extent permitted by the Code and Regulations) of compensation,
including salary, wages, overtime premium, commissions, holiday
pay, vacation pay, bonuses, cash incentives other than from
contests, and salary continuance, paid or payable to or on behalf
of, or otherwise includable in the gross income of an Associate
for Service while an Associate and a Member during that Plan
Year, as determined by the Committee. Compensation shall not
include amounts contributed to the Trust Fund pursuant to the
Plan or paid or contributed to any group insurance plan or other
employee benefit plan, if any, established or maintained by the
employer of an individual, and excludable from his or her gross
income, other than amounts contributed on behalf of a Member
under Section 5.1 of the Plan. In determining Compensation for a
Highly Compensated Associate who is either a 5% owner of the
Company or one of the 10 most highly paid Highly Compensated
Associates and is therefore subject to the family aggregation
rules of Section 414(q)(6) of the Code, the Highly Compensated
Associate's family unit shall be treated as a single employee
with one Compensation. The term "family" shall include the
Highly Compensated Associate and any Associate who is the Highly
Compensated Associate's Spouse or any lineal descendants of the
Highly Compensated Associate who have not attained age 19 before
the close of the Plan Year. If, as a result of applying the
family aggregation rules, the adjusted $150,000 limitation is
exceeded, then the adjusted $150,000 limitation will be allocated
among the members of the family unit in proportion to such
member's Compensation as determined prior to the application of
the $150,000 limitation.
2.15 "Direct Rollover" means a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
2.16 "Distributee" means an Associate or former
Associate. In addition, the Associate's or former Associate's
surviving Spouse or former Spouse who is the alternate payee
under a qualified domestic relations order, as defined in Section
414(p) of the Code, are Distributees with regard to the interest
of the Spouse or former Spouse.
2.17 "Effective Date" means January 1, 1994.
2.18 "Eligible Retirement Plan" means an individual
retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or
a qualified trust described in Section 401(a) of the Code, that
accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
2.19 "Eligible Rollover Distribution" means any
distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of
the Distributee and the Distributee's designated Beneficiary, or
for a specified period of ten years or more; any distribution to
the extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities).
2.20 "Employee", "Associate", "Eligible Employee" or
"Eligible Associate" means any individual who is employed by the
Company, as determined by the Committee, excluding (a) any
associate who is included in a unit of associates covered by a
negotiated collective bargaining agreement which does not provide
for his membership in the Plan, (b) any associate who actively
participates in any other tax-qualified pension or profit-sharing
plan maintained by the Company (other than the Jefferson Stores
Plan and the Retirement Security Plan), (c) any associate of a
division of the Company which the Committee has determined to
treat as though it is an Affiliate which is not a Participating
Company, and (d) any nonresident alien. Notwithstanding the
foregoing, associates who are on the Company payroll and who work
at Montgomery Ward Hong Kong, Ltd. shall be eligible to
participate in the Plan. A director of the Company is not
eligible for membership in the Plan unless he is also an
associate.
2.21 "ERISA" means the Employee Retirement Income
Security Act of 1974, as now in effect or as hereafter amended.
2.22 "Highly Compensated Associate" means an
Associate or Member who, during the relevant period, is treated
as a highly compensated employee under Section 414(q) of the
Code.
2.23 "Hours of Service" means any hour during which
an Associate performs Service (or is treated as performing
Service under Section 2.43) and for which he is paid, or entitled
to payment for the performance of duties for the Company
(including back pay irrespective of mitigation of damages). In
addition, Hours of Service shall also include up to 501 hours of
non-working time during any single continuous period of absence
which does not otherwise constitute Service, but for which an
Associate is directly or indirectly paid or entitled to payment.
The determination of Hours of Service to be credited hereunder
shall be made by the Committee in accordance with the
Regulations, including Sections 2530.200b-2(b) and (c) of the
Labor Department Regulations and Sections 825.214 through 825.216
of the Family and Medical Leave Act ("FMLA") Regulations.
2.24 "Investment Fund" means the Funds provided for
in Section 9 or any of them.
2.25 "Investment Manager" means an Investment
Manager, as that term is defined in ERISA, appointed by the
Trustees in accordance with Section 16.2 hereof.
2.26 "IRS" means the United States Internal Revenue
Service.
2.27 "Jefferson Stores Plan" means the Retirement
Plan for Employees of Jefferson Stores, Inc., as amended
effective January 1, 1984.
2.28 "Labor Department" means the United States
Department of Labor.
2.29 "Lechmere Plan" means the Lechmere, Inc.
Supplemental Retirement and Savings Plan, as amended and restated
as of February 28, 1994.
2.30 "Lechmere Account" means the account, if any,
established and maintained as part of a Member's Account to
reflect amounts transferred with respect to a Member's Account
Balance under the Lechmere Plan pursuant to Section 8.2.
2.31 "Matching Contribution" and "Matching
Contribution Account" mean those contributions made pursuant to
Section 6.1 and that portion of a Member's Account to which such
contributions are credited.
2.32 "Member" means any Associate who is enrolled in
the membership of the Plan as provided in Section 3.
2.33 "Participating Company" means any company which
is an Affiliate, designated by the Board of Directors as such,
the board of directors or equivalent governing body of which
shall adopt the Plan by appropriate action and the Associates of
which shall be eligible to participate in the Plan in the manner
and to the extent determined by the Board of Directors so long as
that company remains so designated. Any such company so
designated and which adopts the Plan shall be deemed thereby to
appoint Ward, the Committee, the Administrative Director and the
Trustees its exclusive agents to exercise on its behalf all of
the powers conferred hereby or by the Trust Agreement upon the
Company, the Committee, the Administrative Director and the
Trustees, respectively, and shall make its allocable
contributions to the Plan. The authority of Ward, the Committee,
the Administrative Director and the Trustees, respectively, to
act as such agent shall continue until the Plan has terminated as
to such company and the relevant Trust Fund assets have been
distributed by the Trustees as provided in Section 18.4 hereof.
2.34 "Plan" means the Montgomery Ward & Co.,
Incorporated Savings and Profit Sharing Plan, as the same may be
amended from time to time.
2.35 "Plan Year" means the nine-month period
beginning April 1, 1983 and ending December 31, 1983, and
thereafter, shall mean the calendar year.
2.36 "Pre-Tax Supplemental Contribution" and "Pre-Tax
Supplemental Contribution Account" mean those Member
contributions made pursuant to Section 5.1(a) and that portion of
the Member's Account to which such contributions are credited.
2.37 "Profit Sharing Contribution" and "Profit
Sharing Contribution Account" mean those contributions made
pursuant to Section 6.2 and that portion of the Member's Account
to which such contributions are credited.
2.38 "Profit-Sharing Plan Balance" means the fair
market value of the amounts credited to a Member's account under
the Retirement Security Plan which were transferred to the
Retirement Security Plan and attributable to a Member's service
under the Montgomery Ward & Co., Incorporated Profit-Sharing Plan
as of December 31, 1974, reduced by any portion thereof withdrawn
prior to the Effective Date, plus interest on such net amount
compounded annually at the rate of 6% per annum from December 31,
1974 to the date such amount was transferred to the Trust from
the Retirement Security Plan pursuant to Section 7.
2.39 "Profit-Sharing Plan Balance Account" means the
account, if any, established and maintained as a part of a
Member's Account to reflect amounts transferred with respect to a
Member's Profit-Sharing Plan Balance pursuant to Section 7.
2.40 "Regulations" means the applicable regulations
issued under the Code, ERISA or other applicable law, by the IRS,
the Labor Department or any other governmental authority and any
proposed or temporary regulations or rules promulgated by such
authorities pending the issuance of such regulations.
2.41 "Retirement Security Plan" means the Montgomery
Ward & Co., Incorporated Retirement Security Plan, effective
January 1, 1994, and as amended from time to time.
2.42 "Salary Reduction Account" means the salary
reduction account, if any, established and maintained as part of
a Member's Account to reflect salary reduction contributions
contributed to the Plan prior to January 1, 1989.
2.43 "Service" means employment with the Company or
with any Affiliate. Service shall also include the following:
(a) Any authorized leave of absence under rules
determined by the Committee, which are uniformly
applicable to all associates similarly situated
and in accordance with the Regulations
(including Sections 2530.200b-2(b) and (c) of
the Labor Department Regulations and Sections
825.214 through 825.216 of the FMLA Regulations;
provided the associate returns to active Service
within the period authorized for such leave;
(b) Service in any of the United States Armed
Forces, if and to the extent required by the
Military Selective Service Act, as amended, the
FMLA, the Uniformed Services Employment and
Reemployment Rights Act of 1994 or any other
federal law, or as otherwise recognized by the
Committee;
(c) Any period of layoff not in excess of 90 days
during which the associate retains reemployment
rights and provided that the associate reports
to work after recall and within the 90 day
period;
(d) Any period of suspension of participation, as
provided for in Section 5.2 hereof; and
(e) Any period of a Member's prior employment by any
organization upon such terms and conditions as
the Committee may approve and subject to any
required IRS approval.
2.44 "Spouse" means the legal spouse of a Member as
determined in accordance with applicable state law.
2.45 "Surviving Spouse" means the survivor of a
deceased former Member to whom such deceased former Member had
been legally married (as determined by the Committee) on the
earlier of (i) the time payments commenced under the Plan or (ii)
for at least one year at the date of the Member's death.
2.46 "Transferred Contribution Account" means the
account, established and maintained as part of a Member's
Account, to reflect amounts transferred with respect to a
Member's Benefit Derived from Associate Contributions, pursuant
to Section 7.
2.47 "Trust" or "Trust Fund" means the trust
established by the Company as a part of the Plan.
2.48 "Trustees" means the trustees of the Trust.
2.49 "Unit" means the unit measuring the value of a
Member's proportionate interest in the Investment Funds.
2.50 "Valuation Date" means the last day of each Plan
Year and the last day of any month or months in a Plan Year as
the Committee in its discretion may from time to time determine
or any other day as the Committee in its discretion may from time
to time determine.
2.51 "Ward" means Montgomery Ward & Co.,
Incorporated, an Illinois corporation, and any successor to all
or substantially all of its business and assets.
2.52 "Year" means the 12 consecutive month period
beginning on the date an Associate's Service commenced or
recommenced after a Break in Service, as determined by the
Committee, or an anniversary date thereof.
2.53 "Year of Service" means a Year in which an
associate performs 1,000 Hours of Service.
<PAGE>
SECTION 3. MEMBERSHIP
3.1 (a) Subject to the following provisions of this
Section 3, each Associate who was a Member of the Plan
immediately prior to the Effective Date shall continue to be a
Member on and after the Effective Date. Each other Eligible
Associate in Service immediately prior to the Effective Date, but
who was not a Member of the Plan, shall be eligible for
membership in the Plan on the later of the Effective Date or the
first day of the month following the date on which he satisfies
the requirements for membership in the Plan as set forth in
Section 3.1(b).
(b) Each Associate who commences Service on or after
the Effective Date shall be eligible to participate in the Plan
(other than with respect to contributions made under Sections 7
and 8 of the Plan), subject to the following provisions of this
Section 3 and provided he is then an Eligible Associate, on the
first day of the month following the later of (i) the date on
which he attains age 21; or (ii) the date on which he completes
one Year of Service. If an individual becomes an Eligible
Associate after the later of the dates specified in (i) and (ii)
above and after completing one Year of Service, he shall be
eligible to participate in the Plan as of the first day of the
month following the date on which he becomes an Eligible
Associate. Notwithstanding the above, with respect to transfers
made under Sections 7 and 8 of the Plan, the individual with
respect to which such transfers are made shall be treated as a
Member with respect to such transfers.
(c) Notwithstanding the foregoing, each participant
in the Lechmere Plan on July 1, 1994 shall become a Member in the
Plan as of July 1, 1994.
3.2 An Eligible Associate shall be enrolled in the
membership of the Plan as of the first day of the month
coincident with or next following the date on which he becomes
eligible for membership and duly files the written enrollment
form prescribed by the Committee.
3.3 An Eligible Associate shall duly file the
prescribed written enrollment form, in accordance with procedures
adopted by the Committee. The written enrollment form shall
include an election to reduce the Member's Compensation,
specifying the amount of his contributions under Sections 4.1 and
5.1, and authorizing any necessary payroll deductions, an
investment direction, a beneficiary designation, and an agreement
to be bound by all the terms and conditions of the Plan and Trust
and any agreement with any other funding agency, including an
insurance company, constituting a part of the Plan and Trust
Fund. If a Member does not elect to reduce his Compensation in
his application, he shall, notwithstanding any provisions of the
Plan to the contrary, be entitled solely to the benefits provided
under Sections 7.4 and 8.4, if applicable.
3.4 The Committee shall notify each Associate when
he becomes eligible for membership, shall furnish an enrollment
application form, and shall take any other necessary or
appropriate action to enroll each Associate eligible to be
enrolled under Section 3. If it is determined that an Eligible
Associate has not been enrolled in the membership of the Plan due
to error, such Associate may be retroactively enrolled. The
Account of an Associate who is retroactively enrolled shall upon
such enrollment, consist solely of the aggregate amount of
contributions which would have been allocated to his Account had
he been enrolled when first eligible, which shall be paid within
the time and upon the conditions prescribed by the Committee
under rules of uniform applicability to all such Associates.
3.5 The membership of a Member shall cease upon
payment to the Member of the entire balance in his Account or
upon the Member's death prior to such payment.
3.6 If a Member who terminates Service and incurs a
Break in Service shall again become an Associate, he shall become
eligible for membership in the Plan as of the first day of the
month coincident with or next following the date he again became
an Eligible Associate.
3.7 The Committee shall establish and maintain or
cause to be established and maintained in respect to each Member
an Account showing his interest under the Plan and in the Trust
Fund (including separate accounts showing his respective
interests, if any, in each of the Investment Funds) with respect
to (a) contributions made under Section 4.1, (b) contributions
made under Sections 5.1(a) and 5.1(c), (c) contributions made
under Sections 6.1 and 6.2, (d) all amounts transferred to the
Plan pursuant to Sections 7 and 8 and (e) all amounts contributed
to the Plan prior to the Effective Date and all other relevant
data pertaining thereto. Each Member shall be furnished with a
written statement of his Account at least annually and upon any
distribution to him. In maintaining the Accounts under the Plan
or causing them to be maintained, the Committee can conclusively
rely on the valuations of the Trust Fund in accordance with the
Plan and the terms of the Trust.
3.8 The establishment and maintenance of, or
allocations and credits to, the Account of any Member shall not
vest in any Member any right, title or interest in and to any
Plan assets or benefits except at the time or times and upon the
terms and conditions and to the extent expressly set forth in the
Plan and in accordance with the terms of the Trust.
<PAGE>
SECTION 4. REQUIRED BASIC CONTRIBUTIONS
4.1 Each Member other than a Member working at
Electric Ave. & More is required to contribute an amount equal to
three percent (3%) of his Compensation. Commencing on or after
January 1, 1989, these required Basic Contributions shall be made
on an after-tax basis. Prior to January 1, 1989, required Basic
Contributions were made on a salary-reduction basis. No Member
working at Electric Ave. & More is permitted to make Basic
Contributions.
<PAGE>
SECTION 5. PRE-TAX SUPPLEMENTAL CONTRIBUTIONS
AND AFTER-TAX SUPPLEMENTAL CONTRIBUTIONS
5.1 (a) A Member may elect to reduce his Compensation
by an amount not less than one percent (1%) and not more than ten
percent (10%) of such Compensation for such Plan Year in any
whole percentage in accordance with procedures adopted by the
Committee, which procedures may include limitations on the
elections of Highly Compensated Associates, and the Employer
shall contribute such amount to the Plan on behalf of the Member
as a Pre-Tax Supplemental Contribution. Notwithstanding the
foregoing, the Committee may amend or revoke a Member's election
to reduce his Compensation if such revocation or amendment is
necessary to ensure that a Member's contributions for any Plan
Year will not exceed the limitations of Section 415 of the Code,
to ensure that the discrimination tests of Section 401(k) of the
Code are met for such Plan Year, to ensure that no more than
$7,000, as adjusted for increases in the cost of living in
accordance with Section 402(g)(5) of the Code, is deferred by any
Member for any calendar year, or, to ensure that the Company
contributions for the Plan Year do not exceed the amount
deductible by the Company with respect to such year for federal
income tax purposes under section 404(a)(3)(A) of the Code. In
the event that the aggregate amount of Pre-Tax Supplemental
Contributions for a Member exceeds the limitation of Section
402(g)(5) of the Code, the amount of such excess ("excess
deferrals"), increased by any income and decreased by any losses
attributable thereto, shall be refunded to the Member no later
than the April 15th of the calendar year following the calendar
year for which the Pre-Tax Supplemental Contributions were made.
If a Member also participates, in any calendar year, in any other
plans subject to the limitations set forth in Section 402(g) of
the Code and has made excess deferrals under this Plan when
combined with the other plans subject to such limits, to the
extent the Member, in writing submitted to the Committee no later
than the March 1 of the Plan Year following the Plan Year for
which the Pre-Tax Supplemental Contributions were made,
designates any Pre-Tax Supplemental Contributions under this Plan
as excess deferrals, the amount of such designated excess,
increased by any income and decreased by any losses attributable
thereto, shall be refunded to the Member no later than the April
15 of the calendar year following the calendar year for which the
Pre-Tax Supplemental Contributions were made.
(b)(i) Notwithstanding any other provision of this
Section 5.1, the actual deferral percentage for the Plan Year for
Highly Compensated Associates who are eligible to participate in
the Plan shall not exceed the greater of the following actual
deferral percentage tests: (a) the actual deferral percentage
for such Plan Year of those Eligible Associates who are not
Highly Compensated Associates multiplied by 1.25; or (b) the
actual deferral percentage for the Plan Year of those Eligible
Associates who are not Highly Compensated Associates multiplied
by 2.0, provided that the actual deferral percentage for Highly
Compensated Associates does not exceed the actual deferral
percentage for such other Eligible Associates by more than 2%.
For purposes of this Section 5.1, the "actual deferral
percentage" for a Plan Year means, for each specified group of
Associates, the average of the actual deferral ratios (calculated
separately for each Associate in such group) of (a) the amount of
contributions made to the Member's Pre-Tax Supplemental
Contribution Account for the Plan Year, to (b) the amount of the
Member's compensation (as defined in Section 414(s) of the Code)
for the Plan Year. An Eligible Associate's actual deferral
percentage shall be zero if no Pre-Tax Supplemental Contribution
is made on his behalf for such Plan Year. In calculating the
actual deferral percentage for a Plan Year, Pre-Tax Supplemental
Contributions shall be taken into account only if they are
allocated to a Member's Account within such Plan Year.
(ii) The Committee shall determine as of the end
of the Plan Year, and at such time or times in its discretion,
whether one of the actual deferral percentage tests specified in
Subsection 5.1(b)(i) is satisfied for such Plan Year and shall
maintain records sufficient to demonstrate satisfaction of such
actual deferral percentage tests. This determination shall be
made after first determining the treatment of excess deferrals
within the meaning of Section 402(g) of the Code under Section
5.1(a). In the event that neither of such actual deferral
percentage tests is satisfied, the Committee shall, to the extent
permissible under the Code and the Regulations, and to the extent
any such recharacterization would not cause a violation of
Section 6.3(a), if the Member so elects, recharacterize such
excess contributions as After-Tax Supplemental Contributions, in
the manner described in Subsection 5.1(b)(iii) or, to the extent
such recharacterization is not possible or the Member does not so
elect, refund the excess contributions in the manner described in
Subsection 5.1(b)(iv). For purposes of this Section 5.1, "excess
contributions" means, with respect to any Plan Year, the excess
of the aggregate amount of Pre-Tax Supplemental Contributions
(and any earnings and losses allocable thereto) made to the Pre-
Tax Supplemental Contribution Accounts of Highly Compensated
Associates for such Plan Year, over the maximum amount of such
contributions that could be made to the Pre-Tax Supplemental
Contribution Accounts of such Members without violating the
requirements of Subsection 5.1(b)(i), determined by reducing Pre-
Tax Supplemental Contributions made on behalf of Highly
Compensated Associates in order of the actual deferral
percentages beginning with the highest of such percentages.
(iii) To the extent provided in Subsection
5.1(b)(ii), in accordance with the Code and the Regulations, if a
Highly Compensated Associate so elects in writing no later than
the March 1 following the Plan Year for which such excess
contributions were made, the Committee may recharacterize excess
contributions of such Member for a Plan Year as After-Tax
Supplemental Contributions in order to satisfy the requirements
of Subsection 5.1(b)(i), in which event the amount of excess
contributions so recharacterized shall, to the extent permitted
by the Code and the Regulations, be treated as having been
refunded to the Member and then contributed by the Member to the
Member's After-Tax Supplemental Contribution Account. Any excess
contributions not so recharacterized shall be distributed before
the end of the Plan Year immediately following the Plan Year for
which such excess contributions were made.
(iv) If a Highly Compensated Associate does not
elect recharacterization under Section 5.1(b)(iii), or, if
required in order to comply with the provisions of Subsection
5.1(b)(i) and the Code, the Committee shall refund excess
contributions for a Plan Year. The distribution of such excess
contributions shall be made to Highly Compensated Associates to
the extent practicable before the 15th day of the third month
immediately following the Plan Year for which such excess
contributions were made, but in no event later than the end of
the Plan Year following such Plan Year. Any such distribution
shall be made to each Highly Compensated Associate on the basis
of the respective portions of such amounts attributable to each
such Highly Compensated Associate.
(v) The amount of excess contributions for a
Highly Compensated Associate shall be determined as follows:
(1) the actual deferral ratio of the Highly Compensated Associate
with the highest actual deferral ratio shall be reduced to the
extent necessary to satisfy the actual deferral percentage test
or cause the actual deferral ratio to equal the actual deferral
ratio of the Highly Compensated Associate with the next highest
actual deferral ratio. This procedure shall be repeated until
the actual deferral percentage test is satisfied. The amount of
excess contributions for a Highly Compensated Associate is then
equal to the total amount of Pre-Tax Supplemental Contributions
taken into account for the actual deferral percentage test, minus
the product of the Highly Compensated Associate's actual deferral
ratio and the Highly Compensated Associate's Compensation. The
amount of excess contributions to be refunded shall be reduced by
the amount of excess deferrals previously distributed for the
taxable year ending in the same Plan Year, and excess deferrals
to be distributed for a taxable year shall be reduced by excess
contributions previously refunded for the Plan Year beginning in
such taxable year. In the case of a Highly Compensated Associate
whose actual deferral ratio is determined under the family
aggregation rules of Section 414(q)(6) of the Code, the
determination of the amount of excess contributions shall be made
by reducing the actual deferral ratio in accordance with the
"leveling" method described in Regulation Section 1.401(k)-
1(f)(2) and allocating the excess contributions among the family
members in proportion to the contributions of each family member
that have been combined.
(vi) For purposes of determining whether the Plan
satisfies the actual deferral percentage test, all salary
reduction contributions that are made under two or more plans
that are aggregated for purposes of Section 401(a)(4) or 410(b)
of the Code (other than Section 401(b)(2)(A)(ii) of the Code)
shall be treated as made under a single plan and, if two or more
plans are permissively aggregated for purposes of Section 401(k)
of the Code, the aggregated plans must also satisfy Section
401(a)(4) or 410(b) of the Code as though they were a single
plan; provided, however, that plans may be aggregated to satisfy
the actual deferral percentage test only if they have the same
plan year. In calculating the actual deferral percentage, a
Highly Compensated Associate's actual deferral ratio shall be
determined by treating all cash or deferred arrangements of the
Company or any Affiliate under which the Highly Compensated
Associate is eligible to participate (other than those which may
not be permissively aggregated) as a single arrangement.
(vii) In the case of a Highly Compensated Associate
who is either a 5% owner or one of the 10 most highly-paid Highly
Compensated Associate and is thereby subject to the family
aggregation rules of Section 414(q)(6) of the Code, the actual
deferral ratio for the family group (which is treated as one
Highly Compensated Associate) is the actual deferral ratio
determined by combining the salary reduction contributions and
compensation of all family members (as defined in Section
414(q)(6) of the Code).
(viii) If required under (ii) above, the Committee
shall refund excess contribution for a Plan Year to the affected
Highly Compensated Associates. The distribution of such excess
contributions shall be made to Highly Compensated Associates to
the extent practicable before the 15th day of the third month
immediately following the Plan Year for which such excess
contributions were made, but in no event later than the last day
of the Plan Year following such Plan Year. Any such distribution
shall be made to each Highly Compensated Associate on the basis
of the respective portions of such amounts attributable to each
such Highly Compensated Associate.
(c) On or before June 30, 1994, subject to
Subsections 5.1(d) and 6.3(a), a Member may elect to make After-
Tax Supplemental Contributions to the Plan of an amount of up to
ten percent (10%) of his Compensation in any whole percentage
through payroll deductions, in accordance with procedures adopted
by the Committee. Effective July 1, 1994, After-Tax Supplemental
Contributions may not be made to the Plan.
(d) The aggregate percentage of the Pre-Tax
Supplemental Contribution made on behalf of a Member and such
Member's After-Tax Supplemental Contribution must not exceed ten
percent (10%) of the Member's Compensation.
5.2 A Member may temporarily suspend the reduction
of his Compensation and any payroll deduction contributions
elected under Section 5.1, as of the first day of any month
without terminating his membership in the Plan, by giving at
least 30 days' prior written notice thereof to the Committee. A
Member may resume reduction of his Compensation and any payroll
deduction contributions under Section 5.1 the first day of any
month following the date of such suspension and must give the
Committee prior written notice of any subsequent election under
Section 5.1, specifying the first day of the month in which his
Compensation is to be reduced and any deduction to be made from
his paycheck. A Member may not temporarily suspend the reduction
of his Compensation and any payroll deduction contributions more
often than once in any Plan Year.
<PAGE>
SECTION 6. COMPANY CONTRIBUTIONS
6.1 The Company shall contribute in respect of each
pay period on behalf of each of the Associates who are Members,
twenty-five percent (25%) of the amount of the Basic
Contributions made by the Member pursuant to Section 4.1 as
Matching Contributions. No contributions shall be made by the
Company with respect to any Member's contributions pursuant to
Section 5.
6.2 (a) In addition to contributions under Sections
4.1 and 5.1, the Company may make Profit Sharing Contributions,
as determined by the Board of Directors in its sole discretion.
Any such Profit Sharing Contributions may not exceed the maximum
amount permitted for deductions under the Code. The Board of
Directors may designate all or a portion of the Profit Sharing
Contributions as Electric Ave. & More Profit Sharing
Contributions.
(b) All Profit Sharing Contributions under
Section 6.2(a) other than Electric Ave. & More Profit Sharing
Contributions shall be allocated among the Eligible Associates
who are Members in Service as of the last day of the Plan Year
other than those Members working at Electric Ave. & More (and if
necessary for the Plan to meet the requirements of Section 410(b)
of the Code, such additional Members with the highest number of
Hours of Service other than those Members working at Electric
Ave. & More with the number of Members as required to meet the
requirements of Section 410(b) of the Code, whether or not in
Service as of the last day of the Plan Year) in the proportion
that the Basic Contributions made on behalf of or by each such
Member pursuant to Section 4.1 bears to the total of the
contributions made pursuant to Section 4.1 for such Plan Year on
behalf of or by all such Members in Service as of the last day of
the Plan Year other than those Members working at Electric Ave. &
More. All Electric Ave. & More Profit Sharing Contributions
under Section 6.2(a) shall be allocated among the Eligible
Associates who are Members working at Electric Ave. & More and in
Service as of the last day of the Plan Year (and if necessary for
the Plan to meet the requirements of Section 410(b) of the Code,
such additional Members working at Electric Ave. & More and with
the highest number of Hours of Service with the number of Members
as required to meet the requirements of Section 410(b) of the
Code, whether or not in Service as of the last day of the Plan
Year) in the proportion that the Pre-Tax Supplemental
Contributions made on behalf of or by each such Member working at
Electric Ave. & More pursuant to Section 5.1 up to three percent
(3%) of such Member's Compensation bears to the total of the Pre-
Tax Supplemental Contributions (with no Member's Pre-Tax
Supplemental Contributions in excess of three percent (3%) of
such Member's Compensation counted for this purpose) made on
behalf of or by all such Members working at Electric Ave. & More
in Service as of the last day of the Plan Year pursuant to
Section 5.1 for such Plan Year.
6.3 (a) Notwithstanding any other provision of this
Section 6, the average contribution percentage for the Plan Year
for Highly Compensated Associates shall not exceed the greater of
the following average contribution percentage tests: (a) the
average contribution percentage for such Plan Year of those
Eligible Associates who are not Highly Compensated Associates
multiplied by 1.25; or (b) the average contribution percentage
for the Plan Year of those Eligible Associates who are not Highly
Compensated Associates multiplied by 2.0, provided that the
average contribution percentage for Highly Compensated Associates
does not exceed the average contribution percentage for such
other Eligible Associates by more than 2%. For purposes of this
Section 6.3, the "average contribution percentage" for a Plan
Year means, for each specified group of Associates, the average
of the actual contribution ratios (calculated separately for each
Associate in such group) of (a) the sum of (I) Matching
Contributions and Profit Sharing Contributions described in
Sections 6.1 and 6.2 respectively credited to his Employer
Contribution Account for the Plan Year, (II) after-tax Basic
Contributions credited to his Basic Contribution Account for the
Plan Year, (III) After-Tax Supplemental Contributions credited to
his After-Tax Supplemental Contribution Account for the Plan
Year, and (IV) if the Committee so elects in accordance with and
to the extent permitted by the Regulations, Pre-Tax Supplemental
Contributions credited to his Pre-Tax Supplemental Account, to
(b) the amount of the Member's compensation (as defined in
Section 414(s) of the Code) for the Plan Year. An Eligible
Associate's average contribution percentage shall be zero if no
contributions are made on his behalf for such Plan Year. In
calculating the average contribution percentage for a Plan Year,
contributions shall be taken into account only if they are
allocated to a Member's Account within such Plan Year. For this
purpose, contributions are considered allocated as of a date
within a Plan Year if the allocation is not contingent on
participation or performance of services after such date and the
contributions are actually paid to the Trust no later than 12
months after the close of the Plan Year to which the
contributions relate.
(b) For purposes of determining whether the
Plan satisfies the average contribution percentage test, all
employee and employer matching contributions that are made under
two or more plans that are aggregated for purposes of Section
401(a) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii)
of the Code) shall be treated as made under a single plan and, if
two or more such plans are permissively aggregated for purposes
of Section 401(m) of the Code, the aggregated plans must also
satisfy Sections 401(a)(4) and 410(b) of the Code as though they
were a single plan; provided, however, that plans may be
aggregated to satisfy the average contribution percentage test
only if they have the same plan year.
(c) In the case of a Highly Compensated
Associate who is either a 5% owner or one of the 10 most highly-
paid Highly Compensated Associates and is thereby subject to the
family aggregation rules of Section 414(q)(6) of the Code, the
actual contribution ratio for the family group (which is treated
as one Highly Compensated Associate) shall be the greater of
(i) the actual contribution ratio determined by combining
contributions and compensation for the Plan Year of all eligible
family members who are Highly Compensated Associates without
regard to family aggregation, or (ii) the actual contribution
ratio determined by combining the contributions and compensation
for the Plan Year of all the eligible family members. Except to
the extent taken into account in the preceding sentence, the
contributions and compensation of all family members shall be
disregarded in determining the average contribution percentage
for the groups of Highly Compensated Associates and non-Highly
Compensated Associates. For purposes of calculating the average
contribution percentage, the actual contribution ratio of a
Highly Compensated Associate shall be determined by treating all
plans of the Company and any Affiliate under which the Highly
Compensated Associate participates as a single plan.
(d) The Committee shall determine as of the end
of the Plan Year, and at such time or times in its discretion,
whether one of the average contribution percentage tests
specified in Subsection 6.3(a) is satisfied for such Plan Year.
This determination shall be made after first determining the
treatment of excess deferrals within the meaning of Section
402(g) of the Code under Section 5.1(a) and then determining the
treatment of excess contributions under Section 5.1(b). In the
event that neither of the average contribution percentage tests
is satisfied, the Committee shall refund or forfeit the excess
contributions in the manner described in Subsection 6.3(c). For
purposes of this Section 6.3, "excess aggregate contributions"
means, with respect to any Plan Year and with respect to any
Member, the excess of the aggregate amount of contributions (and
any earnings and losses allocable thereto) made to (a) the
Matching Contribution Account, (b) the Profit Sharing
Contribution Account, (c) the after-tax Basic Contribution
Account, (d) After-Tax Supplemental Contribution Account and
(e) the Pre-Tax Supplemental Contribution Account (if the
Regulations permit and the Committee elects to take into account
Pre-Tax Supplemental Contributions when calculating the average
contribution percentage) of Highly Compensated Associates for
such Plan Year, over the maximum amount of such contributions
that could be made to the Matching Contribution Account, Profit
Sharing Contribution Account, after-tax Basic Contribution
Account, After-Tax Supplemental Contribution Account and Pre-Tax
Supplemental Contribution Account of such Members without
violating the requirements of Subsection 6.3. The amount of each
Highly Compensated Associate's excess aggregate contributions
shall be determined by reducing the average contribution
percentage of each Highly Compensated Associate whose average
compensation percentage is in excess of the percentage otherwise
permitted under Subsection 6.3(a) to the maximum amount permitted
by that Subsection.
(e) If the Committee is required to refund
excess aggregate contributions for any Highly Compensated
Associate for a Plan Year in order to satisfy the requirements of
Subsection 6.3(a), then the refund of such excess aggregate
contributions shall be made with respect to such Highly
Compensated Associates to the extent practicable before the 15th
day of the third month immediately following the Plan Year for
which such excess aggregate contributions were made, but in no
event later than the end of the Plan Year following such Plan
Year. For each of such Associates, the amounts so refunded shall
be made in the following order of priority (A) by distributing
amounts contributed to the After-Tax Supplemental Contribution
Account, and earnings thereon; (B) by distributing amounts
contributed to the Pre-Tax Supplemental Account (to the extent
such amounts are included in the average contribution
percentage), and earnings thereon; (C) by distributing amounts
contributed to the after-tax Basic Contribution Account, and
earnings thereon and Matching Contributions related thereto; (D)
by distributing amounts contributed to the Matching Contribution
Account, and earnings thereon; and (E) by distributing amounts
contributed to the Profit Sharing Contribution Account and
earnings thereon. All such distributions shall be made to Highly
Compensated Associates on the basis of the respective portions of
such amounts attributable to each such Highly Compensated Associate.
(f) Notwithstanding any other provision of the
Plan, the sum of the actual deferral percentage determined in
accordance with Subsection 5.1(b)(i) of those Highly Compensated
Associates and the average contribution percentage determined in
accordance with Section 6.3(a) of those Highly Compensated
Associates shall not exceed the Aggregate Limit (as defined
below). The actual deferral percentage and the average
contribution percentage of the Highly Compensated Associates are
determined after any corrections required to meet the actual
deferral percentage and average contribution percentage tests are
made.
(g) For purposes of Section 6.3(d) above,
"Aggregate Limit" for a Plan Year means the greater of: (1) the
sum of (A) 1.25 times the greater of the actual deferral
percentage of those non-Highly Compensated Associates eligible to
participate in the Plan ("eligible NHCAs") or the average
contribution percentage of the eligible NHCAs, and (B) two
percentage points plus the lesser of the actual deferral
percentage of the eligible NHCAs or the average contribution
percentage of the eligible NHCAs. In no event, however, may this
amount exceed twice the lesser of the actual deferral percentage
of the eligible NHCAs or the average contribution percentage of
the eligible NHCAs; or (2) the sum of (A) 1.25 times the lesser
of the actual deferral percentage of the eligible NHCAs or the
average contribution percentage of the eligible NHCAs, and
(B) two percentage points plus the greater of the actual deferral
percentage of the eligible NHCAs or the average contribution
percentage of the eligible NHCAs. In no event, however, may this
amount exceed twice the greater of the actual deferral percentage
of the eligible NHCAs or the average contribution percentage of
the eligible NHCAs.
(h) The Committee shall determine as of the end
of the Plan Year, and at such time or times in its discretion,
whether the Aggregate Limit has been exceeded. In the event that
the Aggregate Limit is exceeded, the average contribution
percentage of the eligible Highly Compensated Associates shall be
reduced in the same manner as described in Section 6.3(c).
6.4 The Company's contributions under Sections 5.1,
6.1 and 6.2, and any Member's contributions under Sections 4.1
and 5.1, if any, shall be paid directly to the Trustee under the
Trust during the month in respect of which they are made, or
during the month next following, as the Committee may determine,
provided that the total amount of the Company's contributions
under the Plan for any taxable year shall be paid in full on or
before such date as the federal income tax laws applicable to
such payment require the payment to be made in order to permit
deduction of such payment for such taxable year.
6.5 The Company's contributions made for a taxable
year pursuant to Sections 5.1, 6.1 and 6.2, if any, and any
Member's contributions under Sections 4.1 and 5.1, shall be paid
directly by the Company to the Trustee in cash, or, at the option
of the Company, in whole or in part in other property acceptable
to the Trustee.
<PAGE>
SECTION 7. TRANSFER OF AMOUNTS ATTRIBUTABLE TO MEMBERS'
CONTRIBUTIONS AND PROFIT-SHARING PLAN BALANCES
UNDER THE RETIREMENT SECURITY PLAN
7.1 The Committee shall establish and maintain or
cause to be established and maintained, as part of a Member's
Account, a Transferred Contribution Account and a Profit-Sharing
Plan Balance Account, showing the Member's interest under the
Plan and in the Trust Fund allocable to the amounts transferred
from the trust established as part of the Retirement Security
Plan and attributable to the Member's Benefit Derived from
Associate Contributions and Profit Sharing Plan Balance, if any,
as determined by the Committee in its sole discretion, and all
relevant data pertaining thereto. The amount transferred with
respect to a Member's Benefit Derived from Associate
Contributions shall be credited by the Committee to the Member's
Transferred Contribution Account. The amount transferred with
respect to a Member's Profit-Sharing Plan Balance shall be
credited by the Committee to the Member's Profit-Sharing Plan
Balance Account. All such transferred amounts shall be held by
the Trustee for the exclusive benefit of such Member in
accordance with the terms of the Plan, to be commingled, managed,
invested and reinvested with the other assets of the Plan. Upon
such transfer, the trustees of the Retirement Security Plan shall
have no further liability whatsoever with respect to the
respective transferred amounts or the benefits which had been
based thereon, and the Member shall look solely to the Plan for
any payment or other benefit in respect of the amount so transferred.
7.2 Except to the extent otherwise determined by the
Committee with respect to payments from a Member's Account,
adjustments, charges or allocations to the Member's Transferred
Contribution Account and Profit-Sharing Plan Balance Account
shall be made by adding thereto, or deducting therefrom, as the
case may be, such proportion of any adjustments, charges or
allocations as the amount therein as of the last preceding
Valuation Date bears to the total amount in the Member's Account
as of such preceding Valuation Date. In making such adjustments,
charges or allocations the Committee can conclusively rely on the
valuations of the Trust Fund by the Trustee and in accordance
with the Plan and the terms of the Trust.
7.3 Except as otherwise provided in Section 11.5,
any amount credited to a Member's Transferred Contribution
Account and Profit-Sharing Plan Balance Account, if any, shall be
paid from the Trust Fund to the Member or his Beneficiary or
Surviving Spouse at the same time and in the same manner as any
payment made in accordance with Section 12.
<PAGE>
SECTION 8. TRANSFER OF AMOUNTS ATTRIBUTABLE TO MEMBERS'
ACCOUNT BALANCE UNDER THE LECHMERE PLAN
8.1 Each Member who was a member of the Lechmere
Plan on June 30, 1994 shall have an amount equal to his account
balance under the Lechmere Plan, if any, transferred from the
trust established as part of the Lechmere Plan to the Trust.
8.2 The Committee shall establish and maintain or
cause to be established and maintained, as part of the Account of
a Member, a Lechmere Account, which shall provide for a separate
accounting in the name of each such Member which shall reflect
all contributions of such Member during his participation in the
Lechmere Plan, all amounts contributed by a participating
employer of the Lechmere Plan on his behalf, earnings on all such
contributions, any distributions, withdrawals and any expenses
charged against such contributions (the "Lechmere Account"). The
separate accounting in the name of each Member who was a
participant in the Lechmere Plan shall include a separate
accounting for pre-tax contributions, after-tax contributions,
rollover contributions and matching contributions made on behalf
of such Member under the Lechmere Plan. The amount transferred
to the Trust pursuant to Section 8.1 with respect to a Member's
account balance under the Lechmere Plan shall be credited by the
Committee to the Member's Lechmere Account. All such transferred
amounts shall be held by the Trustee for the exclusive benefit of
such Member in accordance with the terms of the plan, to be
commingled, managed, invested and reinvested with the other
assets of the Plan. Upon such transfer, the Member shall look
solely to the Plan for any payment or other benefit in respect of
the amount so transferred.
8.3 Except to the extent otherwise determined by the
Committee with respect to payments from a Member's Account,
adjustments, charges or allocations to the Member's Lechmere
Account shall be made by adding thereto, or deducting therefrom,
as the case may be, such proportion of any adjustments, charges
or allocations as the amount therein as of the last preceding
Valuation Date bears to the total amount in the Member's Account
as of such preceding Valuation Date. In making such adjustments
or charges, the Committee can conclusively rely on the valuations
of the Trust Fund by the Trustee and in accordance with the Plan
and the terms of the Trust.
8.4 Except as otherwise provided in Section 11.5,
any amount credited to a Member's Lechmere Account, if any, shall
be paid from the Trust Fund to the Member or his Beneficiary or
Surviving Spouse at the same time and in the same manner as any
payment made in accordance with Section 12.
<PAGE>
SECTION 9. INVESTMENT OF CONTRIBUTIONS
9.1 All amounts of money, securities or other
property received under the Plan, including any amounts
transferred to the Plan under Sections 7 and 8, shall be
delivered to the Trustee under the Trust, to be managed,
invested, reinvested and distributed for the exclusive benefit of
the Members and their Beneficiaries in accordance with the Plan,
the Trust and any agreement with an insurance company or other
financial institution constituting a part of the Plan and Trust.
The Trustee shall cause to be established and maintained six
funds or such other number of funds as the Committee shall
determine, to be designated respectively as Fund A, Fund B, Fund
C, Fund D, Fund E, and Fund F, or as otherwise designated by the
Committee, for the investment of all such amounts.
9.2 A Member may, by filing a written direction with
the Committee, specify the percentage (in multiples of 25 percent
or such other percentage as the Committee may determine) of all
contributions which are made by the Company under Sections 6.1
and 6.2 of the Plan, of all supplemental contributions made by
the Member under Section 5 and of all amounts in his Profit-
Sharing Plan Balance Account, Salary Reduction Account and
Lechmere Account that shall be invested in Funds A-F. Unless an
effective investment direction is made by the Member pursuant to
this Section 9.2, all such contributions shall be invested in
Fund A.
9.3 Any investment direction given by a Member shall
be deemed to be a continuing direction until changed. A Member
may change an investment direction as to future contributions
once in each calendar quarter, by filing a written notice of such
change in investment direction with the Committee or by such
other method as the Committee may permit at least 30 days prior
to the date such change is to be effective or such other period
as the Committee may permit. Such change in investment direction
shall be effective on the last day of the calendar quarter in
which the Member changes an investment direction.
9.4 Notwithstanding anything contained herein to the
contrary, effective July 1, 1994, if a Member changes an
investment direction as to future contributions of or in respect
of such Member pursuant to Section 9.3, such change in investment
direction shall be deemed a change in investment direction with
regard to contributions of or in respect of such Member pursuant
to Sections 5 and 6.
9.5 The Plan is intended to constitute a plan
described in Section 404(c) of ERISA and Title 29 of the Code of
Federal Regulations Section 2550.404c-1. A Member may direct as
of the last day of a calendar quarter that all, or any multiple
of 25 percent (or such other percentage as the Committee may
determine), of his interest in any of the Funds which is
attributable to contributions made by or on behalf of such Member
under Sections 5, 6.1 and 6.2, amounts transferred to the Plan on
behalf of such Member pursuant to Section 8 and amounts in such
Member's Profit-Sharing Plan Balance Account, be liquidated and
the proceeds thereof transferred to the other of such Funds, in
one lump sum as of such Valuation Date, provided that such
direction is given in writing to the Committee at least 60 days
prior to such Valuation Date or such other period as the
Committee may permit. Notwithstanding the foregoing, a Member
may direct, as of the last day of a calendar quarter, that all,
or any multiple of 25 percent (or such other percentage as the
Committee may determine), of his interest in any of the Funds
which is attributable to contributions under Sections 5 and 6.1
of the Plan, be liquidated and the proceeds thereof transferred
to the other of such funds, in one lump sum as of the last day of
such calendar quarter, provided that such direction is given in
writing to the Committee at least 30 days prior to the last day
of such calendar quarter or such other period as the Committee
may permit.
9.6 All Basic Contributions made on behalf of or by
Members under Section 4.1, and all amounts in his Transferred
Contribution Account pursuant to Section 7, shall be invested, in
such percentages as the Committee shall specify, in any of the
Funds.
<PAGE>
SECTION 10. VALUATIONS AND MAINTENANCE OF MEMBERS' ACCOUNTS
10.1 As of each Valuation Date, the Trust Fund shall
be valued pursuant to the terms of the Trust to reflect the
effect of income received and accrued, realized and unrealized
profits and losses, and all other transactions of the preceding
period, but such valuation shall not include any contributions
received by the Trustee during such month. Such valuation shall
be conclusive and binding upon all persons having an interest in
the Trust Fund.
10.2 All contributions made on behalf of, or
allocated to, a Member shall be credited to his Account. The
value of a Member's Account may be determined by aggregating the
value of his separate interests, if any, in each Fund.
10.3 (a) For the first month for which contributions
are received in an Investment Fund under the Plan, a Unit in each
Investment Fund shall be valued at one dollar and there shall be
credited to each Member as of the Valuation Date in such month
one Unit in each Fund for each dollar of the contributions made
by him or on his behalf and received by the Trustee during such
month which is invested in such Investment Fund in accordance
with the Plan. As of each subsequent Valuation Date, the value
of a Unit in each Investment Fund shall be determined by dividing
(1) the sum of the cash and the fair market value of any other
property, as determined by the Trustee in accordance with Section
10.1, then held in such Investment Fund, by (2) the total number
of outstanding Units for such Investment Fund immediately prior
to such Valuation Date.
(b) As soon as practicable after the end of
each month following the first month during which contributions
are received by the Trustee, there shall be credited to each
Member a number of Units (or fractions thereof) in each such
Investment Fund calculated by dividing (1) the portion of the
contributions made by him or on his behalf and received by the
Trustee for such month which is invested in such Investment Fund
in accordance with the Plan, by (2) the value of a Unit in such
Investment Fund as of the Valuation Date in such month. A
Member's Account at any time shall reflect all Units credited
thereto as provided in the foregoing provisions of Section 10
less all Units the value of which has been previously withdrawn
by him from such Account.
10.4 The expenses of administering the Plan,
including (i) the fees and expenses of any Associate and of the
Trustee for the performance of their duties under the Plan and
Trust, (ii) the expenses incurred by the members of the Committee
in the performance of their duties under the Plan (including
reasonable compensation for any legal counsel, certified public
accountants, consultants, and agents and cost of services
rendered in respect of the Plan), and (iii) all other proper
charges and disbursements of the Trustee or the members of the
Committee (including settlements of claims or legal actions
approved by counsel to the Plan) may be paid out of the Trust
Fund, and allocated to and deducted from the Accounts of Members
by the Committee in accordance with the provisions of Section
10.3 above, if the Company does not pay such expenses directly.
10.5 Brokerage fees, transfer taxes and other
expenses incident to the purchase or sale of securities by the
Trustee shall be deemed to be part of the cost of such
securities, or deducted in computing the proceeds therefrom, as
the case may be. Taxes, if any, of any and all kinds whatsoever,
which are levied or assessed on any assets held or income
received by the Trustee shall be allocated to and deducted from
the Accounts of Members by the Committee in accordance with the
provisions of Section 10.3 above.
<PAGE>
SECTION 11. ELIGIBILITY FOR BENEFITS
11.1 At all times, each Eligible Associate who became
a Member before July 1, 1994 shall have a nonforfeitable interest
in all amounts credited to his Account.
11.2 Each Eligible Associate who becomes a Member of
the Plan after June 30, 1994 shall have a nonforfeitable interest
in amounts credited to his Matching Contribution Account in
accordance with the following schedule:
Years of Vested
Service Percentage
less than 3 0%
3 or more 100%
Notwithstanding the foregoing, a Member who is employed
by the Company on his (i) normal retirement date, as determined
under the Retirement Security Plan, (ii) death, or (iii)
disability, shall have a nonforfeitable interest in this Matching
Contribution Account as of such normal retirement date, death or
disability. Furthermore, an Associate who terminates in his
third Year of employment shall have a nonforfeitable interest in
this Matching Contribution Account if he performs 2 Years of
Service and at least 20 weeks of Service in his third (final)
Year of employment.
11.3 Notwithstanding the foregoing, the
nonforfeitable interest of a Member who was employed by the
Company on or before July 1, 1994 in amounts credited to his
Matching Contribution Account shall not be less than his vested
percentage determined as of June 30, 1994. In addition,
notwithstanding the foregoing, a Member who was a participant in
the Lechmere Plan shall have a nonforfeitable interest in the
portion of his Lechmere Account attributable to matching
contributions under the Lechmere Plan in accordance with the
following schedule to the extent that the following schedule
results in a greater nonforfeitable interest in such
contributions:
Years Vested
of Service Percentage
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 or more 100%
11.4 Subject to Section 12.2, upon termination of a
Member's Service an amount equal to the value of the Member's
vested Account as of the Valuation Date coincident with or
preceding the date on which his Service is terminated shall be
paid from the Trust Fund. Such payment shall be made by one of
the methods of distribution described and at the time specified
in Section 12 below.
11.5 If a former Member dies before payment of the
full value of his vested Account from the Trust Fund, an amount
equal to the value of the unpaid portion thereof as of the
Valuation Date coincident with or preceding the date of his death
or the date payment is made shall be paid to his Beneficiary from
the Trust Fund. Such payment shall be made by one of the methods
of distribution described and at the time specified in Section 12
below.
11.6 (a) A Member may, while in Service, withdraw
out of the Trust Fund amounts permitted by the Committee,
pursuant to paragraphs (b), (c) or (f) below, under rules
uniformly applicable to all Members similarly situated, by giving
prior notice to the Committee and the Participating Company that
employs him, and in the case of each such withdrawal, which shall
be not less than 30 days following the date such notice is given
to the Committee, as of which the withdrawal is to be made, and
explaining the reason for such withdrawal.
(b) Profit Sharing Plan Balance Account. Subject to
paragraph (a) above, the Committee may permit a Member to
withdraw all or part of the amount credited to his Profit-Sharing
Plan Balance Account for any reason listed in paragraph (d) below
or for any of the following reasons:
(i) The Member's entrance into the United
States Armed Forces;
(ii) To purchase a place of residence for the
Member;
(iii) To provide for the college expenses for
the Member's children;
(iv) Death in the Member's immediate family;
or
(v) Extreme financial hardship of any
nature, as determined solely by the
Committee.
(c) Supplemental Contribution Accounts. Subject to
paragraph (a) above, upon a showing of immediate and heavy
financial hardship caused by unusual expenses beyond the control
of a Member, the Committee may permit a Member to withdraw
amounts credited to his After-Tax Supplemental Contribution
Account and amounts credited to his Pre-Tax Supplemental
Contribution Account exclusive of earnings thereon credited on or
after January 1, 1989. The amount of any such withdrawal may not
exceed the amount required to meet the immediate and heavy
financial need created by such hardship and not reasonably
available from other resources of the Member, including amounts
available for withdrawal under paragraph (b) above and (f) below
and amounts available for loan under Section 15 of this Plan or
any other plan maintained by a Participating Company. Such
withdrawals shall be charged against the Member's Account, and
such charge shall be made first against the Member's After-Tax
Supplemental Account and then against the Member's Pre-Tax
Supplemental Contribution Account, exclusive of earnings thereon
credited on or after January 1, 1989. The amount available for
withdrawal under this paragraph (c) shall be limited by the
amounts reflected in the positions of the Member's Account set
forth in the preceding sentence.
(d) For purposes of paragraph (c) above, hardship
withdrawals shall be available only if the withdrawal is made on
account of an immediate and heavy hardship of the Member
resulting from:
(i) uninsured medical expenses described in
Section 213(d) of the Code incurred by
the Member, his spouse or any dependent
of the Member (as defined in Section 152
of the Code),
(ii) the purchase (excluding mortgage
payments) of a principal residence of
the Member,
(iii) payment of tuition, related educational
fees, and room and board expenses, for
the next twelve (12) months of post-
secondary education for the Member or
his Spouse, children or dependents,
(iv) the need to prevent the eviction of the
Member from his principal residence or
foreclosure on the mortgage of the
Member's principal residence,
(v) death in Member's immediate family;
"immediate family" means Spouse,
Children, or Parents of Member; or
(vi) such other events as may be prescribed
by Regulations or other procedures under
the Code and adopted by the Committee.
(e) Any Member who makes a hardship withdrawal
pursuant to paragraph (d) shall not be permitted to make Pre-Tax
Supplemental Contributions under the Plan until the first day of
the Plan Year following the 12-month period immediately following
the date on which the hardship withdrawal is received.
(f) Lechmere Account. Subject to paragraph (a) above,
the Committee may permit a Member to withdraw all or part of the
balance in his Lechmere Account as of June 30, 1994 for any of
the reasons listed in paragraph (d) above or for any of the
following reasons:
(i) The Member's attainment of age 59-1/2;
or
(ii) The permanent disability of the Member.
Notwithstanding the foregoing, any Member who has
after-tax contributions and rollover contributions in his
Lechmere Account, may withdraw the portion of his Lechmere
Account as of June 30, 1994 attributable to such after-tax
contributions and rollover contributions in accordance with
paragraph (a).
(g) No Other Withdrawals Permitted. A Member may
not withdraw any amounts from his Account except as provided in
this Section 11.6 or in 11.7. Without limiting the foregoing, no
Member may withdraw any amounts from his Basic Contribution
Account or Matching Contribution Account.
11.7 Notwithstanding any of the provisions of this
Plan, including Section 11.6 above, any Member who remains in
Service after his normal retirement date, as determined under the
Retirement Security Plan, may elect, no later than 60 days after
his normal retirement date, to receive in one lump sum, the value
of his Profit-Sharing Plan Balance Account.
<PAGE>
SECTION 12. METHOD OF PAYMENT OF BENEFITS
12.1 (a) Any benefit payable under the Plan shall be
paid in one of the following methods of distribution, as the
Member (or in the case of the Member's death, the Member's
Beneficiary) may elect:
(1) The purchase therewith and delivery to
the Member (or Beneficiary) by the Trustee of a single premium
immediate or deferred annuity (fixed or variable) contract issued
by such insurance company and containing such provisions as the
Committee shall designate, which contract shall (i) provide for
monthly payments continuing, in the case of a Member, for the
life of the Member or the joint lives of the Member and his
Beneficiary or for a period not in excess of the life expectancy,
as determined under the Regulations, of such Member, or the joint
life expectancy, as determined under the Regulations, of such
Member and his Beneficiary, if any, and, in the case of a
Beneficiary, for the life of such Beneficiary or for a period not
in excess of the life expectancy, as determined under the
Regulations, of such Beneficiary, (ii) contain, if the Committee
so determines, provisions which prevent the cash surrender
thereof and which make the payments due thereunder nonassignable,
(iii) provide that the actuarial value of any payments to a
contingent annuitant other than the spouse of the Member shall
not exceed one-half of the actuarial value of the monthly
payments which the Member would otherwise have received without
optional modification;
(2) One lump sum payment thereof from the
Trust Fund; or
(3) In any combination of (1) or (2) above;
provided that, the entire Basic Account Balance must be paid by
either (1) or (2), and all other Account Balances must be paid by
either method (1) or (2).
(4) Notwithstanding the foregoing, if the
total value of the Member's Account Balances is $3,500, or such
other amount prescribed in the Regulations, or less, payment
shall be made to the Member in one lump-sum.
(b) Notwithstanding the foregoing, any Member
who was a Participant in the Lechmere Plan (or Beneficiary
thereof) may elect, by completing such form as required by the
Committee, to have his benefit payable under the Plan in a series
of substantially equal monthly or annual installments. If such
Member (or Beneficiary thereof) elects the form of distribution
under this Section 12.1(b), the period over which payments are to
be made shall not exceed the life expectancy, as determined under
the Regulations, of the Member, or the joint life expectancy, as
determined under the Regulations, of the Member and his
Beneficiary, if any, and, in the case of a Beneficiary, for the
life of such Beneficiary or for a period not in excess of the
life expectancy, as determined under the Regulations, of such
Beneficiary.
(c) The Committee, in its sole discretion, may
direct the Trustee to make one or more advances from the Trust
Fund to a terminated Member, Beneficiary or Member's estate prior
to the date upon which a final distribution would otherwise be
made from the Trust Fund in accordance with the Plan. Such
advances shall be based upon the Committee's estimate of the
benefit amount which would be payable, and shall reduce the
amount which becomes payable as of the date of such final
distribution. In any case where installment payments are to be
paid or are being paid to a Beneficiary, any balance of unpaid
installments upon or after said Beneficiary's death shall be
payable to the estate of such Beneficiary.
(d) Notwithstanding any provision of the Plan
to the contrary, a Distributee may elect, at the time and in the
manner prescribed by the Committee, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct
Rollover.
12.2 (a) Notwithstanding any other provision of the
Plan, unless otherwise provided by law, any benefit payable to a
Member shall commence no later than the April 1st of the calendar
year following the calendar year in which such Member attains age
70.5; provided, however, if a Member attained age 70.5 prior to
January 1, 1988, except as otherwise provided in Subsection
12.2(e), any benefit payable to such Member shall commence no
later than the April 1st of the calendar year following the later
of (i) the calendar year in which the Participant attains age
70.5 or (ii) the calendar year in which the Member retires. Such
benefit shall he paid, in accordance with the Regulations, over a
period not extending beyond the life expectancy of such Member or
the joint life expectancies of such Member and his Beneficiary.
Life expectancy for purposes of this Section shall not be
recalculated annually in accordance with the Regulations.
(b) If distribution of a Member's benefit has
commenced prior to a Member's death, and such Member dies before
his entire benefit is distributed to him, distribution of the
remaining portion of the Member's benefit to the Member's
Beneficiary shall be made at least as rapidly as under the method
of distribution in effect on the date of the Member's death.
(c) If a Member dies before distribution of his
benefit has commenced, distributions to any Beneficiary shall be
made on or before the December 31st of the calendar year which
contains the 5th anniversary of the date of such Member's death;
provided, however, that any distribution to a Beneficiary may be
made over the life of the Beneficiary or a period not extending
beyond the life expectancy of the Beneficiary. Such distribution
shall commence not later than the December 31 of the calendar
year immediately following the calendar year in which the Member
died, or, in the event such Beneficiary is the Member's Surviving
Spouse, not later than the date on which such Member would have
attained age 70.5, if later (or, in either case, on any later
date prescribed by Regulations). If such Member's Surviving
Spouse dies after such Member's death but before distributions to
such Surviving Spouse commence, this paragraph (c) shall be
applied to require payment of any further benefits as if such
Surviving Spouse were the Member.
(d) Pursuant to Regulations, any benefits paid
to a child shall be treated as if paid to a Member's Surviving
Spouse if such amount will become payable to such Surviving
Spouse on the child's attaining majority, or other designated
event permitted by Regulations.
(e) If a Member who is a 5% owner attained age
70.5 before January 1, 1988, any benefit payable to such Member
shall commence no later than the April 1st of the calendar year
following the later of (i) the calendar year in which the Member
attains age 70.5 or (ii) the earlier of (A) the calendar year
within which the Member becomes a 5% owner or (B) the calendar
year in which the Member retires. For purposes of this
Subsection (e), a 5% owner shall mean a 5% owner of such Member's
employer as defined in Section 416(i) of the Code at any time
during the Plan Year in which such owner attains age 66.5 or any
subsequent Plan Year.
12.3 Subject to Section 12.1(a)(4) and the third
sentence of this Section 12.3, after a Member's termination of
Service, the Member must make an election before payments will
commence pursuant to the provisions of the Plan; provided,
however, if the payee is the Member, the Member's spouse must
consent, in writing, to such election or any revocation or change
therein (unless the Committee makes a written determination in
accordance with the Code and Regulations that no such consent is
required). In no event shall payment commence later than sixty
(60) days after the close of the Plan Year during which the later
of the Member's attainment of age sixty-five (65) or the
termination of the Member's Service occurs, unless specifically
authorized by the Member. In the case of a Beneficiary, all
benefits shall be paid in one lump cash sum unless other optional
methods of distribution which may be permissible under the Code
and Regulations are made available to the Member or his
Beneficiary by the Committee.
12.4 In any case where distribution of any benefit
amount from the Trust Fund is to be deferred, the Committee
shall, upon the written request of the former Member, direct the
Trustee to invest such benefit amount in the same manner as the
normal Accounts maintained for Members pursuant to the Plan, from
which account such payment shall be made. Any benefit amount so
deferred pursuant to the foregoing sentence shall be held in the
normal Accounts maintained for Members pursuant to the Plan.
<PAGE>
SECTION 13. MAXIMUM AMOUNT OF ALLOCATION
13.1 The provisions of this Section 13 shall govern
notwithstanding any other provisions of the Plan.
13.2 Except as otherwise provided in Section 13.3,
Annual Additions to a Member's Account in respect of any Plan
Year may not exceed the limitations set forth in Section 415 of
the Code, which are incorporated herein by reference. For this
purpose, the term "Annual Additions" shall have the meaning set
forth in Section 415(c)(2) of the Code, as modified elsewhere in
the Code and Regulations. For purposes of this Section 13.2, a
Member's contributions shall be determined without regard to any
amounts transferred to the Plan pursuant to Sections 7 and 8.
13.3 In the event that the amounts which would
otherwise be allocated to a Member's Account must be reduced by
reason of Section 13.2, the amounts shall be allocated at the end
of the next succeeding Plan Year first, to the extent permissible
under Section 13.2 after taking account of contributions made for
such succeeding Plan Year, to the Member's Account, and any
unallocated portion of such amount shall be allocated to the
Accounts of other Members as the Committee in its sole and
uncontrolled discretion, based on nondiscriminatory standards,
shall determine.
13.4 The Committee shall, to the extent required by
ERISA and in accordance with the Regulations in order to maintain
the tax-qualified status of the Plan, apply the limitations
contained in this Section 13 (after giving due consideration to
the wishes of the Member) by taking into account the benefits
payable and the contributions made under any other plans
maintained by the Company or any Affiliate which are qualified
under Section 401(a) of the Code, and if such other plan is a
defined benefit plan, the sum of the defined benefit plan
fraction and the defined contribution plan fraction (as described
in Section 415(e) of the Code, including paragraph (6) thereof)
shall not exceed 1.0.
<PAGE>
SECTION 14. DESIGNATION OF BENEFICIARIES
14.1 Each Member shall file with the Committee a
written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under
the Plan upon his death. A Member may from time to time revoke
or change his beneficiary designation without the consent of any
prior Beneficiary by filing a new designation with the Committee.
Notwithstanding the foregoing, if the Member is married, his
spouse must consent, in writing, to such designation or any
revocation or change therein (unless the Committee makes a
written determination in accordance with the Code and Regulations
that no such consent is required). The last such designation
received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof,
shall be effective unless received by the Committee prior to the
Member's death, and in no event shall it be effective as of a
date prior to such receipt.
14.2 If no such beneficiary designation is in effect
at the time of a Member's death, or if no designated Beneficiary
survives the Member, the payment of the amount, if any, payable
under the Plan upon his death shall be made to the Member's
Surviving Spouse, if any, or if the Member has no Surviving
Spouse, then to his children, parents, brothers, and sisters, or
other relatives as the Committee shall determine. If the
Committee is in doubt as to the right of any person to receive
such amount, the Committee may direct the Trustee to retain such
amount, without liability for any interest thereon, until the
rights thereto are determined, or the Committee may direct the
Trustee to pay such amount into any court of appropriate
jurisdiction and such payment shall be a complete discharge of
the liability of the Plan and the Trust therefor.
<PAGE>
SECTION 15. LOANS TO MEMBERS
15.1 A Member may borrow from his interest in the
Trust Fund once each Plan Year, subject to the following
provisions of this Section 15.1 and to such additional standards
as the Committee may adopt pursuant thereto, by making prior
written application to the Committee on a form provided for that
purpose by the Committee. Such application (hereinafter referred
to as a "completed application") shall (i) specify the terms
pursuant to which the loan is requested to be made, including the
requested effective date, which shall be the last day of a month
and no less than 15 days following the date the completed
application is given to the Committee, (ii) designate the extent,
if any, that the loan will be made from fixed income or equity
fund, in which the Member has an interest, (iii) authorize the
repayment of the loan through payroll deductions, (iv) provide
such information and documentation as the Committee shall
require, and (v) include a note, duly executed by the Member,
granting a security interest in his entire interest in the Trust
Fund to secure the loan.
15.2 The Committee shall establish standards in
accordance with ERISA and the Code, which shall be uniformly
applicable to all Members similarly situated and shall govern the
Committee's approval or disapproval of completed applications.
The terms for each loan shall be set solely in accordance with
such standards. Such standards shall prescribe the annual rate
of interest to be charged on each loan to a Member under the
Plan, which shall be determined by reference to the prevailing
interest rates charged by commercial lenders under similar
circumstances. Such standards may also prescribe a maximum
percentage of a Member's pay which may be subjected to payroll
deductions for loan repayment under varying circumstances,
minimum and maximum repayment periods, a maximum and minimum loan
amount, and other relevant factors. Each time a Member takes
such a loan, he shall not be permitted to take a subsequent loan
under the Plan until the first loan has been repaid in full. The
maximum amount available for loan under the Plan shall not exceed
the lesser of: (a) $50,000, or (b) 50% of the Member's Account
as of the Valuation Date immediately following the date on which
the Committee receives the completed application.
15.3 The Committee shall, in accordance with its
established standards, review and approve or disapprove a
completed application as soon as practicable after its receipt
thereof, and shall promptly notify the applying Member of such
approval or disapproval. Notwithstanding the foregoing, the
Committee may defer its review of a completed application, or
defer payment of the proceeds of an approved loan, if the
proceeds of the loan would otherwise be paid during the period
commencing on December 1st and ending on the following
January 31st. In addition, in the event the Trustee, in its sole
discretion, determines that it is not reasonably and prudently
able, in the interests of Members, to liquidate the necessary
amount from any of the fixed income or equity funds to comply
with all the designations in Members' completed applications in
accordance with this Section 15.3, the Trustee shall notify the
Committee, and the amount to be paid to each Member whose
completed application designated that a loan be made from such
fixed income or equity fund shall be reduced in proportion to the
ratio which the aggregate amount that the Trustee has advised the
Committee may prudently be liquidated bears to the aggregate
amount which all such Members designated to be paid from such
fixed income or equity fund.
15.4 Subject to Section 15.3, the Committee, upon
approval of a completed application, shall cancel all or any part
of the Member's interest in the fixed income or equity funds in
the aggregate amount, if any, necessary to make payment of the
loan from each such Investment Fund to the extent designated in
the completed application and shall direct the Trustee to
transfer cash to the Member in such aggregate amount from each
such Investment Fund. The Committee shall maintain sufficient
records regarding such amounts to permit an accurate crediting of
repayments of the loan.
15.5 The unpaid balance owed by a Member on a loan
under the Plan shall not reduce the amount credited to his or her
Account. However, from the time of payment of the proceeds of
the loan to the Member such Account shall he deemed invested, to
the extent of such unpaid balance, in such loan until the
complete repayment thereof or distribution from such Account.
15.6 Each loan to a Member under the Plan shall be
repaid in level amounts through regular payroll deductions;
provided, however, that a Member shall be permitted to prepay a
loan without penalty. Except as otherwise permitted by the Code
and the Regulations, each loan shall have a repayment period not
to exceed 5 years, unless the loan is used to acquire any
dwelling unit which within a reasonable period of time is to be
used as the principal residence of the Member. Principal
residence status shall be determined by the Committee at the time
the loan is made. Repayments of principal and interest on a loan
made to a Member under the Plan shall be made to the fixed income
or equity fund in the same proportion as that in which each such
Investment Fund was liquidated in order to make payment of the
loan proceeds to the Member; provided, however, that, if a Member
has elected, pursuant to Section 9.2 to have all or any portion
of his interest in the fixed income or equity fund transferred to
such other Investment Fund, then the aforementioned purchase
proportion on repayment shall be adjusted pro rata by the
Committee to reflect such transfer.
15.7 Repayment of all loans under the Plan shall be
secured by the Member's entire interest in the Trust Fund. If at
any time prior to the full repayment of a loan to a Member under
the Plan the Member should cease to be a Member by reason of his
retirement, death or otherwise, or the Plan should terminate, the
unpaid balance owed by the Member on the loan shall be due and
payable immediately, and, to the extent not repaid, the amount of
the distribution otherwise payable to the Member (or, in the case
of his death, to his designated Beneficiary) shall be reduced by
the amount owed on the loan at the time of such distribution.
Such reduction shall constitute a complete discharge of all
liability to the Plan for the loan.
<PAGE>
SECTION 16. ADMINISTRATION OF THE PLAN
16.1 The Committee shall have authority and
responsibility for the administration and interpretation of the
Plan, and, for purposes of ERISA, shall be the "administrator" of
the Plan and its "named fiduciary" with respect to matters for
which it is responsible; provided that the Board of Directors
shall have the sole authority to amend, suspend or terminate the
Plan, except as otherwise provided in Subsection 16.4(c) hereof.
The Committee shall consist of not less than three persons, who
need not be directors of Ward, as from time to time appointed by
the Board of Directors. Any Committee member may resign and the
Board of Directors may remove any Committee member, with or
without cause, at any time. To the maximum extent permitted by
ERISA, every action and determination of the Committee in
accordance with this Section shall be final and binding upon each
Member, Beneficiary, other Associate and every other person
entitled to or claiming participation in the Plan or benefits
from the Plan. No member of the Committee shall be entitled to
act on or decide any matter relating solely to himself or to any
of his rights or benefits under the Plan.
16.2 The Committee shall appoint the Trustees, and
may remove any Trustees in accordance with the Trust Agreement.
Upon acceptance of their appointments, the Trustees shall have
exclusive authority to manage and control the Trust Fund, subject
to the Provisions of the Plan and the Trust Agreement and, for
purposes of ERISA, shall be the "named fiduciary" of the Plan
with respect to matters for which they are responsible; provided
that, as provided in the Trust Agreement, the Trustees may
appoint one or more Investment Managers and may delegate
authority to the Investment Managers so appointed as provided
therein and permitted by ERISA.
16.3 The Committee shall appoint an Administrative
Director and may from time to time allocate or delegate to any
subcommittee or member of the Committee, the Administrative
Director and others, not necessarily Associates, such duties
relative to compliance with the reporting and disclosure
obligations of ERISA and the administration and interpretation of
the Plan as it deems necessary or appropriate including matters
involving the exercise of discretion. The Administrative
Director may from time to time delegate to others not necessarily
Associates, such of his duties as he deems necessary or
appropriate. The Committee may remove, with or without cause, at
any time the Administrative Director and any person to whom
duties are delegated by the Committee or the Administrative
Director in accordance with this Section.
16.4 In furtherance of, and not by way of limitation
on, the responsibilities and authority conferred on the Committee
in Section 16.1 hereof, the Committee shall administer the Plan
in accordance with its terms and provisions and shall have the
following specific responsibilities and authorities:
(a) to construe and interpret the Plan and
determine all questions arising in its
operation;
(b) to develop and from time to time review
a policy for funding the Plan which
shall be consistent with the objectives
of the Plan in accordance with the
Regulations and to advise the Trustees
of such policy and of any changes
therein from time to time;
(c) to make such amendments in the Plan and
the Trust Agreement as it deems
necessary or appropriate in order to
enable the Plan to comply with ERISA and
any other applicable legal requirements;
provided that such amendment would not
significantly affect the cost of the
Plan;
(d) to receive reports from the Trustees and
from the Administrative Director on the
discharge of their duties and authority
with respect to the Plan, including in
the case of the Administrative Director
the preparation, distribution and
maintenance of all documents necessary
or appropriate for compliance with the
reporting, disclosure and recordkeeping
requirements contained in ERISA, as well
as such other records or data as may be
necessary or appropriate for the proper
administration of the plan;
(e) to employ such certified public
accountants, legal counsel and other
persons as may be required by ERISA or
as it shall otherwise deem necessary or
appropriate in connection with the
operation of the Plan;
(f) to adopt such rules and procedures as
the Committee deems necessary or
appropriate in order to fulfill its
responsibilities with respect to the
Plan; provided that such rules and
procedures are uniformly and
consistently applied to persons in
similar circumstances;
(g) to hold regular meetings designed to
insure the discharge of its
responsibilities hereunder, and to
maintain an accurate written record of
all such meetings; and
(h) to furnish the Board of Directors with
reports, including subjects reported
upon to it by the Trustees and the
Administrative Director.
16.5 Subject to the by-laws of the Company and the
resolutions of the Board of Directors, the Committee shall
establish its own rules of procedure and the time and place of
its meetings. A majority of the members of the Committee shall
constitute a quorum for the transaction of business, and the act
of a majority of the Committee members at a meeting at which a
quorum is present shall be the act of the Committee. Any action
which may be taken at a meeting of the Committee may be taken
without a meeting if a consent, in writing, setting forth the
action so taken, shall be signed by all of the members of the
Committee.
16.6 The Company has entered into the Trust Agreement
with the Trustees providing for the administration and management
of the Trust Fund. All benefits and other amounts payable
hereunder shall be paid exclusively from the Trust Fund, and
neither the Company, the Committee, any Trustee, the
Administrative Director, nor any director, officer, Associate or
agent of the Company assumes any responsibility or liability
therefor. The Trust Fund may be commingled for investment
purposes with like separate trust funds of any other plans and
trusts of Ward or any Affiliate which meet the requirements of
Sections 401(a) and 501(a) of the Code. Each Member, each
Beneficiary or each other person who shall claim the right to any
payment under the Plan shall look exclusively to the Trust Fund
therefor and shall not have any right or claim therefor against
the Company, the Committee, any Trustee, the Administrative
Director or any director, officer, Associate or agent of the
Company. Except as otherwise required by ERISA, neither the
Company, the Committee, the Administrative Director, nor any
director, officer, Associate or agent of the Company shall be
required to inquire into or be responsible for any act or failure
to act of any Trustee or any Member. To the maximum extent
permitted by ERISA and applicable state law, each member of the
Committee, each Trustee, the Administrative Director and each
director and officer of the Company, and each Associate who
performs service on behalf of the Plan or the Trust, shall be
indemnified and saved harmless by the Company out of its own
assets (including the proceeds of any insurance policy the
premiums of which are paid by the Company) from and against any
and all losses, costs and expenses (including any amounts paid in
settlement of a claim with the Committee's approval) to which any
of them may be subjected by reason of any act done or omitted to
be done in good faith in their official capacities with respect
to the Plan or the Trust Agreement, including all expenses
reasonably incurred in their defense.
16.7 (a) Any claim for benefits shall be submitted
on a prescribed claim form to the claimant's local personnel
department. If the claim is wholly or partially denied, written
notice of the denial shall be furnished within 90 days after
receipt of the claim; provided that, if special circumstances
require an extension of time for processing the claim, an
additional 90 days from the end of the initial period shall be
allowed for processing the claim, in which event the claimant
shall be furnished with a written notice of the extension prior
to the termination of the initial 90-day period indicating the
special circumstances requiring an extension. The written notice
denying the claim shall set forth the reasons for the denial,
including specific reference to pertinent provisions of the Plan
on which the denial is based, a description of any additional
information necessary to perfect the claim and information
regarding review of the claim and its denial.
(b) All disputed claims for benefits shall be
submitted within 60 days after receipt by the claimant of the
written notice of denial to, and decided within a reasonable
period of time by, the Administrative Director or one member of
the Committee designated by its Chairman. Written notice of the
decision on each such claim shall be furnished to the claimant
within 60 days after receipt by the Administrative Director of a
request for review, unless special circumstances require an
extension of time for processing, in which event an additional 60
days shall be allowed for review and the claimant shall be so
notified in writing. If the claim is wholly or partially denied,
such written notice shall set forth an explanation of the
specific findings and conclusions on which such denial is based.
A claimant may review all pertinent documents and may request a
review by the Committee of such a decision denying the claim.
Such a request shall be made in writing and filed with the
Committee within 60 days after delivery to the claimant of
written notice of the decision. Such written request for review
shall contain all additional information which the claimant
wishes the Committee to consider. The Committee may hold a
hearing or conduct an independent investigation, and the decision
on review shall be made as soon as possible after the Committee's
receipt of the request for review, but in no event later than the
third regularly scheduled meeting of the Committee after the
Committee's receipt of the request for review. Written notice of
the decision on review shall be promptly furnished to the
claimant and shall include specific reasons for the decision.
For all purposes under the Plan, such decision on claims (where
no review is requested) and decision on review (where review is
requested) shall be final, binding and conclusive on all
interested persons as to participation and benefits eligibility,
the amount of benefits and as to any other matter of fact or
interpretation relating to the Plan. In the case of a Member
covered by a collective bargaining agreement, a disputed claim
for benefits shall be governed by the grievance and arbitration
procedures established under such agreement; provided, however,
that, if such agreement permits, the Committee will review such a
claim before it is referred to formal grievance procedures.
16.8 Except as otherwise provided in the Plan or the
Trust Agreement, all expenses and charges incurred in the
administration and operation of the Plan and the Trust Agreement
shall be paid out of the Trust Fund. No compensation shall be
paid by the Plan to any member of the Committee, any Trustee or
the Administrative Director if employed by the Company or any
Affiliate, but said persons may be reimbursed for their
reasonable expenses incurred in carrying out their duties,
responsibilities and authority hereunder, and the compensation,
or a properly allocable portion thereof, paid to other Associates
who are involved in the administration of the Plan and all other
properly allowable expenses shall, to the extent not paid by the
Company, be treated as administrative expenses. No bond shall be
required of the members of the Committee, the Trustees or the
Administrative Director, except as otherwise required by law.
16.9 Any notice, election, application, instruction,
designation or other form of communication required to be given
or submitted by any Member, other Associate or Beneficiary shall
be in such form as is prescribed from time to time by the
Committee, sent by first class mail or delivered in person to the
Administrative Director of the Plan, Montgomery Ward & Co.,
Incorporated, Montgomery Ward Plaza, Chicago, Illinois 60671, and
shall be deemed to be duly given only upon actual receipt thereof
by the Administrative Director. Any notice, statement, report
and other communication from the Company, the Committee or the
Administrative Director to any Member, other Associate or
Beneficiary required or permitted by the Plan shall be deemed to
have been duly given when delivered to such person or mailed by
first class mail to such person at his address last appearing on
the records of the Company. Each person entitled to receive a
payment under the Plan shall file in accordance herewith his
complete mailing address and each change therein. A check or
communication mailed to any person at his address on file with
the Administrative Director shall be deemed to have been received
by such person for all purposes of the Plan, and neither the
Committee, the Administrative Director nor any Associate or agent
of the Company shall be obliged to search for or ascertain the
location of any such person except as required by ERISA. If the
Administrative Director shall be in doubt as to whether payments
are being received by the person entitled thereto, it may, by
registered mail addressed to such person at his address last
known to the Administrative Director, notify such person that all
future payments will be withheld until such person submits to the
Administrative Director his proper mailing address and such other
information as the Administrative Director may reasonably
request.
16.10 Each Member shall file with the Committee such
pertinent information concerning himself and his Beneficiary, and
each Beneficiary shall file with the Committee such information
concerning himself, as the Committee or the Administrative
Director may specify, and in such manner and form as the
Committee or Administrative Director may specify or provide, and
no Member or Beneficiary shall have any right or be entitled to
any benefits or further benefits under the Plan unless such
information is filed by him or on his behalf.
16.11 If the Committee receives notification from the
Trustee of any trust fund established by the Company as a part of
an employee benefit plan other than the Trust Fund that such
Trustees have a claim against the Trust Fund by reason of
overpayment or otherwise, then the Committee may, subject to the
restrictions provided in Section 19.6, direct the Trustees to
withhold further payments under the Plan, pay the amount of such
claim to any court of competent jurisdiction or take any other
action which the Committee shall deem appropriate.
16.12 The Agent for the service of legal process of
the Plan shall be the Secretary of Ward.
<PAGE>
SECTION 17. TERMINATION OF EMPLOYER PARTICIPATION
17.1 Any Participating Company may terminate its
participation in the Plan by giving the Committee prior written
notice specifying a termination date which shall be the last day
of a month at least 60 days subsequent to the date such notice is
received by the Committee. The Committee may terminate any
Participating Company's participation in the Plan, as of any
termination date specified by the Committee, for the failure of
the Participating Company to make proper contributions or to
comply with any other provision of the Plan and shall terminate a
Participating Company's participation upon complete and final
discontinuance of the contributions. In the event of any such
termination, the Committee shall promptly notify the IRS and
request such determination as counsel to the Plan may recommend
and as the Committee may deem desirable.
17.2 Upon termination of the Plan as to any
Participating Company, such Participating Company shall not make
any further contributions under the Plan and no amount shall
thereafter be payable under the Plan to or in respect of any
Members then employed by such Participating Company except as
provided in this Section 17. To the maximum extent permitted by
ERISA, any rights of Members no longer employed by such
Participating Company and of former Members and their
Beneficiaries and Surviving Spouses under the Plan shall be
unaffected by such termination and any transfers, distributions
or other dispositions of the assets of the Plan as provided in
this Section 17 shall constitute a complete discharge of all
liabilities under the Plan with respect to such Participating
Company's participation in the Plan and any Member then employed
by such Participating Company.
Upon receipt by the Committee of IRS approval of such
termination, the full current value of such amount shall be paid
from the Trust Fund in the manner described in Section 18.4 or
transferred to a successor employee benefit plan which is
qualified under Section 401(a) of the Code; provided, however,
that in the event of any transfer of assets to a successor
employee benefit plan the provisions of Section 17.3 will apply.
No advances against such payments shall be made prior to such
receipt of approval, but after such receipt the Committee, in its
sole discretion, may direct the Trustee to make one or more
advances in accordance with Section 12.1.
All determinations, approvals and notifications
referred to above shall be in form and substance and from a
source satisfactory to counsel for the Plan. To the maximum
extent permitted by ERISA, the termination of the Plan as to any
Participating Company shall not in any way affect any other
Participating Company's participation in the Plan.
17.3 No transfer of the Plan's assets and liabilities
to a successor employee benefit plan (whether by merger or
consolidation with such successor plan or otherwise) shall be
made unless each Member would, if either the Plan or such
successor plan then terminated, receive a benefit immediately
after such transfer which (after taking account of any
distributions or payments to them as part of the same
transaction) is equal to or greater than the benefit he would
have been entitled to receive immediately before such transfer if
the Plan had then been terminated. The Committee may also
request appropriate indemnification from the employer or
employers maintaining such successor plan before making such a
transfer.
<PAGE>
SECTION 18. AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
18.1 (a) Subject to the provisions of paragraph (b),
the Board of Directors reserves the right at any time to amend,
suspend or terminate the Plan, any contributions thereunder, the
Trust, in whole or in part and for any or no reason and without
the consent of any Participating Company, Member, Beneficiary or
Surviving Spouse; except that the Committee may adopt amendments
which would not significantly affect the cost of the Plan and
which may be necessary or appropriate to qualify or maintain the
Plan and the Trust as a plan and trust meeting the requirements
of Sections 401(a), 401(k), 401(m) and 501(a) of the Code or any
other applicable section of law (including ERISA) and the
Regulations issued thereunder. Each Participating Company by its
adoption of the Plan shall be deemed to have delegated this
authority to the Board of Directors and the Committee. The Plan
shall automatically be terminated upon complete and final
discontinuance of contributions thereunder.
18.2 Subject to the provisions of Section 18.1, any
amendment, modification, suspension or termination of any
provisions of the Plan may be made retroactively if necessary or
appropriate to qualify or maintain the Plan and Trust as a plan
and trust meeting the requirements of Sections 401(a), 401(k),
401(m) and 501(a) of the Code or any other applicable section of
law (including ERISA) and the Regulations issued thereunder.
18.3 Notice of any amendment, modification,
suspension or termination of the Plan shall be given by the Board
of Directors or the Committee, whichever adopts the amendment to
the other and to the Trustees and all Participating Companies
and, where and to the extent required by law, to Members and
other interested parties.
18.4 Upon termination of the Plan, the Company shall
not make any further contributions under the Plan and no amount
shall thereafter be payable under the Plan in respect of any
Member except as provided in this Section 18. To the maximum
extent permitted by ERISA transfers, distributions or other
dispositions of the assets of the Plan as provided in this
Section 18 shall constitute a complete discharge of all
liabilities under the Plan. The Committee shall remain in
existence and all of the provisions of the Plan which in the
opinion of the Committee are necessary for the execution of the
Plan and the administration and distribution, transfer or other
disposition of the assets of the Plan in accordance with this
Section 18.4 shall remain in force. After (i) payment of or
provision for all expenses and charges referred to in Sections
10.4 and 10.5 and appropriate adjustment of all Accounts for such
expenses and charges in the manner described in Section 10.3, and
(ii) adjustment for profits and losses of the Trust to such
termination date in the manner described in Section 10.3 the
amount in each Account shall be held, administered, and
distributed, transferred or otherwise disposed of in accordance
with the following provisions of this Section 18.4.
Upon receipt by the Committee of IRS approval of such
termination, the assets of the Plan shall be applied for the
benefit of Members, former Members, Beneficiaries and Surviving
Spouses, to the extent of the amounts held under the Plan for
their benefit, in such manner as the Committee shall determine.
All determinations, approvals and notifications
referred to above shall be in form and substance and from a
source satisfactory to counsel.
18.5 No transfer of the Plan's assets and liabilities
to a successor employee benefit plan (whether by merger or
consolidation with such successor plan or otherwise) shall be
made unless each Member would, if either the Plan or such
successor plan then terminated, receive a benefit immediately
after such transfer which (after taking account of any
distributions or payments to them as part of the same
transaction) is equal to or greater than the benefit he would
have been entitled to receive immediately before such transfer if
the Plan had then been terminated. The Committee may also
request appropriate indemnification from the employer or
employers maintaining such successor plan before making such a
transfer.
18.6 In no event shall any part of the funds of the
Plan (other than such part as is required to pay taxes, if any,
and expenses as provided in Section 10.4) be used for or diverted
to any purposes other than for the exclusive benefit of Members
and their Beneficiaries and Surviving Spouses under the Plan.
<PAGE>
SECTION 19. GENERAL LIMITATIONS AND PROVISIONS
19.1 Each Member, former Member, Beneficiary and
Surviving Spouse shall assume all risk in connection with any
decrease in the value of the assets of the Trust and the Members'
Accounts or special accounts and neither the Participating
Companies nor the Committee shall be liable or responsible
therefor.
19.2 The Trust shall be the sole source of benefits
under the Plan and, except as otherwise required by ERISA, the
Company, the Committee and the Administrative Director assume no
liability or responsibility for payment of such benefits, and
each Member, Surviving Spouse, Beneficiary or other person who
shall claim the right to any payment under the Plan shall be
entitled to look only to the Trust for such payment and shall not
have any right, claim or demand therefor against the Company, the
Committee or the Administrative Director or any member thereof,
or any associate or director of the Company.
19.3 Nothing contained in the Plan shall give any
associate the right to be retained in the employment of the
Company or any of its subsidiaries or affiliated or associated
corporations or affect the right of any such employer to dismiss
any associate. The adoption and maintenance of the Plan shall
not constitute a contract between the Company and any associate
or consideration for, or an inducement to or condition of, the
employment of any associate.
19.4 Notwithstanding any other provision of this
Plan, the payment of benefits to Members and their Beneficiaries,
Surviving Spouses and other eligible survivors under the Plan may
be paid as a part of and concomitantly with any benefits to which
he is entitled under the Retirement Security Plan.
19.5 If the Committee shall find that any person to
whom any amount is payable under the Plan is unable to care for
his affairs because of illness or accident, or is a minor, or has
died, then any payment due him or his estate (unless a prior
claim therefor has been made by a duly appointed legal
representative) may, if the Committee so elects, be paid to his
spouse, a child, a relative, an institution maintaining or having
custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person
otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Plan and the Trust
therefor.
19.6 Except insofar as may otherwise be required by
law or pursuant to the terms of a Qualified Domestic Relations
Order, no amount payable at any time under the Plan and the Trust
shall be subject in any manner to alienation by anticipation,
sale, transfer, assignment, bankruptcy, pledge, attachment,
charge or encumbrance of any kind nor in any manner be subject to
the debts or liabilities of any person and any attempt to so
alienate or subject any such amount, whether presently or
thereafter payable, shall be void. If any person shall attempt
to, or shall, alienate, sell, transfer, assign, pledge, attach,
charge or otherwise encumber any amount payable under the Plan
and Trust, or any part thereof, or if by reason of his bankruptcy
or other event happening at any such time such amount would be
made subject to his debts or liabilities or would otherwise not
be enjoyed by him, then the Committee, if it so elects, may
direct that such amount be withheld and that the same or any part
thereof be paid or applied to or for the benefit of such person,
his spouse, children or other dependents, or any of them, in such
manner and proportion as the Committee may deem proper. For
purposes of the Plan, a "Qualified Domestic Relations Order"
means any judgment, decree or order (including approval of a
settlement agreement) which has been determined by the Committee
in accordance with procedures established under the Plan, to
contribute a qualified domestic relations order within the
meaning of Section 414(p)(1) of the Code.
19.7 If the Committee cannot ascertain the
whereabouts of any person to whom a payment is due under the
Plan, and if, after five years from the date such payment is due,
a notice of such payment due is mailed to the last known address
of such person, as shown on the records of the Committee or the
Company, and within three months after such mailing such person
has not made written claim therefor, the Committee, if it so
elects, after receiving advice from counsel to the Plan, may
direct that such payment and all remaining payments otherwise due
to such person be cancelled on the records of the Plan and the
amount thereof applied to reduce the contributions of the
Company, and upon such cancellation, the Plan and the Trust shall
have no further liability therefor except that, in the event such
person later notifies the Committee of his whereabouts and
requests the payment or payments due to him under the Plan, the
amount so applied shall be paid to him as provided in Section 12.
19.8 Any and all rights or benefits accruing to any
persons under the Plan shall be subject to the terms of the trust
agreement which Ward shall enter into with the Trustees providing
for the administration of the Trust Fund.
19.9 Upon such terms and conditions as the Committee
may approve, and subject to any required IRS approval, benefits
may be provided under the Plan to a Member with respect to any
period of his prior employment by any organization, and such
benefits may be provided for, in whole or in part, by funds
transferred, directly or indirectly (including a rollover from an
individual retirement account, or an individual retirement
annuity as described in Section 408 of the Code), to the Trust
from an employee benefit plan of such organization which
qualified under Section 401(a) of the Code.
19.10 Whenever used in the Plan the masculine gender
includes the feminine.
19.11 The captions preceding the sections of the Plan
have been inserted solely as a matter of convenience and in no
way define or limit the scope or intent of any provisions of the
Plan.
19.12 The Plan and all rights thereunder shall be
governed by and construed in accordance with ERISA and the laws
of the State of Illinois.
<PAGE>
SECTION 20. TOP HEAVY PROVISIONS
20.1 The Plan will be considered a Top Heavy Plan for
any Plan Year if it is determined to be a Top Heavy Plan as of
the last day of the preceding Plan Year. Notwithstanding any
other provisions in the Plan, the provisions of this Section 20
shall apply and supersede all other provisions in the Plan with
respect to a Plan Year with respect to which the Plan is
determined to be a Top Heavy Plan.
20.2 For purposes of this Section 20 and as otherwise
used in this Plan, the following terms shall have the meanings
set forth below:
(a) "Affiliate" shall mean any entity affiliated
with the Company within the meaning of Section 414(b),
414(c), 414(m) or 414(o) of the Code, except that for
purposes of applying the provisions hereof with respect to
the limitation on contributions, Section 415(h) of the Code
shall apply.
(b) "Aggregation Group" shall mean the group
composed of each qualified retirement plan of the Company or
an Affiliate in which a Key Associate is a participant and
each other qualified retirement plan of the Company or an
Affiliate which enables a plan of the Company or an
Affiliate in which a Key Associate is a participant to
satisfy Sections 401(a)(4) or 410(b) of the Code. In
addition, the Company may choose to treat any other
qualified retirement plan as a member of the Aggregation
Group if such Aggregation Group will continue to satisfy
Sections 401(a)(4) and 410(b) of the Code with such plan
being taken into account.
(c) "Key Associate" shall mean a "Key Employee" as
defined in Section 416(i)(1) and (5) of the Code and
Regulations promulgated thereunder.
(d) "Top Heavy Plan" shall mean a "Top Heavy Plan"
as defined in Section 416(g) of the Code and Regulations
promulgated thereunder.
20.3 Subject to Section 20.4, for each Plan Year that
the Plan is a Top Heavy Plan, the Company's contribution
(including contributions attributable to salary reduction)
allocable to the Account of each Member who is in Service at the
end of the Plan Year and who is not a Key Associate, shall not be
less than the lesser of (a) 3% of such Member's compensation (as
described in Section 415 of the Code), or (b) the percentage at
which contributions for such Plan Year are made and allocated on
behalf of the Key Associate for whom such percentage is the
highest. For the purpose of determining the appropriate
percentage under clause (b), all defined contribution plans
required to be included in an Aggregation Group shall be treated
as one plan. Clause (b) shall not be applicable if the Plan is
required to be included in an Aggregation Group which enables a
defined benefit plan also required to be included in said
Aggregation Group to satisfy Sections 401(a)(4) or 410(b) of the
Code.
20.4 (a) For each Plan Year that the Plan is a Top
Heavy Plan, 1.0 shall be substituted for 1.25 as the multiplicand
of the dollar limitation in determining the denominator of the
defined benefit plan fraction and of the defined contribution
plan fraction for purposes of Section 415(e) of the Code.
(b) If, after substituting 90% for 60% wherever
the latter appears in Section 416(g) of the Code, the Plan is not
determined to be a Top Heavy Plan, the provisions of Subsection
(a) hereof shall not be applicable if the minimum contribution by
the Company allocable to the Account of any Member who is not a
Key Associate as specified in Section 20.3 is determined by
substituting "4%" for "3%".
20.5 The Committee shall, to the extent permitted by
the Code and in accordance with Regulations, apply the provisions
of this Section 20 by taking into account the benefits payable
and the contributions made under any other plans maintained by
the Company or any of its subsidiaries or affiliated or
associated entities which are qualified under Section 401(a) of
the Code to prevent inappropriate omissions or duplication of
minimum benefits or contributions.
<PAGE>
EXHIBIT 10.(xii)
April 5, 1994
Joseph Reddington
1223 N. Astor
Chicago, Illinois 60610
Dear Joe:
This letter will confirm our offer to you to become Chairman and CEO of
Signature Group, with overall charge and responsibility for its business and
affairs and reporting directly to the Chairman of Montgomery Ward Holding Corp.
Your compensation plan will be as follows:
1.) Base salary of $600,000 annually, paid semi-monthly.
2.) Target bonus on the short-term Performance Management Plan will be $250,000
annually. Your objectives and the determination of results will be set by
the Board Committee on Senior Executive Compensation as required by the tax
and S.E.C. regulations. For 1994, your target of $250,000 is guaranteed.
3.) You will participate in the Long Term Incentive Plan at the 50% of base
salary level. You will be included in the 1992-1994 cycle at the full
target level of $300,000. Thereafter, you will participate in all sub-
sequent cycles, (including 1993-1995 and 1994-1996 which are both in
progress) at the full level.
4.) You will participate in all Senior Officer Perquisite Plans, including
Special Merchandise Discount, Financial and Tax Planning, Club Membership,
Executive Vacation and Medical and Supplemental Life Insurance. Copies of
these plans are included.
5.) The Stock Ownership Committee will approve a grant of an option on 200,000
shares of Montgomery Ward Holding Stock at $26.50 per share. This option
will have a ten year life and vest 50% on January 31, 1995 and 100% on
January 31, 1996.
6.) You will receive a stock option for 100,000 shares at $16.50 per share.
This option will have a ten year life and vest as follows:
50,000 Shares July 1, 1994
50,000 Shares July 1, 1995
<PAGE>
<PAGE>
Joseph Reddington
April 5, 1994
Page 2
If you voluntarily leave Montgomery Ward prior to July 1, 1995, you will
forfeit these options and sell back any that are exercised at that time at
the $16.50 purchase price. However, if you are terminated by Montgomery
Ward for any reason other than "Cause" all of the options in this section
will immediately vest.
NOTE: The options in points 5 and 6 are held in accordance with the
Terms and Conditions of the Stockholders Agreement unless
specifically modified. These options are subject to approval of
the Board of Directors as part of the Senior Officer Compensation
Plan. A copy of the Prospectus is included.
7.) Your base salary and the most recent short term bonus awards will be
guaranteed and paid through December 31, 1997 should your employment be
terminated by Montgomery Ward for any reason other than "Cause" as defined
in the Associate Handbook (attached) as a Class "A" violation. During the
term of this Agreement, the Company will give you an 18 month notice of its
wish not to continue your services. After the initial period (through
December 31, 1997), you will revert to the normal Senior Officer Severance
Plan then in effect.
8.) If you terminate your employment prior to December 31, 1997 due to a change
in your position, duties or reporting or other responsibilities which is
inconsistent with the position, duties and responsibilities initially
assigned to you or in the event of a "Change in Control" (as defined
below), you will be entitled to your base salary and bonuses through
December 31, 1997 as if you had continued to be employed through that date
plus prorata shares of the awards you would have been entitled to under the
Long Term Incentive Plan based on your employment through your actual date
of termination. A "Change in Control" shall me "Event" has occurred under
the Stockholders Agreement or the Signature Group ceases to be a subsidiary
of Montgomery Ward Holding Corp. For purposes of this section, a public
offering of Montgomery Ward Holding Stock or of Signature Group that does
not change your position, duties or reporting, or other responsibilities
will not constitute an "Event."
<PAGE>
<PAGE>
Joseph Reddington
April 5, 1994
Page 3
All of the points in this offer are conditioned upon final approval of the
Montgomery Ward Holding Board of Directors, to be received no later than
April 30, 1994.
If you are in agreement with this offer, please sign a copy and return it to me.
Sincerely,
Robert A. Kasenter
Attachments
/s/Joseph Reddington
Joseph Reddington
4-12-94
Date
cc: Bernie Brennan
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
52-WEEK PERIOD ENDED
DECEMBER 31, 1994
Class A Class B
Earnings available
for Common
Shareholders $57,446,133 $57,524,082
Weighted average
of shares
outstanding:
Shares outstanding 19,481,364 25,000,000
Shares issued
upon assumed
exercise of
stock options 5,434,576 -
Shares assumed
to be repurchased
under Treasury
Stock method
(at fair market
value of $26.50) (3,508,561) -
Total number of
options considered
as common stock
equivalents 1,926,015 -
Total weighted
average number
of shares 21,407,379 25,000,000
Earnings per share $2.68 $2.30
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
52-WEEK PERIOD ENDED
JANUARY 1, 1994
Class A Class B
Earnings available
for Common
Shareholders $49,982,912 $51,059,110
Weighted average
of shares
outstanding:
Shares outstanding 20,148,623 25,000,000
Shares issued
upon assumed
exercise of
stock options 4,066,804 -
Shares assumed
to be repurchased
under Treasury
Stock method
(at fair market
value of $22.50) (2,410,224) -
Total number of
options considered
as common stock
equivalents 1,656,580 -
Total weighted
average number
of shares 21,805,203 25,000,000
Earnings per share $2.29 $2.04
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
53-WEEK PERIOD ENDED
JANUARY 2, 1993
Class A Class B
Earnings available
for Common
Shareholders $25,526,342 $26,294,923
Weighted average
of shares
outstanding:
Shares outstanding 20,892,268 25,000,000
Shares issued
upon assumed
exercise of
stock options 3,240,240 -
Shares assumed
to be repurchased
under Treasury
Stock method
(at fair market
value of $18.75) (1,594,969) -
Total number of
options considered
as common stock
equivalents 1,645,271 -
Total weighted
average number
of shares 22,537,539 25,000,000
Earnings per share $1.13 $1.05
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included (or incorporated by
reference) in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File No. 33-41161).
Arthur Andersen LLP
Chicago, Illinois
March 30, 1995
EXHIBIT 24
MONTGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the
undersigned directors and/or officers of Montgomery Ward Holding
Corp., a Delaware corporation, hereby constitutes and appoints
SPENCER H. HEINE, EDWIN G. POHLMANN, JOHN L. WORKMAN and PHILIP D.
DELK, his or her true and lawful attorneys-in-fact and agents to
execute in his or her name and capacity the 1994 annual report on
Form 10-K of this Corporation and any amendments to such annual
report, with all exhibits thereto, and any and all documents in
connection therewith pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, each of them with full power to
act without the others;
AND FURTHER, that each of the undersigned directors and/or
officers of the Corporation hereby grants to said attorneys-in-fact
and agents and each of them, full power and authority to do and
perform any and all acts and things essential and necessary to be
done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person in connection
with the proper exercise of the powers granted hereunder.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the undersigned as directors and/or
officers of said Montgomery Ward Holding Corp. or as individuals,
have hereunto set their hands and seals as of this 23rd day of
March, 1995.
NAME AND TITLE /s/ Bernard F. Brennan
Bernard F. Brennan, Director,
Chairman and Chief Executive
Officer
NAME AND TITLE /s/ Richard Bergel
Richard Bergel, Director and
Vice Chairman
NAME AND TITLE /s/ Bernard W. Andrews
Bernard W. Andrews, Director
and President
NAME AND TITLE /s/ Spencer H. Heine
Spencer H. Heine, Director and
Executive Vice President
NAME AND TITLE /s/ G. Joseph Reddington
G. Joseph Reddington, Director
NAME AND TITLE /s/ Myron Lieberman
Myron Lieberman, Director
NAME AND TITLE /s/ Silas S. Cathcart
Silas S. Cathcart, Director
NAME AND TITLE /s/ David D. Ekedahl
David D. Ekedahl, Director
NAME AND TITLE /s/Denis J. Nayden
Denis J. Nayden, Director
NAME AND TITLE /s/James A. Parke
James A. Parke, Director
<TABLE> <S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 33
<SECURITIES> 317
<RECEIVABLES> 118
<ALLOWANCES> 0
<INVENTORY> 1625
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<PP&E> 1990
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75
0
<OTHER-SE> 687
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<SALES> 6573
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