UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
____________
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1996
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17540
MONTGOMERY WARD HOLDING CORP.
(Exact Name Of Registrant As Specified In Its charter)
Delaware 36-3571585
(State Of Incorporation) (I.R.S.
Employer Identification No.)
Montgomery Ward Plaza, Chicago, Illinois 60671
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code: 312/467-2000
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
As of April 27, 1996 the Registrant had 18,722,248 shares of
Class A Common Stock and 25,000,000 shares of Class B Common
Stock of the Registrant outstanding.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX
Page
Montgomery Ward Holding Corp.
Consolidated Statement ofIncome.................... 2
Consolidated Balance Sheet......................... 3
Consolidated Statement of Cash Flows............... 4
Notes to Consolidated Financial Statements........ 6
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the 13-Week
Period Ended
March 30, April 1,
(Millions) 1996 1995
Revenues
Net sales, including leased and
licensed department sales...................... $1,253 $1,357
Direct response marketing revenues,
including insurance............................ 182 130
Total Revenues.............................. 1,435 1,487
Costs and Expenses
Cost of goods sold, including net
occupancy and buying expense................... 1,038 1,076
Operating, selling, general and
administrative expenses, including
benefits and losses of direct
response operations (Note 3)................... 452 399
Interest expense.................................. 22 19
Total Costs and Expenses..................... 1,512 1,494
Loss Before Income Taxes............................. (77) (7)
Income Tax Benefit................................... (29) (3)
Net Loss............................................. (48) (4)
Preferred Stock Dividend Requirements (Note 4)....... 3 1
Net Loss Applicable to
Common Shareholders............................... $ (51) $ (5)
Net Loss per Common Share (Note 2)
Class A.......................................... $ (1.27) $ (.12)
Class B.......................................... $ (1.07) $ (.10)
Cash dividends per Common Share $ - $ -
See notes to consolidated financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED BALANCE SHEET
(UNAUDITED )
ASSETS
March 30, December 30,
(Millions) 1996 1995
Cash and cash equivalents...........................$ 63 $ 37
Short-term investments.............................. 1 1
Investments of insurance operations................. 330 345
Total Cash and Investments................. 394 383
Trade and other accounts receivable................. 179 166
Accounts and notes receivable from affiliates....... 12 22
Total Receivables.......................... 191 188
Merchandise inventories............................. 1,569 1,770
Prepaid pension cost................................ 339 335
Prepaid federal income taxes........................ 26 -
Properties, plants and equipment, net of
accumulated depreciation and amortization........ 1,348 1,366
Direct response and insurance acquisition costs..... 540 395
Other assets........................................ 528 447
Total Assets........................................ $4,935 $4,884
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt.................................... $ 701 $ 160
Trade accounts payable............................. 1,313 1,804
Federal income taxes payable....................... - 6
Accrued liabilities and other obligations.......... 1,219 1,195
Insurance policy claim reserves.................... 242 236
Long-term debt..................................... 422 423
Obligations under capital leases................... 65 66
Deferred income taxes.............................. 163 119
Total Liabilities......................... 4,125 4,009
Commitments and Contingent Liabilities (Note 6)
Redeemable Preferred Stock (Note 4)............... 175 175
Shareholders' Equity
Common stock.................................... 1 1
Capital in excess of par value.................. 46 45
Retained earnings............................... 707 758
Unrealized gain on marketable securities........ 10 10
Less: Treasury stock, at cost.................. (129) (114)
Total Shareholders' Equity............... 635 700
Total Liabilities and Shareholders' Equity......... $4,935 $4,884
See notes to consolidated financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 13-Week
Period Ended
March 30, April 1,
(Millions) 1996 1995
Cash flows from operating activities:
Net loss.............................................$ (48) $ (4)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization.................. 31 30
Amortization of Goodwill....................... 6 1
Amortization of Direct response and
insurance acquisition costs................... 42 33
Deferred income taxes.......................... - 2
Net loss adjusted for non-cash expenses... 31 62
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade and other accounts receivable............... 12 8
Accounts and notes receivable from affiliates.... 10 (12)
Merchandise inventories.......................... 201 (3)
Prepaid pension cost............................. (4) (2)
Federal income taxes receivable, net............. (31) (17)
Direct response insurance acquisition costs...... (64) (49)
Other assets..................................... (10) (9)
Increase (decrease) in:
Trade accounts payable............................. (494) (474)
Accrued liabilities and other obligations......... (57) (104)
Insurance policy claim reserves................... 6 2
Net cash used for operations................. (400) (598)
Cash flows from investing activities:
Investment in Merchant Partners...................... (2) -
Acquisition of Amoco Enterprises..................... (102) -
Purchase of short-term investments................... (9) (28)
Purchase of investments of insurance operations...... (104) (91)
Sale of short-term investments....................... 9 25
Sale of investments of insurance operations.......... 117 94
Capital expenditures................................. (11) (18)
Disposition of properties, plants and
equipment, net...................................... 1 6
Net cash used for investing activities......... $(101) $ (12)
See notes to consolidated financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the 13-Week
Period Ended
March 30, April 1,
(Millions) 1996 1995
Cash flows from financing activities:
Proceeds from short-term borrowings, net........... $ 541 $ 633
Payments of long-term debt......................... (1) (3)
Payments of obligations under capital leases....... (1) (1)
Proceeds from issuance of common stock............. 1 -
Cash dividends paid................................ (3) (1)
Purchase of treasury stock, at cost................ (10) (3)
Net cash provided by financing activities..... 527 625
Increase in cash and cash equivalents.................. 26 15
Cash and cash equivalents at beginning of period....... 37 33
Cash and cash equivalents at end of period............. $ 63 $ 48
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes......................................$ 1 $ 20
Interest..........................................$ 23 $ 16
Non-cash investing activity:
Change in unrealized gain on marketable equity
securities.......................................$ - $ 3
Non-cash financing activity:
Notes issued for purchase of treasury stock..........$ 5 $ -
See notes to consolidated financial statements.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
1. Accounting Policies
Basis of Presentation:
The Consolidated Balance Sheet as of March 30, 1996 and the
Statements of Income and Cash Flows for the three months ended
March 30, 1996 and April 1, 1995 are unaudited. The interim
financial statements reflect all adjustments (consisting only of
normal recurring accruals) which are, in the opinion of
management, necessary for a fair statement of the results for
the interim periods presented. The interim financial statements
should be read in the context of the financial statements and
notes thereto filed with the Securities and Exchange Commission
in MW Holding's 1995 Annual Report on Form 10-K. Capitalized
terms not otherwise defined herein have the meaning ascribed to
such terms in the 1995 Annual Report on Form 10-K. Certain
prior period amounts have been reclassified to be comparable
with the current period presentation.
Accounting for Long-Lived Assets
Effective December 31, 1995, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of." The provisions require a
review of long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If it is determined that an
impairment loss has occurred based on expected undiscounted
future cash flows, the loss will be recognized in the income
statement and certain disclosures will be made regarding the
impairment. There was no financial impact from the adoption of
this statement on the first quarter financial statements.
2. Net Loss Per Common Share
Net Loss per common share is computed as follows:
13-Week Period Ended
March 30, 1996
Class A Class B
Net Loss applicable to Common
Shareholders................................... $(24) $(27)
Weighted average number of common shares
outstanding.................................... 19,155,678 25,000,000
Net Loss per share............................. $(1.27) $(1.07)
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
2. Net Loss Per Common Share (continued)
13-Week Period Ended
April 1, 1995
Class A Class B
Net Loss applicable to Common Shareholders......... $(2) $(3)
Weighted average number of common shares
outstanding........................................ 20,882,543 25,000,000
Net Loss per share................................. $(.13) $(.10)
3. Benefits and Losses
Operating, selling, general and administrative expenses include
benefits and losses related to direct response marketing
operations of $39 and $28 for the 13-week periods ended March
30, 1996 and April 1, 1995, respectively.
4. Preferred Stock
On January 31, 1996, GE Capital exercised the exchange option
contained in the MW Senior Preferred Stock subscription
agreement which allowed an exchange of the MW Senior Preferred
Stock for senior preferred stock of the Company with
substantially the same terms. On March 28, 1996, the Company's
Certificate of Incorporation was amended to authorize the
issuance of a new series of senior preferred stock (New Senior
Preferred Stock). On March 29, 1996, the Company issued all of
the 1,750 shares of New Senior Preferred Stock to GE Capital in
exchange for the 1,750 shares of MW Senior Preferred Stock held
by GE Capital.
Dividends on the New Senior Preferred Stock are payable
quarterly at an annual rate of $7,010 per share. The Company is
required to redeem the New Senior Preferred Stock on June 30,
2002, with the option of redeeming all or any portion prior to
June 30, 2002.
5. Acquisition of Amoco Enterprises, Inc.
On December 31, 1995, Montgomery Ward acquired all of the
outstanding capital stock of Amoco Enterprises, Inc.
(Enterprises), operator of the Amoco Motor Club and a wholly-
owned subsidiary of Amoco Oil Holding Company. The purchase
price was $102. The acquisition was financed through the use of
the majority of the proceeds generated from the issuance of the
MW Senior Preferred Stock. On January 2, 1996, Montgomery
Ward's wholly-owned subsidiary, Signature, purchased Enterprises
from Montgomery Ward for $102.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
5. Acquisition of Amoco Enterprises, Inc. (continued)
The acquisition was accounted for as a purchase. The purchase
price has been allocated to Enterprises' 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:
Accounts receivable.......................... $ 25
Federal income tax receivable................ 1
Properties, plant & equipment................ 3
Direct response and insurance
acquisition costs......................... 123
Goodwill..................................... 67
Other assets................................. 6
Trade accounts payable....................... (3)
Accrued liabilities and other obligations.... (76)
Deferred income taxes........................ (44)
$102
6. Commitments and Contingent Liabilities
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>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
7. Customer Credit Agreement
A. Effective April 1, 1996, Montgomery Ward entered into
interim agreements with GE Capital and its wholly-owned
subsidiaries Montgomery Ward Credit Corporation ("Montgomery
Ward Credit") and Monogram Credit Card Bank of Georgia
("Monogram") reflecting a prior memorandum of understanding
with GE Capital pursuant to which Monogram is extending
credit to retail customers of Montgomery Ward under open-end
revolving credit plans on a non recourse basis.
For the Montgomery Ward memorandum of understanding
interim agreements provide for the sharing of certain
additional revenues generated by increases in interest rates
and late fee charges to customers with the extension of
credit to the customers made directly by Monogram. Certain
of these additional revenues will be applied to reduce the
obligations of Montgomery Ward for prior losses incurred
under the original Account Purchase Agreement with Montgomery
Ward Credit and Montgomery Ward's obligation to pay Credit
losses in excess of 3.9% of the average receivable balance up
to 5%, and 50% of the losses in excess of 5% up to 8%,
incurred by Monogram under the new agreements. Except as
noted above, the new agreements together generally impose
obligations upon and provide benefits to Montgomery Ward and
GE Capital and its subsidiaries, Montgomery Ward Credit and
Monogram similar to the prior arrangements under the Account
Purchase Agreement.
If definitive agreements are not entered into by July
31, 1996 by Montgomery Ward, Monogram, Montgomery Ward Credit
and GE Capital permanently implementing the changes
contemplated by the memorandum of understanding and interim
agreements for the Montgomery Ward credit customers,
Montgomery Ward credit transactions will revert to the
original Account Purchase Agreement.
B. Effective March 13, 1996, Lechmere, Inc., a subsidiary
of Montgomery Ward, entered into interim agreements with GE
Capital and its wholly-owned subsidiaries Montgomery Ward
Credit and Monogram reflecting a prior memorandum of
understanding with GE Capital pursuant to which Monogram is
extending credit to retail customers of Lechmere under open-
end revolving credit plans on a non recourse basis.
The Lechmere memorandum of understanding and interim
agreements provide for a guaranteed Monogram Bank/GE Capital
annual return on its equity of 17.50%. For any shortfalls,
an annual payment would be made by Lechmere. Any return
above 17.50% will be shared equally by Lechmere and
Monogram/GE Capital. For any annual credit losses over 4.25%
and less than 8% of the average receivable balance, Lechmere
is responsible for 50% of said losses. It is envisioned that
a similar relationship will be established for Montgomery
Ward's "Electric Ave. & More" credit card customer
receivables. If definitive agreements are not executed by
August 31, 1996, the Lechmere interim agreements will expire.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
7. Customer Credit Agreements (continued)
C. In addition, pursuant to an agreement dated April 3,
1996, Montgomery Ward and Lechmere agreed to sell to
Montgomery Ward Credit receivables from certain commercial
customers of Montgomery Ward and Lechmere.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of results of operations
for MW Holding compares the first quarter of 1996 to the first
quarter of 1995. All dollar amounts referred to in this
discussion are in millions, and all income and expense items are
shown before income taxes, unless specifically stated otherwise.
MW Holding's business is seasonal, with one-third of the sales
traditionally occurring in the fourth quarter; accordingly, the
results of operations for the first three months are not
necessarily indicative of the results for the entire year.
Results of Operations
First Quarter 1996 Compared with First Quarter 1995
Consolidated total revenues (net sales and direct response
marketing revenues, including insurance) were $1,435 compared
with $1,487 in 1995, a decrease of $52. The decrease reflects a
$104 decrease in net sales and a $52 increase in direct response
marketing revenues.
Net sales of $1,253 in the quarter reflected a decline of 12% in
apparel and domestics sales and a decline of 6% in hardlines
sales. Comparable store sales decreased 8%.
Credit sales in the first quarter at Montgomery Ward declined
$70 in the quarter. The decline was attributable to a decline
in the number of "new accounts" which started in the Fourth
Quarter of 1995 and the confusion created from a March, 1996
notification to the credit card customer base. New programs for
acquisition of credit card customers were established at the end
of the first quarter which are expected to provide a double
digit increase in new accounts for the entire year and which
have early results reflecting increases of over 20 percent
compared to the prior year.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
First Quarter 1996 Compared with First Quarter 1995 (continued)
Sales at Lechmere declined $41 million from the prior year,
being negatively impacted by two major transitions. First, was
the integration of Lechmere systems into those of Montgomery
Ward which required major changes to the older, marginal systems
of Lechmere. Unfortunately, the changes resulted in data
integrity problems which created inventory imbalances and
significant out-of-stock problems in key items. The problems
have been identified and are being corrected. Further, the
entire Lechmere merchandising function has been relocated to
Chicago which will provide additional leverage through one
common buying organization. The second transition was related
to the transfer of the credit portfolio from the previous
provider to GE Capital who services the Montgomery Ward credit
card. Lechmere had been in a dispute with the previous provider
which was settled in Lechmere's favor in late 1995 with the transfer
of the credit portfolio to GE Capital in April, 1996.
Also impacting sales in the first quarter was the reduction in
advertising pages and events which was done in response to the
significant increase in paper and printing costs which occurred in
the Fall of 1995. Pages will be added and events re-established
late in the second quarter. As paper costs have started to moderate,
the Fall season should reflect some favorable comparisons over the
prior year.
Direct response marketing revenues in the quarter were $182.
Versus the prior year quarter, club revenues increased by $49,
with approximately one-half of this increase due to the
acquisition of Amoco Enterprises (See Note 5 to Consolidated
Financial Statements) and the majority of the remainder
resulting from growth in continuing businesses, and insurance
revenues increased by $3.
Gross margin (net sales less cost goods sold) dollars were $215,
a decrease of $66, or 23%. The decrease in gross margin was due
to a decrease in the gross margin rate of $38 and decreased
volume of $28. Gross margin performance was impacted by intense
retail competition and consumers' hesitancy to spend. The growth in
inventories, in concert with the slowdown in sales in 1995, required
significant action to be taken to impact the size and composition of the
inventory. These aggressive actions, while necessary to liquidate goods
in a competitive enviroment, also created some dislodgements of product
and best selling merchandise. The Company has embarked on a program with
a focus on narrowing the assortments and obtaining significant volume
through key items and categories.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
First Quarter 1996 Compared with First Quarter 1995 (continued)
Operating, selling, general and administrative expenses
increased $53 from the prior year, primarily due to added
expenses related to the acquisition of the Amoco Motor Club of
$26 (See Note 5 to the Consolidated Financial Statements).
Other factors included increased payroll and other
administrative expenses of Signature of $22, primarily due to
Signature's continued growth of business; decreased income from
the sale of product service contracts of $5; the impact of new
store openings of $5; and increased advertising and promotional
costs of $4; partially offset by decreased operating and other
administrative expenses of Montgomery Ward and Lechmere of $9.
Net interest expense increased $3 from the prior year to $22,
primarily due to increased borrowings (as more fully described
in the discussion of Financial Condition), and higher average
borrowing rates related to longer term borrowings placed in 1995
to extend the maturity and fix the interest rate on a
significant portion of the Company's debt.
Net loss for the first quarter of 1996 was $48, which was $44
greater than the $4 loss experienced in the prior year period.
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.
Montgomery Ward has 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
agreement is $175 in 1996. Under the terms of the interest rate
exchange agreements, Montgomery Ward pays the banks a weighted
average fixed rate of 7.4% multiplied by the notional principal
amount in 1996 and will receive the one-month daily average
London Interbank Offered (LIBO) rate multiplied by the notional
principal amount. The average aggregate notional principal
amount under the various cap agreements is $158 in 1996. Under
the terms of the cap agreements, Montgomery Ward receives
payments from the banks when the one-month daily average LIBO
rate exceeds the 6.0% cap strike rate in 1996. 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
strike rate. The interest rate exchange and cap agreements
increased the effective borrowing rate under the Agreements by
.93% for the 13-week period ended March 30, 1996.
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Discussion of Financial Condition (continued)
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 Company's cash flows are seasonal with negative cash flows
historically experienced in the first quarter due to working
capital levels.
Net cash used in the Company's operating activities totaled $402
for first quarter 1996, which was $196 favorable to the cash
used in operating activities in first quarter 1995. The
improvement in cash flow primarily resulted from a $201 cash
source from inventory reduction, which was a result of inventory
management initiatives implemented in the third quarter of 1995,
compared to a $3 cash use for inventory in first quarter 1995.
Net cash provided by financing activities totaled $527 for the
first three months of 1996, compared to $625 for the same period
in 1995. The decrease was primarily due to decreased borrowings
under the Agreements. Borrowings decreased as inventory
purchases decreased in conjunction with inventory management
initiatives.
Future cash needs are expected to be provided by ongoing
operations, the sale of customer receivables to Montgomery Ward
Credit and borrowings under the Agreements
Capital expenditures during the first three months of 1996 or
$11 were primarily related to expenditures for the opening of
one full-line store. Capital expenditures for the comparable
1995 period were $18.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
On March 29, 1996, the Company's Certificate of Incorporation
was amended to authorize the issuance of a new series of senior
preferred stock ("New Senior Preferred Stock"). On that date,
the Company issued all of the 1,750 shares of New Senior
Preferred Stock authorized by the Certificate of Incorporation
to GE Capital in exchange for the 1,750 shares of MW Senior
Preferred Stock held by GE Capital.
Except as required by law, holders of New Senior Preferred Stock
will not have any voting rights, other than the right to elect
one director to be an additional member of the Company's Board
of Directors (a) during the period following a default in the
payment of accrued dividends on the New Senior Preferred Stock
for four consecutive quarters until such accrued dividends shall
have been paid in full and (b) during the period following any
failure to make a mandatory redemption of New Senior Preferred
Stock (as described below) until such failure shall have been
cured.
Holders of New Senior Preferred Stock are entitled to receive,
before any dividends may be declared and paid upon or set aside
for Common Stock of the Company, cumulative cash dividends of
$7,010 per share per annum, in equal quarterly payments on the
last business day of March, June, September and December.
Dividend payments with respect to the New Senior Preferred Stock
may be made only in cash. No dividends may be declared or paid
on the New Senior Preferred Stock when such declaration or
payment would constitute a default under any debt agreements
governing indebtedness for borrowed money of the Company and its
direct and indirect subsidiaries.
The Company may, upon ten business days notice to the holders
thereof, at any time redeem the whole or any part of the New
Senior Preferred Stock at a price of $100,000 per share plus
unpaid accrued dividends thereon. No such redemption may be
made when such redemption would constitute a default under any
debt agreements.
On June 30, 2002, the Company is required to redeem all of the
New Senior Preferred Stock at a redemption price of $100,000 per
share plus unpaid accrued dividends thereon. No such redemption
may be made when such redemption would constitute a default
under any of the Agreements.
Upon any liquidation, dissolution or winding up of the Company,
the holders of the New Senior Preferred Stock shall be entitled
to be paid, before any distributions or payment is made to any
holder of Common Stock of the Company, an amount in cash equal
to $100,000 per share plus unpaid accrued dividends thereon.
<PAGE>
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Pursuant to a Statement in Support of Solicitation of Written
Consents dated March 28, 1996, 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 executed and returned the consents before March 29,
1996. Pursuant to the consent, the stockholders approved the
amendment to the Certificate of Incorporation which revoked the
authorization of the then authorized senior preferred stock of
the Company, none of which was then outstanding, and authorized
a new series of senior preferred stock, as described above (See
Item 2).
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.(i)(H)(2) Amendment dated March 19, 1996 to the Long Term Credit
Agreement dated as ofSeptember 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.
10.(i)(I)(2) Amendment dated March 19, 1996 to the 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.
10.(i)(K)(1) Amendment dated March 20, 1996 to the Term Loan Agreement
dated as of September 29, 1995 between Montgomery Ward & Co.,
Incorporated and The Industrial Bank of Japan,
Limited, Chicago Branch.
10.(iv)(J) Form of Montgomery Ward Special Retention Plan document
entered into with the following persons: Alan E. DiGangi,
Spencer H. Heine, Carol J. Harms, Robert A. Kasenter,
Frederick E. Meiser, Edwin G. Pohlmann, Robert J.
Stevenish and John Workman.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K (continued)
10.(iv)(K) Letter agreement dated March 1, 1996
between the Company and John L. Workman.
10.(iv)(L) Form of Montgomery Ward Change of Control Security Plan
document entered into with the following persons:
Alan E. DiGangi, Spencer H. Heine, Carol J. Harms,
Robert A. Kasenter, Frederick E. Meiser, Edwin G. Pohlmann,
Robert J. Stevenish and John L. Workman.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
On January 16, 1996, the Company filed a Form 8-K with
respect to the acquisition by Montgomery Ward of all of the
outstanding stock of Amoco Enterprises, Inc. from Amoco Oil
Holding Company on December 31, 1995. The press release issued
by the Company on January 2, 1996 was attached as an exhibit
thereto.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant 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
and
Chief Financial Officer
DATE: May 14, 1996
Exhibit 10.(i)(H)(2)
March 19, 1996
To the Banks parties to the
Long Term Credit Agreement
referred to below
Re: Amendment to and Approval under 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, as amended (the "Long Term
Credit Agreement")
Gentlemen:
This letter constitutes an agreement amending the Long Term
Credit Agreement in certain respects. All terms when capitalized
and used herein and not otherwise defined herein shall have the
meaning ascribed to such terms in the Long Term Credit Agreement.
The Company, GE Capital, MWCC and Monogram Credit Card Bank of
Georgia ("Monogram"), a subsidiary of GE Capital, intend to
replace the existing arrangements between MWCC and the Company
relative to the acquisition of receivables generated from the
sale of merchandise to the Company's customers as set forth in
the MWCC Receivables Purchase Agreement. Attached is a
Confidential Memorandum of Understanding, dated as of March 14,
1996, between the Company and GE Capital (the "Memorandum of
Understanding") outlining the new arrangement (the "Credit
Program"). The Credit Program will be formalized in an agreement
or agreements between Monogram and the Company (the "Monogram
Agreement"), an agreement or agreements between GE Capital and
the Company (the "GE Capital Agreement") and possibly an
agreement or agreements between MWCC and the Company (the "MWCC
Agreement"). GE Capital will guarantee the performances of the
respective obligations of Monogram and MWCC under the Monogram
Agreement and the MWCC Agreement, if any (collectively, the "GE
Capital Guaranties"). Upon the execution of the GE Capital
Agreement, the Monogram Agreement and the MWCC Agreement, if any
(together with the GE Capital Guaranties, collectively, the
"Retail Credit Program Agreement"), the existing MWCC Receivables
Purchase Agreement shall be terminated.
By the execution hereof, the Banks hereby approve (i) the
execution of the Retail Credit Program Agreement provided the
Retail Credit Program Agreement embodies in all material respects
the terms outlined in the Memorandum of Understanding except for
such changes in such terms or additions to such terms as the
Company may approve provided such changes or additions shall not
materially adversely affect the Banks and (ii) the termination of
the existing MWCC Receivables Purchase Agreement provided that
such termination is concurrent with the execution and effective
upon the effective date of the Retail Credit Program Agreement.
Within 30 days after the execution of the Retail Credit Program
Agreement and the termination of the existing MWCC Receivables
Purchase Agreement, the Company will deliver copies of the Retail
Credit Program Agreement to the Banks and the Agents certified as
true and correct by an Authorized Officer on behalf of the
Company.
In consideration of the Banks' approval of the execution of the
Retail Credit Program Agreement and the termination of the
existing MWCC Receivables Purchase Agreement, the Company, the
Banks and the Agents agree that effective upon the execution of
the Retail Credit Program Agreement and the termination of the
MWCC Receivables Purchase Agreement, on the terms set forth in
this letter agreement, the Long Term Credit Agreement is hereby
amended as follows:
1. Section 1.1 of the Long Term Credit Agreement is amended by
(i) deleting the definition of the MWCC Receivables Purchase
Agreement, (ii) by substituting "Retail Credit Program
Agreement" for "MWCC Receivables Purchase Agreement" in the
definition of Material Litigation and (iii) by adding the
following definitions:
"GE Capital Parties" means GE Capital, Monogram and
MWCC.
"Monogram" means Monogram Retail Credit Card Bank of
Georgia, a subsidiary of GE Capital.
"Memorandum of Understanding" means the "Memorandum of
Understanding" as defined in that certain letter
agreement dated March 19, 1996 among the Company, the
Banks and the Agents.
"Retail Credit Program Agreement" means the "Retail
Credit Program Agreement" as defined in that certain
letter agreement dated March 19, 1996 among the
Company, the Banks and the Agents, as such Retail
Credit Program Agreement may be amended, modified or
supplemented from time to time in a manner which does
not result in an Event of Default under Section
13.1(j)."<PAGE>
"Seller Notes" means the Seller Notes as defined in and
issued pursuant to the Account Purchase Agreement
between the Company and MWCC dated as of June 24, 1988,
as amended (including any amendments thereto pursuant
to the Retail Credit Program Agreement), together with
the Loss Note referred to in the Memorandum of
Understanding and issued pursuant to the Retail Credit
Program Agreement.
2. Sections 11.1(i), 11.2(a) and 15.3(c) of the Long Term
Credit Agreement are each amended by substituting "Retail
Credit Program Agreement" for "MWCC Receivables Purchase
Agreement" wherever such term appears therein.
3. Section 13.1(j) of the Long Term Credit Agreement is amended
to read in its entirety as follows:
(j) Retail Credit Program Agreement. (i) An
amendment which materially adversely affects the Banks
shall be made to the Retail Credit Program Agreement
without the prior written consent of the Required
Banks, including, without limitation, any amendment to
any provision thereto which secures any Seller Notes
(other than as permitted by clause (ii) of this Section
13.1(j)) or provides for the mandatory payment of such
Seller Notes on a date earlier than the date on which
such Seller Notes are payable as at March 14, 1996
(except as otherwise contemplated in the "Loss Note
Section" of the Memorandum of Understanding), or (ii)
any of the Seller Notes shall be secured by any
property or rights other than the receivables sold or
financed under the Retail Credit Program Agreement, and
collections and offset rights thereunder, or (iii) the
Retail Credit Program Agreement shall fail to remain in
full force and effect, or (iv) any default by the
Company under the Retail Credit Program Agreement
(after the expiration of any applicable grace period)
shall occur and be continuing which has not been waived
by the GE Capital Parties and which provides the GE
Capital Parties thereunder with the right to terminate
obligations of the GE Capital Parties to purchase
customer receivables thereunder from the Company and to
extend credit to the customers of the Company pursuant
thereto, or (v) the Company or the GE Capital Parties
shall give notice of termination or take any action to
terminate thereunder (other than the notice to
terminate the Retail Credit Program Agreement at the
expiration of the term thereof (or such term as
extended pursuant thereto) and other than a termination
by the Company pursuant to which a wind down or
transition of at least one year is provided).
4. Section 15.3 of the Long Term Credit Agreement is amended by
substituting "GE Capital Parties" for "MWCC".
Except as hereinabove expressly provided, all the terms and
provisions of the Long Term Credit Agreement shall remain in full
force and effect and all references therein and in any related
documents to the Long Term Credit Agreement shall henceforth
refer to the Long Term Credit Agreement as amended by this letter
agreement. This letter agreement shall be deemed incorporated
into, and a part of, the Long Term Credit Agreement.
This letter agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. This letter agreement shall be governed by and
construed in accordance with the law of the State of Illinois.
This letter agreement may be executed in any number of
counterparts and by the different parties on separate
counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same agreement.
If the foregoing is acceptable, please evidence your agreement
thereto by your execution hereof in the space provided below.
This letter agreement shall become effective upon the execution
by the Required Banks.
MONTGOMERY WARD & CO., INCORPORATED
BY /Carol J. Harms/
Carol J. Harms
Vice President & Treasurer
ACCEPTED AND APPROVED:
THE FIRST NATIONAL BANK OF CHICAGO,
in its individual capacity and in
its capacity as Documentary Agent
By: /Jeanette Ganousis/
Name: Jeanette Ganousis
Title: Senior Banker
THE BANK OF NEW YORK, in its
individual capacity and in its
capacity as Negotiated Loan Agent
By: /Michael Flannery/
Name: Michael Flannery
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent
By: /F.C.H. Ashby/
Name: F.C.H. Ashby
Title: Senior Manager Loan
Operations
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its
individual capacity and in its
capacity as Advisory Agent
By: /MA Detrick/
Name: MA Detrick
Title: Vice President
CIBC INC.
By: /David McGowan/
Name: David McGowan
Title: Director
NATIONSBANK OF NORTH CAROLINA
By: /Christopher B. Torie/
Name: Christopher B. Torie
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /Mark A. Thompson/
Name: Mark A. Thompson
Title: Vice President and Deputy
General Manager
<PAGE>
CREDIT LYONNAIS CHICAGO BRANCH
By: /Mary Ann Klemm/
Name: Mary Ann Klemm
Title: Vice President and Group
Head
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /Mary Ann Klemm/
Name: Mary Ann Klemm
Title: Vice President and Group
Head
BANCA COMMERCIALE ITALIANA, CHICAGO
BRANCH
By: /Julian M. Teodori/
Name: Julian M. Teodori
Title: Senior Vice President
By: /Matthew V. Trujillo/
Name: Matthew V. Trujillo
Title: Assistant Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By: /Takeshi Hemmi/
Name: Takeshi Hemmi
Title: Vice President
THE MITSUBISHI BANK, LIMITED,
CHICAGO BRANCH
By: /Noboru Kobayashi/
Name: Noboru Kobayashi
Title: Joint General Manager
<PAGE>
THE NORTHERN TRUST COMPANY
By: /David C. Blowers/
Name: David C. Blowers
Title: Vice President
THE SAKURA BANK, LTD.
By: /Hajime Miyagi/
Name: Hajime Miyagi
Title: Joint General Manager
THE SANWA BANK, LIMITED, CHICAGO
BRANCH
By: /Gordon R. Holtby/
Name: Gordon R. Holtby
Title: Vice President & Manager
SWISS BANK CORPORATION
By: /H. Clark Worthley/
Name: H. Clark Worthley
Title: Associate Director
By: /David J. Bergman/
Name: David J. Bergman
Title: SEC Executive Director
UNITED STATES NATIONAL BANK OF
OREGON
By: /Chris J. Karlin/
Name: Chris J. Karlin
Title: Vice President
UNION BANK
By: /Richard A. Sutter/
Name: Richard A. Sutter
Title: Vice President
ABN AMRO BANK N.V.
By: /David C. Sagers/
Name: David C. Sagers
Title: Vice President
By: /Laurie D. Flom/
Name: Laurie D. Flom
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /Merri Bernhardson/
Name: Merri Bernhardson
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /Bethann R. Halligan/
Name: Bethann R. Halligan
Title: Managing Director
THE FUJI BANK, LIMITED
By: /Peter L. Chinnici/
Name: Peter L. Chinnici
Title: Joint General Manager
PNC BANK, NATIONAL ASSOCIATION
By: /Karen C. Brogan/
Name: Karen C. Brogan
Title: Commercial Banking Officer<PAGE>
THE YASUDA TRUST AND BANKING CO.,
LTD.
By: /Joseph C. Meek/
Name: Joseph C. Meek
Title: First Vice President &
Manager
THE FIRST NATIONAL BANK OF MARYLAND
By: /Andrew W. Fish/
Name: Andrew W. Fish
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO DI
TORINO,
S.P.A.
By: /William DeAngelo/ /Robert
Wurster/
Name: William DeAngelo/Robert
Wurster
Title: F.V.P./F.V.P.
KREDIETBANK N.V.
By: /Robert Snauffer/
Name: Robert Snauffer
Title: Vice President
By: /John F. Donohoe/
Name: John F. Donohoe
Title: Assistant Treasurer
UNION BANK OF SWITZERLAND - CHICAGO
BRANCH
By: /Walter R. Wolff/
Name: Walter R. Wolff
Title: Managing Director
<PAGE>
WELLS FARGO BANK, N.A.
By: /Mathew Harvey/
Name: Mathew Harvey
Title: Assistant Vice President
BANCA DI ROMA, S.P.A.
By: /Aurora Pensa/
Name: Aurora Pensa
Title: Vice President
By: /Claudio Perna/
Name: Claudio Perna
Title: Vice President and Deputy
Manager
COMERICA BANK
By: /David L. Morrison/
Name: David L. Morrison
Title: Assistant Vice President
BANK OF AMERICA ILLINOIS
By: /MA Detrick/
Name: MA Detrick
Title: Vice President
<PAGE>
Confidential
3/14/96
Montgomery Ward Credit Program
Memorandum of Understanding
Summarized below are the principal terms and conditions agreed to
by Montgomery Ward & Co., Incorporated (MW) and General Electric
Capital Corporation (GECC) pursuant to which the MW Credit
Program will be transferred to the Monogram Credit Card Bank of
Georgia (Bank) and thereafter serviced by the Bank. This
memorandum describes the basic business deal, but does not
include all the terms and conditions to be included in the
definitive documentation governing the arrangement.
Cardholder Terms & Conditions
*APR: A Fixed Annual Percentage Rate (APR) of 22.6%
will be charged on entire account balances
subject to standard 1/40th payment terms after
a trigger purchase except for:
Starter Cards (including Marginal
accounts) - 26%
Chairman s Cards presently at an APR of
either 14.9% or 16.9% - no change
Iowa - 19.8%, Wisconsin - 18.0% (both opt
out states)
California, Illinois, Montana, Oklahoma,
Maine, Wyoming, Arkansas, Alabama,
Alaska - only new purchases will be
billed at exported rates.
Foreign Accounts - no change
1/50th extended payment terms - applicable
1/40th APR less one (1) basis point
Home Improvement - no change
Trigger purchases will begin in May for
approximately 90% of card base; new APRs will
be effective with the next billing.
To the extent that new Signature product sales
can be identified, these purchases will be
treated as trigger purchases. Signature
renewals, product service renewal sales and any
insurance sales will not be considered trigger
purchases.
Dual Balance Acount Treatment
Prior to a trigger purchase, all dual balances
will continue to be billed as before. Upon the
trigger purchase, the entire balance will be
assessed at 22.6% except in California,
Illinois, Montana, Oklahoma, Wyoming, and
Arkansas where existing balances will be
collapsed to the lower APR. In Connecticut,
Minnesota, Pennsylvania, and South Dakota, APRs
lower than 18% will remain and any APRs at 18%
or above will increase to 22.6%.<PAGE>
*Late Fees: Trigger purchase required before assessment of
exported late fee.
Trigger purchases begin in April 1996 for
approximately 90% of cardholders, new fees will
be effective on May delinquent bills.
Late fee of $15 per late/missed payment to be
charged except for:
- California,Iowa,New Jersey,Wisconsin - $10
- Pennsylvania - $12
- Indiana - $14.50
- Missouri - $10 or $5 if payment less than
$25
- Texas, Puerto Rico - $0 (zero)
- Foreign Accounts - $0 (zero)
A "silent" five day grace period applies except
for:
- California, Indiana, Colorado, DC,
Oklahoma, Utah, Missouri, New Jersey - 10
days
- Iowa - 30 days
- Pennsylvania - 34 days
A "real" five day grace period in Wisconsin.
California, Maine, and Wyoming require pay down
of entire existing balance prior to assessing
an exported late fee.
*Payment Terms: Except for Starter Cards (including Marginal
accounts), scheduled payment terms will remain
unchanged at standard 1/40th, $10.00 minimum
and extended 1/50th, $10.00 minimum on big
ticket purchases (presently greater than $400
for initial purchases and $200 for add-on
purchases). Starter Cards (including
Marginal accounts) to remain at 1/40th, but
scheduled minimum payment will be increased
from $10.00 to $20.00.
(Bank policy requires 90% of minimum payment
due to prevent an account from becoming
delinquent or aging further. This represents
an increase from the current policy which
requires 50% of minimum payment due.)
Client Program Agreement
*Term: New 15-year with 10 year written termination
notice from date of contract execution.
(Effectively extending current expiration date
by five years, from December 31, 2006 to
December 31, 2011).<PAGE>
*Maximum
Investment: The maximum investment amount will be increased
from $6.0 Billion to $7.0 Billion.
Pricing: No change in non-promotional credit sales -
will continue to be settled at face amount
(zero discount).
No change in Starter Card monthly and annual
settlements - a 2.00% discount will continue to
be charged monthly in those states where the
billed APR is less than 26%. Also, no change
in either no interest/no payment promotions or
after-the-fact-free (AFF) promotions - will
continue to be billed at 17.14% annualized
rate. No interest/no payment promotions will
be billed monthly and AFF will be billed at
time of finance charge reversal.
No change in overlimit transactions - MW pays
certain incremental charges associated with
selected overlimit transactions.
*Promo Reserve: To comply with regulatory requirements that
Bank not carry any interest-free loans, MW will
provide advance funding to Bank for the purpose
of establishing a reserve equivalent to two
months of estimated promotional finance charge
revenues, which is expected to be approximately
$3.5MM. Currently, a two month lag exists
between the cardholder billing date and receipt
of settlement payments from MW. The two-month
reserve requirement will be reviewed and
adjusted semi-annually if necessary.
Money Costs: Current money cost pass-through provision will
continue to apply - no money cost pass-through
unless the blended rate exceeds 10% as
specified in the current contract.
*Operating Expenses: No change from current contract - all
operating expenses, with the exception of
marketing administration, credit merchandising,
and in-store credit services, will be borne by
Bank.
Incremental "Signature only" operating expenses
to be billed to Signature including 10% mark-up
per current Signature letter agreement.
*Credit Marketing
Expenses: MW will pay vendor invoices directly as
received. Monthly, Bank will credit MW for (a)
39 basis points of that month s credit sales
plus a flat payment of $416,667, less (b) the
lesser of five hundredths percent (.05%) of
the year-to-date credit sales or the year-to-
date actual credit merchandising expenses, reduced by the
amounts paid year-to-date through the previous month for
credit marketing administration expenses.
*Competitive
Credit Offerings: GECC will have the right of first
refusal on all new credit programs and products
(i.e., co-branded cards, affinity cards,
secondary sourcing, etc.)
Cross Marketing: Signature will continue to receive 100% of all
revenues generated from the sale of Signature
products and services. MW will continued to
received 100% of all revenues generated from
the billing statement insert programs.
*Revenue Sharing: Upon conversion of the MW Credit Program to
the Bank, incremental revenues resulting from
the exportation of APRs and late fees will be
realized by the Bank. Both MW and GECC agree
to share such incremental realized revenues, as
well as any incremental realized revenues that
may occur due to increases in APRs or late fees
in the future. Notwithstanding the above,
there exists several previously agreed to
revenue sharing arrangements between the
parties.
Going forward, a revenue sharing program will
be developed which retains all previously
agreed to revenue sharing arrangements.
All incremental revenues realized from the Bank
conversion (exportation of APRs and late fees)
will be applied in the following order:
(1)To cover both parties out-of-pocket Bank
conversion expenses
(2)To cover all parties incremental ongoing
expenses including costs as applicable to
comply with Section 106 of the Bank
Holding Company Act Amendments of 1970
(Section 106), FDIC insurance, bank
overhead assessment, increased
state income tax rate, and MW s potential
loss of sales tax recapture benefits
(3)To cover any litigation and judgment
expenses arising from legal actions
related to the Bank conversion
(4)To cover both parties current year
unrestricted losses above 5.00%, including layers of loss
rollbacks beginning in '97
(5) To cover MW s current year losses
between 3.9% and 5.00%
(6) To MW to pay off loss sharing note (due
date to be extended beyond 2/98)
(7) Remaining revenues shared 20% MW and 80%
GECC
Either State or Federal law changes may
impact expected incremental revenues. MW and
GECC agree that any additions or takeaways
will affect the total pool of revenue
available for sharing.
*Loss Sharing: No change from current program agreement
except that losses over 8.0%, if any, are
included in the revenue sharing application
(item #4). However, Bank write-off policy
requires that accounts be written off at 7
payments due rolling 8 payments due (6 months
past due). Currently, MWCC writes off at 14
payments due rolling 15 payments due (13
months past due).
To spread out the effect of conforming with
Bank write-off policy, for contractual loss
sharing purposes, write-off timing will be
accelerated as follows:
Write-off At:
1996 14 Due Rolling 15 (no
change)
1997 11 Due Rolling 12
1998 9 Due Rolling 10
1999 8 Due Rolling 9
2000 & Beyond 7 Due Rolling 8
In any event, finance charges and late fees
will no longer be assessed on accounts once
those accounts have rolled 8 payments due.
CSP insurance may be assessed. If CSP
insurance is assessed, the Signature Group
agrees to pay 100% of related incremental
losses.
<PAGE>
Starter Card losses will be shared as in the
current agreement. However, MW will make a
minimum annual cash payment to GECC equal to
MW s share of Starter Card losses beginning
in 1997 (see Loss Note below).
*Loss Note: The term of the note will be extended from
February, 1998 to February, 2003. MW will
continue to pay interest on the note annually
and may continue to add to the note during
the 1996 transition year. Notwithstanding
prior contractual agreements, MW agrees to
apply its share of revenues from the 1992
rate increases in Texas, Florida, and
Washington to the note balance, as well as
the late fee increases effective 2/95 and
10/95, including MW s share of incremental
late fees generated during the entire year of
1996. In addition, MW will pay towards the
note at the end of 1996 the greater of $25
million or its share of Starter Card losses.
In each of the years 1997 through 2000, MW
will pay the amount specified below, plus its
share of Starter Card losses. In all years
beyond 2000, MW will continue to pay cash
equivalent to its share of Starter Card
losses, and any non-Starter Card loss sharing
greater than the incremental revenues per the
revenue sharing application (items #4 & #5).
Any incremental revenues per the revenue
sharing application (item #6) will be applied
towards the note balance. Based upon current
projections, this payment application will
pay off the note by 2002. MW will pay any
remaining note balance in February, 2003 in
cash.
Required Note Payment:
1997 $28MM
1998 $24MM
1999 $23MM
2000 $17MM
*Out-of-Pocket Bank
Conversion Expenses: All one-time, non-recurring conversion
expenses incurred by either party will be
funded with incremental revenues generated
from the exportation of
APRs and late fees per the revenue sharing
application (item #1). Such expenses will
include legal expenses, systems programming
expenses, cardholder notification costs,
obsolescence costs (MWCC stationery, card
carriers, etc.) and any operations-related
relocation/transfer expenses.
*Incremental Ongoing
Expenses: All incremental ongoing expenses associated
with the Bank conversion incurred by either
party will be funded with incremental
revenues generated from the exportation of
APRs and late fees per the revenue sharing
application (item #2). Such expenses will
include any costs to comply with Section 106,
Bank s FDIC insurance and overhead, GECC s
increased state income taxes, and MW's
potential loss of sales tax recapture
benefits.
* Denotes change from current Program Agreement.
Notwithstanding the above, Montgomery Ward Credit Corporation
(MWCC) will continue to purchase accounts and related
indebtedness from MW up to and including the date of the transfer
(currently targeted for April 1, 1996). Thereafter, the Bank
will extend credit directly to MW cardholders.
This memorandum reflects the terms and conditions upon which the
MW Credit Program will be transferred to the Bank. It is not
intended to be all inclusive and the transactions contemplated
hereby are subject to the receipt of all necessary approvals and
the negotiation, execution and delivery of final documentation
acceptable to both parties and their respective counsel. GECC
will guarantee the Bank s performance in the same manner as it
did for MWCC under the existing MW Credit Program.
It is understood that this memorandum contains confidential
information that should not be disclosed other than to those who
have a specific need to know, including those whos approval is
required to allow for the completion of the transaction.
General Electric Capital Corporation
/S/ GAIL N. LANIK
Name: Gail N. Lanik
Date: March 14, 1996
Agreed to and Accepted by:
Montgomery Ward & Co., Incorporated
/S/ JOHN L. WORKMAN
Name: John L. Workman
Date: March 15, 1996
Exhibit 10.(i)(I)(2)
March 19, 1996
To the Banks parties to the
Short Term Credit Agreement
referred to below
Re: Amendment to and Approval under 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, as amended (the "Short Term
Credit Agreement")
Gentlemen:
This letter constitutes an agreement amending the Short Term
Credit Agreement in certain respects. All terms when capitalized
and used herein and not otherwise defined herein shall have the
meaning ascribed to such terms in the Short Term Credit
Agreement.
The Company, GE Capital, MWCC and Monogram Credit Card Bank of
Georgia ("Monogram"), a subsidiary of GE Capital, intend to
replace the existing arrangements between MWCC and the Company
relative to the acquisition of receivables generated from the
sale of merchandise to the Company's customers as set forth in
the MWCC Receivables Purchase Agreement. Attached is a
Confidential Memorandum of Understanding, dated as of March 14,
1996, between the Company and GE Capital (the "Memorandum of
Understanding") outlining the new arrangement (the "Credit
Program"). The Credit Program will be formalized in an agreement
or agreements between Monogram and the Company (the "Monogram
Agreement"), an agreement or agreements between GE Capital and
the Company (the "GE Capital Agreement") and possibly an
agreement or agreements between MWCC and the Company (the "MWCC
Agreement"). GE Capital will guarantee the performances of the
respective obligations of Monogram and MWCC under the Monogram
Agreement and the MWCC Agreement, if any (collectively, the "GE
Capital Guaranties"). Upon the execution of the GE Capital
Agreement, the Monogram Agreement and the MWCC Agreement, if any
(together with the GE Capital Guaranties, collectively, the
"Retail Credit Program Agreement"), the existing MWCC Receivables
Purchase Agreement shall be terminated.
By the execution hereof, the Banks hereby approve (i) the
execution of the Retail Credit Program Agreement provided the
Retail Credit Program Agreement embodies in all material respects
the terms outlined in the Memorandum of Understanding except for
such changes in such terms or additions to such terms as the
Company may approve provided such changes or additions shall not
materially adversely affect the Banks and (ii) the termination of
the existing MWCC Receivables Purchase Agreement provided that
such termination is concurrent with the execution and effective
upon the effective date of the Retail Credit Program Agreement.
Within 30 days after the execution of the Retail Credit Program
Agreement and the termination of the existing MWCC Receivables
Purchase Agreement, the Company will deliver copies of the Retail
Credit Program Agreement to the Banks and the Agents certified as
true and correct by an Authorized Officer on behalf of the
Company.
In consideration of the Banks' approval of the execution of the
Retail Credit Program Agreement and the termination of the
existing MWCC Receivables Purchase Agreement, the Company, the
Banks and the Agents agree that effective upon the execution of
the Retail Credit Program Agreement and the termination of the
MWCC Receivables Purchase Agreement, on the terms set forth in
this letter agreement, the Short Term Credit Agreement is hereby
amended as follows:
1. Section 1.1 of the Short Term Credit Agreement is amended by
(i) deleting the definition of the MWCC Receivables Purchase
Agreement, (ii) by substituting "Retail Credit Program
Agreement" for "MWCC Receivables Purchase Agreement" in the
definition of Material Litigation and (iii) by adding the
following definitions:
"GE Capital Parties" means GE Capital, Monogram and
MWCC.
"Monogram" means Monogram Retail Credit Card Bank of
Georgia, a subsidiary of GE Capital.
"Memorandum of Understanding" means the "Memorandum of
Understanding" as defined in that certain letter
agreement dated March 19, 1996 among the Company, the
Banks and the Agents.
"Retail Credit Program Agreement" means the "Retail
Credit Program Agreement" as defined in that certain
letter agreement dated March 19, 1996 among the
Company, the Banks and the Agents, as such Retail
Credit Program Agreement may be amended, modified or
supplemented from time to time in a manner which does
not result in an Event of Default under Section
13.1(j)."
"Seller Notes" means the Seller Notes as defined in and
issued pursuant to the Account Purchase Agreement
between the Company and MWCC dated as of June 24, 1988,
as amended (including any amendments thereto pursuant
to the Retail Credit Program Agreement), together with
the Loss Note referred to in the Memorandum of
Understanding and issued pursuant to the Retail Credit
Program Agreement.
2. Sections 11.1(i), 11.2(a) and 15.3(c) of the Short Term
Credit Agreement are each amended by substituting "Retail
Credit Program Agreement" for "MWCC Receivables Purchase
Agreement" wherever such term appears therein.
3. Section 13.1(j) of the Short Term Credit Agreement is
amended to read in its entirety as follows:
(j) Retail Credit Program Agreement. (i) An
amendment which materially adversely affects the Banks
shall be made to the Retail Credit Program Agreement
without the prior written consent of the Required
Banks, including, without limitation, any amendment to
any provision thereto which secures any Seller Notes
(other than as permitted by clause (ii) of this Section
13.1(j)) or provides for the mandatory payment of such
Seller Notes on a date earlier than the date on which
such Seller Notes are payable as at March 14, 1996
(except as otherwise contemplated in the "Loss Note
Section" of the Memorandum of Understanding), or (ii)
any of the Seller Notes shall be secured by any
property or rights other than the receivables sold or
financed under the Retail Credit Program Agreement, and
collections and offset rights thereunder, or (iii) the
Retail Credit Program Agreement shall fail to remain in
full force and effect, or (iv) any default by the
Company under the Retail Credit Program Agreement
(after the expiration of any applicable grace period)
shall occur and be continuing which has not been waived
by the GE Capital Parties and which provides the GE
Capital Parties thereunder with the right to terminate
obligations of the GE Capital Parties to purchase
customer receivables thereunder from the Company and to
extend credit to the customers of the Company pursuant
thereto, or (v) the Company or the GE Capital Parties
shall give notice of termination or take any action to
terminate thereunder (other than the notice to
terminate the Retail Credit Program Agreement at the
expiration of the term thereof (or such term as
extended pursuant thereto) and other than a termination
by the Company pursuant to which a wind down or
transition of at least one year is provided).
4. Section 15.3 of the Short Term Credit Agreement is amended
by substituting "GE Capital Parties" for "MWCC".
Except as hereinabove expressly provided, all the terms and
provisions of the Short Term Credit Agreement shall remain in
full force and effect and all references therein and in any
related documents to the Short Term Credit Agreement shall
henceforth refer to the Short Term Credit Agreement as amended by
this letter agreement. This letter agreement shall be deemed
incorporated into, and a part of, the Short Term Credit
Agreement.
This letter agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. This letter agreement shall be governed by and
construed in accordance with the law of the State of Illinois.
This letter agreement may be executed in any number of
counterparts and by the different parties on separate
counterparts and each such counterpart shall be deemed to be an
original, but all such counterparts shall together constitute but one and
the same agreement.
If the foregoing is acceptable, please evidence your agreement
thereto by your execution hereof in the space provided below.
This letter agreement shall become effective upon the execution
by the Required Banks.
MONTGOMERY WARD & CO., INCORPORATED
BY /Carol J. Harms/
Carol J. Harms
Vice President & Treasurer
ACCEPTED AND APPROVED:
THE FIRST NATIONAL BANK OF CHICAGO,
in its individual capacity and in
its capacity as Documentary Agent
By: /Jeanette Ganousis/
Name: Jeanette Ganousis
Title: Senior Banker
THE BANK OF NEW YORK, in its
individual capacity and in its
capacity as Negotiated Loan Agent
By: /Michael Flannery/
Name: Michael Flannery
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent
By: /F.C.H. Ashby/
Name: F.C.H. Ashby
Title: Senior Manager Loan
Operations
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its
individual capacity and in its
capacity as Advisory Agent
By: /MA Detrick/
Name: MA Detrick
Title: Vice President
CIBC INC.
By: /David McGowan/
Name: David McGowan
Title: Director
NATIONSBANK OF NORTH CAROLINA
By: /Christopher B. Torie/
Name: Christopher B. Torie
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /Mark A. Thompson/
Name: Mark A. Thompson
Title: Vice President and Deputy
General Manager
<PAGE>
CREDIT LYONNAIS CHICAGO BRANCH
By: /Mary Ann Klemm/
Name: Mary Ann Klemm
Title: Vice President and Group
Head
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /Mary Ann Klemm/
Name: Mary Ann Klemm
Title: Vice President and Group
Head
BANCA COMMERCIALE ITALIANA, CHICAGO
BRANCH
By: /Julian M. Teodori/
Name: Julian M. Teodori
Title: Senior Vice President
By: /Matthew V. Trujillo/
Name: Matthew V. Trujillo
Title: Assistant Vice President
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By: /Takeshi Hemmi/
Name: Takeshi Hemmi
Title: Vice President
THE MITSUBISHI BANK, LIMITED,
CHICAGO BRANCH
By: /Noboru Kobayashi/
Name: Noboru Kobayashi
Title: Joint General Manager
<PAGE>
THE NORTHERN TRUST COMPANY
By: /David C. Blowers/
Name: David C. Blowers
Title: Vice President
THE SAKURA BANK, LTD.
By: /Hajime Miyagi/
Name: Hajime Miyagi
Title: Joint General Manager
THE SANWA BANK, LIMITED, CHICAGO
BRANCH
By: /Gordon R. Holtby/
Name: Gordon R. Holtby
Title: Vice President & Manager
SWISS BANK CORPORATION
By: /H. Clark Worthley/
Name: H. Clark Worthley
Title: Associate Director
By: /David J. Bergman/
Name: David J. Bergman
Title: SEC Executive Director
UNITED STATES NATIONAL BANK OF
OREGON
By: /Chris J. Karlin/
Name: Chris J. Karlin
Title: Vice President
<PAGE>
UNION BANK
By: /Richard A. Sutter/
Name: Richard A. Sutter
Title: Vice President
ABN AMRO BANK N.V.
By: /David C. Sagers/
Name: David C. Sagers
Title: Vice President
By: /Laurie D. Flom/
Name: Laurie D. Flom
Title: Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /Merri Bernhardson/
Name: Merri Bernhardson
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /Bethann R. Halligan/
Name: Bethann R. Halligan
Title: Managing Director
THE FUJI BANK, LIMITED
By: /Peter L. Chinnici/
Name: Peter L. Chinnici
Title: Joint General Manager
PNC BANK, NATIONAL ASSOCIATION
By: /Karen C. Brogan/
Name: Karen C. Brogan
Title: Commercial Banking Officer<PAGE>
THE YASUDA TRUST AND BANKING CO.,
LTD.
By: /Joseph C. Meek/
Name: Joseph C. Meek
Title: First Vice President
& Manager
THE FIRST NATIONAL BANK OF MARYLAND
By: /Andrew W. Fish/
Name: Andrew W. Fish
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO DI
TORINO,
S.P.A.
By: /William DeAngelo/ /Robert
Wurster/
Name: William DeAngelo/Robert
Wurster
Title: F.V.P./F.V.P.
KREDIETBANK N.V.
By: /Robert Snauffer/
Name: Robert Snauffer
Title: Vice President
By: /John F. Donohoe/
Name: John F. Donohoe
Title: Assistant Treasurer
UNION BANK OF SWITZERLAND - CHICAGO
BRANCH
By: /Walter R. Wolff/
Name: Walter R. Wolff
Title: Managing Director
<PAGE>
WELLS FARGO BANK, N.A.
By: /Mathew Harvey/
Name: Mathew Harvey
Title: Assistant Vice President
BANCA DI ROMA, S.P.A.
By: /Aurora Pensa/
Name: Aurora Pensa
Title: Vice President
By: /Claudio Perna/
Name: Claudio Perna
Title: Vice President and Deputy
Manager
COMERICA BANK
By: /David L. Morrison/
Name: David L. Morrison
Title: Assistant Vice President
BANK OF AMERICA ILLINOIS
By: /MA Detrick/
Name: MA Detrick
Title: Vice President
Confidential
3/14/96
Montgomery Ward Credit Program
Memorandum of Understanding
Summarized below are the principal terms and conditions agreed to
by Montgomery Ward & Co., Incorporated (MW) and General Electric
Capital Corporation (GECC) pursuant to which the MW Credit
Program will be transferred to the Monogram Credit Card Bank of
Georgia (Bank) and thereafter serviced by the Bank. This
memorandum describes the basic business deal, but does not
include all the terms and conditions to be included in the
definitive documentation governing the arrangement.
Cardholder Terms & Conditions
*APR: A Fixed Annual Percentage Rate (APR) of 22.6%
will be charged on entire account balances
subject to standard 1/40th payment terms after
a trigger purchase except for:
Starter Cards (including Marginal
accounts) - 26%
Chairman s Cards presently at an APR of
either 14.9% or 16.9% - no change
Iowa - 19.8%, Wisconsin - 18.0% (both opt
out states)
California, Illinois, Montana, Oklahoma,
Maine, Wyoming, Arkansas, Alabama,
Alaska - only new purchases will be
billed at exported rates.
Foreign Accounts - no change
1/50th extended payment terms - applicable
1/40th APR less one (1) basis point
Home Improvement - no change
Trigger purchases will begin in May for
approximately 90% of card base; new APRs will
be effective with the next billing.
To the extent that new Signature product sales
can be identified, these purchases will be
treated as trigger purchases. Signature
renewals, product service renewal sales and any
insurance sales will not be considered trigger
purchases.
Dual Balance Acount Treatment
Prior to a trigger purchase, all dual balances
will continue to be billed as before. Upon the
trigger purchase, the entire balance will be
assessed at 22.6% except in California,
Illinois, Montana, Oklahoma, Wyoming, and
Arkansas where existing balances will be
collapsed to the lower APR. In Connecticut,
Minnesota, Pennsylvania, and South Dakota, APRs
lower than 18% will remain and any APRs at 18%
or above will increase to 22.6%.
*Late Fees: Trigger purchase required before assessment of
exported late fee.
Trigger purchases begin in April 1996 for
approximately 90% of cardholders, new fees will
be effective on May delinquent bills.
Late fee of $15 per late/missed payment to be
charged except for:
- California,Iowa,New Jersey,Wisconsin - $10
- Pennsylvania - $12
- Indiana - $14.50
- Missouri - $10 or $5 if payment less than
$25
- Texas, Puerto Rico - $0 (zero)
- Foreign Accounts - $0 (zero)
A "silent" five day grace period applies except
for:
- California, Indiana, Colorado, DC,
Oklahoma, Utah, Missouri, New Jersey - 10
days
- Iowa - 30 days
- Pennsylvania - 34 days
A "real" five day grace period in Wisconsin.
California, Maine, and Wyoming require pay down
of entire existing balance prior to assessing
an exported late fee.
*Payment Terms: Except for Starter Cards (including Marginal
accounts), scheduled payment terms will remain
unchanged at standard 1/40th, $10.00 minimum
and extended 1/50th, $10.00 minimum on big
ticket purchases (presently greater than $400
for initial purchases and $200 for add-on
purchases). Starter Cards (including
Marginal accounts) to remain at 1/40th, but
scheduled minimum payment will be increased
from $10.00 to $20.00.
(Bank policy requires 90% of minimum payment
due to prevent an account from becoming
delinquent or aging further. This represents
an increase from the current policy which
requires 50% of minimum payment due.)
Client Program Agreement
*Term: New 15-year with 10 year written termination
notice from date of contract execution.
(Effectively extending current expiration date
by five years, from December 31, 2006 to
December 31, 2011).<PAGE>
*Maximum
Investment: The maximum investment amount will be increased
from $6.0 Billion to $7.0 Billion.
Pricing: No change in non-promotional credit sales -
will continue to be settled at face amount
(zero discount).
No change in Starter Card monthly and annual
settlements - a 2.00% discount will continue to
be charged monthly in those states where the
billed APR is less than 26%. Also, no change
in either no interest/no payment promotions or
after-the-fact-free (AFF) promotions - will
continue to be billed at 17.14% annualized
rate. No interest/no payment promotions will
be billed monthly and AFF will be billed at
time of finance charge reversal.
No change in overlimit transactions - MW pays
certain incremental charges associated with
selected overlimit transactions.
*Promo Reserve: To comply with regulatory requirements that
Bank not carry any interest-free loans, MW will
provide advance funding to Bank for the purpose
of establishing a reserve equivalent to two
months of estimated promotional finance charge
revenues, which is expected to be approximately
$3.5MM. Currently, a two month lag exists
between the cardholder billing date and receipt
of settlement payments from MW. The two-month
reserve requirement will be reviewed and
adjusted semi-annually if necessary.
Money Costs: Current money cost pass-through provision will
continue to apply - no money cost pass-through
unless the blended rate exceeds 10% as
specified in the current contract.
*Operating Expenses: No change from current contract - all
operating expenses, with the exception of
marketing administration, credit merchandising,
and in-store credit services, will be borne by
Bank.
Incremental "Signature only" operating expenses
to be billed to Signature including 10% mark-up
per current Signature letter agreement.
*Credit Marketing
Expenses: MW will pay vendor invoices directly as
received. Monthly, Bank will credit MW for (a)
39 basis points of that month s credit sales
plus a flat payment of $416,667, less (b) the
lesser of five hundredths percent (.05%) of
the year-to-date credit sales or the year-to-
date actual credit merchandising expenses, reduced by the
amounts paid year-to-date through the previous month for
credit marketing administration expenses.
*Competitive
Credit Offerings: GECC will have the right of first
refusal on all new credit programs and products
(i.e., co-branded cards, affinity cards,
secondary sourcing, etc.)
Cross Marketing: Signature will continue to receive 100% of all
revenues generated from the sale of Signature
products and services. MW will continued to
received 100% of all revenues generated from
the billing statement insert programs.
*Revenue Sharing: Upon conversion of the MW Credit Program to
the Bank, incremental revenues resulting from
the exportation of APRs and late fees will be
realized by the Bank. Both MW and GECC agree
to share such incremental realized revenues, as
well as any incremental realized revenues that
may occur due to increases in APRs or late fees
in the future. Notwithstanding the above,
there exists several previously agreed to
revenue sharing arrangements between the
parties.
Going forward, a revenue sharing program will
be developed which retains all previously
agreed to revenue sharing arrangements.
All incremental revenues realized from the Bank
conversion (exportation of APRs and late fees)
will be applied in the following order:
(1)To cover both parties out-of-pocket Bank
conversion expenses
(2)To cover all parties incremental ongoing
expenses including costs as applicable to
comply with Section 106 of the Bank
Holding Company Act Amendments of 1970
(Section 106), FDIC insurance, bank
overhead assessment, increased
state income tax rate, and MW s potential
loss of sales tax recapture benefits
(3)To cover any litigation and judgment
expenses arising from legal actions
related to the Bank conversion
(4)To cover both parties current year
unrestricted losses above 5.00%, including layers of loss
rollbacks beginning in ' 97
(5) To cover MW s current year losses
between 3.9% and 5.00%
(6) To MW to pay off loss sharing note (due
date to be extended beyond 2/98)
(7) Remaining revenues shared 20% MW and 80%
GECC
Either State or Federal law changes may
impact expected incremental revenues. MW and
GECC agree that any additions or takeaways
will affect the total pool of revenue
available for sharing.
*Loss Sharing: No change from current program agreement
except that losses over 8.0%, if any, are
included in the revenue sharing application
(item #4). However, Bank write-off policy
requires that accounts be written off at 7
payments due rolling 8 payments due (6 months
past due). Currently, MWCC writes off at 14
payments due rolling 15 payments due (13
months past due).
To spread out the effect of conforming with
Bank write-off policy, for contractual loss
sharing purposes, write-off timing will be
accelerated as follows:
Write-off At:
1996 14 Due Rolling 15 (no
change)
1997 11 Due Rolling 12
1998 9 Due Rolling 10
1999 8 Due Rolling 9
2000 & Beyond 7 Due Rolling 8
In any event, finance charges and late fees
will no longer be assessed on accounts once
those accounts have rolled 8 payments due.
CSP insurance may be assessed. If CSP
insurance is assessed, the Signature Group
agrees to pay 100% of related incremental
losses.
<PAGE>
Starter Card losses will be shared as in the
current agreement. However, MW will make a
minimum annual cash payment to GECC equal to
MW s share of Starter Card losses beginning
in 1997 (see Loss Note below).
*Loss Note: The term of the note will be extended from
February, 1998 to February, 2003. MW will
continue to pay interest on the note annually
and may continue to add to the note during
the 1996 transition year. Notwithstanding
prior contractual agreements, MW agrees to
apply its share of revenues from the 1992
rate increases in Texas, Florida, and
Washington to the note balance, as well as
the late fee increases effective 2/95 and
10/95, including MW s share of incremental
late fees generated during the entire year of
1996. In addition, MW will pay towards the
note at the end of 1996 the greater of $25
million or its share of Starter Card losses.
In each of the years 1997 through 2000, MW
will pay the amount specified below, plus its
share of Starter Card losses. In all years
beyond 2000, MW will continue to pay cash
equivalent to its share of Starter Card
losses, and any non-Starter Card loss sharing
greater than the incremental revenues per the
revenue sharing application (items #4 & #5).
Any incremental revenues per the revenue
sharing application (item #6) will be applied
towards the note balance. Based upon current
projections, this payment application will
pay off the note by 2002. MW will pay any
remaining note balance in February, 2003 in
cash.
Required Note Payment:
1997 $28MM
1998 $24MM
1999 $23MM
2000 $17MM
*Out-of-Pocket Bank
Conversion Expenses: All one-time, non-recurring conversion
expenses incurred by either party will be
funded with incremental revenues generated
from the exportation of
APRs and late fees per the revenue sharing
application (item #1). Such expenses will
include legal expenses, systems programming
expenses, cardholder notification costs,
obsolescence costs (MWCC stationery, card
carriers, etc.) and any operations-related
relocation/transfer expenses.
*Incremental Ongoing
Expenses: All incremental ongoing expenses associated
with the Bank conversion incurred by either
party will be funded with incremental
revenues generated from the exportation of
APRs and late fees per the revenue sharing
application (item #2). Such expenses will
include any costs to comply with Section 106,
Bank s FDIC insurance and overhead, GECC s
increased state income taxes, and MW's
potential loss of sales tax recapture
benefits.
* Denotes change from current Program Agreement.
Notwithstanding the above, Montgomery Ward Credit Corporation
(MWCC) will continue to purchase accounts and related
indebtedness from MW up to and including the date of the transfer
(currently targeted for April 1, 1996). Thereafter, the Bank
will extend credit directly to MW cardholders.
This memorandum reflects the terms and conditions upon which the
MW Credit Program will be transferred to the Bank. It is not
intended to be all inclusive and the transactions contemplated
hereby are subject to the receipt of all necessary approvals and
the negotiation, execution and delivery of final documentation
acceptable to both parties and their respective counsel. GECC
will guarantee the Bank s performance in the same manner as it
did for MWCC under the existing MW Credit Program.
It is understood that this memorandum contains confidential
information that should not be disclosed other than to those who
have a specific need to know, including those whos approval is
required to allow for the completion of the transaction.
General Electric Capital Corporation
/S/ GAIL N. LANIK
Name: Gail N. Lanik
Date: March 14, 1996
Agreed to and Accepted by:
Montgomery Ward & Co., Incorporated
/S/ JOHN L. WORKMAN
Name: John L. Workman
Date: March 15, 1996
Exhibit 10.(i)(K)(1)
March 20, 1996
The Industrial Bank of Japan, Limited
Chicago Branch
227 W. Monroe Street
Suite 2600
Chicago, IL 60606
Re: Amendment to and Approval under the Term Loan Agreement
dated as of September 29, 1995 between Montgomery Ward &
Co., Incorporated and The Industrial Bank of Japan, Limited,
Chicago Branch (the "Term Loan Agreement").
Gentlemen:
This letter constitutes an agreement amending the Term Loan
Agreement in certain respects. All terms when capitalized and
used herein and not otherwise defined herein shall have the
meaning ascribed to such terms in the Term Loan Agreement.
The Company, GE Capital, MWCC and Monogram Credit Card Bank of
Georgia ("Monogram"), a subsidiary of GE Capital, intend to
replace the existing arrangements between MWCC and the Company
relative to the acquisition of receivables generated from the
sale of merchandise to the Company's customers as set forth in
the MWCC Receivables Purchase Agreement. Attached is a
Confidential Memorandum of Understanding, dated as of March 14,
1996, between the Company and GE Capital (the "Memorandum of
Understanding") outlining the new arrangement (the "Credit
Program"). The Credit Program will be formalized in an agreement
or agreements between Monogram and the Company (the "Monogram
Agreement"), an agreement or agreements between GE Capital and
the Company (the "GE Capital Agreement") and possibly an
agreement or agreements between MWCC and the Company (the "MWCC
Agreement"). GE Capital will guarantee the performances of the
respective obligations of Monogram and MWCC under the Monogram
Agreement and the MWCC Agreement, if any (collectively, the "GE
Capital Guaranties"). Upon the execution of the GE Capital
Agreement, the Monogram Agreement and the MWCC Agreement, if any
(together with the GE Capital Guaranties, collectively, the
"Retail Credit Program Agreement"), the existing MWCC Receivables
Purchase Agreement shall be terminated.
By the execution hereof, the Bank hereby approves (i) the
execution of the Retail Credit Program Agreement provided the
Retail Credit Program Agreement embodies in all material respects
the terms outlined in the Memorandum of Understanding except for
such changes in such terms or additions to such terms as the
Company may approve provided such changes or additions shall not
materially adversely affect the Bank and (ii) the termination of
the existing MWCC Receivables Purchase Agreement provided that
such termination is concurrent with the execution and effective
upon the effective date of the Retail Credit Program Agreement.
Within 30 days after the execution of the Retail Credit Program
Agreement and the termination of the existing MWCC Receivables
Purchase Agreement, the Company will deliver a copy of the Retail
Credit Program Agreement to the Bank certified as true and
correct by an Authorized Officer on behalf of the Company.
In consideration of the Bank's approval of the execution of the
Retail Credit Program Agreement and the termination of the
existing MWCC Receivables Purchase Agreement, the Company and the
Bank agree that effective upon the execution of the Retail Credit
Program Agreement and the termination of the MWCC Receivables
Purchase Agreement, on the terms set forth in this letter
agreement, the Term Loan Agreement is hereby amended as follows:
1. Section 1.1 of the Term Loan Agreement is amended by (i)
deleting the definition of the MWCC Receivables Purchase
Agreement, (ii) by substituting "Retail Credit Program
Agreement" for "MWCC Receivables Purchase Agreement" in the
definition of Material Litigation and (iii) by adding the
following definitions:
"GE Capital Parties" means GE Capital, Monogram and
MWCC.
"Monogram" means Monogram Retail Credit Card Bank of
Georgia, a subsidiary of GE Capital.
"Memorandum of Understanding" means the "Memorandum of
Understanding" as defined in that certain letter
agreement dated March 20, 1996 between the Company and
the Bank.
"Retail Credit Program Agreement" means the "Retail
Credit Program Agreement" as defined in that certain
letter agreement dated March 20, 1996 between the
Company and the Bank, as such Retail Credit Program
Agreement may be amended, modified or supplemented from
time to time in a manner which does not result in an
Event of Default under Section 13.1(i)."
"Seller Notes" means the Seller Notes as defined in and
issued pursuant to the Account Purchase Agreement
between the Company and MWCC dated as of June 24, 1988,
as amended (including any amendments thereto pursuant
to the Retail Credit Program Agreement), together with
the Loss Note referred to in the Memorandum of
Understanding and issued pursuant to the Retail Credit
Program Agreement.
2. Sections 11.1(i), 11.2(a) and 15.3(c) of the Term Loan
Agreement are each amended by substituting "Retail Credit
Program Agreement" for "MWCC Receivables Purchase Agreement"
wherever such term appears therein.
3. Section 13.1(i) of the Term Loan Agreement is amended to
read in its entirety as follows:
(i) Retail Credit Program Agreement. (i) An
amendment which materially adversely affects the Bank
shall be made to the Retail Credit Program Agreement
without the prior written consent of the Bank,
including, without limitation, any amendment to any
provision thereto which secures any Seller Notes (other
than as permitted by clause (ii) of this Section
13.1(i) or provides for the mandatory payment of such
Seller Notes on a date earlier than the date on which
such Seller Notes are payable as at March 14, 1996
(except as otherwise contemplated in the "Loss Note
Section" of the Memorandum of Understanding), or (ii)
any of the Seller Notes shall be secured by any
property or rights other than the receivables sold or
financed under the Retail Credit Program Agreement, and
collections and offset rights thereunder, or (iii) the
Retail Credit Program Agreement shall fail to remain in
full force and effect, or (iv) any default by the
Company under the Retail Credit Program Agreement
(after the expiration of any applicable grace period)
shall occur and be continuing which has not been waived
by the GE Capital Parties and which provides the GE
Capital Parties thereunder with the right to terminate
obligations of the GE Capital Parties to purchase
customer receivables thereunder from the Company and to
extend credit to the customers of the Company pursuant
thereto, or (v) the Company or the GE Capital Parties
shall give notice of termination or take any action to
terminate thereunder (other than the notice to
terminate the Retail Credit Program Agreement at the
expiration of the term thereof (or such term as
extended pursuant thereto) and other than a termination
by the Company pursuant to which a wind down or
transition of at least one year is provided).
4. Section 15.3 of the Term Loan Agreement is amended by
substituting "GE Capital Parties" for "MWCC".
Except as hereinabove expressly provided, all the terms and
provisions of the Term Loan Agreement shall remain in full force
and effect and all references therein and in any related
documents to the Term Loan Agreement shall henceforth refer to
the Term Loan Agreement as amended by this letter agreement.
This letter agreement shall be deemed incorporated into, and a
part of, the Term Loan Agreement.
This letter agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. This letter agreement shall be governed by and
construed in accordance with the law of the State of Illinois.
If the foregoing is acceptable, please evidence your agreement
thereto by your execution of the duplicate original hereof in the
space provided below and your returning the same to me at
Montgomery Ward & Co., Incorporated, 844 N. Larrabee, 5-3,
Chicago, IL 6067l.
MONTGOMERY WARD & CO., INCORPORATED
BY /S/ Carol J. Harms
Carol J. Harms
Vice President & Treasurer
ACCEPTED AND APPROVED:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
CHICAGO BRANCH
By: /S/ Hiroaki Nakamura
Name: Hiroaki Nakamura
Title: Joint General Manager
<PAGE>
Confidential
3/14/96
Montgomery Ward Credit Program
Memorandum of Understanding
Summarized below are the principal terms and conditions agreed to
by Montgomery Ward & Co., Incorporated (MW) and General Electric
Capital Corporation (GECC) pursuant to which the MW Credit
Program will be transferred to the Monogram Credit Card Bank of
Georgia (Bank) and thereafter serviced by the Bank. This
memorandum describes the basic business deal, but does not
include all the terms and conditions to be included in the
definitive documentation governing the arrangement.
Cardholder Terms & Conditions
*APR: A Fixed Annual Percentage Rate (APR) of 22.6%
will be charged on entire account balances
subject to standard 1/40th payment terms after
a trigger purchase except for:
Starter Cards (including Marginal
accounts) - 26%
Chairman s Cards presently at an APR of
either 14.9% or 16.9% - no change
Iowa - 19.8%, Wisconsin - 18.0% (both opt
out states)
California, Illinois, Montana, Oklahoma,
Maine, Wyoming, Arkansas, Alabama,
Alaska - only new purchases will be
billed at exported rates.
Foreign Accounts - no change
1/50th extended payment terms - applicable
1/40th APR less one (1) basis point
Home Improvement - no change
Trigger purchases will begin in May for
approximately 90% of card base; new APRs will
be effective with the next billing.
To the extent that new Signature product sales
can be identified, these purchases will be
treated as trigger purchases. Signature
renewals, product service renewal sales and any
insurance sales will not be considered trigger
purchases.
Dual Balance Acount Treatment
Prior to a trigger purchase, all dual balances
will continue to be billed as before. Upon the
trigger purchase, the entire balance will be
assessed at 22.6% except in California,
Illinois, Montana, Oklahoma, Wyoming, and
Arkansas where existing balances will be
collapsed to the lower APR. In Connecticut,
Minnesota, Pennsylvania, and South Dakota, APRs
lower than 18% will remain and any APRs at 18%
or above will increase to 22.6%.<PAGE>
*Late Fees: Trigger purchase required before assessment of
exported late fee.
Trigger purchases begin in April 1996 for
approximately 90% of cardholders, new fees will
be effective on May delinquent bills.
Late fee of $15 per late/missed payment to be
charged except for:
- California,Iowa,New Jersey,Wisconsin - $10
- Pennsylvania - $12
- Indiana - $14.50
- Missouri - $10 or $5 if payment less than
$25
- Texas, Puerto Rico - $0 (zero)
- Foreign Accounts - $0 (zero)
A "silent" five day grace period applies except
for:
- California, Indiana, Colorado, DC,
Oklahoma, Utah, Missouri, New Jersey - 10
days
- Iowa - 30 days
- Pennsylvania - 34 days
A "real" five day grace period in Wisconsin.
California, Maine, and Wyoming require pay down
of entire existing balance prior to assessing
an exported late fee.
*Payment Terms: Except for Starter Cards (including Marginal
accounts), scheduled payment terms will remain
unchanged at standard 1/40th, $10.00 minimum
and extended 1/50th, $10.00 minimum on big
ticket purchases (presently greater than $400
for initial purchases and $200 for add-on
purchases). Starter Cards (including
Marginal accounts) to remain at 1/40th, but
scheduled minimum payment will be increased
from $10.00 to $20.00.
(Bank policy requires 90% of minimum payment
due to prevent an account from becoming
delinquent or aging further. This represents
an increase from the current policy which
requires 50% of minimum payment due.)
Client Program Agreement
*Term: New 15-year with 10 year written termination
notice from date of contract execution.
(Effectively extending current expiration date
by five years, from December 31, 2006 to
December 31, 2011).<PAGE>
*Maximum
Investment: The maximum investment amount will be increased
from $6.0 Billion to $7.0 Billion.
Pricing: No change in non-promotional credit sales -
will continue to be settled at face amount
(zero discount).
No change in Starter Card monthly and annual
settlements - a 2.00% discount will continue to
be charged monthly in those states where the
billed APR is less than 26%. Also, no change
in either no interest/no payment promotions or
after-the-fact-free (AFF) promotions - will
continue to be billed at 17.14% annualized
rate. No interest/no payment promotions will
be billed monthly and AFF will be billed at
time of finance charge reversal.
No change in overlimit transactions - MW pays
certain incremental charges associated with
selected overlimit transactions.
*Promo Reserve: To comply with regulatory requirements that
Bank not carry any interest-free loans, MW will
provide advance funding to Bank for the purpose
of establishing a reserve equivalent to two
months of estimated promotional finance charge
revenues, which is expected to be approximately
$3.5MM. Currently, a two month lag exists
between the cardholder billing date and receipt
of settlement payments from MW. The two-month
reserve requirement will be reviewed and
adjusted semi-annually if necessary.
Money Costs: Current money cost pass-through provision will
continue to apply - no money cost pass-through
unless the blended rate exceeds 10% as
specified in the current contract.
*Operating Expenses: No change from current contract - all
operating expenses, with the exception of
marketing administration, credit merchandising,
and in-store credit services, will be borne by
Bank.
Incremental "Signature only" operating expenses
to be billed to Signature including 10% mark-up
per current Signature letter agreement.
*Credit Marketing
Expenses: MW will pay vendor invoices directly as
received. Monthly, Bank will credit MW for (a)
39 basis points of that month s credit sales
plus a flat payment of $416,667, less (b) the
lesser of five hundredths percent (.05%) of
the year-to-date credit sales or the year-to-
date actual credit merchandising expenses, reduced by the
amounts paid year-to-date through the previous month for
credit marketing administration expenses.
*Competitive
Credit Offerings: GECC will have the right of first
refusal on all new credit programs and products
(i.e., co-branded cards, affinity cards,
secondary sourcing, etc.)
Cross Marketing: Signature will continue to receive 100% of all
revenues generated from the sale of Signature
products and services. MW will continued to
received 100% of all revenues generated from
the billing statement insert programs.
*Revenue Sharing: Upon conversion of the MW Credit Program to
the Bank, incremental revenues resulting from
the exportation of APRs and late fees will be
realized by the Bank. Both MW and GECC agree
to share such incremental realized revenues, as
well as any incremental realized revenues that
may occur due to increases in APRs or late fees
in the future. Notwithstanding the above,
there exists several previously agreed to
revenue sharing arrangements between the
parties.
Going forward, a revenue sharing program will
be developed which retains all previously
agreed to revenue sharing arrangements.
All incremental revenues realized from the Bank
conversion (exportation of APRs and late fees)
will be applied in the following order:
(1)To cover both parties out-of-pocket Bank
conversion expenses
(2)To cover all parties incremental ongoing
expenses including costs as applicable to
comply with Section 106 of the Bank
Holding Company Act Amendments of 1970
(Section 106), FDIC insurance, bank
overhead assessment, increased
state income tax rate, and MW s potential
loss of sales tax recapture benefits
(3)To cover any litigation and judgment
expenses arising from legal actions
related to the Bank conversion
(4)To cover both parties current year
unrestricted losses above 5.00%, including layers of loss
rollbacks beginning in ' 97
(5) To cover MW s current year losses
between 3.9% and 5.00%
(6) To MW to pay off loss sharing note (due
date to be extended beyond 2/98)
(7) Remaining revenues shared 20% MW and 80%
GECC
Either State or Federal law changes may
impact expected incremental revenues. MW and
GECC agree that any additions or takeaways
will affect the total pool of revenue
available for sharing.
*Loss Sharing: No change from current program agreement
except that losses over 8.0%, if any, are
included in the revenue sharing application
(item #4). However, Bank write-off policy
requires that accounts be written off at 7
payments due rolling 8 payments due (6 months
past due). Currently, MWCC writes off at 14
payments due rolling 15 payments due (13
months past due).
To spread out the effect of conforming with
Bank write-off policy, for contractual loss
sharing purposes, write-off timing will be
accelerated as follows:
Write-off At:
1996 14 Due Rolling 15 (no
change)
1997 11 Due Rolling 12
1998 9 Due Rolling 10
1999 8 Due Rolling 9
2000 & Beyond 7 Due Rolling 8
In any event, finance charges and late fees
will no longer be assessed on accounts once
those accounts have rolled 8 payments due.
CSP insurance may be assessed. If CSP
insurance is assessed, the Signature Group
agrees to pay 100% of related incremental
losses.
<PAGE>
Starter Card losses will be shared as in the
current agreement. However, MW will make a
minimum annual cash payment to GECC equal to
MW s share of Starter Card losses beginning
in 1997 (see Loss Note below).
*Loss Note: The term of the note will be extended from
February, 1998 to February, 2003. MW will
continue to pay interest on the note annually
and may continue to add to the note during
the 1996 transition year. Notwithstanding
prior contractual agreements, MW agrees to
apply its share of revenues from the 1992
rate increases in Texas, Florida, and
Washington to the note balance, as well as
the late fee increases effective 2/95 and
10/95, including MW s share of incremental
late fees generated during the entire year of
1996. In addition, MW will pay towards the
note at the end of 1996 the greater of $25
million or its share of Starter Card losses.
In each of the years 1997 through 2000, MW
will pay the amount specified below, plus its
share of Starter Card losses. In all years
beyond 2000, MW will continue to pay cash
equivalent to its share of Starter Card
losses, and any non-Starter Card loss sharing
greater than the incremental revenues per the
revenue sharing application (items #4 & #5).
Any incremental revenues per the revenue
sharing application (item #6) will be applied
towards the note balance. Based upon current
projections, this payment application will
pay off the note by 2002. MW will pay any
remaining note balance in February, 2003 in
cash.
Required Note Payment:
1997 $28MM
1998 $24MM
1999 $23MM
2000 $17MM
*Out-of-Pocket Bank
Conversion Expenses: All one-time, non-recurring conversion
expenses incurred by either party will be
funded with incremental revenues generated
from the exportation of
APRs and late fees per the revenue sharing
application (item #1). Such expenses will
include legal expenses, systems programming
expenses, cardholder notification costs,
obsolescence costs (MWCC stationery, card
carriers, etc.) and any operations-related
relocation/transfer expenses.
*Incremental Ongoing
Expenses: All incremental ongoing expenses associated
with the Bank conversion incurred by either
party will be funded with incremental
revenues generated from the exportation of
APRs and late fees per the revenue sharing
application (item #2). Such expenses will
include any costs to comply with Section 106,
Bank s FDIC insurance and overhead, GECC s
increased state income taxes, and MW's
potential loss of sales tax recapture
benefits.
* Denotes change from current Program Agreement.
Notwithstanding the above, Montgomery Ward Credit Corporation
(MWCC) will continue to purchase accounts and related
indebtedness from MW up to and including the date of the transfer
(currently targeted for April 1, 1996). Thereafter, the Bank
will extend credit directly to MW cardholders.
This memorandum reflects the terms and conditions upon which the
MW Credit Program will be transferred to the Bank. It is not
intended to be all inclusive and the transactions contemplated
hereby are subject to the receipt of all necessary approvals and
the negotiation, execution and delivery of final documentation
acceptable to both parties and their respective counsel. GECC
will guarantee the Bank s performance in the same manner as it
did for MWCC under the existing MW Credit Program.
It is understood that this memorandum contains confidential
information that should not be disclosed other than to those who
have a specific need to know, including those whos approval is
required to allow for the completion of the transaction.
General Electric Capital Corporation
/S/ GAIL N. LANIK
Name: Gail N. Lanik
Date: March 14, 1996
Agreed to and Accepted by:
Montgomery Ward & Co., Incorporated
/S/ JOHN L. WORKMAN
Name: John L. Workman
Date: March 15, 1996
Exhibit 10.(iv)(J)
MONTGOMERY WARD SPECIAL RETENTION PLAN
PARTICIPANT: [NAME OF PARTICIPANT]
DATE OF AGREEMENT: 3/1/96
PURPOSE OF PLAN
The Special Retention Plan is provided to key executives of the
Company to encourage their continued employment for the Retention
Period. The Company expects that this Plan will enhance the
selected participants economic security while remaining with the
Company and provide a stable Executive Team throughout the
Retention Period.
RETENTION AWARD
The participant will receive a Retention Award of [50% to 75% of
base salary] if the participant remains with the Company for one
year from the date of Agreement above. This Retention Award will
be payable immediately if the participant should be terminated by
the Company for any reason other than "Cause" as defined in the
Senior Officer Severance Plan or any voluntary resignation. If
the Company has a Change of Control prior to the completion of
the entire Retention Period, the Retention Award will be payable
upon the Closing Date of such transaction.
ADDITIONAL PROVISIONS
1.) This Plan is provided in addition to any other salary,
incentives, benefits or perquisite plans in which you
participate and does not alter such plans.
2.) If you leave the Company voluntarily or are terminated
for "Cause" prior to the end of the entire Retention
Period or prior to an intervening sale of the Company,
no payment will be due from the Plan.
3.) This Plan does not create an Employment Contract and
does not alter the Employment-At-Will relationship
between the Company and the participant. It merely
provides compensation for meeting the conditions of the
award.
4.) This Plan is confidential and is not to be discussed
with anyone other than the Chairman and CEO or the EVP
Human Resources.
[NAME OF PARTICIPANT] IS SELECTED FOR PARTICIPATION IN THE
SPECIAL RETENTION PLAN.
/s/ Bernard F. Brennan
March 1, 1996
I understand the terms and conditions of this Plan and I accept
participation in the Special Retention Plan and agree to the
Terms and Conditions of the Plan.
/s/ [Name of Participant]
March 1, 1996
Exhibit 10.(iv)(K)
March 1, 1996
John Workman
EVP & Chief Financial Officer
Montgomery Ward
Dear John:
This letter is a supplement to the Change of Control Security
Plan in which you are a participant. In recognition of your
valuable contributions to Montgomery Ward in your position as
Chief Financial Officer and for the important role you would need
to play with respect to any negotiations with respect to a sale
or change of control of the Company, if Montgomery Ward concludes
a sale or change of control transaction prior to December 31,
1996, you will receive, as a supplement to your benefits under
the security plan, the following:
1. A one-time bonus payment of $775,000 (after taxes).
The gross-up will be 36% for federal and 3% for state
taxes.
2. A loan from Montgomery Ward for up to $250,000. The
loan will be for one year and have an interest rate
equal to "prime" on the date you receive the loan. The
principal and interest will be due in a balloon payment
at the end of one year.
This special supplement is intended to provide you an equitable
opportunity, in the event of any sale or change of control of the
Company, to truly benefit from the value you have added to
Montgomery Ward since the purchase in 1988. However, this
agreement is highly confidential and should not be discussed with
anyone except Bob Kasenter and me.
Sincerely,
/s/ Bernie Brennan
Exhibit 10.(iv)(L)
MONTGOMERY WARD CHANGE OF CONTROL SECURITY PLAN
PARTICIPANT: [NAME OF PARTICIPANT]
PURPOSE OF PLAN
This Plan is created to provide the selected executives with
financial security in the event of the sale or Change of Control
of the Company. Additionally, the Plan is designed to encourage
the participant's cooperation with any marketing and sale which
may be undertaken with respect to the Company and the
continuation of the successful operation of the Company during
and after any such sale.
All benefits of this Plan are due only if the Company is sold or
has a Change of Control and the participant is a "Qualified
Participant" on the Closing Date of such transaction.
A "Qualified Participant" must either be actively employed by the
Company on the Closing Date of a transaction or been terminated
for reasons other than voluntary resignation or "Cause" as
defined in the Senior Officer Severance Plan within one year of
the Closing Date of a transaction.
PLAN BENEFITS
In the event of a sale or Change of Control of the Company, you
will be eligible for:
1.) Sale Bonus
A Sale Bonus of [one-third of base salary] is payable on the
Closing Date of such transaction. In addition, you are
eligible to receive a Discretionary Award supplement of up
to [one-third of base salary] which will be based upon an
evaluation of your contribution and cooperation in such a
sale of the Company. The Discretionary Award supplement
amount will be recommended by the Chairman and C.E.O. with
the approval of the Board of Directors prior to the Closing
Date.
2.) Enhanced Severance Plan
Upon the completion of such a sale of the Company, you will
receive an enhanced Severance Plan that will provide an
additional twelve months of base salary above the normal
Senior Officer Severance Plan coverage if you are either
terminated by the Company for any reason other than
voluntary resignation or "Cause" as defined above; or you
are "demoted" during the first two years following a Change
of Control. For purposes of this Plan, "demoted" is defined
as any negative change to the participant's position
responsibilities, Job Title, Compensation, Benefits or a
relocation more than 50 miles from Chicago without the
participant's prior written agreement to such change.
If you are separated under the conditions of this provision,
you will also receive:
A.) Continuation of all your benefits for the entire
severance period at the Associate's premium rates.
B.) Executive Outplacement Services consistent with past
executive plans and capped at $20,000 cost to the
Company.
C.) Continuation of Tax Preparation and Financial Planning
Services Plan for one year.
ADDITIONAL PROVISIONS
1.) This Plan is a supplement to the normal Senior Officer
Severance Plan and does not diminish the benefits of
that plan in any way.
2.) This Plan will terminate two years and one month after
December 31, 1998 unless specifically renewed.
3.) This Plan does not create an Employment Contract and
does not alter the Employment-At-Will relationship
between the Company and the Participant. It only
provides the benefits stated if conditions are met
while the participant is employed by the Company under
the terms of this Plan.
4.) This Plan is confidential and is not to be discussed
with anyone other than the Chairman and CEO or the
Executive Vice President Human Resources.
[NAME OF PARTICIPANT] IS SELECTED TO PARTICIPATE IN THE
CHANGE OF CONTROL SECURITY PLAN.
/s/ Bernard F. Brennan
March 1, 1996
I understand the terms and conditions of this Plan and I accept
participation in the Change of Control Security Plan and agree to
the terms and conditions of the Plan.
/s/ [Name of Participant]
March 1, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 63
<SECURITIES> 331
<RECEIVABLES> 191
<ALLOWANCES> 0
<INVENTORY> 1569
<CURRENT-ASSETS> 0
<PP&E> 2070
<DEPRECIATION> 722
<TOTAL-ASSETS> 4935
<CURRENT-LIABILITIES> 0
<BONDS> 0
175
0
<COMMON> 1
<OTHER-SE> 634
<TOTAL-LIABILITY-AND-EQUITY> 4935
<SALES> 1253
<TOTAL-REVENUES> 1435
<CGS> 1038
<TOTAL-COSTS> 1038
<OTHER-EXPENSES> 452
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> (77)
<INCOME-TAX> (29)
<INCOME-CONTINUING> (48)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48)
<EPS-PRIMARY> (1.27)
<EPS-DILUTED> (1.27)
</TABLE>
