<PAGE>
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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 29, 1997
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 30, 1997 the Registrant had 18,324,522 shares of Class A Common
Stock and 25,000,000 shares of Class B Common Stock of the Registrant
outstanding.
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<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX
Page
Montgomery Ward Holding Corp.
Consolidated Statement of Income................................... 2
Consolidated Balance Sheet......................................... 3
Consolidated Statement of Cash Flows............................... 4
Notes to Consolidated Financial Statements......................... 6
1
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
March 29, March 30,
1997 1996
--------- ---------
<S> <C> <C>
(Millions, except per share amounts)
Revenues
Net sales, including leased and
licensed department sales........................... $1,119 $1,253
Direct response marketing revenues,
including insurance................................. 210 182
------ ------
Total Revenues.................................... 1,329 1,435
------ ------
Costs and Expenses
Cost of goods sold, including net
occupancy and buying expense........................ 997 1,038
Operating, selling, general and
administrative expenses, including
benefits and losses of direct
response operations (Note 4)........................ 525 452
Interest expense....................................... 33 22
------ ------
Total Costs and Expenses........................... 1,555 1,512
------ ------
Loss Before Income Taxes............................... (226) (77)
Income Tax Benefit..................................... (85) (29)
------ ------
Net Loss............................................... (141) (48)
Preferred Stock Dividend Requirements (Note 5)......... 3 3
------ ------
Net Loss Applicable to
Common Shareholders................................... $ (144) $ (51)
====== ======
Net Loss per Common Share (Note 2)
Class A............................................... $(3.71) $(1.27)
Class B............................................... $(3.05) $(1.07)
Cash dividends per Common Share........................ $ - $ -
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 29, December 28,
1997 1996
--------- -----------
ASSETS
(Millions)
<S> <C> <C>
Cash and cash equivalents........................... $ 96 $ 32
Short-term investments.............................. 4 3
Investments of insurance operations................. 276 317
------ ------
Total Cash and Investments..................... 376 352
Trade and other accounts receivable................. 174 213
Accounts and notes receivable from affiliates....... 11 13
------ ------
Total Receivables.............................. 185 226
Merchandise inventories............................. 1,402 1,545
Prepaid pension cost................................ 355 351
Properties, plant and equipment, net of
accumulated depreciation and amortization.......... 1,297 1,308
Direct response and insurance acquisition costs..... 599 603
Other assets........................................ 510 494
Prepaid deferred income taxes....................... 44 -
------ ------
Total Assets................................... $4,768 $4,879
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt..................................... $1,437 $1,028
Trade accounts payable.............................. 1,340 1,585
Federal income taxes payable........................ 4 4
Accrued liabilities and other obligations........... 1,148 1,228
Insurance policy claim reserves..................... 230 227
Long-term debt...................................... 85 87
Obligations under capital leases.................... 58 60
Deferred income taxes............................... - 52
------ ------
Total Liabilities.............................. 4,302 4,271
Commitments and Contingent Liabilities (Note 6)
Redeemable Preferred Stock (Note 5)................. 175 175
Shareholders' Equity
Common stock....................................... 1 1
Capital in excess of par value..................... 53 53
Retained earnings.................................. 364 509
Unrealized gain on marketable securities.......... 12 9
Less: Treasury stock, at cost.................... (139) (139)
------ ------
Total Shareholders' Equity................... 291 433
------ ------
Total Liabilities and Shareholders' Equity.......... $4,768 $4,879
====== ======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 13-Week
Period Ended
March 29, March 30,
(Millions) 1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................. $ (141) $ (48)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization.......................... 31 31
Amortization of Goodwill............................... 2 6
Amortization of Direct response and
insurance acquisition costs........................... 61 42
Deferred income taxes.................................. (96) -
------- ------
Net (loss) income adjusted for non-cash expenses..... (143) 31
------- ------
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade and other accounts receivable................... 39 12
Accounts and notes receivable from affiliates......... 2 10
Merchandise inventories............................... 143 201
Prepaid pension cost.................................. (4) (4)
Federal income taxes receivable, net.................. - (31)
Direct response insurance acquisition costs........... (57) (64)
Other assets.......................................... (16) (10)
Increase (decrease) in:
Trade accounts payable................................ (245) (494)
Accrued liabilities and other obligations............. (77) (57)
Insurance policy claim reserves....................... 3 6
------- ------
Net cash used for operations........................ (355) (400)
------- ------
Cash flows from (used for) investing activities:
Investment in Merchant Partners.......................... - (2)
Acquisition of Amoco Enterprises......................... - (102)
Purchase of short-term investments....................... (43) (9)
Purchase of investments of insurance operations.......... (101) (104)
Sale of short-term investments........................... 42 9
Sale of investments of insurance operations.............. 142 117
Capital expenditures..................................... (20) (11)
Disposition of properties, plant and
equipment, net......................................... - 1
------- ------
Net cash from (used for) investing activities....... $ 20 $ (101)
------- ------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the 13-Week
Period Ended
March 29, March 30,
(Millions) 1997 1996
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from short-term borrowings, net......... $ 409 $ 541
Payments of long-term debt....................... (2) (1)
Payments of obligations under capital leases..... (2) (1)
Proceeds from issuance of common stock........... - 1
Cash dividends paid.............................. (6) (3)
Purchase of treasury stock, at cost.............. - (10)
--------- ---------
Net cash provided by financing activities...... 399 527
--------- ---------
Increase in cash and cash equivalents............. 64 26
Cash and cash equivalents at beginning of period.. 32 37
--------- ---------
Cash and cash equivalents at end of period........ $ 96 $ 63
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes.................................... $ - $ 1
Interest........................................ $ 19 $ 23
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
</TABLE>
See notes to consolidated financial statements.
5
<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 29, 1997 and the Statements of
Income and Cash Flows for the three months ended March 29, 1997 and March
30, 1996 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 the 1996 Annual Report on
Form 10-K of Montgomery Ward Holding Corp. (the "Company"). Capitalized
terms not otherwise defined herein have the meaning ascribed to such terms
in the 1996 Annual Report on Form 10-K. Certain prior period amounts have
been reclassified to be comparable with the current period presentation.
2. Net (Loss) Per Common Share
Net (Loss) per common share is computed as follows:
For the 13-Week
Period Ended
March 29, 1997
Class A Class B
Net (Loss) applicable to Common $(68) $(76)
Shareholders......................
Weighted average number of common
shares outstanding........................ 18,326,019 25,000,000
Net (Loss) per share................ $(3.71) $3.05)
For the 13-Week
Period Ended
March 30, 1996
Class A Class B
Net Loss applicable to Common $(24) $(27)
Shareholders......................
Weighted average number of common
shares outstanding....................... 19,155,678 25,000,000
Net (Loss) per share................ $(1.27) $(1.07)
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." The
statement is effective for financial statements for periods ending after
December 15, 1997, and changes the method in which earnings per share will
be determined and presented in the financial statements. Adoption of this
statement by the Company will not have a material impact on earnings per
share.
6
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
3. Liquidity
The Company had a net loss of $141 for the 13-week period ending March 29,
1997 and its short term debt increased by $409 from December 28, 1996. An
amendment to the Company's bank agreements was required at year end 1996
and was obtained. Due to the Company's worsening financial condition,
waivers were required and obtained for the first quarter of 1997. It will
likely be necessary for the Company to obtain amendments or waivers with
respect to the second quarter of fiscal 1997.
The Company intends to improve its financial condition and reduce its
dependence on borrowing by slowing expansion, controlling expenses, closing
certain unprofitable stores and continuing to implement its inventory
reduction program. Management is in the process of reevaluating the
Company's merchandising, marketing, store operations and real estate
strategies. The Company is also considering the sale of certain operating
units as a means of generating cash. The Company is actively involved in
negotiations with respect to the sale of certain of these units, including
The Signature Group. Future cash is also expected to continue to be
provided by ongoing operations, sales of receivables under the Agreements
with Monogram Credit Card Bank of Georgia ("Monogram") and Montgomery Ward
Credit Corporation ("MWCC"), borrowings under revolving loan facilities and
vendor financing programs.
The Company is currently in discussions with financing sources with a view
toward a longer term solution to its liquidity problems and obtaining
refinancing for all or a substantial portion of its outstanding
indebtedness, including a total of $1,437 which will mature on or about
August 29, 1997. This would include repayment of the current bank
borrowings and amounts outstanding under the Note Purchase Agreements. The
Company's management is highly confident that the indebtedness can be
refinanced. The Company's largest shareholder, GE Capital, also expects the
Company to be able to refinance such indebtedness. However, there can be no
assurance that such refinancing can be obtained or, if obtained, will be on
terms favorable to the Company or that amendments or waivers required to
maintain compliance with the existing agreements can be obtained.
4. Insurance, Benefits and Losses
Operating, selling, general and administrative expenses include benefits
and losses related to direct response marketing operations of $34 and $39
for the 13-week periods ended March 29, 1997 and March 30, 1996,
respectively.
7
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
5. Preferred Stock
On January 31, 1996, GE Capital exercised an exchange option which allowed
it to exchange 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 General Electric Capital Corporation ("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.
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.
On April 29, 1997 the Company, Montgomery Ward and Lechmere, were served
with a complaint, purporting to represent a nationwide class, filed by
certain bankrupt credit card holders of Montgomery Ward and Lechmere credit
cards. The complaint alleged that the Company, Montgomery Ward and Lechmere
benefited from the actions taken by Hurley State Bank ("Hurley"),
Lechmere's previous credit card provider, MWCC and Monogram (both of which
are affiliates of GE Capital), and Montgomery Ward's and Lechmere's current
credit card providers in that the recoveries received from the bankrupt
credit card holders, allegedly in violation of the bankruptcy laws dealing
with reaffirmations ultimately reduced Montgomery Ward's and Lechmere's
loss sharing obligations. Hurley, MWCC and Monogram took all actions
related to such bankruptcy reaffirmations and neither the Company nor any
of its subsidiaries took any such actions. Management believes that the
indemnification obligations contained in its various agreements with Hurley
and with MWCC and Monogram will relieve Lechmere, Montgomery Ward and the
Company of any financial obligations related to the acts alleged in the
complaint.
8
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Millions of dollars, except per share amounts)
7. Customer Credit Agreement
Montgomery Ward entered into a Bank Credit Card Program Agreement (Card
Agreement) effective April 1, 1996 with Monogram and an Account-Related
Agreement (Account Related Agreement) effective April 1, 1996 with MWCC
(collectively referred to as the Agreements) pursuant to which Monogram and
MWCC (collectively referred to as the "Montgomery Ward Credit Companies"),
both of which are affiliates of GE Capital, make payments to Montgomery
Ward as to the receivables generated by sales to customers of Montgomery
Ward, its affiliates and licensees who utilize the Montgomery Ward private
label credit card, and pursuant to which Agreements the Montgomery Ward
Credit Companies provide services to Montgomery Ward. Under the Agreements,
Monogram has the exclusive right to operate the Montgomery Ward private
label credit card system and the obligation to pay to Montgomery Ward the
face amount of Monogram's receivables generated by the Montgomery Ward
private label credit card system, up to $7,000 outstanding at any time. If
Montgomery Ward desires to receive payment for receivables generated by the
Montgomery Ward private label credit card system at any time when
Montgomery Ward Credit Companies own $7,000 or more of such receivables and
do not desire to finance additional receivables, alternative arrangements,
such as the sale of receivables to banks or other financial institutions,
would be required unless Monogram agrees to fund the excess.
Montgomery Ward's subsidiary, Lechmere entered into an Interim Consumer
Credit Card Program Agreement (Lechmere Agreement) effective March 13, 1996
with Monogram pursuant to which Monogram makes payments to Lechmere in the
face amount of Monogram's receivables generated by sales to customers of
Lechmere who utilize the Lechmere private label credit card system that is
provided by Monogram pursuant to the Lechmere Agreement. (The Lechmere
Agreement provides that it will terminate upon the earlier of May 31,
1997 or the execution of a long-term agreement between the parties.) A term
sheet was executed on March 7, 1997, outlining the major provisions that
the parties intend to incorporate in the long-term agreement. The term
sheet contemplates a long-term agreement for a fifteen year term which
would continue thereafter from year to year unless either party gives ten
years prior notice of its election to terminate. The term sheet further
provides that Montgomery Ward will (i) be responsible for 50% of credit
losses that are between 4.25% and 8.0% of average outstanding receivables,
(ii) receive a one time payment of $3 million in consideration of entering
into the agreement, (iii) be responsible for a payment to Monogram of
approximately $2.5 million representing 50% of the reserve established when
Monogram purchased the Lechmere portfolio from the previous provider of the
Lechmere private label credit card, and (iv) receive 50% of the net income
generated from the portfolio in excess of a 17.5% return.
The performance of the respective obligations of MWCC and Monogram under
the Agreements and the Lechmere Agreement have been guaranteed by GE
Capital.
8. Inventory
The Company changed its method of valuing inventory in 1996 from the retail
inventory Last In-First Out (LIFO) method to the retail inventory First
In-First Out (FIFO) method. The impact of this change had no impact on the
first quarter of 1996 results of operations as previously reported.
9
<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
The following discussion and analysis of results of operations for the
Company compares the first quarter of 1997 to the first quarter of 1996.
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.
The Company's business is seasonal, with approximately 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.
Forward-Looking Statements
Information included in this Report on Form 10-Q may constitute forward-
looking statements that involve a number of risks and uncertainties. From
time to time, information provided by the Company or statements made by its
employees may contain other forward-looking statements. Factors that could
cause actual results to differ materially from the forward-looking
statements include but are not limited to: general economic conditions
including inflation, consumer debt levels, trade restrictions and interest
rate fluctuations; competitive factors including pricing pressures,
technological developments and products offered by competitors; inventory
risks due to changes in market demand or the Company's business strategies;
and changes in effective tax rates. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the date made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Results of Operations
First Quarter 1997 Compared with First Quarter 1996
The Company's performance reflected difficult competitive conditions with
the consolidated net loss of $141, increasing $93 from the first quarter
1996 net loss of $48. In the first quarter of 1996, the Company accelerated
efforts to reduce and redeploy inventory to allow for a shift in focus to
items the Company believes will provide higher turnover and improved
merchandise assortments in the future. Aggressive markdowns and promotional
advertising to liquidate inventory were continued in the first quarter of
1997.
10
<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 1997 Compared with First Quarter 1996
While these actions have had an adverse earnings impact, they are
generating positive cash flows. The Company aggressively identified and
began to liquidate discontinued and problem merchandise in the fourth
quarter of 1996. The total amount of the inventory identified at the
beginning of the fourth quarter of 1996 was more than $300. As of March 29,
1997, $87 of this inventory remained, for which there was a reserve of $51
available. The Company believes that the liquidation of this inventory
should position it with balanced inventory assortments to execute its
strategic plan in future periods. However, the Company anticipates that the
trends resulting from competitive pressures underlying declining revenues
and margin rates will continue in fiscal 1997. The consolidated net loss
applicable to common shareholders was $144 versus $51 in the first quarter
of 1996.
Consolidated total revenues (net sales and direct response marketing
revenues, including insurance) were $1,329 compared with $1,435 in the
first quarter of 1996, decreasing by $106 or 7%. The $106 total revenue
decrease consisted of a $134 decrease in net sales and a $28 increase in
direct marketing revenues. The change in total net sales represented an 11%
decline. Specifically, in the Montgomery Ward retail stores, Apparel sales
declined 5%, Jewelry sales declined 5%, Home and Furniture sales declined
10%, Electronics sales declined 24%, Appliances sales declined 4% and
Automotive sales declined 14%. The Company believes that the decline in net
sales in the first quarter of 1997 reflected a decline in market share
compared to competitors. The increase in direct response marketing revenues
was primarily due to increased clubs' membership.
Gross margin (net sales less cost of goods sold) dollars were $122, a
decrease of $93, or 43%, from the first quarter of 1996. This decrease was
due to the gross margin impact of the decreased sales of $29, a decrease in
the margin rate on sales of $62, and increased buying and other expenses of
$2.
Operating, selling, general and administrative expenses increased $73, or
16%, from the first quarter of 1996. The increase is primarily due to
increased payroll and other administrative expenses of Signature of $37;
decreased income from the sale of product service contracts of $10;
increased advertising and promotional costs of $8; and increased operating
and other administrative expenses of Montgomery Ward and Lechmere of $18.
11
<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 1997 Compared with First Quarter 1996 (continued)
Net interest expense increased $11, or 50%, from the prior year. The
increase is due to higher interest rates and increased borrowings resulting
from a combination of higher average working capital levels and reduced
cash flow resulting from slower than anticipated sales.
Income tax benefit was $85 for 1997, as compared to an income tax benefit
of $29 for the first quarter 1996.
Discussion of Financial Condition
Montgomery Ward is the only subsidiary of the Company and, therefore,
Montgomery Ward and its subsidiaries are the Company's sole source of
funds.
Net cash used in the Company's operating activities totaled $355 compared
to $400 in the first quarter of 1996. The lower cash usage reflects a
larger operating loss offset by a significantly lower cash payments related
to accounts payable.
As a result of the inventory reduction program and better management of
receipts of inventory, inventory decreased by $143 from December 29, 1996.
This was offset by a decrease in trade accounts payable of $245 and an
expenditure for direct response and insurance acquisition costs of $57.
Net cash generated in the Company's investing activities totaled $20 in the
first quarter 1997, compared to net cash used of $101 in the first quarter
of 1996. 1996 net cash used included Signature's acquisition of the Amoco
Motor Club.
Net cash provided by financing activities totaled $399 for the first
quarter of 1997, compared to $527 for the first quarter of 1996.
Montgomery Ward has obtained waivers under the Long Term Credit Agreement
(Long Term Agreement) and the Short Term Credit Agreement (Short Term
Agreement) with respect to compliance for the fiscal quarter ending March
29, 1997 with covenants requiring maintenance of minimum consolidated
shareholders' equity, a minimum ratio of debt to capitalization and minimum
earnings before interest, taxes, depreciation, amortization and rent
(EBITDAR). These waivers and amendments also reduce the maximum of amount
of debt permitted to be incurred by Signature and the maturity
12
<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)
of the Long Term Agreement was changed from February 15, 1998 to August 29,
1997. Similar amendments to corresponding covenants in the Company's two
Purchase and Master Lease Agreements were made.
The Long Term Credit Agreement and the Short Term Credit Agreement were
amended on December 23, 1996, to substitute the EBITDAR test for an
earnings to fixed charges test for the three quarters ended June 28, 1997,
to add a limitation on capital expenditures, to require prepayments if
proceeds of certain asset dispositions are received and to amend the
minimum debt to equity ratio required to permit payment of preferred stock
dividends. In connection with these amendments the Company paid fees, the
rates of interest under both agreements were increased in three stages, at
the date of the agreement and effective at the end of the first and second
quarters of 1997, the commitment fee was increased by 0.375% of the unused
commitment and the maturity of the Long Term Agreement was changed to
February 15, 1998 from September 6, 2000. These amendments also limited the
amount of debt which can be incurred by Signature. Similar amendments to
the corresponding covenants in the Company's two Purchase and Master Lease
Agreements were made (including shortening the lease expiration dates to
August 29, 1997) and the rents thereunder were increased.
The Company entered into an amendment and waiver agreement with holders of
the notes issued under the 1993 and 1995 Note Purchase Agreements, which
included a waiver through June 27, 1997 of compliance with the minimum
shareholders' equity test, added restrictions on the disposition of assets
and the incurrence of debt and funded debt, required a mandatory prorata
prepayment in the event of any prepayment of any loans or termination of
bank commitments under the Long Term and Short Term Agreements and
shortened the maturity dates of all Notes to August 29, 1997. In connection
therewith the noteholders received fees and interest rates on the Notes
were increased in two stages.
Montgomery Ward also entered into a Credit Agreement (Seasonal Credit
Agreement) dated as of October 4, 1996 with various lenders, including GE
Capital. The Seasonal Credit Agreement expires August 29, 1997 and provides
a revolving loan facility in the principal amount of $165. A waiver
corresponding to those most recently obtained with respect to the Long Term
and Short Term Agreements has been obtained by the Company. The
13
<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)
purpose of this facility is to provide back-up liquidity. Unless the
lenders otherwise agree, loans may be made under this facility only after
the commitments under the Short Term Agreement and the Long Term Agreement
are fully used.
It will likely be necessary for the Company to obtain amendments or waivers
with respect to the second quarter of fiscal 1997.
The Company intends to improve its financial condition and reduce its
dependence on borrowing by slowing expansion, controlling expenses, closing
certain unprofitable stores and continuing to implement its inventory
reduction program. Management is in the process of reevaluating the
Company's merchandising, marketing, store operations and real estate
strategies. The Company is also considering the sale of certain operating
units as a means of generating cash. The Company is actively involved in
negotiations with respect to the sale of certain of these units, including
The Signature Group. Future cash is also expected continue to be provided
by ongoing operations, receipt of payment for credit sales under the
Agreements with Montgomery Ward Credit Companies, borrowings under
revolving loan facilities and vendor financing programs.
The Company is currently in discussions with financing sources with a view
toward a longer term solution to its liquidity problems and obtaining
refinancing for all or a substantial portion of its outstanding
indebtedness, including a total of $1,437 which will mature on or about
August 29, 1997. This would include repayment of the current bank
borrowings and amounts outstanding under the Note Purchase Agreements. The
Company's management is highly confident that the indebtedness can be
refinanced. The Company's largest shareholder, GE Capital, also expects the
Company to be able to refinance such indebtedness. However, there can be no
assurance that such refinancing can be obtained or that amendments or
waivers required to maintain compliance with the existing agreements can be
obtained.
The Long Term Agreement provides a revolving facility in the principal
amount of $603. As of March 29, 1997, $603 was outstanding under the Long
Term Agreement.
14
<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)
The Short Term Agreement provides a revolving facility in the principal
amount of $456. As of March 29, 1997, $456 was outstanding under the Short
Term Agreement.
The Seasonal Credit Agreement provides a revolving facility in the
principal amount of $165. As of March 29, 1997, Montgomery Ward had no
amounts outstanding under the Seasonal Credit Agreement.
In 1997, Montgomery Ward has facilities under vendor financing programs
(which are reflected in Trade Accounts Payable) which total $500. As of May
13, 1997 this facility had been increased to an aggregate amount of $600.
At March 29, 1997, these facilities were principally drawn. There was an
increase in the facility of $150 in the first quarter of 1997.
On March 29, 1997, Montgomery Ward had no amounts outstanding under the
short term uncommitted lines of credit.
15
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On April 29, 1997 the Company, Montgomery Ward and Lechmere, were served
with a complaint, purporting to represent a nationwide class, filed by
certain bankrupt credit card holders of Montgomery Ward and Lechmere credit
cards. The complaint alleged that the Company, Montgomery Ward and
Lechmere, benefited from the actions taken by Hurley, Lechmere's previous
credit card provider, and MWCC and Monogram, (both of which are affiliates
of GE Capital) Montgomery Ward's and Lechmere's current credit card
providers, in that the recoveries received from the bankrupt credit card
holders, allegedly were in violation of the bankruptcy laws dealing with
reaffirmations ultimately reduced Montgomery Ward's and Lechmere's loss
sharing obligations. Hurley, MWCC and Monogram took all actions related to
such bankruptcy reaffirmations and neither the Company nor any of its
subsidiaries took any such actions. Management believes that the
indemnification obligations contained in its various agreements with
Hurley, MWCC and Monogram will relieve Lechmere, Montgomery Ward and the
Company of any financial obligations related to the acts alleged in the
complaint.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.(i)(A)(3) Amendment No. 17 to Stockholders' Agreement, dated as of
March 31, 1997.
16
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K (continued)
(a) Exhibits (continued):
10.(i)(F)(2) Limited Waiver and First Amendment to Note Purchase
Agreements dated as of March 29, 1997 among Montgomery
Ward & Co., Incorporated and various lenders.
10.(i)(H)(5) Waiver and Fourth Amendment to Long Term Credit
Agreement dated as of March 29, 1997 among Montgomery
Ward & Co., Incorporated and various banks.
10.(i)(I)(6) Waiver and Fourth Amendment to Short Term Credit
Agreement dated as of March 29, 1997 among Montgomery
Ward & Co., Incorporated and various banks.
10.(i)(L)(2) Waiver Letter dated as of March 27, 1997 addressed to
Signature Financial/Marketing, Inc. from The Bank of New
York and The Bank of Nova Scotia.
10.(i)(L)(3) Correction Letter Agreement dated as of March 27, 1997
among Signature Financial/Marketing, Inc., The Bank of
New York and The Bank of Nova Scotia.
10.(i)(M)(3) Waiver and Third Amendment to Credit Agreement dated as
of March 29, 1997 among Montgomery Ward & Co.,
Incorporated and various lenders.
10.(iii)(C) Waiver Letter of General Electric Capital Corporation
dated March 27, 1997.
10.(iv)(D)(3) Third Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan.
10.(xiv) Employment Agreement dated April 11, 1997 between
Montgomery Ward & Co., Incorporated and Spencer H.
Heine.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
On January 21, 1997, the Company filed a Form 8-K with respect to the
appointment of Roger V. Goddu as Chief Executive Officer of the
Company, the related resignations of three of the Company's directors
and other matters.
17
<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 13, 1997
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EXHIBIT 10.(i)(A)(3)
AMENDMENT NO. 17 TO
-------------------
STOCKHOLDERS' AGREEMENT
-----------------------
This Amendment No. 17 to Stockholders' Agreement ("Amendment No. 17") is
consented to and made as of the 31st day of March, 1997 by and among MONTGOMERY
WARD HOLDING CORP., a Delaware corporation (the "Company"), Bernard F. Brennan,
individually and as attorney-in-fact for certain other parties to that certain
Stockholders' Agreement dated as of June 17, 1988, as heretofore amended (the
"Stockholders' Agreement"), General Electric Capital Corporation, a New York
corporation, and Myron Lieberman, as Trustee of the Brennan 1988 MW Trust.
WHEREAS, it is advisable to amend the Stockholders' Agreement to make
certain changes set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 7.1 of the Stockholders' Agreement is hereby amended as follows:
1. Paragraph (a) of Section 7.1 is hereby designated as paragraph (a)(i)
of Section 7.1 and amended by inserting at the beginning of such
paragraph the words "with respect to Management Shareholders whose
employment with the Ward Group is terminated prior to February 1,
1997,".
2. A new paragraph (a)(ii) is added to Section 7.1 to read as follows:
" (ii) with respect to all other Management Shareholders, during the
time that he is employed by a member of the Ward Group and for a period of
one year following the termination of his employment by the Ward Group for
any reason whatsoever other than discharge without Cause, he shall not,
directly or indirectly, own, manage, operate, join, control, be employed
by, or participate in the ownership, management, operation or control of or
be connected in any manner, including but not limited to holding the
positions of officer, director, shareholder, consultant, independent
contractor, employee, partner or investor, with any of K-mart Corporation,
Wal-Mart Stores, Inc., Sears, Roebuck and Co., Dayton Hudson Corp., J.C.
Penney or any affiliate of the foregoing; provided that such Management
Shareholder may invest in stocks, bonds or securities of any entity (but
without participating in the business thereof) if such stocks, bonds or
other securities are listed for trading on a national securities exchange
or on NASDAQ and such Management Shareholders' investment does not exceed
1% of the issued and outstanding shares of capital stock, or in the case of
bonds or other securities, 1% of the aggregate principal amount thereof
issued and outstanding;"
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby consent to and execute this
Amendment No. 17 as of the day and year first above written.
MONTGOMERY WARD HOLDING CORP. GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ John Workman By: /s/ Edward D. Stewart
----------------------------- -------------------------------
Its: Exec VP and CFO Its: Exec VP
----------------------------- -------------------------------
/s/ Bernard F. Brennan /s/ Myron Lieberman
- ---------------------------------- ------------------------------------
Bernard F. Brennan, individually Myron Lieberman, as Trustee of the
and as attorney-in-fact for the Brennan 1988 MW Trust.
beneficial owners of all Shares
(as defined in the Stockholders'
Agreement) held by him as Voting
Trustee under those certain Voting
Trust Agreements dated as of
June 21, 1988 and October 21,
1994, respectively.
2
<PAGE>
EXHIBIT 10.(i)(F)(2)
LIMITED WAIVER AND FIRST AMENDMENT
TO
NOTE PURCHASE AGREEMENTS
This Limited Waiver and First Amendment to Note Purchase Agreements (this
"Waiver and Amendment") is made as of March 29, 1997 by and among Montgomery
Ward & Co., Incorporated, an Illinois corporation (the "Company"), and the
holders of Senior Notes of the Company identified on Annex 1 hereto
(individually, a "Noteholder" and, collectively, the "Noteholders.")
RECITALS
A. Certain of the Noteholders (the "1993 Noteholders") are parties to a
Note Purchase Agreement, dated as of March 1, 1993, as amended June 30, 1995
(immediately prior to giving effect to this Waiver and Amendment, the "Existing
1993 Agreement" and, after giving effect thereto, the "1993 Agreement"),
pursuant to which the Company issued the series of its Senior Notes identified
below (collectively, immediately prior to giving effect to this Waiver and
Amendment, the "Existing 1993 Notes" and, after giving effect thereto, the "1993
Notes"):
(i) 7.07% Series A Senior Notes due 1998 (the "Series A Notes");
(ii) 7.56% Series B Senior Notes due 2003 (the "Series B Notes");
(iii) 7.61% Series C Senior Notes due 2003 (the "Series C Notes");
(iv) 7.92% Series D Senior Notes due 2001 (the "Series D Notes");
(v) 8.13% Series E Senior Notes due 2003 (the "Series E Notes");
(vi) 8.18% Series F Senior Notes due 2003 (the "Series F Notes"); and
(vii) 8.18% Series G Senior Notes due 2005 (the "Series G Notes").
<PAGE>
B. Certain of the Noteholders (the "1995 Noteholders" and, together with
the 1993 Noteholders, the "Noteholders") are parties to a Note Purchase
Agreement, dated as of July 11, 1995 (immediately prior to giving effect to this
Waiver and Amendment, the "Existing 1995 Agreement" and, after giving effect
thereto, the "1995 Agreement"), pursuant to which the Company issued the series
of its Senior Notes identified below (collectively, immediately prior to giving
effect to this Waiver and Amendment, the "Existing 1995 Notes" and, after giving
effect thereto, the "1995 Notes") (the Existing 1993 Agreement and the Existing
1995 Agreement are referred to herein, collectively, as the "Existing Note
Agreements;" the 1993 Agreement and the 1995 Agreement are referred to herein,
collectively, as the "Note Agreements"; the Existing 1993 Notes and the Existing
1995 Notes are referred to herein, collectively, as the "Existing Notes;" and
the 1993 Notes and the 1995 Notes are referred to herein, collectively, as the
"Notes"):
(i) 6.52% Series H Senior Notes due 2000 (the "Series H Notes");
(ii) 6.74% Series I Senior Notes due 2002 (the "Series I Notes"); and
(iii) 6.98% Series J Senior Notes due 2005 (the "Series J Notes").
C. The Company and certain banks (the "Long Term Banks") are parties to a
Long Term Credit Agreement (as amended by the letter agreements and amendments
referred to below in this Recital C, but without giving effect to any
amendments, waivers or modifications that may be made with respect thereto after
the Effective Date (as defined below), the "Long Term Bank Agreement"), dated as
of September 15, 1994, as amended by a letter agreement, dated March 19, 1996,
by a letter agreement which became effective September 6, 1996, and by a Third
Amendment to Long Term Credit Agreement, dated as of December 23, 1996 (the
"Third Bank Long Term Amendment"). The Long Term Banks and the Company will be
entering into a Waiver and Fourth Amendment to Long Term Credit Agreement, dated
as of March 29, 1997 (the "Fourth Bank Long Term Amendment").
D. The Company and certain banks (the "Short Term Banks" and, together
with the Long Term Banks, the "Banks") are parties to a Short Term Credit
Agreement (as amended by
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the letter agreements and amendments referred to below in this Recital D, but
without giving effect to any amendments, waivers or modifications that may be
made with respect thereto after the Effective Date, the "Short Term Bank
Agreement"), dated as of September 15, 1994, as amended by letter agreements,
dated March 19, 1996 and September 6, 1996, and a Third Amendment to Short Term
Credit Agreement, dated as of December 23, 1996 (the "Third Bank Short Term
Amendment"). The Short Term Banks and the Company will be entering into a Waiver
and Fourth Amendment to Short Term Credit Agreement, dated as of March 29, 1997
(the "Fourth Bank Short Term Amendment"). The Long Term Bank Agreement and the
Short Term Bank Agreement are referred to herein, collectively, as the "Bank
Agreements."
E. The Company has requested that the Noteholders enter into this Waiver
and Amendment to waive compliance with Section 6.2 of the Existing Note
Agreements on the terms and conditions set forth herein (including, without
limitation, the amendments effected hereby) and any Event of Default (as defined
below) resulting from such non-compliance, and the Noteholders are willing to
enter into this Waiver and Amendment subject, among other things, to the Long
Term Banks and the Short Term Banks entering into the Fourth Bank Long Term
Amendment and the Fourth Bank Short Term Amendment, respectively.
F. Terms used and not defined herein have the respective meanings
ascribed thereto in the Existing Note Agreements.
AGREEMENT
1. Waiver. For all periods prior to and including June 27, 1997, the
Noteholders waive compliance by the Company with Section 6.2 of each of the
Existing Note Agreements, waive any right the Noteholders would have as a result
of any Event of Default arising from non-compliance with Section 6.2 of the
Existing Note Agreements prior to and including June 27, 1997, and also waive
any rights the Noteholders would have pursuant to Section 4(a) of this Waiver
and Amendment as the result of an Event of Default arising from a failure by the
Company to comply with the provisions of Sections 11.3, 11.4 and 11.20 of each
of the Bank Agreements; provided, however, that, solely for purposes of Section
5 of the Note
3
<PAGE>
Agreements (providing, inter alia, for the payment of certain expenses and the
exercise of certain inspection rights), any Event of Default that would have
been continuing but for the waiver set forth in this Section 1 shall be deemed
to be continuing.
2. Financial Provisions. The financial provisions set forth in this
Section 2 shall apply notwithstanding anything to the contrary set forth in the
Existing Note Agreements or the Bank Agreements.
(a) Interest Prior to Second Quarter. Interest on the Notes accruing
prior to March 29, 1997 shall accrue at the non-default rates set forth in the
1993 Agreement or the 1995 Agreement, as applicable.
(b) Second Quarter Interest. The following interest rates shall apply
from and including March 29, 1997 to and including June 28, 1997 for each of the
series of Notes identified below:
Series A Notes - 8.695% per annum
Series B Notes - 9.185% per annum
Series C Notes - 9.235% per annum
Series D Notes - 9.545% per annum
Series E Notes - 9.755% per annum
Series F Notes - 9.805% per annum
Series G Notes - 9.805% per annum
Series H Notes - 8.145% per annum
Series I Notes - 8.365% per annum
Series J Notes - 8.605% per annum
(c) Interest after Second Quarter. The following interest rates shall
apply on and after June 29, 1997 for each of the series of Notes identified
below:
Series A Notes - 9.195% per annum
4
<PAGE>
Series B Notes - 9.685% per annum
Series C Notes - 9.735% per annum
Series D Notes - 10.045% per annum
Series E Notes - 10.255% per annum
Series F Notes - 10.305% per annum
Series G Notes - 10.305% per annum
Series H Notes - 8.645% per annum
Series I Notes - 8.865% per annum
Series J Notes - 9.105% per annum
(d) Interest Rate for Late Payments. For the avoidance of doubt, it
is understood and agreed that, with respect to each series of Notes, the
non-default rate of interest referred to in the phrase "the interest rate
borne by such series of Notes" in the definition of "Default Rate" in the
Note Agreements shall mean the interest rates specified above, for the
periods specified above, in this Section 2.
(e) Payment Dates for Interest. Interest on the 1993 Notes shall be
payable on March 15, June 15, September 15 and December 15 in each year,
commencing on June 15, 1997. Interest on the 1995 Notes shall be payable on
January 15, April 15, July 15 and October 15 in each year, commencing on
April 15, 1997.
(f) Makewhole Amount. Any prepayment of the Notes before, after or
upon the occurrence of a Default or an Event of Default with cash from any
source, whether from internal cash, external investment, proceeds of the
sale of any asset or business, a refinancing or otherwise, shall be made
together with all interest accrued to the date of prepayment and a
Makewhole Amount on the principal amount so prepaid determined as of the
date of such prepayment; provided that, notwithstanding the change in
interest rates and maturities in respect of the Notes as provided herein,
any calculation of the Makewhole Amount shall be made on
5
<PAGE>
the basis of the interest rates, interest payment dates, principal
prepayment dates and amounts, maturity dates and amounts payable at
maturity in effect under the Existing Note Agreements (which term, as
stated in the Recitals, means such documents as in effect immediately prior
to giving effect to this Waiver and Amendment). The Makewhole Amount due
under any provision of this Waiver and Amendment (including, without
limitation, paragraphs (h), (i) and (j) of this Section 2) or the Note
Agreements shall be in the amount so calculated.
(g) Waiver Fee. In consideration for the execution by the Noteholders
of this Waiver and Consent, the Company shall pay to each Noteholder, on
the Effective Date, by wire transfer in immediately available funds, a
waiver fee in the amount set forth opposite its name on Annex 1 hereto.
(h) Mandatory Prepayment on Paydown of Bank Debt. If the Company, or
any of its Subsidiaries or Affiliates, shall prepay any principal of any
Loan (as defined in the Bank Agreements) at any time, or if the Aggregate
Bank Commitment (as defined below) shall be permanently reduced at any
time, the Company shall, or shall cause one or more of its Subsidiaries or
Affiliates to, simultaneously prepay a portion of principal of the 1993
Notes and the 1995 Notes in an amount in each case (without double
counting) equal to the outstanding principal amount of such Notes
multiplied by a fraction, of which
(i) the numerator shall be the greater of the aggregate
principal amount of Loans so prepaid or the amount of the reduction in
the Aggregate Bank Commitment (whether under the Long Term Bank
Agreement, the Short Term Bank Agreement or both) and
(ii) the denominator shall be, in the case of any such
prepayment, the aggregate principal amount of Loans under both Bank
Agreements outstanding immediately prior to such prepayment or, in the
case of any such reduction, the Aggregate Bank Commitment in effect
immediately prior to such reduction.
6
<PAGE>
Each such prepayment shall be made together with all interest accrued to
the date of prepayment and the Makewhole Amount on the principal amount so
prepaid determined as of the date of such prepayment. The "Aggregate Bank
Commitment" means the sum of the Commitments (as such term is defined in
the Bank Agreements) under both Bank Agreements.
(i) Mandatory Prepayment on Change of Control. If a Change of
Control (as defined in the Bank Agreements) shall occur, then, upon 30 days
written demand made by holders of at least two-thirds of the outstanding
principal amount of the 1993 Notes or the 1995 Notes, as the case may be,
to the Company within 180 days after the occurrence of such Change in
Control (or, if later, within 180 days after such holders' obtaining actual
knowledge of such Change in Control), the Company shall prepay all of the
1993 Notes, if such demand was made in respect of such Notes and/or all of
the 1995 Notes, if such demand was made in respect of such Notes. Such
principal amount shall be paid on the next Business Day after its receipt
of such demand, together with all interest accrued to the date of
prepayment and the Makewhole Amount on the principal amount so prepaid
determined as of the date of such prepayment.
(j) Maturity Date. The entire principal amount of the Notes shall be
due and payable on August 29, 1997, together with all interest accrued to
such date and the Makewhole Amount on the principal amount so paid
determined as of the date of such payment.
3. Covenants. The covenants set forth in this Section 3 shall apply
notwithstanding anything to the contrary set forth in the Existing Note
Agreements or the Bank Agreements.
(a) Asset Dispositions. The Company shall not, and shall not permit
any of its Subsidiaries to, effect any Disposition (as defined below) if,
after giving effect thereto, the aggregate amount of Net Proceeds (as
defined below) received and to be received from such Disposition and from
all other Dispositions consummated on or after December 23, 1996 would
exceed $20,000,000. "Disposition" and "Net Proceeds" shall have the
respective meanings ascribed thereto in the
7
<PAGE>
Third Bank Long Term Amendment and the Third Bank Short Term Amendment.
(b) Debt Incurrence. The Company shall not, and shall not permit any
of its Subsidiaries to, at any time incur any Funded Debt or any Debt (as
"Debt" is defined in the Bank Agreements); provided, however, that the
Company may incur Funded Debt or Debt pursuant to the Liquidity Facility,
the Deutsche Agreement, the GECC Inventory Program and the GECC Receivables
Program (as each such term is defined below). For the period commencing on
the Effective Date and ending on and including June 27, 1997, the
Noteholders shall waive and defer the effect of any non-compliance by the
Company with Section 6.3 of the Note Agreements in connection with the
Company's incurrence of Funded Debt or Debt under the facilities listed in
the proviso to the immediately preceding sentence; provided, however, that
on and after June 28, 1997, the effect of any such non-compliance shall be
determined without giving effect to such deferral or waiver. As used in
this Waiver and Amendment, the following terms have the following meanings:
"Deutsche Agreement" means the Program Agreement dated as of October
7, 1996, among Deutsche Financial Services Corporation, Montgomery
Ward & Co., Incorporated and Lechmere, Inc., as amended by agreement
dated as of October 30, 1996.
"GECC Inventory Program" means the Program Agreement dated October 12,
1989, between Montgomery Ward & Co., Incorporated and General Electric
Capital Corporation, as amended by letter agreement dated October 12,
1989, and by Program Agreement Amendment dated as of March 4, 1997,
and by letter agreement dated February 14, 1997. The GECC Inventory
Program is governed in the manner described in (S)(S) 2-6 of Draft
GTM031497 of the Amended and Restated Program Agreement dated March 4,
1997, but unsigned, in the form submitted to counsel to the
Noteholders on March 25, 1997.
"GECC Receivables Program" means the Account Purchase Agreement dated
as of June 24, 1988, as amended, restated and renamed the Account-
8
<PAGE>
Related Agreement dated as of April 1, 1996, between Montgomery Ward
Credit Corporation and Montgomery Ward & Co., Incorporated, and the
Interim Consumer Credit Card Program dated as of April 1, 1996, as
amended, restated and renamed the Bank Credit Card Program Agreement
dated as of April 1, 1996, between Monogram Credit Card Bank of
Georgia and Montgomery Ward & Co., Incorporated.
"Liquidity Facility" means the Credit Agreement dated as of October 4,
1996 among Montgomery Ward & Co., Incorporated, The Bank of Nova
Scotia as Administrative Agent and as a Lender, The Bank of New York
as Documentation Agent and as a Lender, and General Electric Capital
Corporation as a Lender, as amended by agreement dated as of December
23, 1996.
(c) Liens. The Company shall not, and shall not permit any of its
Subsidiaries to, incur any Liens pursuant to clauses (i) (related to
financing or refinancing of real estate or tangible fixed assets), (xii)
(relating to Liens in favor of the Banks), or (xix) (relating to a basket
permission for Liens securing Debt up to 1% of the Company's total assets)
of Section 11.2 of each of the Bank Agreements or pursuant to clause (t)
(relating to a basket permission for Liens) of Section 6.4 of the Note
Agreements.
(d) Restricted Payments. The Company shall not make any Restricted
Payment other than amounts payable to the Parent to permit the Parent to
pay its corporate and business expenses in an aggregate amount for all such
expenses not to exceed $1,333,333 for the period from the commencement of
its current Fiscal Year to August 29, 1997 (with no carry-over for amounts
not so used in any prior Fiscal Year). Notwithstanding anything to the
contrary set forth in this Waiver and Amendment or in the Note Agreements,
no Event of Default shall result from the payment by the Company of a
dividend on March 31, 1997 in the amount of $3,066,875 on the Company's
Debt-Like Preferred Stock.
(e) Mergers. The Company shall not, and shall not permit any of its
Subsidiaries to, voluntarily liquidate or
9
<PAGE>
dissolve, or consolidate or merge with or into any other Person, or
participate in a share exchange with, or sell, lease, transfer, contribute
or otherwise dispose of all or substantially all of its assets to, any
other Person; provided, however, that any of the Company's Subsidiaries may
be consolidated or merged with or into the Company or any other Subsidiary
of the Company.
(f) Repayment of Subordinated Debt and Debt-Like Preferred Stock. The
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, distribute, make or set apart
any sum or property for the prepayment of principal of or prepayment charge
or premium on, or any redemption, retirement, purchase or other
acquisition, directly or indirectly, of, any Subordinated Debt or any Debt-
Like Preferred Stock.
(g) Deposits with Banks. The Company shall not, nor shall it permit
any of its Subsidiaries to, maintain amounts on deposit with any Bank to be
in an aggregate amount in excess of an amount consistent with the past
practices of the Company and its Subsidiaries.
(h) No Amendment to Financing Documents. The Company shall not enter
into any amendment, waiver or modification of the Bank Agreements. The
Company shall not enter into any amendment, waiver or modification of the
GECC Inventory Program, the GECC Receivables Program, the Deutsche
Agreement or the Liquidity Facility, except for any amendment to any of
such documents which solely increases the amounts that may be borrowed by
the Company or its Subsidiaries thereunder and except that the Company may
(i) enter into an amendment of the GECC Receivables Program if
such amendment shall not secure the Seller Notes (as defined GECC
Receivables Program), provide for any of such Seller Notes to be
payable on a date earlier than the date on which such Seller Notes are
payable as of the Effective Date, or otherwise materially adversely
affect the Noteholders, or
(ii) enter into any other amendment of the GECC Receivables
Program so long as such amendment would not constitute an Event of
Default (as defined
10
<PAGE>
in the Bank Agreements) under clauses (ii), (iii), or (iv) of Section
13.1(j) of the Bank Agreements.
(i) Information. In addition to furnishing the information required
pursuant to Sections 4 and 5 of the Existing Note Agreements, the Company shall
provide to each Noteholder the same reports and other information as are
provided to the Banks pursuant to either of the Bank Agreements (including,
without limitation, the monthly financial information required to be provided to
the Banks pursuant to the amendments to the Long Term Bank Agreement and the
Short Term Bank Agreement effected by Section 1.8 of the Third Bank Long Term
Amendment and the Third Bank Short Term Amendment), and such other information
as may be reasonably requested by the Noteholders or provided to the Banks
pursuant to any amendment or other modification to the Long Term Bank Agreement
or the Short Term Bank Agreement entered into after the Effective Date. All such
reports and other information provided to the Banks shall be provided to the
Noteholders substantially contemporaneously with the provision thereof to the
Banks. All such information provided to the Noteholders pursuant to this
paragraph (i) shall be subject to Section 5(b) of the Note Agreements.
(j) Diligence. In addition to furnishing the information required pursuant
to Sections 4(p) and 5 of the Existing Note Agreements, the Company shall, upon
request of any Noteholder, provide such Noteholder with all information such
Noteholder may reasonably request regarding progress formulating a restructuring
plan for consideration by the Noteholders, and regarding financial support,
investments and contractual and other relationships that may exist between the
Company or any of its Subsidiaries or Affiliates, on the one hand, and General
Electric Capital Corporation or any of its Subsidiaries or Affiliates, on the
other hand. All information provided to the Noteholders pursuant to this
paragraph (j) shall be subject to Section 5(b) of the Note Agreements.
4. Defaults.
(a) Cross-Default. An Event of Default shall exist under the Note
Agreements upon the occurrence of an Event of Default under (and as defined in)
either of the
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Bank Agreements (such Event of Default under either Bank Agreement being
referred to as a "Bank Default"). No waiver, amendment or other action by
the Banks with respect to any Bank Default shall be effective to terminate
the Event of Default under the Note Agreements arising from such Bank
Default.
(b) Default under Sections 3 and 6 of this Waiver and Amendment. An
Event of Default shall exist under the Note Agreements if the Company shall
default in the due performance and observance of any covenant, provision,
agreement or condition set forth in Section 3 of this Waiver and Amendment
or if any representation or warranty of the Company set forth in Section 6
of this Waiver and Amendment shall be false or incorrect or breached in any
material respect.
5. Lechmere Guaranty. The Company shall cause Lechmere, Inc. to guaranty
(the "Lechmere Guaranty") all amounts owing in respect of the Notes pursuant to
a Guaranty substantially in the form of Exhibit A hereto.
6. Representations and Warranties. The Company represents and warrants
as of the Effective Date as follows:
(a) Organization and Authority. The Company is a corporation duly
organized and in good standing under the laws of Illinois and has all requisite
power and authority to execute and deliver this Waiver and Amendment.
(b) Authorization, Execution and Enforceability. The execution and
delivery by the Company of this Waiver and Amendment has been duly authorized by
all necessary action on the part of the Company, has been duly executed and
delivered, and constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its terms, except as such enforceability
may be:
(i) limited by bankruptcy, insolvency or other similar laws
affecting the enforceability of creditors' rights generally; and
(ii) subject to the availability of equitable remedies.
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<PAGE>
(c) No Conflicts. Neither the execution and delivery by the Company of
this Waiver and Amendment, nor the performance by the Company of its obligations
hereunder, conflicts with, results in any breach of any of the provisions of,
constitutes a default under, or violates or results in the creation of any Lien
upon or other security interest in any property of the Company under, the
provisions of:
(i) the certificate of incorporation or by-laws of the Company;
(ii) any agreement, instrument or conveyance to which the
Company, any of its Subsidiaries or any of their respective properties
may be bound or affected except as disclosed by letter, dated March
27, 1997, by the Company to counsel to the Noteholders; or
(iii) any statute, rule or regulation or any order, judgment or
award of any court, tribunal or arbitrator by which the Company, any
of its Subsidiaries or any of their respective properties may be bound
or affected.
(d) Litigation. There are no proceedings pending or, to the knowledge
of the Company, threatened against the Company, any of its Subsidiaries or
any of their respective properties in any court or before any Governmental
Body or arbitration board or tribunal which, either individually or in the
aggregate, would conflict or interfere with the ability of the Company to
execute, deliver and perform its obligations under this Waiver and
Amendment, the Note Agreements or the Notes.
(e) Disclosure. None of the documents delivered to certain Noteholders
at a meeting at the Company's offices in Chicago, Illinois on March 20,
1997 contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein,
in light of the circumstances under which they were made, not misleading.
There is no fact which the Company did not disclose to the Noteholders on
March 20, 1997 which materially affects adversely or, so far as the Company
can now foresee, will materially affect adversely the properties, business,
prospects,
13
<PAGE>
profits or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as whole, or the ability of the Company to perform its
obligations under this Waiver and Amendment, the Note Agreements or the
Notes.
(f) Bank Agreements. All of the documents comprising the Long Term
Bank Agreement and the Short Term Bank Agreement are identified in the
Recitals of this Waiver and Amendment.
(g) Existence of Events of Default. There are no Events of Default or
material Defaults in existence under the Note Agreements on the Effective
Date, after giving effect to the waiver set forth in Section 1 hereof and
there are no Events of Default (as defined in the Bank Agreements), and no
material events which, with the passage of time or the giving of notice, or
both, would become any such Event of Default, in existence on the Effective
Date, after giving effect to the Fourth Bank Long Term Amendment and the
Fourth Bank Short Term Amendment.
(h) Outstanding Obligations Under Other Agreements. The amounts of
specific obligations outstanding as of specific dates under each of the
following agreements are shown below:
<TABLE>
<CAPTION>
Approx.
Amount
Outstanding
Facility ($ in millions) Item Date
-------- --------------- ---- -----
<S> <C> <C> <C>
Long Term Credit Agreement $ 603.0 Principal 3/25/97
Short Term Credit Agreement $ 455.7 Principal 3/25/97
Liquidity Facility $ 0.0 Principal 3/25/97
Deutsche Agreement $ 73.0 Outstanding 3/25/97
advances
and pending
commitments
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GECC Inventory Program $ 469.0 Outstanding 3/25/97
advances
and pending
commitments
GECC Receivables Program $4,969.0 Customer account 3/01/97
balance
GECC Receivables Program $ 262.0 Loss Sharing Note 3/01/97
</TABLE>
7. Conditions to Effectiveness. This Waiver and Amendment shall be
effective only if the following conditions shall have been satisfied on or prior
to March 28, 1997 (the "Effective Date"):
(a) Lechmere Guaranty. Lechmere, Inc. shall have duly executed and
delivered the Lechmere Guaranty.
(b) Bank Waiver. The Banks and the Company shall have executed a
Waiver and Fourth Amendment to Long Term Credit Agreement and a Waiver and
Fourth Amendment to Short Term Credit Agreement in substantially the forms
attached hereto as Exhibits B and C, respectively.
(c) Execution by All Noteholders. Each of the Noteholders and the
Company shall have executed this Waiver and Amendment.
(d) Waiver Fee. The Company shall have paid the waiver fee provided
for in Section 2(g) of this Waiver and Amendment.
(e) Fees and Expenses. The Company shall have paid the fees and
expenses referred to in Section 8(c) of this Waiver and Amendment.
(f) Secretary's Certificate. The Company shall have delivered to the
Noteholders a certificate of its Secretary in the form of Exhibit D-1
hereto, and shall have caused Lechmere, Inc. to deliver to the Noteholders
a certificate of its Secretary in the form of Exhibit D-2 hereto, or, in
either case, in form and substance satisfactory to the Noteholders.
15
<PAGE>
(g) Opinion of Counsel. The Company shall have delivered to the
Noteholders an opinion of Altheimer & Gray in the form of Exhibit E hereto.
(h) Proceedings Satisfactory. All proceedings taken in connection with
this Waiver and Amendment and all documents and papers relating thereto
shall be satisfactory to the Noteholders and their special counsel. The
Noteholders and their special counsel shall have received copies of such
documents and papers as they may reasonably request in connection
therewith, in form and substance satisfactory to them.
8. Miscellaneous.
(a) Limitation of Waiver and Amendment. The terms of this Waiver and
Amendment shall not, except as set forth in Section 1 hereof, operate as or
constitute a waiver by the Noteholders of, or otherwise prejudice, the
Noteholders' rights, remedies or powers under the Existing Notes, the
Existing Note Agreements or under applicable law. Except as otherwise
expressly provided herein,
(i) no other terms and provisions of the Existing Note Agreement
or the Existing Notes are modified or changed by this Waiver and
Amendment, and
(ii) the terms and provisions of the Existing Note Agreements and
the Existing Notes shall continue in full force and effect.
The Company hereby acknowledges, confirms, and ratifies all of its
obligations and duties under the Notes and the Note Agreements. Except as
set forth in Section 1 hereof, this Waiver and Amendment is not a
limitation on the ability of any Noteholder to exercise any of its rights
and remedies due to any Default or Event of Default. This Waiver and
Amendment may not be contradicted by evidence of any actual or alleged
prior, contemporaneous or subsequent understandings or agreements of the
parties, written or oral, express or implied, other than a writing which
expressly amends or supersedes this Waiver and Amendment, and there are no
unwritten oral understandings or agreements between
16
<PAGE>
the parties concerning the subject matter of this Waiver and Amendment.
This Waiver and Amendment may not be amended, modified or waived except by
a written instrument signed by all of the parties hereto except that any
amendment to or waiver of any provision of the Existing Note Agreements
effected hereby may be superseded by an amendment to or waiver of such
provision signed by the holders of the requisite percentage of outstanding
Notes, as specified in the Note Agreements.
(b) Effect of Execution by Noteholders. Each of the Noteholders, in
executing this Waiver and Amendment, is executing it only with respect to
the Notes which it holds and the Note Agreement to which it is a party.
(c) Expenses. Without limitation on the Company's obligations to pay
expenses of the Noteholders, as set forth in the Note Agreements or in any
other document to which any Noteholder and the Company may be a party, the
Company shall pay the reasonable out-of-pocket costs incurred by the
Noteholders (including, without limitation, travel costs) in connection
with consideration of this Waiver and Amendment or any future waiver or
amendment that may be proposed by any Noteholder or the Company, or any of
its Subsidiaries or Affiliates (regardless of whether it shall become
effective), the presentation, review or analysis of the Company's existing
financial arrangements or any financial plan proposed by the Company, or
any of its Subsidiaries or Affiliates, or any analysis of the rights and
remedies of the Noteholders under the Note Agreements or in any other
document to which any Noteholder and the Company may be a party, and the
Company shall also pay all reasonable fees and disbursements of special
counsel to the Noteholders, and the reasonable allocated cost of in-house
counsel for any Noteholder, related to any of the foregoing.
(d) Duplicate Originals; Execution in Counterpart. Two or more
duplicate originals of this Waiver and Amendment may be signed by the
parties hereto, each of which shall be an original but all of which
together shall constitute one and the same instrument. This Waiver and
Amendment may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each
party
17
<PAGE>
hereto, and each set of counterparts which, collectively, show execution by
each party hereto shall constitute one duplicate original.
(e) Headings. All headings and captions preceding the text of the
several Section of this Waiver and Amendment are intended solely for
convenience of reference and shall not constitute a part of this Waiver and
Amendment nor shall they affect its meaning, construction or effect.
(f) Successors and Assigns. This Waiver and Amendment shall be binding
upon each of the parties hereto and their respective successor and assigns.
(g) Notices. Any notices sent in respect of this Waiver and Amendment
shall be sent in the manner and to the addresses specified in the Note
Agreements.
(h) Governing Law. THIS WAIVER AND AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be duly executed by one or more of their authorized officers.
[Remainder of Page Intentionally Blank; Next Pages are Signature Pages]
18
<PAGE>
MONTGOMERY WARD & CO., INCORPORATED
By /s/ C. J. Harms
------------------------------------
Name: C. J. Harms
Title: Senior Vice President - Finance
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By New York Life Insurance Company
By /s/ William Y. Cheng
------------------------------------
Name: William Y. Cheng
Title: Vice President
NEW YORK LIFE INSURANCE COMPANY
By /s/ Lydia S. Sangree
------------------------------------
Name: Lydia S. Sangree
Title: Investment Vice President
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By /s/ Sharon Manewitz
------------------------------------
Name: Sharon Manewitz
Title: Director - Special Loans
<PAGE>
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Michael D. Groseclose
--------------------------------------
Name: Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-Income Securities
EMPLOYERS LIFE INSURANCE COMPANY
OF WAUSAU
By /s/ John G. Powles
--------------------------------------
Name: John G. Powles
Title: Vice President
Subsidiary & Affiliate Investments
NATIONWIDE LIFE AND ANNUITY INSURANCE
COMPANY
(formerly Financial Horizons Life
Insurance Company)
By /s/ Michael D. Groseclose
--------------------------------------
Name: Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-Income Securities
WISCONSIN HEALTH CARE LIABILITY
INSURANCE PLAN
<PAGE>
By /s/ John G. Powles
--------------------------------------
Name: John G. Powles, Vice President
Title: Assistant Treasurer
Employers Insurance Company
of Wausau
Acting Agent Wisconsin Health
Care Liability Insurance Plan
WEST COAST LIFE INSURANCE COMPANY
By /s/ Michael D. Groseclose
--------------------------------------
Name: Michael D. Groseclose
Title: Attorney-in-Fact
SUN LIFE ASSURANCE COMPANY OF CANADA
By /s/ John N. Whelihan
--------------------------------------
Name: John N. Whelihan
Title: Vice President, U.S. Private
Placements for President
By /s/ Jeffrey J. Skerry
--------------------------------------
Name: Jeffrey J. Skerry
Title: Senior Associate Counsel -
for Secretary
SUN LIFE ASSURANCE COMPANY OF
<PAGE>
CANADA (U.S.)
By /s/ L. Brock Thomson
--------------------------------------
Name: L. Brock Thomson
Title: Treasurer
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA INVESTMENTS, INC.
By /s/ James F. Coggins, Jr.
--------------------------------------
Name: James F. Coggins, Jr.
Title: Managing Director
AID ASSOCIATION FOR LUTHERANS
By /s/ James Abitz
--------------------------------------
Name: James Abitz
Title: Vice President - Securities
By /s/ Alan D. Onstad
--------------------------------------
Name: Alan D. Onstad
Title: Assistant Vice President - Securities
<PAGE>
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By /s/ Marlene J. DeLeon
--------------------------------------
Name: Marlene J. DeLeon
Title: Investment Officer
THE TRAVELERS INSURANCE COMPANY
By /s/ Teresa M. Torrey
--------------------------------------
Name: Teresa M. Torrey
Title: Second Vice President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ Mary Ann McCarthy
--------------------------------------
Name: Mary Ann McCarthy
Title: Managing Director
CM LIFE INSURANCE COMPANY
By /s/ Mary Ann McCarthy
--------------------------------------
Name: Mary Ann McCarthy
Title: Investment Officer
THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY
<PAGE>
By /s/ Julia S. Tucker
--------------------------------------
Name: Julia S. Tucker
Title: Investment Officer
THE FRANKLIN LIFE INSURANCE
COMPANY
By /s/ Julia S. Tucker
--------------------------------------
Name: Julia S. Tucker
Title: Investment Officer
Cummings & Co. As Nominee For:
THE CANADA LIFE ASSURANCE
COMPANY
By /s/ Wilfredo Cuevas
--------------------------------------
Name: Wilfredo Cuevas
Title: Assistant Vice President
Cummings & Co. As Nominee For:
CANADA LIFE INSURANCE
COMPANY OF AMERICA
By /s/ Wilfredo Cuevas
--------------------------------------
Name: Wilfredo Cuevas
Title: Assistant Vice President
<PAGE>
LUTHERAN BROTHERHOOD
By /s/ Randall L. Boushek
--------------------------------------
Name: Randall L. Boushek
Title: Vice President
AMERICAN FAMILY LIFE INSURANCE
COMPANY
By /s/ Phillip Hannifan
--------------------------------------
Name: Phillip Hannifan
Title: Investment Director
<PAGE>
KANSAS CITY LIFE INSURANCE COMPANY
By /s/ Richard L. Finn
--------------------------------
Name: Richard L. Finn
Title: Senior Vice President
THE SAFECO LIFE INSURANCE COMPANY
By /s/ Michael C. Knebel
--------------------------------
Name: Michael C. Knebel
Title: Vice President and Treasurer
WOODMEN ACCIDENT AND LIFE COMPANY
By /s/ A. M. McCray
--------------------------------
Name: A. M. McCray
Title: Vice President
and Assistant Treasurer
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
By /s/ S. C. Lange
--------------------------------
Name: S. C. Lange
Title: Vice President
<PAGE>
PROVIDENT MUTUAL LIFE INSURANCE
COMPANY
By /s/ S. C. Lange
--------------------------------
Name: S. C. Lange
Title: Vice President
<PAGE>
GREAT WESTERN INSURANCE COMPANY
By MIMLIC ASSET MANAGEMENT
COMPANY
By /s/ Joseph R. Betlej
-------------------------------------
Name: Joseph R. Betlej
Title: Vice President
GUARANTEE RESERVE LIFE INSURANCE COMPANY
By MIMLIC ASSET MANAGEMENT
COMPANY
By /s/ Guy M. de Lambert
-------------------------------------
Name: Guy M. de Lambert
Title: Vice President
NATIONAL TRAVELERS LIFE COMPANY
By MIMLIC ASSET MANAGEMENT
COMPANY
By /s/ Guy M. de Lambert
-------------------------------------
Name: Guy M. de Lambert
Title: Vice President
NORTHWEST LIFE ASSURANCE COMPANY
OF CANADA
By MIMLIC ASSET MANAGEMENT
COMPANY
<PAGE>
By /s/ Joseph R. Betlej
-------------------------------------
Name: Joseph R. Betlej
Title: Vice President
<PAGE>
BERKSHIRE LIFE INSURANCE COMPANY
By /s/ Ellen I. Whittaker
-----------------------------
Name: Ellen I. Whittaker
Title: Investment Officer
SECURITY MUTUAL LIFE INSURANCE
COMPANY
By /s/ William R. Schmeeckle
-----------------------------
Name: William R. Schmeeckle
Title: Second Vice President
<PAGE>
Annex 1 to March 29, 1997
Limited Waiver and First Amendment
<TABLE>
<CAPTION>
Noteholders Series Original 1993 1993 Notes 1995 Notes Waiver Fee
Notes Principal Principal 0.3906250%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New York Life Insurance and Annuity Corp. H $ 30,000,000.00 $ 117,187.50
- ----------------------------------------------------------------------------------------------------------------------------------
New York Life Insurance Company H $ 10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Teachers Insurance and Annuity Association of America G $ 35,000,000.00 $35,000,000.00 $ 136,718.75
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide Life Insurance Company I $ 12,500,000.00 $ 48,828.13
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide Life Insurance Company C $ 5,000,000.00 $ 4,285,681.82 $ 19,531.25
- ----------------------------------------------------------------------------------------------------------------------------------
Nationwide Life Insurance Company F $ 10,000,000.00 $10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
Employers Life Insurance Company of Wausau C $ 3,000,000.00 $ 2,571,409.09 $ 11,718.75
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Horizons Life Insurance Company C $ 2,000,000.00 $ 1,714,272.73 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
Wisconsin Health Care Liability Insurance Plan I $ 500,000.00 $ 1,953.13
- ----------------------------------------------------------------------------------------------------------------------------------
West Coast Life Insurance Company I $ 2,000,000.00 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Sun Life Assurance Company of Canada D $ 2,000,000.00 $ 2,000,000.00 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
Sun Life Assurance Company of Canada (U.S.) D $ 9,000,000.00 $ 9,000,000.00 $ 35,156.25
- ----------------------------------------------------------------------------------------------------------------------------------
Sun Life Assurance Company of Canada (U.S.) I $ 10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
Sun Life Assurance Company of Canada I $ 2,500,000.00 $ 9,765.63
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Connecticut General Life Insurance Company H $ 12,000,000.00 $ 46,875.00
- ----------------------------------------------------------------------------------------------------------------------------------
Connecticut General Life Insurance Company I $ 10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Aid Association for Lutherans I $ 10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
Aid Association for Lutherans C $ 10,000,000.00 $ 8,571,363.63 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
John Hancock Mutual Life Insurance Company H $ 20,000,000.00 $ 78,125.00
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
The Travelers Insurance Company I $ 10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Connecticut Mutual Life Insurance Company (Mass I $ 11,000,000.00 $ 42,968.75
Mutual)
- ----------------------------------------------------------------------------------------------------------------------------------
CM Life Insurance Co. (Mass Mutual) I $ 4,000,000.00 $ 15,625.00
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
The Variable Annuity Life Insurance Company J $ 10,000,000.00 $ 39,062.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
The Franklin Life Insurance Company C $ 2,000,000.00 $ 1,714,272.73 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
The Franklin Life Insurance Company G $ 3,000,000.00 $ 3,000,000.00 $ 11,718.75
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
The Canada Life Assurance Company A $ 5,000,000.00 $ 5,000,000.00 $ 19,531.25
- ----------------------------------------------------------------------------------------------------------------------------------
Canada Life Insurance Company of America A $ 2,500,000.00 $ 2,500,000.00 $ 9,765.63
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lutheran Brotherhood I $ 7,000,000.00 $ 27,343.75
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
American Family Life Insurance Company H $ 5,000,000.00 $ 19,531.25
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Kansas City Life Insurance Co. I $ 5,000,000.00 $ 19,531.25
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Safeco Life Insurance Company E $ 5,000,000.00 $ 5,000,000.00 $ 19,531.25
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Woodmen Accident and Life Company F $ 2,500,000.00 $ 2,500,000.00 $ 9,765.63
- ----------------------------------------------------------------------------------------------------------------------------------
Woodmen Accident and Life Company J $ 2,000,000.00 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Provident Mutual Life Insurance Company of Philadelphia A $ 2,000,000.00 $ 2,000,000.00 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
Provident Mutual Life Insurance Company I $ 1,500,000.00 $ 5,859.38
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Great Western Insurance Company* J $ 500,000.00 $ 1,953.13
- ----------------------------------------------------------------------------------------------------------------------------------
Guarantee Reserve Life Insurance Company J $ 500,000.00 $ 1,953.13
- ----------------------------------------------------------------------------------------------------------------------------------
National Travelers Life Company J $ 1,000,000.00 $ 3,906.25
- ----------------------------------------------------------------------------------------------------------------------------------
North West Life Assurance Company of Canada H $ 1,000,000.00 $ 3,906.25
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Berkshire Life Insurance Company B $ 2,000,000.00 $ 1,714,000.00 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Security Mutual Life Insurance Company H $ 2,000,000.00 $ 7,812.50
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
$100,000,000.00 $96,571,000.00 $180,000,000.00 $1,093,750.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 10.(i)(H)(5)
WAIVER AND FOURTH AMENDMENT
TO
LONG TERM CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT (this "Waiver and Amendment") dated as of March
29, 1997 (the "Effective Date"), is made and entered into among MONTGOMERY WARD
& CO., INCORPORATED (the "Company") and the banks listed on the signature pages
hereof (herein, together with their respective successors and assigns,
collectively called the "Banks" and individually called a "Bank").
WHEREAS the Banks are parties to that certain Long Term Credit Agreement
dated as of September 15, 1994, as amended (the "Long Term Credit Agreement"),
among Montgomery Ward & Co., Incorporated, various banks named therein, 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; and
WHEREAS the Company desires that the Banks waive compliance by the Company
with certain financial covenants contained in the Long Term Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
WAIVERS
1.1 Waiver. (a) For the Fiscal Quarter ending March 29, 1997 (the "Waiver
Period"), the Banks hereby waive any noncompliance by the Company with the
provisions of Sections 11.3, 11.4, and 11.20, of the Long Term Credit Agreement.
(b) The Banks hereby further waive compliance by the Company under Section
11.18 of the Long Term Credit Agreement with the ratio of Debt of the Company
and its Restricted Subsidiaries to Total Capitalization, such waiver being for
the sole purpose to permit the Company on March 31, 1997 to make a dividend of
(but not in excess of) $3,066,875 on its Debt-Like Preferred Stock.
(c) The Banks hereby further waive any Event of Default under Section
13.1(c) of the Long Term Credit Agreement arising by reason of any payment or
other concession pursuant to the Finance Agreement Modifications referred to in
Section 3.2(a) hereof.
<PAGE>
1.2 Modification of Finance Agreements. After the Effective Date, without
the written consent of the Required Banks, the Company will not, and will not
permit any Subsidiary to, enter into any amendment, waiver or modification with
respect to any Finance Agreement (hereinafter defined).
1.3 Limitation on Waivers. The waivers contained herein are limited
precisely to their terms and shall not constitute an amendment, modification or
waiver generally or for any other purpose. The waivers contained herein shall
immediately terminate and cease to be effective upon breach by the Company of
its obligations under Section 1.2 hereof or any of the representations or
warranties contained in Article III.
ARTICLE II
AMENDMENTS
----------
2.1 Signature Debt. Section 11.23 of the Long Term Credit Agreement is
amended to read in its entirety as follows:
11.23 Limitation on Signature Debt. Not permit Signature to incur or
permit to exist any Indebtedness for Borrowed Money, except (i)
Indebtedness for Borrowed Money under the Signature Credit Agreement not
exceeding $101,886,491 in aggregate principal amount, and (ii) Indebtedness
for Borrowed Money of Signature to the Company or its other Subsidiaries.
2.2 Seller Notes. Section 13.1(j) of the Long Term Credit Agreement is
amended by substituting "February 28, 2003" for "March 14, 1996".
2.3 Inventory Financing. Section 13.1 of the Long Term Credit Agreement is
further amended by adding subsections (m) and (n) as follows:
(m) Inventory Financing with GE Capital. The aggregate outstanding
principal amount of indebtedness of the Company and its subsidiary,
Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall
at any time be less than $350,000,000.
(n) Note Purchase Agreements. The occurrence of an event of default
under the Company's Note Purchase Agreements dated as of March 1, 1993 and
July 11, 1995, as amended. No waiver, amendment or other action by the
noteholders with respect to any event of default under the such Note
Purchase Agreements shall be effective to terminate the Event of Default
arising under this Section 13.1(n).
2.4 Termination Date. The definition of Termination Date is amended by
substituting "August 29, 1997" for "February 15, 1998".
2
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company hereby represents and warrants to the Agents and the Banks as
of the Effective Date:
3.1 No Default. No Event of Default or Unmatured Event of Default will
exist after giving effect to this Waiver and Amendment.
3.2 Finance Agreements. (a) Without limitation of Section 2.1, for the
Waiver Period the Company has obtained all necessary amendments, waivers or
modifications (collectively, the "Finance Agreement Modifications") in respect
of any financial covenants under the Finance Agreements so that during the
Waiver Period, no default or event of default shall exist under any of such
Finance Agreements as a result of noncompliance with any of such financial
covenants. The Company has furnished to the Agents copies of any amendment,
waiver or modification entered into on or after December 23, 1996 with respect
to any Finance Agreement. The Company has furnished to each of the Banks a true
and correct summary (dated as of 3/27/97) of the Finance Agreement
Modifications.
(b) As used herein, "Finance Agreement" means any or all of the following:
(i) any and all agreements of the Company or any of its Subsidiaries evidencing
or governing the terms of any Indebtedness for Borrowed Money, (ii) the so-
called synthetic or operating lease agreements with Sumitomo Bank Leasing and
Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii) any
agreements or notes (including the so-called Seller Notes referred to in Section
13.1(j) of the Long Term Credit Agreement) evidencing amounts owed by the
Company or a Subsidiary under the Retail Credit Program Agreement.
3.3 Due Execution. The execution, delivery and performance of this Waiver
and Amendment, (i) are within the Company's corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) do not require any
governmental approval which has not been previously obtained (and each such
governmental approval that has been previously obtained remains effective), (iv)
do not and will not contravene or conflict with any provision of law, or of any
judgment, decree or order, or of the Company's charter or by-laws, and (v) do
not and will not contravene or conflict with, or cause any Lien to arise under,
any provision of any agreement binding upon the Company, any Subsidiary or any
of their respective properties.
3.4 Validity. The Long Term Credit Agreement as modified by this Waiver and
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in
3
<PAGE>
accordance with its respective terms, without defense, counterclaim or offset.
3.5 Long Term Credit Agreement. All representations and warranties of the
Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11,
10.12, 10.15 and 10.18 of the Long Term Credit Agreement are true and correct as
of the date hereof with the same effect as though made on the date hereof.
3.6 Maturity of Seller Notes. The maturity of the Seller Notes referred to
in Section 13.1(j) of the Long Term Credit Agreement has been extended to
February 28, 2003.
3.7 Inventory Financing with GE Capital. As of the Effective Date, the
aggregate outstanding principal amount of indebtedness of the Company and its
Subsidiary Lechmere, Inc. to GE Capital under its so-called vendor program is at
least $350,000,000.
ARTICLE IV
GENERAL
4.1 Expenses. The Company agrees to pay all fees and expenses of McDermott,
Will & Emery as counsel to the Documentary Agent, the Administrative Agent and
the Negotiated Loan Agent in connection with the preparation, execution and
delivery of this Waiver and Amendment.
4.2 Effectiveness. This Waiver and Amendment shall become effective as of
the Effective Date, subject to receipt by McDermott, Will & Emery as counsel to
the Agents of the following, each duly executed and dated the Effective Date and
in form and substance reasonably satisfactory to the Administrative Agent:
(a) Waiver and Amendment. Counterparts of this Waiver and Amendment,
whether on the same or different counterparts, executed by the Company and
the Required Banks (or in the case of any Bank as to which an executed
counterpart shall not have been so received, telegraphic, telefax, telex or
other written confirmation of execution of a counterpart hereof by such
Bank);
(b) Finance Agreements. A certificate of an Authorized Officer of the
Company to the effect that (i) attached thereto is an executed copy of each
Finance Agreement Modification entered into during the period from December
24, 1996 through the Effective Date, and (ii) each such Finance Agreement
Modification is fully effective; and
4
<PAGE>
(c) Short Term Credit Agreement. A duly executed waiver and amendment
to the Short Term Credit Agreement that has terms substantially identical
to the terms of this Waiver and Amendment.
4.3 Definitions. Except as otherwise herein specifically defined, all the
capitalized terms contained herein shall have the meaning ascribed to such terms
in the Long Term Credit Agreement.
4.4 Reaffirmation. 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
modified by this Waiver and Amendment. This Waiver and Amendment shall be deemed
incorporated into, and a part of, the Long Term Credit Agreement.
4.5 Successors. This Waiver and Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
4.6 Governing Law. This Waiver and Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.
4.7 Counterparts. This Waiver and Amendment 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.
4.8 Acknowledgement of Lechmere. By executing the acknowledgement to this
Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the
Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect
and is hereby ratified and confirmed in all respects, except that on or after
the Effective Date each reference therein to the "Long Term Credit Agreement"
shall refer to the Long Term Credit Agreement after giving effect to this Waiver
and Amendment.
5
<PAGE>
Delivered at Chicago, Illinois as of the day, month and year first above
written.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Carol J. Harms
--------------------------------
Name: Carol J. Harms
Title: Senior Vice President -
Finance
ACCEPTED AND APPROVED:
THE FIRST NATIONAL BANK OF CHICAGO,
in its individual capacity and in its
capacity as Documentary Agent
By: /s/ Linda M. Thompson
-----------------------------
Name: Linda M. Thompson
Title: First Vice President
THE BANK OF NEW YORK, in its
individual capacity and in its capacity
as Negotiated Loan Agent
By: /s/ Michael Flannery
-----------------------------
Name: Michael Flannery
THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent
By: /s/ A.S. Norsworthy
-----------------------------
Name: A.S. Norsworthy
Title: Sr. Team Leader-Loan Operations
6
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its
individual capacity and in its
capacity as Advisory Agent
By: /s/ Sandra S. Ober
------------------------------
Name: Sandra S. Ober
CIBC INC.
By: /s/ William J. Koslo, Jr.
------------------------------
Name: William J. Koslo, Jr.
NATIONSBANK, N.A.
By: /s/ Valerie C. Mills
------------------------------
Name: Valerie C. Mills
Title: Sr. Vice President
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:
------------------------------
Name:
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Mary Ann Klemm
------------------------------
Name: Mary Ann Klemm
Title: Vice President and Group Head
BANCA COMMERCIALE ITALIANA,
CHICAGO BRANCH
By: /s/ Julian M. Teodori
------------------------------
Name: Julian M. Teodori
Title: Senior Vice President & Branch Manager
By: /s/ Matthew V. Trujillo
------------------------------
Name: Matthew V. Trujillo
Title: Assistant Vice President
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By:
------------------------------
Name:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Gus C. Browne II
------------------------------
Name: Gus C. Browne II
THE NORTHERN TRUST COMPANY
By: /s/ Sidney R. Dillard
------------------------------
Name: Sidney R. Dillard
THE SAKURA BANK, LTD.
By:
------------------------------
Name:
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By: /s/ Tomomi Omura
------------------------------
Name: Tomomi Omura
Title: Assistant General Manager
SWISS BANK CORPORATION, CHICAGO BRANCH
By: /s/ Nancy Russell
------------------------------
Name: Nancy Russell
Title: SBC Director
By: /s/ Ernst Schirmer
-----------------------------
Name: Ernst Schirmer
Title: Director Credit Risk Management
<PAGE>
UNITED STATES NATIONAL BANK OF OREGON
By:
------------------------------
Name:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard A. Sutter
------------------------------
Name: Richard A. Sutter
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ David C. Sagers
-----------------------------
Name: David C. Sagers
Title: Vice President
By: /s/ Ronald R. Richter
-----------------------------
Name: Ronald R. Richter
Title: Group Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Christopher H. Patton
-----------------------------
Name: Christopher H. Patton
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Judith C.E. Kelly
------------------------------
Name: Judith C.E. Kelly
Title: Vice President
THE FUJI BANK, LIMITED
By:
------------------------------
Name:
Title:
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:
------------------------------
Name:
THE YASUDA TRUST AND BANKING CO., LTD.
By: /s/ Joseph C. Meek
------------------------------
Name: Joseph C. Meek
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Andrew W. Fish
------------------------------
Name: Andrew W. Fish
Title: Vice President
INSTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A.
By: /s/ Robert Wurster
------------------------------
Name: Robert Wurster
Title: First Vice President
By: /s/ Carlo Persico
------------------------------
Name: Carlo Persico
Title: Deputy General Manager
KREDIETBANK N.V.
By: /s/ Raymond F. Murray
------------------------------
Name: Raymond F. Murray
Title: Vice President
By: /s/ Robert Snauffer
------------------------------
Name: Robert Snauffer
Title: Vice President
<PAGE>
UNION BANK OF SWITZERLAND - NEW YORK BRANCH
By: /s/ Daniel R. Strickford
------------------------------
Name: Daniel R. Strickford
Title: Assistant Vice President
By: /s/ Samuel Azizo
------------------------------
Name: Samuel Azizo
Title: Vice President
WELLS FARGO BANK, N.A.
By:
------------------------------
Name:
<PAGE>
BANCA DI ROMA, S.P.A.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
COMERICA BANK
By: /s/ Harve C. Light
------------------------------
Name: Harve C. Light
Title: Assistant Vice President
BANK OF AMERICA ILLINOIS
By: /s/ Sandra S. Ober
------------------------------
Name: Sandra S. Ober
<PAGE>
GUARANTY REAFFIRMED:
LECHMERE, INC.
By: /s/ Carol J. Harms
------------------------------
Name: Carol J. Harms
Title: Vice President and Treasurer
<PAGE>
EXHIBIT 10.(i)(I)(6)
WAIVER AND FOURTH AMENDMENT
TO
SHORT TERM CREDIT AGREEMENT
THIS WAIVER AND AMENDMENT (this "Waiver and Amendment") dated as of
March 29, 1997 (the "Effective Date"), is made and entered into among MONTGOMERY
WARD & CO., INCORPORATED (the "Company") and the banks listed on the signature
pages hereof (herein, together with their respective successors and assigns,
collectively called the "Banks" and individually called a "Bank").
WHEREAS the Banks are parties to that certain Short Term Credit
Agreement dated as of September 15, 1994, as amended (the "Short Term Credit
Agreement"), among Montgomery Ward & Co., Incorporated, various banks named
therein, 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; and
WHEREAS the Company desires that the Banks waive compliance by the
Company with certain financial covenants contained in the Short Term Credit
Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
WAIVERS
1.1 Waiver. (a) For the Fiscal Quarter ending March 29, 1997 (the
"Waiver Period"), the Banks hereby waive any noncompliance by the Company with
the provisions of Sections 11.3, 11.4, and 11.20, of the Short Term Credit
Agreement.
(b) The Banks hereby further waive compliance by the Company under
Section 11.18 of the Short Term Credit Agreement with the ratio of Debt of the
Company and its Restricted Subsidiaries to Total Capitalization, such waiver
being for the sole purpose to permit the Company on March 31, 1997 to make a
dividend of (but not in excess of) $3,066,875 on its Debt-Like Preferred Stock.
(c) The Banks hereby further waive any Event of Default under Section
13.1(c) of the Short Term Credit Agreement arising by reason of any payment or
other concession pursuant to the Finance Agreement Modifications referred to in
Section 3.2(a) hereof.
<PAGE>
1.2 Modification of Finance Agreements. After the Effective Date,
without the written consent of the Required Banks, the Company will not, and
will not permit any Subsidiary to, enter into any amendment, waiver or
modification with respect to any Finance Agreement (hereinafter defined).
1.3 Limitation on Waivers. The waivers contained herein are limited
precisely to their terms and shall not constitute an amendment, modification or
waiver generally or for any other purpose. The waivers contained herein shall
immediately terminate and cease to be effective upon breach by the Company of
its obligations under Section 1.2 hereof or any of the representations or
warranties contained in Article III.
ARTICLE II
AMENDMENTS
----------
2.1 Signature Debt. Section 11.23 of the Short Term Credit Agreement
is amended to read in its entirety as follows:
11.23 Limitation on Signature Debt. Not permit Signature to incur or
permit to exist any Indebtedness for Borrowed Money, except (i)
Indebtedness for Borrowed Money under the Signature Credit Agreement not
exceeding $101,886,491 in aggregate principal amount, and (ii) Indebtedness
for Borrowed Money of Signature to the Company or its other Subsidiaries.
2.2 Seller Notes. Section 13.1(j) of the Short Term Credit Agreement
is amended by substituting "February 28, 2003" for "March 14, 1996".
2.3 Inventory Financing. Section 13.1 of the Short Term Credit
Agreement is further amended by adding subsections (m) and (n) as follows:
(m) Inventory Financing with GE Capital. The aggregate outstanding
principal amount of indebtedness of the Company and its subsidiary,
Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall
at any time be less than $350,000,000.
(n) Note Purchase Agreements. The occurrence of an event of default
under the Company's Note Purchase Agreements dated as of March 1, 1993 and
July 11, 1995, as amended. No waiver, amendment or other action by the
noteholders with respect to any event of default under the such Note
Purchase Agreements shall be effective to terminate the Event of Default
arising under this Section 13.1(n).
2
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company hereby represents and warrants to the Agents and the Banks
as of the Effective Date:
3.1 No Default. No Event of Default or Unmatured Event of Default will
exist after giving effect to this Waiver and Amendment.
3.2 Finance Agreements. (a) Without limitation of Section 2.1, for the
Waiver Period the Company has obtained all necessary amendments, waivers or
modifications (collectively, the "Finance Agreement Modifications") in respect
of any financial covenants under the Finance Agreements so that during the
Waiver Period, no default or event of default shall exist under any of such
Finance Agreements as a result of noncompliance with any of such financial
covenants. The Company has furnished to the Agents copies of any amendment,
waiver or modification entered into on or after December 23, 1996 with respect
to any Finance Agreement. The Company has furnished to each of the Banks a true
and correct summary (dated as of 3/27/97) of the Finance Agreement
Modifications.
(b) As used herein, "Finance Agreement" means any or all of the
following: (i) any and all agreements of the Company or any of its Subsidiaries
evidencing or governing the terms of any Indebtedness for Borrowed Money, (ii)
the so-called synthetic or operating lease agreements with Sumitomo Bank Leasing
and Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii) any
agreements or notes (including the so-called Seller Notes referred to in Section
13.1(j) of the Short Term Credit Agreement) evidencing amounts owed by the
Company or a Subsidiary under the Retail Credit Program Agreement.
3.3 Due Execution. The execution, delivery and performance of this
Waiver and Amendment, (i) are within the Company's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) do not require any
governmental approval which has not been previously obtained (and each such
governmental approval that has been previously obtained remains effective), (iv)
do not and will not contravene or conflict with any provision of law, or of any
judgment, decree or order, or of the Company's charter or by-laws, and (v) do
not and will not contravene or conflict with, or cause any Lien to arise under,
any provision of any agreement binding upon the Company, any Subsidiary or any
of their respective properties.
3.4 Validity. The Short Term Credit Agreement as modified by this
Waiver and Amendment constitutes the legal, valid and binding obligations of the
Company, enforceable against it in
3
<PAGE>
accordance with its respective terms, without defense, counterclaim or offset.
3.5 Short Term Credit Agreement. All representations and warranties
of the Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10,
10.11, 10.12, 10.15 and 10.18 of the Short Term Credit Agreement are true and
correct as of the date hereof with the same effect as though made on the date
hereof.
3.6 Maturity of Seller Notes. The maturity of the Seller Notes
referred to in Section 13.1(j) of the Short Term Credit Agreement has been
extended to February 28, 2003.
3.7 Inventory Financing with GE Capital. As of the Effective Date,
the aggregate outstanding principal amount of indebtedness of the Company and
its Subsidiary Lechmere, Inc. to GE Capital under its so-called vendor program
is at least $350,000,000.
ARTICLE IV
GENERAL
-------
4.1 Expenses. The Company agrees to pay all fees and expenses of
McDermott, Will & Emery as counsel to the Documentary Agent, the Administrative
Agent and the Negotiated Loan Agent in connection with the preparation,
execution and delivery of this Waiver and Amendment.
4.2 Effectiveness. This Waiver and Amendment shall become effective
as of the Effective Date, subject to receipt by McDermott, Will & Emery as
counsel to the Agents of the following, each duly executed and dated the
Effective Date and in form and substance reasonably satisfactory to the
Administrative Agent:
(a) Waiver and Amendment. Counterparts of this Waiver and Amendment,
whether on the same or different counterparts, executed by the Company and
the Required Banks (or in the case of any Bank as to which an executed
counterpart shall not have been so received, telegraphic, telefax, telex or
other written confirmation of execution of a counterpart hereof by such
Bank);
(b) Finance Agreements. A certificate of an Authorized Officer of the
Company to the effect that (i) attached thereto is an executed copy of each
Finance Agreement Modification entered into during the period from December
24, 1996 through the Effective Date, and (ii) each such Finance Agreement
Modification is fully effective; and
4
<PAGE>
(c) Long Term Credit Agreement. A duly executed waiver and amendment
to the Long Term Credit Agreement that has terms substantially identical to the
terms of this Waiver and Amendment.
4.3 Definitions. Except as otherwise herein specifically defined, all
the capitalized terms contained herein shall have the meaning ascribed to such
terms in the Short Term Credit Agreement.
4.4 Reaffirmation. 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 modified by this Waiver and Amendment. This Waiver and Amendment
shall be deemed incorporated into, and a part of, the Short Term Credit
Agreement.
4.5 Successors. This Waiver and Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
4.6 Governing Law. This Waiver and Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.
4.7 Counterparts. This Waiver and Amendment 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.
4.8 Acknowledgement of Lechmere. By executing the acknowledgement to
this Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the
Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect
and is hereby ratified and confirmed in all respects, except that on or after
the Effective Date each reference therein to the "Short Term Credit Agreement"
shall refer to the Short Term Credit Agreement after giving effect to this
Waiver and Amendment.
5
<PAGE>
Delivered at Chicago, Illinois as of the day, month and year first
above written.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Carol J. Harms
------------------------------------
Name: Carol J. Harms
---------------------------------
Title: Senior Vice President - Finance
ACCEPTED AND APPROVED:
THE FIRST NATIONAL BANK OF CHICAGO, in its
individual capacity and in its capacity as
Documentary Agent
By: /s/ Linda M. Thompson
-----------------------------
Name: Linda M. Thompson
Title: First Vice President
THE BANK OF NEW YORK, in its individual
capacity and in its capacity as Negotiated
Loan Agent
By: /s/ Michael Flannery
------------------------------
Name: Michael Flannery
THE BANK OF NOVA SCOTIA, in its individual
capacity and in its capacity as Administrative
Agent
By: /s/ A.S. Norsworthy
-----------------------------
Name: A.S. Norsworthy
Title: Sr. Team Leader-Loan Operations
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, in its individual capacity and
in its capacity as Advisory Agent
By: /s/ Sandra S. Ober
-----------------------------
Name: Sandra S. Ober
CIBC INC.
By: /s/ William J. Koslo, Jr.
-----------------------------
Name: William J. Koslo, Jr.
NATIONSBANK, N.A.
By: /s/ Valerie C. Mills
-----------------------------
Name: Valerie C. Mills
Title: Sr. Vice President
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:_____________________________
Name:
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Mary Ann Klemm
-----------------------------
Name: Mary Ann Klemm
Title: Vice President and Group Head
<PAGE>
BANCA COMMERCIALE ITALIANA, CHICAGO BRANCH
By: /s/ Julian M. Teodori
-----------------------------
Name: Julian M. Teodori
Title: Senior Vice President Branch Manager
By: /s/ Matthew V. Trujillo
-----------------------------
Name: Matthew V. Trujillo
Title: Assistant Vice President
THE DAI-ICHI KANGYO BANK, LTD., CHICAGO BRANCH
By:_____________________________
Name:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By: /s/ Gus C. Browne II
-----------------------------
Name: Gus C. Browne II
THE NORTHERN TRUST COMPANY
By: /s/ Sidney R. Dillard
-----------------------------
Name: Sidney R. Dillard
THE SAKURA BANK, LTD.
By:_____________________________
Name:
<PAGE>
SWISS BANK CORPORATION, CHICAGO BRANCH
By: /s/ Nancy Russell
----------------------------
Name: Nancy Russell
Title: SBC Director
By: /s/ Ernst Schirmer
------------------------------
Name: Ernst Schirmer
Title: Director Credit Risk Management
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Richard A. Sutter
-----------------------------
Name: Richard A. Sutter
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ David C. Sagers
-----------------------------
Name: David C. Sagers
Title: Vice President
By: /s/ Ronald R. Richter
-----------------------------
Name: Ronald R. Richter
Title: Group Vice President
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Christopher H. Patton
-----------------------------
Name: Christopher H. Patton
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Judith C.E. Kelly
-----------------------------
Name: Judith C.E. Kelly
Title: Vice President
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Name:
THE YASUDA TRUST AND BANKING CO., LTD.
By: /s/ Joseph C. Meek
-----------------------------
Name: Joseph C. Meek
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Andrew W. Fish
-----------------------------
Name: Andrew W. Fish
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO DI TORINO, S.P.A.
By: /s/ Robert Wurster
----------------------
Name: Robert Wurster
Title: First Vice President
By: /s/ Carlo Persico
------------------
Name: Carlo Persico
Title: Deputy General Manager
UNION BANK OF SWITZERLAND - NEW YORK BRANCH
By: /s/ Daniel R. Strickford
-------------------------
Name: Daniel R. Strickford
Title: Assistant Vice President
By: /s/ Samuel Azizo
-----------------------
Name: Samuel Azizo
Title: Vice President
WELLS FARGO BANK, N.A.
By:_____________________________
Name:
<PAGE>
COMERICA BANK
By: /s/ Harve C. Light
-----------------------------
Name: Harve C. Light
Title: Assistant Vice President
BANK OF AMERICA ILLINOIS
By: /s/ Sandra S. Ober
-----------------------------
Name: Sandra S. Ober
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:_____________________________
Name:
<PAGE>
GUARANTY REAFFIRMED:
LECHMERE, INC.
By: /s/ Carol J. Harms
-----------------------------
Name: Carol J. Harms
Title: Vice President and Treasurer
<PAGE>
EXHIBIT 10.(i)(L)(2)
THE BANK OF NEW YORK
THE BANK OF NOVA SCOTIA
March 27, 1997
Signature Financial/Marketing, Inc.
200 North Martingale Road
Schaumburg, Illinois 60173
Gentlemen:
We refer to the Credit Agreement dated as of September 27, 1997, as amended and
restated as of October 21, 1996 and as amended as of December 23, 1996 among
Signature Financial/Marketing, Inc., various Banks, BNY, and BNS (the "Signature
Credit Agreement").
The Bank of New York ("BNY") and The Bank of Nova Scotia ("BNS") have been
advised by Montgomery Ward & Co., Incorporated ("Montgomery Ward") that
Montgomery Ward plans to enter into a Limited Waiver and First Amendment (the
"Waiver and Amendment") to the Note Purchase Agreements dated as of March 1,
1993 between Montgomery Ward and the note purchasers thereunder (the "Note
Agreements") with the holders (the "Noteholders") of the notes (the "Notes")
issued under the Note Agreements. The Waiver and Amendment provides for the
waiver by the Noteholders for the periods prior to and including June 27, 1997
of compliance by Montgomery Ward with the minimum shareholders equity and
priority debt tests under the Note Agreements and provides for the payment of a
waiver fee to the Noteholders, an increase in interest rates on the Notes, a
shortening to August 29, 1997 of the maturity of the Notes and the imposition of
certain additional covenants and restrictions on Montgomery Ward.
BNY and BNS have been advised that the Program Agreement dated as of October 7,
1996, as amended, ("Program Agreement") among Montgomery Ward, Lechmere, Inc.
and Deutsche Financial Services Corporation has a cross default provision
similar to the cross default provision contained in section 13.1(c) of the Long
and Short Term Credit Agreements dated as of September 15, 1994, as amended,
among Montgomery Ward, various Banks, and BNY, BNS, The First National Bank of
Chicago, and Bank of America National Trust and Savings Association, as agents.
<PAGE>
March 27, 1997
Page 2
BNS and BNY hereby waive any "Event of Default" which might arise under section
8.1(f) of the Signature Credit Agreement solely and exclusively by reason of any
"Event of Default" under section 7.1(e) of the Program Agreement, provided that
such "Event of Default" under the Program Agreement was caused solely and
exclusively by reason of the execution and delivery by Montgomery Ward of the
Waiver and Amendment and the performance by Montgomery Ward of its obligations
thereunder and for no other reason whatsoever.
The waiver contained herein is limited precisely to its terms and shall not
constitute an amendment, modification or waiver generally or for any other
purpose.
This letter may be executed in any number of counterparts, each of which shall
be an original and all of which when taken together will constitute one
document. This letter shall be governed by and construed in accordance with the
laws of the State of Illinois.
THE BANK OF NEW YORK, in its
individual capacity and in its
capacity as Documentation Agent
By: /s/ Michael Flannery
-----------------------------
Name: Michael Flannery
THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent
By: /s/ F.C.H. Ashby
-----------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
<PAGE>
Exhibit 10.(i)(L)(3)
March 27, 1997
THE BANK OF NOVA SCOTIA, as Administrative Agent
600 Peachtree Street NE, Suite 2700
Atlanta, Georgia 30308
THE BANK OF NEW YORK, as Documentation Agent
One Wall Street
New York, New York 10286
Re: Signature Financial/Marketing, Inc.
-----------------------------------
This letter confirms that the Credit Agreement dated as of September
27, 1996, as amended and restated as of October 21, 1996 and as amended as of
December 23, 1996 entered into and among the Banks and Signature
Financial/Marketing, Inc. as now in effect or hereafter extended, renewed,
modified, supplemented, amended or restated is corrected so that the definition
of "Change in Control" shall read in its entirety as follows:
"Change of Control" shall be deemed to have occurred at such time as:
(i) General Electric Capital Corporation ceases to own on a fully-diluted basis
the percentage of each class of the capital stock of Montgomery Ward Holding
Corp., a Delaware corporation, which is owned by it on the Original Closing Date
on a fully-diluted basis, or (ii) Montgomery Ward Holding Corp. ceases to own
100% of the capital stock of MW on a fully-diluted basis, or (iii) MW ceases to
own 100% of the capital stock of the Borrower on a fully-diluted basis, or (iv)
the Borrower ceases to own, directly or indirectly, 100% of the capital stock of
any Subsidiary of the Borrower on a fully-diluted basis.
SIGNATURE FINANCIAL/MARKETING, INC.
<PAGE>
March 27, 1997
Page 2
By: /s/ Alan Portelli
-------------------------
Title:
-----------------------
THE BANK OF NEW YORK, in its
individual capacity and in its
capacity as Documentation Agent
By: /s/ Michael Flannery
-------------------------
Title: Vice President
-----------------------
THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent
By: /s/ A.S. Norsworthy
-------------------------
Title: Sr. Team Leader-Loan Operations
-------------------------------
<PAGE>
EXHIBIT 10.(i)(M)(3)
WAIVER AND THIRD AMENDMENT
TO
CREDIT AGREEMENT
THIS WAIVER AND THIRD AMENDMENT (the "Waiver and Amendment") dated as
of March 29, 1997, is made and entered into among MONTGOMERY WARD & CO.,
INCORPORATED (the "Company") and the lenders listed on the signature pages
hereof (herein, together with their respective successors and assigns,
collectively called the "Lenders" and individually called a "Lender").
WHEREAS the Lenders are parties to that certain Credit Agreement dated
as of October 4, 1996, as amended (the "Credit Agreement"), among Montgomery
Ward & Co., Incorporated, various Lenders, The Bank of New York as Documentation
Agent, and The Bank of Nova Scotia, as Administrative Agent; and
WHEREAS the Company desires to amend the Credit Agreement in certain
respects;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
WAIVER
1.1 Waiver. The Lenders hereby waive any Event of Default under
Section 13.1(c) of the Credit Agreement arising by reason of any payment or
other concession pursuant to the Finance Agreement Modifications referred to in
Section 3.2 hereof.
1.2 Limitation on Waivers. The waiver contained herein is limited
precisely to their terms and shall not constitute an amendment, modification or
waiver generally or for any other purpose. The waiver contained herein shall
immediately terminate and cease to be effective upon breach by the Company of
its obligations under Section 2.3 hereof or any of the representations or
warranties contained in Article III.
ARTICLE II
AMENDMENTS
2.1 Section 1.1 of the Credit Agreement is hereby amended by adding
the following definitions thereto:
(a) the definition of "Existing Credit Agreements"
<PAGE>
is amended by deleting reference therein to "December 23, 1996" and inserting in
lieu thereof "March 29, 1997".
(b) the definition of "Change in Control" is corrected by deleting
reference therein to "Company" and inserting in lieu thereof "Montgomery Ward
Holding Corp., a Delaware corporation".
(c) The following definition is added in the appropriate alphabetical
order:
"Finance Agreements" means any or all of the following: (i) any and
all agreements of the Company or any of its Subsidiaries evidencing or
governing the terms of any Indebtedness for Borrowed Money, (ii) the so-
called synthetic or operating lease agreements with Sumitomo Bank Leasing
and Finance, Inc. and Credit Lyonnais, as lessors, as amended, and (iii)
any agreements or notes (including the so-called Seller Notes referred to
in Section 13.1(j)) evidencing amounts owed by the Company or a Subsidiary
under the Retail Credit Program Agreement.
2.2 Section 11 of the Credit Agreement is hereby amended by replacing
in subsection (i) reference to "December 23, 1996" and inserting in lieu thereof
"March 29, 1997".
2.3 Section 11 of the Credit Agreement is hereby amended by adding the
following paragraph at the end of the section:
Modification of Finance Agreements. Without the consent of the Required
Lenders, after the Effective Date the Company will not, and will not permit
any Subsidiary to, enter into any material amendment, waiver or
modification with respect to any Finance Agreement.
2.4 Inventory Financing and Note Purchase Agreements. Section 13.1 of
the Credit Agreement is further amended by adding subsections (m) and (n) as
follows:
(m) Inventory Financing with GE Capital. The aggregate outstanding
principal amount of indebtedness of the Company and its subsidiary,
Lechmere, Inc. to GE Capital pursuant to its so-called vendor program shall
at any time be less than $350,000,000.
(n) Note Purchase Agreements. The occurrence of an event of default
under the Company's Note Purchase Agreements dated as of March 1, 1993 and
July 11, 1995, as amended. No waiver, amendment or other action by the
noteholders with respect to any event of default under the such Note
Purchase Agreements shall be effective to
2
<PAGE>
terminate the Event of Default arising under this Section 13.1(n).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company hereby represents and warrants to the Agents and the
Lenders as follows:
3.1 No Default. No Event of Default or Unmatured Event of Default has
occurred and is continuing or will exist after giving effect to this Waiver and
Amendment.
3.2 Finance Agreements. Without limitation of Section 2.1, for the
Fiscal Quarter ending March 29, 1997 the Company has obtained all necessary
amendments, waivers or modifications (collectively, the "Finance Agreement
Modifications") in respect of any financial covenants under the Finance
Agreements so that during the Waiver Period, no default or event of default
shall exist under any of such Finance Agreements as a result of noncompliance
with any of such financial covenants. The Company has furnished to the Agents
copies of any amendment, waiver or modification entered into on or after
December 23, 1996 with respect to any Finance Agreement. The Company has
furnished to each of the Lenders a true and correct summary (dated as of
3/27/97) of each Finance Agreement Modification.
3.3 Due Execution. The execution, delivery and performance of this
Waiver and Amendment, (i) are within the Company's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) do not require any
governmental approval which has not been previously obtained (and each such
governmental approval that has been previously obtained remains effective), (iv)
do not and will not contravene or conflict with any provision of law, or of any
judgment, decree or order, or of the Company's charter or by-laws, and (v) do
not and will not contravene or conflict with, or cause any Lien to arise under,
any provision of any agreement binding upon the Company, any Subsidiary or any
of their respective properties.
3.4 Validity. The Credit Agreement as amended by this Waiver and
Amendment constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
3.5 Credit Agreement. All representations and warranties of the
Company contained in Sections 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11,
10.12, 10.15 and 10.18 of the Credit Agreement are true and correct as of the
date hereof with the same effect as though made on the date hereof.
3
<PAGE>
ARTICLE IV
GENERAL
-------
4.1 Expenses. The Company agrees to pay all out-of-pocket expenses
(including fees and expenses of McDermott, Will & Emery) of the Documentation
Agent and the Administrative Agent in connection with the preparation, execution
and delivery of this Waiver and Amendment.
4.2 Effectiveness. Article I of this Waiver and Amendment shall
become effective as of the date on which, McDermott, Will & Emery as counsel to
the Agents shall have received the following in form and substance reasonably
satisfactory to the Documentation Agent:
(a) Waiver and Amendment. Counterparts of this Waiver and Amendment,
whether on the same or different counterparts, executed by the Company and
the Required Lenders (or in the case of any Lender as to which an executed
counterpart shall not have been so received, telegraphic, telefax, telex or
other written confirmation of execution of a counterpart hereof by such
Lender).
(b) Finance Agreements. A certificate of an Authorized Officer of the
Company to the effect that (i) attached thereto is an executed copy of each
Finance Agreement Modification entered into during the period from December
24, 1996 through the Effective Date, and (ii) each such Finance Agreement
Modification is fully effective.
4.3 Definitions. Except as otherwise herein specifically defined, all
the capitalized terms contained herein shall have the meaning ascribed to such
terms in the Credit Agreement.
4.4 Reaffirmation. Except as hereinabove expressly provided, all the
terms and provisions of the Credit Agreement shall remain in full force and
effect and all references therein and in any related documents to the Credit
Agreement shall henceforth refer to the Credit Agreement as amended by this
Waiver and Amendment. This Waiver and Amendment shall be deemed incorporated
into, and a part of, the Credit Agreement.
4.5 Successors. This Waiver and Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
4.6 Governing Law. This Waiver and Amendment shall be governed by
and construed in accordance with the laws of the State of Illinois.
4
<PAGE>
4.7 Counterparts. This Waiver and Amendment 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.
4.8 Acknowledgement of Lechmere. By executing the acknowledgement to
this Waiver and Amendment, Lechmere, Inc. hereby confirms and agrees that the
Lechmere, Inc. Guaranty is, and shall continue to be in full force and effect
and is hereby ratified and confirmed in all respects, except that on or after
the Effective Date each reference therein to the "Credit Agreement" shall refer
to the Credit Agreement after giving effect to this Waiver and Amendment.
5
<PAGE>
Delivered at Chicago, Illinois as of the day, month and year first
above written.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Carol J. Harms
--------------------------------
Name: Carol J. Harms
Title: Senior Vice President - Finance
ACCEPTED AND APPROVED:
THE BANK OF NEW YORK, in its
individual capacity and in
its capacity as Documentation Agent
By: /s/ Michael Flannery
-----------------------------
Name: Michael Flannery
THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent
By: /s/ A.S. Norsworthy
-----------------------------
Name: A.S. Norsworthy
Title: Sr. Team Leader-Loan Operations
GENERAL ELECTRIC CAPITAL CORPORATION,
in its individual capacity
By: /s/ R.M. Agans
------------------------------
Name: R.M. Agans
<PAGE>
GUARANTY REAFFIRMED:
LECHMERE, INC.
By: /s/ Carol J. Harms
-------------------
Name: Carol J. Harms
Title: Vice President and Treasurer
<PAGE>
Exhibit 10.(iii)(c)
March 27, 1997
Montgomery Ward & Co., Incorporated
Montgomery Ward Plaza
Chicago, IL 60671
Gentlemen:
General Electric Capital Corporation ("GE Capital") has been advised by
Montgomery Ward & Co., Incorporated ("Montgomery Ward") that Montgomery Ward
plans to enter into a Limited Waiver and First Amendment (the "Waiver and
Amendment") to the Note Purchase Agreements dated March 1, 1993 between
Montgomery Ward and the note purchasers thereunder, as amended, and the Note
Purchase Agreement dated July 11, 1995 among Montgomery Ward and the note
purchasers thereunder (the "Note Agreements") with the holders ("Noteholders")
of the notes (the "Notes") issued under the Note Agreements. The Waiver and
Amendment provides for the waiver by the Noteholders for the periods prior to
and including June 27, 1997 of compliance by Montgomery Ward with the minimum
shareholder equity and priority debt tests under the Note Agreements and
provides for the payment of a waiver fee to the Noteholders, an increase in
interest rates on the Notes, a shortening to August 29, 1997 of the maturity of
the Notes and the imposition of certain additional covenants and restrictions on
Montgomery Ward.
GE Capital hereby waives an "Event of Default" which might arise under Section
7(a)(4) of the Program Agreement dated October 12, 1989 between GE Capital and
Montgomery Ward, as amended, solely and exclusively by reason of the execution
and delivery by Montgomery Ward of the Waiver and Amendment and the performance
by Montgomery Ward of its obligations thereunder and for no other reason
whatsoever.
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-------------------------
Title:
-------------------------
<PAGE>
EXHIBIT 10.(iv)(D)(3)
MONTGOMERY WARD & CO., INCORPORATED
Third Amendment
to the
Montgomery Ward & Co., Incorporated
Retirement Security Plan
Dated: March 30, 1997
WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation
("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security
Plan ("Plan"); and
WHEREAS, pursuant to Section 17.1 Power to Amend, the power to amend the
Plan is reserved to the Board of Directors of Montgomery Ward & Co.,
Incorporated ("Board"); and
WHEREAS, the Board desires to amend the Plan.
NOW, THEREFORE, the Plan is amended effective April 1, 1997, in the
following manner:
1. Addendum B is added to the Plan to read in its entirety as attached
hereto.
2. In all other respects, the Plan shall continue in full force and effect.
MONTGOMERY WARD & CO., INCORPORATED
By: Robert A. Kasenter /s/ Robert A. Kasenter
------------------------------------------
Its: EVP Human Resources
-----------------------------------------
ATTEST:
By: Philip Delk /s/ Philip Delk
-------------------------------
Its: VP & Deputy General Counsel
------------------------------
<PAGE>
Addendum B
Montgomery Ward & Co., Incorporated
Retirement Security Plan
B-1 Purpose. The purpose of this Addendum B is to provide for
participation in the Plan by eligible employees of Montgomery Ward & Co.,
Incorporated-Japan Branch.
B-2 Use of Terms. Except where the context of this Addendum B expressly
indicates to the contrary, terms used and defined in the Plan shall have the
same meanings for purposes of this Addendum B. As used in this Addendum B, the
term this "Addendum B" shall include only this Addendum
B, and the references to the "Plan" shall include all provisions of the Plan but
shall not include this Addendum B.
B-3 Conflicts Between Plan and This Addendum B. This Addendum B, together
with the Plan, comprises the Plan with respect to Participants under this
Addendum B. In case of any conflict between the provisions of the Plan and this
Addendum B, the terms and the provisions of this Addendum B shall govern to the
extent necessary to eliminate such conflict.
B-4 Participants. Nonresident aliens employed by Montgomery Ward & Co.,
Incorporated-Japan Branch shall be considered "Employees", "Associates", and
"Japan Associates" for purposes of the Plan and this Addendum B. Japan
Associates employed by Montgomery Ward & Co., Incorporated-Japan Branch on April
1, 1997 who have completed one Year of Service by April 1, 1997 participate in
the Plan as of April 1, 1997. Each other Associate who both attains age 21 and
complete one Year of Service shall become a Participant under the Plan on the
first day of the month following the month in which such Associate meets the
eligibility requirements.
B-5 Vesting. If a Japan Associate completes two Years of Service, such
Associate shall be Vested (have a nonforfeitable right to a Retirement Benefit)
in such Associate's Retirement Benefit.
B-6 Final Monthly Salary. For purposes of this Addendum B, "Final Monthly
Salary" means annual base salary or pay preceding the date of termination of
Service by a Japan Associate, divided by fifteen (15).
B-7 Retirement Benefit. If a Participant who is a Japan Associate Retires
on the Participant's Normal Retirement Date, the amount of the Retirement
Benefit shall be the Actuarial Equivalent of a lump sum expressed in the
currency of Japan determined by multiplying the participant's Final Monthly
Salary by the Participant's years of Service (calculated to the nearest month).
Sections 9.1, 9.2, 10.1, 10.2 and 10.3 of the Plan
<PAGE>
do not apply to Participants who are Japan Associates. Except as otherwise
provided in Article IX and Section 11.4 of the Plan, a Participant who is a
Japan Associate who Retires on the Participant's Normal Retirement Date shall be
eligible for the Retirement Benefit defined in this paragraph B-7 or an
Actuarial Equivalent benefit thereto as provided for herein.
B-8 Optional Methods of Payment. In lieu of the Qualified Joint and
Survivor Benefit payable to a married Participant or the single life annuity
payable to an unmarried Participant, a Participant who is a Japan Associate may
elect, subject to Sections 11.3 and 11.4 of the Plan, to receive the Actuarial
Equivalent of the Retirement Benefit to which the Participant is entitled under
the Plan in one lump sum payment in the currency of Japan, or in installments
over five quarterly payments in the currency of Japan. Any such election shall
comply with the spousal consent requirements of Section 11.5 of the Plan.
Section 11.2 of the Plan does not apply to Participants who are Japan
Associates.
B-9 Termination of Service by a Vested Participant. If the Service of a
Participant who is a Japan Associate and who is Vested terminates prior to
Retirement, such Participant may elect, subject to the spousal consent
requirements of Section 11.5 of the Plan, a Retirement Benefit commencing on the
first day of any month within nine months after the Participant's termination of
Service and prior to the Participant's Normal Retirement Date or on the
Participant's Normal Retirement Date. Section 13.2 of the Plan does not apply to
Participants who are Japan Associates.
B-10 Death Benefits. In lieu of the Pre-Retirement Death Benefit
described in Section 12.1, the spouse of a Participant who died while employed
as Japan Associate or within the first nine months after the Participant's
termination of Service may elect to receive (i) a lump sum amount equal to the
lump sum amount which would have been payable to the Participant if the
Participant had terminated Service on the earlier of the date of the
Participant's death or the Participant's prior termination of Service or (ii)
five quarterly installments equal to the quarterly installment amount which
would have been payable to the Participant if the Participant had terminated
Service on the earlier of the date of the Participant's death or the
Participant's prior termination of Service.
B-11 Actuarial Equivalent. For purposes of this Addendum B, "Actuarial
Equivalent" shall mean the lesser of (i) Actuarial Equivalent as otherwise
defined in the Plan and (ii) Actuarial Equivalent computed as otherwise defined
in the Plan but using a 5% interest rate.
2
<PAGE>
[LETTERHEAD OF MONTGOMERY WARD]
EXHIBIT 10.(xiv)
CONFIDENTIAL
------------
April 1, 1997
Spencer H. Heine
1141 Carberry Circle
Inverness, Illinois 60067
Dear Spencer:
This letter confirms our offer to you to remain Executive Vice President,
General Counsel and President Montgomery Ward properties for Montgomery Ward
with continuing responsibility for all Legal and Real Estate activities for the
Company. Additionally, you will remain the Corporate Secretary. You will report
to Burnie Donoho, Vice Chairman and Chief Operating Officer and continue to
serve as a member of the Montgomery Ward Executive Committee under this
Agreement. Your compensation plan will include the following:
1.) Base salary of $400,000 annually, paid semi-monthly.
2.) Target bonus on the Performance Management Plan of $125,000. Based
upon the achievement of superior performance against specific
objectives for the year, you have the opportunity to earn up to 150%
of your target bonus. For fiscal 1997, your target bonus of $125,000
will be guaranteed.
3.) You will receive a one-time payment of $400,000 within 10 days of your
signing this agreement in exchange for your waiver of the diminution
of your position when you were removed from the Board of Directors in
January, 1997. Upon receipt of this payment, you will waive your
ability to elect a two year severance option due to any act through
this date. This payment is also consideration for your waiver of all
future rights under the Montgomery Ward Change of Control Security
Plan dated March 1, 1996. This letter will constitute our new
Agreement.
4.) You will continue to participate in the senior officer perquisites,
including; financial counselling, tax assistance, executive medical,
and annual physical examination. You will also participate in any new
benefits, retention, and perquisite plans that are implemented for the
Executive Committee members as a group.
<PAGE>
Spencer H. Heine
April 11, 1997
Page 2
5.) When the new Stock Option Plan is approved, (or as soon as possible
using the current plan if the new plan is not approved by the Board)
you will receive a stock option for 225,000 shares of Montgomery Ward
Holding stock at the 1997 fair market value as of December 29, 1996.
These options will vest as follows:
75,000 - April 1, 1998
75,000 - April 1, 1999
75,000 - April 1, 2000
All stock options in point 5 are subject to the Stockholder's
Agreement which govern the Stock Option Plan at the time they are
granted. (A copy of the current 10-Q and latest Prospectus are
included).
6.) If Montgomery Ward initiates a separation of your employment prior to
April 1, 2000 for any reason other than "Cause" as defined below, you
will receive:
A) Your base salary for twenty-four months. After April 1, 2000,
you will participate in the normal Senior Officer Severance
Plan that exists as of that date.
B) The continuation of the vesting of your stock and stock
options through April 1, 2000.
"Cause" shall mean (i) your willful failure to substantially perform
your duties hereunder, (ii) your willful failure to follow a written,
lawful order or written directive from the Board of Directors or Chief
Executive Officer of the company, or (iii) your conviction of any kind
of felony or any misdemeanor involving moral turpitude. For purposes
of this paragraph, no act, or failure to act, on your part shall be
considered "willful" unless such act, or failure to act by you was not
in good faith and was without reasonable belief that your action or
omission was in the best interest of the Company.
<PAGE>
Spencer H. Heine
April 11, 1997
Page 3
In the event of a Change of Control where the Company is sold to a
third party you may elect to leave the Company upon thirty (30) days
written notice to the Chairman and Chief Executive Officer. If you
elect this separation reason, you will receive one year's base salary
in a lump sum. All stock and stock options will vest in accordance
with the normal terms of the Stockholder's Agreement and will not be
accelerated. You must elect this option within thirty (30) days of the
Change of Control or it will terminate as an option to you.
If you voluntarily leave Montgomery Ward, or are separated for
"Cause", you will receive no severance payments, nor will your stock
continue to vest beyond your separation date.
I am happy that you are remaining with Montgomery Ward. If you are in agreement
with this letter, please sign below and return it to me whereupon it will become
our binding agreement. I am certain that your experience and knowledge of the
Company will be a valuable asset to us as we move forward and improve Montgomery
Ward's performance. I look forward to working together to meet our goals.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman & C.E.O.
Montgomery Ward
cc: Bob Kasenter
/s/ Spencer H. Heine
-----------------------------
Spencer H. Heine
4/13/97
-----------------------------
Date
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<PAGE>
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<S> <C>
<PERIOD-TYPE> OTHER
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<PERIOD-START> DEC-29-1996
<PERIOD-END> MAR-29-1997
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<SECURITIES> 280
<RECEIVABLES> 185
<ALLOWANCES> 0
<INVENTORY> 1402
<CURRENT-ASSETS> 0
<PP&E> 1297
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<TOTAL-ASSETS> 4768
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175
0
<COMMON> 1
<OTHER-SE> 290
<TOTAL-LIABILITY-AND-EQUITY> 4768
<SALES> 1119
<TOTAL-REVENUES> 1329
<CGS> 997
<TOTAL-COSTS> 997
<OTHER-EXPENSES> 525
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<NET-INCOME> (141)
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</TABLE>
