<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant x
Filed by a party other than the registrant
Check the appropriate box:
x Preliminary proxy statement Confidential, for Use of
Commission only (as permitted by
Rule 14a-6(e)(2))
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Montgomery Ward Holding Corp.
(Name of Registrant as Specified in Its Charter)
Montgomery Ward Holding Corp.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
x No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:<PAGE>
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Montgomery Ward Plaza
Chicago, Illinois 60671
NOTICE OF ANNUAL MEETING
Notice is hereby given that the Annual Meeting of stockholders
of Montgomery Ward Holding Corp. will be held at its corporate
offices, Montgomery Ward Plaza, Chicago, Illinois 60671, on Thursday,
May 29, 1997, at 9:00 A.M., to (i) elect directors; (ii) approve an
amendment to the Certificate of Incorporation of Montgomery Ward
Holding Corp.; (iii) approve amendments to the Montgomery Ward & Co.,
Incorporated Stock Ownership Plan; (iv) approve the grant of certain
stock options by Montgomery Ward Holding Corp. to each of Roger V.
Goddu, Burnett W. Donoho, Thomas Grimes, Spencer H. Heine, Karl S.
Taylor and Kevin Freeman; and (v) transact such other business as
properly may come before the meeting or any adjournment thereof.
Stockholders of record at the close of business on April 15,
1997, are entitled to receive notice of, and to vote at, the meeting.
BY ORDER OF THE BOARD OF DIRECTORS, April __, 1997
SPENCER H. HEINE
EXECUTIVE VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL<PAGE>
<PAGE>
PRELIMINARY COPIES
PROXY STATEMENT
MONTGOMERY WARD HOLDING CORP.
Montgomery Ward Plaza
Chicago, Illinois 60671
(312) 467-2000
This Proxy Statement, dated April __, 1997, is furnished in
connection with the solicitation by the Board of Directors of
Montgomery Ward Holding Corp. (the "Company") of proxies to be voted
at the Annual Meeting of the Company's stockholders on May 29, 1997,
and any adjournment thereof. This Proxy Statement and the
accompanying proxy and the Annual Report on Form 10-K for the fiscal
year ended December 28, 1996 are being mailed to stockholders on or
about April __, 1997. Business at the Annual Meeting is conducted in
accordance with the procedures determined by the presiding officer.
RECORD DATE AND OUTSTANDING VOTING SECURITIES
Stockholders of record at the close of business on April 15,
1997, are entitled to receive notice of the meeting and to vote the
shares held on that date. The number of voting securities of the
Company outstanding on April 15, 1997 was 18,222,706 shares of Class
A Common Stock, Series 1, $0.01 par value ("Series 1 Shares"), owned
by three stockholders of record; 101,816 shares of Class A Common
Stock, Series 2, $0.01 par value ("Series 2 Shares", and, together
with the Series 1 Shares and shares of Class A Common Stock, Series
3, $0.01 par value ("Series 3 Shares"), of which none were
outstanding as of April 15, 1997, the "Class A Shares"), owned by one
stockholder of record; and 25,000,000 shares of Class B Common Stock,
$0.01 par value (the "Class B Shares"), owned by one stockholder of
record. The Class A Shares and Class B Shares are
collectively referred to herein as the "Common Stock." Each share of
Class A Common Stock, Series 1, Class A Common Stock, Series 2, Class
A Common Stock, Series 3, and Class B Common Stock is entitled to one
vote.
VOTING OF PROXIES
Stockholders are urged to read carefully the material in this
Proxy Statement, specify their choice on each matter by marking the
appropriate box on the enclosed Proxy and sign, date and return the
Proxy. If the enclosed Proxy is properly executed and returned to
the Company in time for the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions of the
stockholder giving the Proxy. A stockholder giving a proxy may
revoke it at any time prior to its exercise by written notice of
revocation to the Secretary of the Company, or by the execution of a
proxy bearing a later date or by attending the meeting and voting in
person.
QUORUM AND REQUISITE VOTE
The holders of a majority of the outstanding shares of Common
Stock must be represented in person or by proxy at the Annual Meeting
for the meeting to be held. The affirmative vote of a majority of
the outstanding shares of Common Stock represented at the meeting, in
person or by proxy, is required for the election of directors and the
approval of stock option grants. The affirmative vote of a majority
of the outstanding shares of each of (i) the Common Stock; (ii) the
Series 1 Shares (as to the additional Series 3 Shares (as defined
herein) only); and (iii) the Class B Shares (as to the additional
Series 3 Shares only) is required for approval of the amendment to
<PAGE>
the Certificate of Incorporation of the Company described herein (the
"Certificate Amendment"). The affirmative vote of the holders
of record of a majority of the outstanding shares of (i) the
Common Stock and (ii) the Series 1 Shares is required for approval
of the amendment to the Montgomery Ward & Co., Incorporated Stock
Ownership Plan (the "Plan") described herein (the "Plan Amendment").
No shares of Common Stock are held by brokers and thus no broker
non-votes will be made at the meeting. Pursuant to applicable
Delaware law, votes abstaining from voting, since they are not cast
"for" a particular matter, will have the same effect as negative
votes or votes "against" a particular matter.
THE BOARD OF DIRECTORS
Pursuant to the General Corporation Law of the State of
Delaware, as implemented by the Company's Certificate of
Incorporation and By-laws, all corporate powers are exercised by and
under the direction of the Board of Directors, and the Company's
business, property and affairs are managed by and under the direction
of the Board of Directors.
ELECTION OF DIRECTORS
The following persons have been nominated for election as
directors of the Company: Roger V. Goddu, Burnett W. Donoho, Bernard
F. Brennan, Edwin G. Pohlmann, Myron Lieberman, Silas S. Cathcart,
Daniel W. Porter, Denis J. Nayden, Gary C. Wendt and Edward D.
Stewart. The Board of Directors recommends a vote for the election
of each of such persons. If elected, directors will serve until the
next Annual Meeting or until a successor is elected and qualified.
Under that certain Stockholders' Agreement dated as of June 17,
1988, as amended to date (the "Stockholders' Agreement"), the By-laws
of the Company shall provide (and the By-laws of the Company do so
provide), and the parties to the Stockholders' Agreement agree to
vote, for the election of a Board of Directors consisting of ten
members, three to be designated by Mr. Brennan (which three shall
include Mr. Brennan), five to be designated by General Electric
Capital Corporation ("GE Capital") and two to be designated by the
Chief Executive Officer of Montgomery Ward & Co., Incorporated, a
wholly-owned subsidiary of the Company ("Montgomery Ward") (which two
shall include such Chief Executive Officer). Of the nominees listed
below, Mr. Brennan has designated himself and Messrs. Pohlmann and
Lieberman, GE Capital has designated Messrs. Cathcart, Porter,
Nayden, Wendt and Stewart, and Mr. Goddu, who is the Chief Executive
Officer of Montgomery Ward, has designated himself and Mr. Donoho to
be directors of the Company.
The persons named as proxies intend to vote all shares for
which they receive proxies for the election of those of the nominees
identified above who are so designated and available at the time of
the election, unless such authority is withheld by the stockholders
giving the proxy with respect to one or more of such nominees, in
which case the shares will not be voted for the election of any
directors as to whom such authority is withheld. If any nominee
becomes unavailable for election for any reason, or is no longer
designated by Mr. Brennan, GE Capital, or Mr. Goddu, as the case may
be, at the time of the election, neither of which is anticipated, the
shares represented by the proxies will be voted for any substitute
nominee designated by Mr. Brennan, GE Capital or Mr. Goddu, as
applicable.
<PAGE>
Information with respect to ages of the directors is as of
April 1, 1997 and information as to their ownership of shares of the
Company as of that date is provided under the caption "OWNERSHIP OF
COMMON STOCK".
The Board of Directors recommends a vote FOR each of the
nominees listed below.
Roger V. Goddu, age 46, has been Chief Executive Officer and a
director of the Company since January 6, 1997 and has been Chairman
and Chief Executive Officer of Montgomery Ward since such date.
Prior thereto, Mr. Goddu served as President - U.S. Merchandising of
Toys "R" Us, Inc., from 1996 through 1997 and as Executive Vice
President / General Merchandise Manager of Toys "R" Us from 1989
through 1995.
Burnett W. Donoho, age 57, has been a director of the Company
since February 3, 1997, has been Chief Operating Officer of the
Company since February 24, 1997 and has been Vice Chairman and Chief
Operating Officer of Montgomery Ward since such date. Prior thereto,
Mr. Donoho managed his own retail consulting firm during 1996 and
from January 1995 through June 1995. Mr. Donoho was Chief Operating
Officer of The Broadway Stores from July 1995 through January 1996.
Prior thereto, he was Vice Chairman, Chief Operating Officer of
Macy's East from July 1992 through December 1994. Mr. Donoho is a
member of the Board of Directors of Office Max, Inc. and GTech
Corporation.
Bernard F. Brennan, age 58, has been a director of the Company
since February 9, 1988, has been Chairman since June 17, 1988, was
Chief Executive Officer from February 9, 1988 through December 10,
1996, and was President from February 9, 1988 through September 10,
1992. Mr. Brennan served as Chief Executive Officer of Montgomery
Ward from May 13, 1985 through December 10, 1996. He served as
President of Montgomery Ward from May 13, 1985 through September 10,
1992. Mr. Brennan has been a director of Itel Corporation since
1988.
Edwin G. Pohlmann, age 49, has been a director of the Company
since February 3, 1997. Mr. Pohlmann served as an Executive Vice
President of the Company from September 30, 1991 through January 15,
1997 and served as Chief Financial Officer of the Company from
September 30, 1991 through August 30, 1992. Mr. Pohlmann served as
Executive Vice President, Merchandise and Store Operations of
Montgomery Ward from November 16, 1993 through January 15, 1997.
Prior thereto, he was Executive Vice President, Merchandise Control
of Montgomery Ward from June 25, 1993 through November 15, 1993 and
Executive Vice President, Stores and Finance of Montgomery Ward from
January 27, 1992 through June 24, 1993.
Myron Lieberman, age 66, has been a director of the Company
since June 25, 1988. He is a senior partner in the law firm of
Altheimer & Gray and has practiced law in Chicago, Illinois since
1954.
Silas S. Cathcart, age 70, has been a director of the Company
since June 25, 1988. In January, 1990 Mr. Cathcart, who is retired,
resigned as Chairman of Kidder, Peabody Group Inc. Mr. Cathcart has
been a director of Illinois Tool Works, Inc. since 1964 and a
director of General Electric Capital Services, Inc. and GE Capital
since 1987. He also is a director of Quaker Oats Company, Baxter
International and General Electric Company.
Denis J. Nayden, age 42, has been a director of the Company
since June 25, 1988. Mr. Nayden has been President and Chief
Operating Officer of GE Capital since January 1, 1995. Mr. Nayden
served as President and Chief Operating Officer of Kidder, Peabody
<PAGE>
Group, Inc. from June 1994 through December 1994. Prior thereto, Mr.
Nayden was an Executive Vice President of GE Capital from February
1989 to June 1994. Mr. Nayden is a director of General Electric
Capital Services, Inc. and GE Capital.
Daniel W. Porter, age 41, has been a director of the Company
since May 12, 1995. Mr. Porter has been Vice President and General
Manager of GE Capital since April 1990 and has been President and
Chief Executive Officer of Retailer Financial Services, Inc., a
wholly-owned subsidiary of GE Capital, since March 30, 1995. Prior
thereto, he served as President and Chief Executive Officer of
Retailer Financial Services -- North America from September 1993
through March 1995. He served as Vice President and General Manager
of GE Capital's Private Label Financing business from April 1990
through September 1993.
Gary C. Wendt, age 55, has been a director of the Company since
December 17, 1996. Mr. Wendt has been Chairman and Chief Executive
Officer of GE Capital since 1991.
Edward D. Stewart, age 54, has been a director of the Company
since December 10, 1996. Mr. Stewart has been an Executive Vice
President of GE Capital since January 1, 1992.
Information with respect to the executive officers of the
Company is included in the Company's Annual Report on Form 10-K.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held four meetings during
the 1996 fiscal year. Messrs. Brennan and Porter attended every
meeting; Messrs. Lieberman and Nayden each attended three meetings;
Mr. Cathcart attended two meetings; and Mr. Stewart attended the one
meeting held following his appointment to the Board of Directors.
None of Messrs. Goddu, Donoho, Pohlmann or Wendt was a director of
the Company at the time of any of the meetings held during the 1996
fiscal year. Messrs. James A. Parke, G. Joseph Reddington, Spencer H.
Heine and John L. Workman, who were directors of the Company during
1996, attended three meetings, four meetings, four meetings, and
four meetings, respectively.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company does not have a nominating committee of the Board
of Directors, as the designation of directors is governed by the By-laws of
the Company and by the Stockholders' Agreement.
While the Company does not have an audit committee,
compensation committee, or a finance committee, its wholly-owned
subsidiary, Montgomery Ward, has created committees of its board of
directors to address audits, compensation and finance.
Audit. The Audit Committee of Montgomery Ward met three times
during 1996. Mr. Lieberman is chairman of the Committee, Messrs.
Porter and Donoho are members, and Mr. Workman, Chief Financial
Officer of the Company and of Montgomery Ward, is secretary. Mr.
Parke served as a member of the Committee until his resignation as a
director in December 1996. The primary functions of the Committee
are to recommend independent public accountants to the Board of
Directors, to review the scope of the independent public accountants'
examination, to review the fees for audit and non-audit services by
<PAGE>
the independent public accountants and to consider the results of the
independent public accountants' review of the internal accounting
controls and other matters resulting from the audit.
Compensation. The Compensation Committee of Montgomery Ward
met once during 1996. Mr. Cathcart is chairman of the Committee, Mr.
Brennan and Mr. Porter are members and Mr. Robert A. Kasenter,
Executive Vice President of the Company and Executive Vice President,
Human Resources and Corporate Communications of Montgomery Ward, is
secretary. The function of the Committee is to review and make
recommendations upon proposals by management as to compensation,
bonuses, officers' severance arrangements and other benefits and
policies respecting such matters for the officers and associates of
Montgomery Ward.
Finance. The Finance Committee of Montgomery Ward did not hold
separate meetings during 1996. Mr. Goddu is chairman of the
Committee, Messrs. Nayden and Stewart are members and Mr. Workman is
secretary. Mr. Heine served as Chairman of the Committee until his
resignation as a director in January 1997. The functions of the
Committee are to monitor the financial affairs and treasury functions
of Montgomery Ward and report thereon, from time to time, to its
Board of Directors.
DIRECTOR COMPENSATION ARRANGEMENTS
Messrs. Cathcart and Lieberman are paid director fees of $6,000
per fiscal quarter, plus $1,500 for each meeting such director
attends of the Board of Directors of the Company and Montgomery Ward,
plus $1,500 for each meeting such director attends of a committee of
the Company and Montgomery Ward of which such director is a member,
provided that if a meeting of the Board of Directors of the Company
is held jointly with or immediately prior to or following a meeting
of the Board of Directors of Montgomery Ward, the aggregate fees for
such meetings shall be $1,500, and provided further that if a meeting
of a committee of the Company is held jointly with or immediately
prior to or following a meeting of a committee of Montgomery Ward the
aggregate fees for such meetings shall be $1,500. Such directors
fees may be converted into Series 1 or Series 2 Shares pursuant to
the Directors Fee Plan described below. Directors of the Company who
are also executive officers of Montgomery Ward currently receive no
directors fees or other compensation for their service as directors
of the Company. Likewise, directors of the Company who are
designated by GE Capital (other than Mr. Cathcart) currently receive
no directors fees or other compensation for their service as
directors of the Company.
In December 1990, the Board of Directors adopted a plan, which
was approved by the shareholders in May 1991, allowing Messrs.
Cathcart and Lieberman to elect to receive all or any portion of the
fees for their services as directors of the Company and Montgomery
Ward in Series 1 Shares. In May 1991, the Board of Directors amended
and restated the plan as the Directors Plan (the "Directors Fee
Plan") to permit (a) the participation of additional directors, (b)
the receipt of Series 2 Shares as well as Series 1 Shares and (c) the
establishment of a committee (the "Directors Fee Plan Committee") to
(i) administer the Directors Fee Plan, (ii) estimate director fees
payable to directors for the fiscal year and (iii) permit directors
to elect to receive Class A Shares with a value determined by the
Directors Fee Plan Committee not to exceed the estimated fees. The
Directors Fee Plan as so amended and restated was approved by the
shareholders on May 17, 1991.
Directors of the Company or Montgomery Ward other than members
of the Directors Fee Plan Committee are eligible to participate in
the Directors Fee Plan if designated by the Directors Fee Plan
Committee. The Directors Fee Plan Committee is comprised of not
fewer than two directors who are appointed by the Board of Directors
<PAGE>
and who serve at the pleasure of the Board of Directors. The current
members of the Directors Fee Plan Committee are Messrs. Brennan,
Porter and Stewart. Of the seven eligible directors, the Directors
Fee Plan Committee has designated only Messrs. Cathcart and Lieberman
as participants in the Directors Fee Plan as of April 15, 1997.
Pursuant to an irrevocable election made in 1992, each of Messrs.
Cathcart and Lieberman has elected to receive all of the fees earned
by them for service as directors of the Company and of Montgomery
Ward in Series 1 Shares. As of April 15, 1997, Messrs. Cathcart and
Lieberman have acquired 8,987 and 10,235 Series 1 Shares,
respectively, pursuant to rights ("Conversion Rights") under the
Directors Fee Plan.
Conversion Rights are automatically granted after the end of
each fiscal quarter of the Company to participating directors in a
number determined by dividing the director fees for the fiscal
quarter by the fair market value per share of the Company's Common
Stock. The number of Class A Shares acquired pursuant to accelerated
Conversion Rights (as described below) reduces the number of
automatically granted Conversion Rights.
The acquisition of Class A Shares by directors pursuant to
Conversion Rights does not require any direct payment by a director,
but the director fees which otherwise would be payable to the
director are reduced by such fair market value of the Class A Shares
acquired. If directors acquire Class A Shares pursuant to Conversion
Rights, the Company will pay the directors an amount sufficient to
pay all applicable federal and state taxes payable by the directors
with respect to the Class A Shares acquired pursuant to Conversion
Rights and the amount attributable to this payment.
The Directors Fee Plan Committee decides based on the past
service of the director whether there should be an acceleration of
the grant of Conversion Rights based on an estimate of director fees
for the fiscal year. If the grant of Conversion Rights is
accelerated by the Directors Fee Plan Committee, the Directors Fee
Plan Committee determines the number of Class A Shares to which the
Conversion Rights relate, the value of the Class A Shares, the
duration of the Conversion Rights and the limitations on the Class A
Shares acquired pursuant to the Conversion Rights. It is currently
anticipated that any Class A Shares acquired pursuant to accelerated
Conversion Rights would be forfeited to the extent a director does
not earn the anticipated director fees for the fiscal year.
The Board of Directors may amend or terminate the Directors Fee
Plan, except that no such action by the Board of Directors may change
the terms and conditions of any Conversion Rights previously granted
in a manner adverse to the holder of the Conversion Right without the
consent of such holder. The Directors Fee Plan Committee has the
right to make adjustments with respect to Conversion Rights if
Montgomery Ward or the Company dissolves or is liquidated or upon the
occurrence of a public offering of shares of the Company.
EXECUTIVE COMPENSATION
The Company had no employees and paid no compensation in 1996.
The following information details compensation accrued by Montgomery
Ward and its subsidiaries to executive officers of the Company.
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Background
The Compensation Committee focuses on executive compensation
programs linked to the strategic goals of the Company by tying
significant portions of each executive's compensation to the
Company's financial performance and related shareholder value. Key
program components include base salary, annual incentives and long
term incentives. The Compensation Committee believes that the
strategic use of these program components provides the greatest
opportunity to:
Attract and retain talented key executives in the competitive
marketplace;
Provide individual performance-based awards which relate to
Company and individual performance; and
Balance effort between short-term and long-term goals.
As stated earlier, the function of the Compensation Committee
is to review and make recommendations upon proposals by management as
to the compensation, bonuses, officers' severance arrangements and
other benefits and policies respecting such matters for the officers
and associates of Montgomery Ward. The Compensation Committee is
composed of Messrs. Brennan, Cathcart and Porter. Mr. Robert A.
Kasenter is secretary of the Compensation Committee. Each year the
Compensation Committee conducts a review of Montgomery Ward's
executive compensation program, including, without limitation, the
compensation of the Chief Executive Officer. (Mr. Brennan did not
participate in the evaluation of his own compensation.) In
determining the compensation levels and components, the Compensation
Committee considers several factors which include but are not limited
to the following:
Independent compensation surveys of executive compensation for
a peer group of retail companies. Two surveys used are
prepared by Management Compensation Services ("MCS"), an
affiliate of Hewitt Associates. One MCS survey includes 107
retail organizations averaging $4.3 billion in annual sales
while the second MCS survey includes a sample of 10 large-volume
mass merchants selected as a peer group for Montgomery
Ward. The companies in the survey are not necessarily the same
as the companies in the S&P Retail (General Merchandise) Index
for which the cumulative return is shown on the Performance
Graph;
Independent compensation surveys of executive compensation of a
group of general industry companies. Two surveys used are the
Hewitt Associates Total Compensation Database ("Hewitt Survey")
and the Towers Perrin Executive Compensation Database ("Towers
Perrin Survey"). The Hewitt Survey is an annual survey
providing comparative data for each of 57 executive positions,
presented by company annual sales ranges. For 1995, 436
service and manufacturing companies participated in the Hewitt
Survey and the average participant's sales volume was $7.8
billion. The Towers Perrin Survey is an annual survey
providing comparative data for each of 113 executive and senior
management positions. This survey provides compensation data
on base salary and annual bonus by a scope range such as sales.
In 1995, 458 general industry corporations participated in the
Towers Perrin Survey and 72% of these companies had annual
sales over $1.0 billion. The companies in the survey are not
necessarily the same as the companies in the S&P 500 Index for
which the cumulative return is shown on the Performance Graph;
<PAGE>
Overall performance of each executive officer in order to
emphasize pay for performance; and
Compensation levels which allow the Company to attract, retain,
and enhance the development of knowledgeable key executives.
Base Compensation and Annual Incentives
In determining the aggregate base compensation and target
annual incentives for each executive officer, the Compensation
Committee averages the aggregate base compensation and short-term
incentive compensation data for the executive officer position from
each of the MCS Surveys, the Hewitt Survey and the Towers Perrin
Survey, with equal weight given to each survey. Subjective
adjustments to such arithmetic average are made to adjust for company
size, function, reporting relationships and individual performance.
The resulting adjusted average aggregate base compensation and target
annual incentive provide a guideline to the Compensation Committee
and the committee which administers the incentive plans described
below (the "Incentive Compensation Committee") for determining
executive compensation. Base compensation and target annual
incentives for individual executive officers vary from the guideline
based upon the Compensation Committee's and the Incentive
Compensation Committee's respective subjective judgment of Company
and individual performance, experience and competitive
considerations.
Base compensation and annual incentives for executive officers
are generally reviewed annually by the Compensation Committee and the
Incentive Compensation Committee. Often, as part of the compensation
package offered to attract an executive officer to Montgomery Ward,
base compensation and annual incentives, sometimes for more than one
year, as well as severance arrangements are specified in an
employment agreement. See the description of certain employment
agreements under the heading "CERTAIN ARRANGEMENTS."
Base Compensation
Montgomery Ward's base compensation for its executive officers
is designed to be generally competitive in the applicable
marketplace. In this regard, the Compensation Committee evaluates
the Company's base compensation levels against base compensation
levels at a group of retail companies set forth in the MCS surveys
described above. Moreover, because the pool of executives from which
Montgomery Ward considers candidates is broader than the retail peer
group, consideration is also given to general industry executive
compensation levels as set forth in the Hewitt Survey and Towers
Perrin Survey described above.
Within this general framework, an individual executive's base
pay ultimately is determined by several subjective factors relating
to that individual's historic performance and the Company's overall
performance. The executive's individual performance is evaluated
based upon financial performance and contribution of the area of the
Company and its subsidiaries under his or her supervision. Financial
performance is evaluated on both a short-term and long-term
historical horizon. Factors other than pure financial performance
are also taken into account by the Compensation Committee in setting
individuals' base pay. Such other subjective factors include the
executive's demonstrated ability to effectively implement strategic
goals, provide leadership, and develop his or her associates.
Prior to the termination of his employment, Mr. Brennan's base
compensation had increased to $1,050,000 during 1996, with a
significant portion of his total compensation contingent on Company
<PAGE>
performance. Pursuant to his Employment Agreement, described below,
Mr. Goddu's base compensation for 1997 will be $1,000,000. See
"CERTAIN ARRANGEMENTS."
Annual Incentives
In order to motivate executives, the Company's executive
compensation program includes variable compensation components which
can account for a significant portion of each executive's overall
compensation. Annual incentives can be created through the Senior
Executive Performance Management Program ("PMP") for the Chief
Executive Officer and the four most highly compensated executive
officers other than the Chief Executive Officer and through the
Performance Management Program for other executive officers. PMP is
an annual incentive program which links each executive's award to
pre-tax earnings goals. Each goal is expressed in terms of a
minimum, target and maximum payout. The Incentive Compensation
Committee administers the PMP and determines target awards and pre-tax earnings
goals. The current members of the Incentive Compensation Committee are
Messrs. Brennan, Cathcart and Porter. The Incentive Compensation
Committee may adjust awards downward under the PMP based on Company and
individual performance. The Performance Management Program for other
executive officers is similar to the PMP but is administered by
Montgomery Ward's Chief Executive Officer, its Executive Vice President,
Human Resources and Corporate Communications and its Director of
Compensation Benefits and Human Resource Planning.
Based on performance, no awards under either the PMP or the
Performance Management Program were made for 1996 to any individual,
including Mr. Brennan, other than those officers who were guaranteed
such awards pursuant to agreements entered into in connection with
such officers' employment by Montgomery Ward. See "CERTAIN
ARRANGEMENTS". Mr. Goddu's Employment Agreement provides that he will
receive a bonus of not less than $350,000 for 1997. See "CERTAIN
ARRANGEMENTS."
Long-Term Incentives
The Company provides long term incentives for a select group of
executives, and provides such incentives to the executive officers
named in the Summary Compensation Table through the Executive Long-Term
Incentive Plan. Other executives participate in a similar long-term incentive
plan. The Executive Long-Term Incentive Plan provides
for a significant portion of an executive's total compensation to be
tied to performance against a predetermined set of long term
strategic goals of the Company. The Executive Long-Term Incentive
Plan generally consists of three-year cycles that can be initiated
annually. The Incentive Compensation Committee administers the
Executive Long-Term Incentive Plan and determines target performance
objectives and target payouts. If target performance objectives for
pre-tax earnings and return on equity are achieved for any designated
cycle, cash may be awarded to each participant based upon a
percentage of the base salary of such participant. The pre-tax
earnings and return on equity objectives are weighted 60% and 40%,
respectively. In general, target payouts for cycles ending in 1995
and thereafter have been 85% of base salary for the Chief Executive
Officer, and between 20% and 50% of base salary for the other
executive officers named in the Summary Compensation Table. The
Incentive Compensation Committee may adjust target payouts based upon
the results of Montgomery Ward against its objectives for the cycle
and individual performance and no award would be given for
performance below minimum performance levels. No awards under the
Executive Long-Term Incentive Plan for the cycle ending in 1996 were
made to executive officers named in the Summary Compensation Table,
as set forth in the Summary Compensation Table under the heading
"LTIP Payout".
<PAGE>
Mr. Brennan's Executive Long-Term Incentive Plan award was
linked to predetermined long term pre-tax earnings and return on
equity strategic goals of the Company. For 1996, he received no
award based on Company goal performance. Mr. Goddu does not
participate in the Executive Long-Term Incentive Plan.
Equity Participation
The Compensation Committee believes that equity participation
of its executives and other key associates can be an important long
term partnership between the shareholders and the executives and
other key associates. The equity participation of each executive
named in the Summary Compensation Table may be found listed in the
table under the caption "OWNERSHIP OF COMMON STOCK". As reflected in
such table, executive officers have equity participation in the
Company. Stock options or awards may become part of the compensation
package of existing executive officers. Significant stock option
grants have been made as part of the compensation package offered to
attract a new executive officer, when there is a significant increase
in the responsibilities of an executive and to recognize outstanding
effort on the part of an executive officer.
Tax Deductibility of Compensation
It is the Compensation Committee's policy to maximize the
effectiveness, as well as the tax efficiency, of the Company's
executive compensation programs. Therefore, to maintain flexibility
to take actions which it deems to be in the best interests of the
Company and its shareholders, the Compensation Committee may approve
executive compensation programs that may not qualify for tax
deductibility. Section 162(m) of the Internal Revenue Code generally
denies a deduction to any publicly held corporation for compensation
paid to a "covered employee" in a taxable year to the extent that the
employee's compensation (other than qualified performance-based
compensation) exceeds $1 million. Currently, the plans administered
by the Incentive Compensation Committee do not qualify as qualified
performance-based compensation under Section 162(m).
Compensation Committee and Incentive
Compensation Committee:
Silas S. Cathcart, Chairman
Bernard F. Brennan
Daniel W. Porter
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth summary compensation information
for (i) Mr. Brennan, who served as Chief Executive Officer of the
Company until the termination of his employment in December 1996 and
who was the only person to serve as Chief Executive Officer during
the Company's 1996 fiscal year, (ii) the four most highly compensated
other executive officers who were serving as executive officers at
the end of the Company's 1996 fiscal year and (iii) Frederick E.
Meiser, who would have been among such four most highly compensated
other executive officers but for the termination of his employment in
December 1996 (collectively, the "Named Executive Officers").
Annual Compensation
Other Annual
Name and Salary Bonus Compensation
Principal Position Year ($) ($) ($)1
Bernard F. Brennan 1996 963,710 0 115,385
Chairman and Chief 1995 975,000 400,000 166
Executive Officer3 1994 950,000 565,600 1,912
G. Joseph Reddington 1996 600,000 250,000 114
Chairman and Chief 1995 600,000 282,000 277
Executive Officer, 1994 410,000 250,000 44
Signature Financial
Marketing, Inc.4
Michael Searles 1996 342,607 250,000 0
President, Softlines5
Robert J. Stevenish 1996 450,000 0 0
Executive Vice 1995 128,750 150,000 0
President, Stores and
Logistics6
Spencer H. Heine 1996 400,000 0 0
Executive Vice 1995 400,000 50,000 3,400
President, Secretary 1994 391,667 76,780 2,330
and General Counsel
Frederick E. Meiser 1996 420,834 0 8,654
Chairman and Chief 1995 61,112 100,000 0
Executive Officer,
Lechmere, Inc.7
<PAGE>
Long Term Compensation
Securities
Underlying LTIP All Other
Name and Options Payout Compensation
Principal Position Year (#) ($) ($)2
Bernard F. Brennan 1996 ------- 0 10,886
Chairman and Chief 1995 ------- 472,600 10,952
Executive Officer3 1994 ------- 777,600 10,901
G. Joseph Reddington 1996 ------- 0 1,800
Chairman and Chief 1995 ------- 166,900 1,152
Executive Officer, 1994 300,000 288,900 672
Signature Financial
Marketing, Inc.4
Michael Searles 1996 300,000 0 0
President, Softlines5
Robert J. Stevenish 1996 ------- 0 1,152
Executive Vice 1995 55,000 39,400 52,881
President, Stores and
Logistics6
Spencer H. Heine 1996 ------- 0 2,954
Executive Vice 1995 ------- 100,000 3,042
President, Secretary 1994 ------- 192,600 2,975
and General Counsel
Frederick E. Meiser 1996 ------- 0 1,104
Chairman and Chief 1995 100,000 0 80,676
Executive Officer,
Lechmere, Inc.7
<PAGE>
________________
1 Includes Company-paid legal fees, taxes paid on stock transfers,
earned and accrued vacation for Messrs. Brennan and Meiser for 1996
of $115,385 and $8,654, respectively, and purchases of Company stock
at below-market prices. No named executive officer received
perquisites exceeding $50,000 or 10% of salary and bonus.
2 Represents Company matching contributions to the Savings and
Profit Sharing Plan, Company payments of premiums on group term life
insurance policies, Company payments of premiums on a split-dollar
life insurance policy for Mr. Brennan of $7,284, $6,468 and $5,910
for 1996, 1995 and 1994, respectively, and hiring bonuses for Messrs.
Stevenish and Meiser for 1995 of $50,000 and $80,580, respectively.
3 Mr. Brennan's employment with the Company terminated in December
1996.
4 Mr. Reddington joined the Company in April 1994 and his employment
with the Company terminated in February 1997.
5 Mr. Searles joined the Company in June 1996.
6 Mr. Stevenish joined the Company in November 1995 and his
employment with the Company terminated in March 1997.
7 Mr. Meiser joined the Company in November 1995 and his employment
with the Company terminated in December 1996.
OPTION GRANTS AND EXERCISES
The following tables set forth summaries of the terms of stock
options granted to Mr. Searles during the Company's 1996 fiscal year
and the value of unexercised options held by Messrs. Reddington,
Searles, Stevenish and Meiser as of December 28, 1996, using assumed
annual rates of stock price appreciation. No other Named Executive
Officers held any options as of December 28, 1996. No Named
Executive Officer other than Mr. Searles received options during the
1996 fiscal year. None of the Named Executive Officers exercised any
stock options during the 1996 fiscal year. No stock appreciation
rights were granted to or exercised by any of the Named Executive
Officers during the 1996 fiscal year.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
Percentage
of Total
Options
No. of Granted
Securities to
Underlying Associ-
Options ates in Base
Granted Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5%($) 10%($)
Michael Searles 300,000 88.2% $24.50 6/1/06 $957,000 $5,877,000
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money
FY-End (#) Options at FY-End
Name Exercisable Unexercisable Exercisable Unexercisable
G. Joseph Reddington 300,000 0 $50,000 N/A
Michael Searles 0 300,000 N/A $0
Robert J. Stevenish 25,000 30,000 $0 $0
Frederick E. Meiser 50,000 50,000 $0 $0
LONG TERM INCENTIVE PLAN AWARDS
Senior executives of Montgomery Ward, generally Senior Vice
Presidents and above, are eligible to participate in the Executive
Long-Term Incentive Plan. The Executive Long-Term Incentive Plan
generally consists of three-year cycles that can be initiated
annually. If specific objectives for the pre-tax earnings and return
on equity for the Company and its subsidiaries established by the
Incentive Compensation Committee are achieved for any designated
cycle, cash is awarded based upon a target Executive Long-Term
Incentive Plan payout, which is a percentage (determined by the
Incentive Compensation Committee) of the base salary of each
participant, but in no event may the target Executive Long-Term
Incentive Plan payout for any participant exceed $2,000,000 for any
cycle. For 1996 the Incentive Compensation Committee set performance
goals based on pre-tax earnings and return on equity. Executives who
are hired into the eligible participant group after the beginning of
a cycle will have a target Executive Long-Term Incentive Plan payout
prorated based on the proportion of the cycle objectives achieved
after the first day of the quarter following their commencement of
employment through the end of the cycle.
Target Executive Long-Term Incentive Plan payouts will also be
proportionately adjusted to the extent the cycle objectives are (or
are not) met. Until the Incentive Compensation Committee determines
otherwise with respect to subsequent cycles not yet commenced, the
pre-tax earnings and return on equity objectives are weighted sixty
percent (60%) and forty percent (40%), respectively. To receive an
award, the participant must on the last day of the applicable cycle
be the Chief Executive Officer of the Company or be among the four
highest compensated officers of the Company (not taking into account
the Chief Executive Officer). The Incentive Compensation Committee
may in its discretion adjust downward the target Executive Long-Term
Incentive Plan payout of any participant. No award shall be made if
the Incentive Compensation Committee determines that the
participant's conduct has been detrimental to the Company or its
subsidiaries.
The following table sets forth information regarding the
participation of the Named Executive Officers in the three-year award
cycle under the Executive Long-Term Incentive Plan commencing in the
Company's 1996 fiscal year.
<PAGE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
Estimated Future
Performance Payouts under Non-Stock
Number of or Other Price-Based Plans
Shares, Period Until
Units Maturation
or Other or Threshold Target Maximum
Name Rights(#)1 Payout $)2 ($)3 ($)4
Bernard F. Brennan5 --- --- --- --- ---
G. Joseph Reddington5 --- --- --- --- ---
Michael Searles 283,000 1998 $169,800 $283,000 $396,200
Robert J. Stevenish5 --- --- --- --- ---
Spencer H. Heine 200,000 1998 $120,000 $200,000 $280,000
Frederick J. Meiser5 --- --- --- --- ---
_______________
1 Units each represent one dollar of target payout, based on a
target of 50% of current base salary for Messrs. Searles and Heine.
2 While there are no per se threshold payouts under the Executive
Long-Term Incentive Plan, it is unlikely that the Incentive
Compensation Committee would approve payouts if arithmetic
interpolation of the targets would result in a payout less than 60%
of target payouts.
3 Target levels are based on the attainment of target performance
goals, with no adjustment to the payout made by the Incentive
Compensation Committee.
4 While there are no per se maximum payouts under the Executive
Long-Term Incentive Plan (other than the $2,000,000 payout maximum),
it is unlikely that the Incentive Compensation Committee would
approve payouts in excess of 140% of target payouts.
5 Messrs. Brennan and Meiser's employment with the Company
terminated in 1996 and Messrs. Reddington and Stevenish's employment
with the Company terminated in 1997. They will receive no further
payouts under the Executive Long-Term Incentive Plan. Were they
still employed, Messrs. Brennan, Reddington, Stevenish and Meiser
would have been eligible to receive from threshold levels of
$535,500, $180,000, $94,500 and $54,000, respectively, to maximum
payouts of $1,249,500, $420,000, $220,500 and $126,000, respectively.
PENSION PLAN
Executive officers of Montgomery Ward, in addition to many other
associates, participate in a pension plan (the "Pension Plan"), which
provides benefits defined by formulae based primarily on a
participant's compensation, offset as provided by benefits provided
by the participant's accounts in the Savings and Profit Sharing Plan
("Savings Plan"), in which executive officers of Montgomery Ward, in
addition to many other associates, participate. From 1989 through
1993, no more than $200,000, as adjusted annually under Section
401(a)(17) of the Internal Revenue Code of 1986, as amended (the
<PAGE>
"Code"), of any participant's compensation was considered for any
purpose, including for purposes of the formulae, under the Pension
Plan. Beginning in 1994, no more than $150,000, as adjusted,
($160,000 in 1997) of any participant's compensation is considered
for any purpose, including for purposes of the formulae, under the
Pension Plan. The monthly pension benefit to which current
associates are entitled under the Pension Plan at the normal
retirement age of 65 is generally based on different benefit formulae
that are applicable to different years of service. The formula for
service after 1988 applies to credited service, as defined in the
Pension Plan, earned after 1988 while making contributions to the
Savings Plan and is based on "career earnings". A participant's
annual benefit under the post-1988 formula is 1.5% of the
participant's eligible pay for each year of credited service after
1988. The Pension Plan formulae benefit is determined by adding the
benefit under the post-1988 formula to the participant's accrued
benefit under the Pension Plan as of December 31, 1988, as
determined under the formulae in effect prior to 1988. A
participant's benefit determined under the Pension Plan is reduced by
an amount equivalent to an annuity which could be purchased with
the participant's Basic Contribution and Transferred
Contribution accounts in the Savings Plan.
The following table sets forth the estimated annual
benefits (calculated on a straight life annuity basis) upon
retirement at age 65 (for executives who have not retired or
resigned) under the Pension Plan, which is the only defined
benefit plan under which associates of Montgomery Ward can
currently accrue benefits, to the Named Executive Officers
(calculated on the basis of estimated years of service at retirement
age; levels of compensation paid in calendar year 1996
(including compensation pursuant to the PMP), assuming 6% annual
increases (for executives who have not retired or resigned); but with
regard to Code limitations on compensation and benefits and without
regard to any reduction for benefits under the Savings Plan):
Name of Participant Estimated Annual Pension at Retirement
Bernard F. Brennan $84,277.76
G. Joseph Reddington N/A
Michael Searles $60,000.00
Robert J. Stevenish N/A
Spencer H. Heine $92,215.22
Frederick J. Meiser N/A
Messrs. Reddington, Stevenish and Meiser have resigned as officers
of the Company and will receive no payments under the Pension Plan.
CERTAIN ARRANGEMENTS
In the course of recruiting new executives, promoting existing
associates to executive positions, increasing the responsibilities of
existing executives and retaining executives, Montgomery Ward
frequently enters into employment agreements which set forth the
general terms of the compensation arrangements for such executive.
Such agreements have, in the past, typically set forth, among other
things, a recipient's base salary, the target bonus under the PMP,
the maximum percentage of the target bonus under the PMP that can be
earned, participation in the Executive Long Term Incentive Plan with
initial target bonuses for applicable Executive Long Term Incentive
Plan cycles, the percentage of the executive's base pay that can be
earned annually through the Executive Long Term Incentive Plan after
the initial bonus target period has run, bonus guarantees, if any,
relocation payments and the number of stock options, if any, that are
<PAGE>
expected to be initially granted to the executive in his or her new
position. Of the executive officers named in the Summary
Compensation Table, Messrs. Searles and Heine have agreements of this
type and Messrs. Reddington, Stevenish and Meiser had agreements of
this type, each of which were entered into in connection with the
commencement of the executive's employment with Montgomery Ward
(other than the agreement with Mr. Heine, which was entered into in
connection with his retention as an executive officer of Montgomery
Ward).
The agreements with Messrs. Searles and Heine provide, and the
agreements with Messrs. Reddington, Stevenish and Meiser provided
for, respectively, (i) initial annual base salary of $500,000,
$400,000, $600,000, $450,000 and $400,000; (ii) PMP target bonuses of
$250,000, $125,000, $250,000, $150,000 and $200,000, in each case
guaranteed at 100% for the initial year (other than with respect to
Mr. Meiser, whose guarantee was for $100,000 for 1995 and with
respect to Mr. Searles, whose target bonus was also guaranteed for
1997) and in each case with opportunities to earn up to 150% of such
target bonuses; and (iii) Executive Long Term Incentive Plan
participation at a target bonus level of base salary for Messrs.
Searles and Reddington of 50%, for Mr. Stevenish of 35% and for Mr.
Meiser of 20% (the agreement with Mr. Heine does not address his
participation in the Executive Long Term Incentive Plan). The
agreement with Mr. Searles stated that he would receive options to
purchase 300,000 Class A Shares at $24.50 per share, with such
options vesting 50% on June 1, 1997 and 50% on June 1, 1998. Mr.
Searles was granted all of such options effective June 1, 1996. The
agreement with Mr. Reddington stated that he would receive options to
purchase 100,000 Class A Shares at $16.50 per share, with such
options vesting 50% on July 1, 1994 and 50% on July 1, 1995, and
options to purchase 200,000 Class A Shares at $26.50 per share, with
such options vesting 50% on January 31, 1995 and 100% on January 31,
1996. Mr. Reddington was granted all of such options on December 28,
1994. The agreement with Mr. Stevenish stated that he would receive
options to purchase 55,000 Class A Shares at $24.50 per share, with
such options vesting with respect to 25,000 shares on November 1,
1996 and with respect to 30,000 shares on November 1, 1997. Mr.
Stevenish was granted all of such options in December 1995. The
agreement with Mr. Meiser stated that he would receive options to
purchase 100,000 Class A Shares at $24.50 per share, with such
options vesting 50% on November 1, 1996 and 50% on November 1, 1997.
Mr. Meiser was granted all of such options on December 1995. The
agreement with Mr. Heine states that he will receive options to
purchase 225,000 Class A Shares at the Fair Market Value per Share of
a Class A Share as of December 29, 1996, the first day of the 1997
fiscal year, as determined pursuant to the Stockholders' Agreement
(which is $__.__ per share), with such options vesting with respect
to 75,000 shares on April 1, 1998, 75,000 shares on April 1, 1999 and
75,000 shares on April 1, 2000. The Company expects to grant such
options to Mr. Heine promptly following the annual meeting and the
approval by the stockholders of the Company of the grant of options
to Mr. Heine. See "APPROVAL OF CERTAIN STOCK OPTION GRANTS."
The agreement with Mr. Reddington provided that if he terminated
his employment prior to December 31, 1997 under certain circumstances
or in the event of a change in control of Signature, Mr. Reddington
would be entitled to his base salary and bonuses through December 31,
1997. Mr. Reddington resigned in February 1997 and received a
payment of $1,000,000 in respect of this provision (of which $250,000
is reflected in the Summary Compensation Table under the heading
"Bonus").
Pursuant to his agreement, Mr. Heine received a one-time payment
of $400,000 with respect to the termination of his service as a
director of the Company in January 1997. The agreement with Mr.
Heine further provides that upon receipt of this payment, he waived
his ability to elect a two-year severance option due to any act
through the date of such agreement. The agreement with Mr. Heine
<PAGE>
provides that such payment is also consideration for his waiver of
all future rights under the security plan (as described below).
The agreement with Mr. Searles provides that if Montgomery Ward
initiates a separation of his employment for any reason other than
cause or if he terminates his employment for good reason (each as
defined in such agreement), his options would immediately vest and he
would receive the higher of (x) his base pay and most recent short
term bonus through May 31, 1998, (y) the payments provided in the
security plan (as described below) or (z) 18 months base salary plus
1.5 timed his most recent PMP award.
The agreements with each of Messrs. Stevenish and Meiser provided
that if Montgomery Ward initiated a separation of the executive's
employment for any reason other than for cause (as defined in each
such agreement), he would continue vesting of his options through
November 1, 1997 and receive the greater of his base salary and PMP
bonus through November 1, 1997 or one year's base salary. Mr. Meiser
resigned from the Company in 1997 and will receive no payments
pursuant to this provision. In connection with the termination of
his employment, Mr. Stevenish and Montgomery Ward entered into a
Termination Agreement, Cross Release and Covenant Not to Sue dated as
of March 1, 1997, which provided for a cash payment of $750,000,
continuation of health care coverage through December 31, 1998, and
certain outplacement services. In connection with the foregoing,
each party discharged the other from all claims arising out of Mr.
Stevenish's employment with Montgomery Ward. The release also
contains provisions relating to confidentiality of information
received in connection with Mr. Stevenish's employment.
The agreement with Mr. Heine provides that if Montgomery Ward
initiates a separation of his employment for any reason other than
for cause (as defined in each such agreement) prior to April 1, 2000,
he would continue vesting of his options through April 1, 2000 and
receive his base salary for twenty-four months.
In connection with the termination of his employment as Chief
Executive Officer of the Company and as Chairman and Chief Executive
Officer of Montgomery Ward, Mr. Brennan, the Company, Montgomery Ward
and GE Capital entered into a Relationship Agreement dated as of
December 10, 1996 (the "Relationship Agreement"). The Relationship
Agreement provided the terms of Mr. Brennan's separation from the
Company and Montgomery Ward, including with respect to his continued
participation as Chairman of the Company and a director of each of
the Company and Montgomery Ward. Pursuant to the Relationship
Agreement, the Company loaned to Mr. Brennan $12.5 million in cash,
without interest, for which the Company's sole recourse is the shares
of Common Stock owned by Mr. Brennan and his permitted transferees.
In the Relationship Agreement, Mr. Brennan agreed that within five
business days after he or any permitted transferee sells any such
shares or receives any proceeds with respect to any such shares
(other than as a result of certain charity loans), such proceeds
would be applied toward any outstanding balance of such loan,
provided that if proceeds are received pursuant to the "put"
provisions of the Stockholders' Agreement, only 75% of such proceeds
need be so applied. The Relationship Agreement also provides that
amounts outstanding under the loan, if not paid sooner, shall be due
and payable on the last to occur of the deaths of Mr. Brennan, his
wife and his children. The Relationship Agreement provides that Mr.
Brennan is engaged as a consultant to the Company and Montgomery Ward
for the lesser of five years or until the date on which he and his
permitted transferees no longer own any shares of Common Stock. The
Company and Montgomery Ward agreed to make annual cash consulting
payments totalling $1.5 million to Mr. Brennan in installments not
less frequently than semi-monthly throughout the consulting period.
Also in the Relationship Agreement, the Company and Montgomery Ward
<PAGE>
agreed to pay all premiums with respect to, and to keep in place,
certain life insurance policies on the life of Mr. Brennan and agreed
to provide to Mr. Brennan certain continuing benefits. Also in
connection with his resignation, Mr. Brennan, the Company and GE
Capital entered into an Amendment Agreement dated as of December 10,
1996 with respect to certain amendments to the Stockholders'
Agreement and the Company's By-laws (the "Amendment Agreement").
Pursuant to the Amendment Agreement, Mr. Brennan's right to require
the Company to purchase his shares of Common Stock will become
effective on January 1, 1999. The Amendment Agreement also amended
the Stockholders' Agreement to provide the director designation
rights described herein and the supermajority requirements described
herein. See "ELECTION OF DIRECTORS" and "CONTROL MATTERS." Finally,
the Amendment Agreement provides Mr. Brennan and his affiliates with
certain rights to participate in transfers of shares of Common Stock
by GE Capital, provides for Mr. Brennan's and his affiliates'
participation in certain sales of the stock or assets of the Company,
and provides GE Capital, Mr. Brennan and their respective affiliates
with a right of first refusal on new securities issued by the
Company.
Mr. Goddu joined the Company as Chief Executive Officer and as
Chairman and Chief Executive Officer of Montgomery Ward effective
January 6, 1997. In connection with his employment with Montgomery
Ward, Mr. Goddu, the Company and Montgomery Ward entered into an
Employment Agreement dated as of December 20, 1996 (the "Goddu
Agreement"). The term of the Goddu Agreement expires on December 31,
2001. During the term of the Goddu Agreement (unless his employment
is earlier terminated), Mr. Goddu is to serve as Chairman of the
Board and Chief Executive Officer of Montgomery Ward and as Chief
Executive Officer of the Company. Pursuant to the Goddu Agreement,
Mr. Goddu is to receive a base salary of $1,000,000 per annum,
increasing at a rate of $50,000 per year or such larger increase as
the Board of Directors may determine. In addition, the Goddu
Agreement provides that Mr. Goddu is eligible to receive an annual
cash bonus of up to 50% of his base salary, based on performance
targets to be established from time to time by the Board of Directors
or a committee thereof. For each of 1997, 1998 and 1999, Mr. Goddu's
bonus is guaranteed to be at least $350,000 without regard to such
targets. The bonus may be increased by up to an additional 50% of
base salary based on the achievement of exceptional performance
against the targets. The Goddu Agreement also provides that Mr.
Goddu will be provided with a supplemental pension benefit on the
same terms as his arrangement with his prior employer with an
actuarial present value at age 60 of $3.9 million. The Company also
agreed to pay Mr. Goddu $2,221,948 as compensation for benefits
accrued with Mr. Goddu's prior employer which were lost by Mr. Goddu
in connection with the termination of his employment with such former
employer.
The Goddu Agreement also provided that he would receive the option
grant described herein. See "APPROVAL OF CERTAIN STOCK OPTION
GRANTS." The Goddu Agreement also provides that, subject to certain
limitations, the Company has certain rights to purchase the shares
received by Mr. Goddu upon exercise of his options and that, subject
to certain limitations, Mr. Goddu has certain rights to require the
Company to purchase up to an aggregate amount of $75 million purchase
price of such shares from and after December 31, 1997. The Goddu
Agreement also provides that Montgomery Ward would provide Mr. Goddu
a loan in the principal amount of $2,000,000, payable in five years,
and bearing interest at LIBOR plus 25 basis points payable in arrears
on each January 6 during the loan term. The Company provided such
loan to Mr. Goddu on January 8, 1997, and Mr. Goddu executed a
Promissory Note (the "Goddu Note") with respect thereto on that date.
The Goddu Agreement provides that in the event his employment is
terminated due to his death or disability, he (or his estate, as
applicable) would be entitled to unpaid base salary through the month
in which his death or disability occurs, an amount equal to 50% of
his base salary in effect on the date of his death or disability (in
<PAGE>
lieu of any bonus), and a restatement of the Goddu Note to provide a
maturity date of the third anniversary of Mr. Goddu's death or
disability. In the event his employment is terminated by Montgomery
Ward for cause (as defined in the Goddu Agreement), he would be
entitled to unpaid base salary through the month in which the
termination of his employment occurs, and amounts outstanding under
the Goddu Note will become immediately due and payable 90 days after
such termination. In the event that his employment is terminated
without cause or through a constructive termination, as provided in
the Goddu Agreement, he would be entitled to a prorated bonus through
the date of termination of employment, continuation of his then-current
base salary for a period of 24 months and, in lieu of further
bonus, an amount equal to $700,000 (which salary continuation and
amount may be paid in a lump sum) and cancellation of Mr. Goddu's
obligations under the Goddu Note. In the event his employment is
terminated by the expiration of the Goddu Agreement, Mr. Goddu would
be entitled to continuation of his then-current base salary for a
period of 24 months and, in lieu of further bonus, an amount equal to
$700,000 (which salary continuation and amount may be paid in a lump
sum).
The normal severance plan for certain senior officers of
Montgomery Ward provides that upon termination of a participating
officer's employment with Montgomery Ward, for reasons other than
cause, death, retirement or resignation, the senior officer will
receive from Montgomery Ward a payment equal to 12 months of his or
her base pay. Each of the executive officers named in the Summary
Compensation Table who is currently employed by Montgomery Ward is a
participant in this severance plan.
Certain senior executives of Montgomery Ward were, during the 1996
fiscal year, participants in each of a retention plan and a security
plan. The retention plan provided that each participant would
receive a retention award if such participant remained employed by
Montgomery Ward through March 1, 1997 or was terminated for any
reason other than voluntary resignation or cause. In addition, in
the event of a change of control of Montgomery Ward prior to such
date, the retention award would be payable at such time. The
security plan, which expires on January 31, 2001, provides that in
the event of a sale or change of control of Montgomery Ward, each
participant who is, at such time, actively employed by Montgomery
Ward or who is terminated for reasons other than voluntary
resignation or cause within one year of such date will receive: (i)
a bonus payable at the time of such date or change of control; (ii)
an award supplement, at the discretion of the Board of Directors
based on the recommendation of the Chief Executive Officer, with
respect to the participant's contribution and cooperation in the
transaction; (iii) enhanced severance of an additional twelve months
base salary above the amount to which the participant would have been
entitled under the severance plan described above if, during the
first two years following the sale or change of control, the
participant is either (x) terminated for any reason other than
voluntary termination or cause or (y) demoted without the
participant's prior written approval; (iv) continuation of benefits
for the entire severance payment period; (v) out placement services;
and (vi) certain tax preparation and financial planning services.
The bonuses payable upon a change of control under the retention plan
and the security plan were paid by Montgomery Ward in January 1997 in
connection with certain amendments to the Stockholders' Agreement
which changed the makeup of the Board of Directors of the Company.
The participants in the retention plan and the security plan
consisted of eight (8) senior officers of the Company, including
Messrs. Searles, Stevenish, Heine and Meiser, whose retention awards
under the retention plan were $0, $337,500, $200,000 and $0,
respectively, and whose bonuses under the security plan were
$187,500, $168,750, $150,000 and $0, respectively.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Brennan, Chairman of the Company and a former executive
officer of the Company, serves as a member of the Compensation
Committee of Montgomery Ward's Board of Directors. Robert A.
Kasenter, Executive Vice President of the Company and Executive Vice
President, Human Resources and Corporate Communications of Montgomery
Ward, serves as Secretary of the Compensation Committee of Montgomery
Ward's Board of Directors, although Mr. Kasenter is not a director of
the Company or of Montgomery Ward.
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative
total stockholder return on its Common Stock for the period beginning
December 27, 1991 and ending December 29, 1996, with the cumulative
total return of the Standard & Poor's 500 stock index and the
cumulative total return of a peer group of companies consisting of
the Standard & Poor's Retail (General Merchandise) Group (the "Peer
Group") for the same period. In all cases, a $100 investment at the
Initial Measuring Point and dividend reinvestment has been assumed,
although divided reinvestment is not currently available with respect
to the Company's Common Stock.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG
THE COMPANY, S&P 500 INDEX AND
S&P RETAIL (GENERAL MERCHANDISE) INDEX
Dec. 27,
Company/Index Name 1991 1992 1993 1994 1995 1996
Montgomery Ward
Holding Corp. 100.00 120.00 142.50 145.00 135.00 49.10
Standard & Poor's
500 Index 100.00 107.62 118.46 120.03 165.13 203.05
Standard & Poor's
Retail Index 100.00 114.00 104.75 89.60 100.56 114.31
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership, as of
April 15, 1997, of Class A Shares (i) by each person who is a
director of the Company (none of whom except the individuals
identified owns any shares of the Company's equity securities), (ii)
by each of the Named Executive Officers (none of whom except the
individuals identified owns any shares of the Company's equity
securities), (iii) by each person who is known to be a holder of more
than 5% of Class A Shares and (iv) by all directors and executive
officers of the Company as a group.
Individual or Group Shares %
Bernard F. Brennan (a) 16,123,816 88.0%
Myron Lieberman (b) 2,514,485 13.7%
Edwin G. Pohlmann (c)(d) 692,500 3.8%
Silas S. Cathcart (c)(e) 18,987 0.1%
G. Joseph Reddington (f) 600,000 3.3%
Michael Searles (g) 150,000 0.8%
Robert J. Stevenish (h) 25,000 0.1%
Spencer H. Heine (c)(i) 241,250 1.3%
Frederick E. Meiser (j) 50,000 0.3%
Tamara Brennan (k) 2,200,000 12.0%
All directors and executive
officers as a group
(17 persons) (l) 16,961,272 91.7%
_______________________
(a) Comprised of 13,025,750 Class A Shares (71.1% of the Class A
Shares and 30.1% of the Company's common stock ("Common Stock")
outstanding as of April 15,1997) owned of record by Mr. Brennan
and with respect to which Mr. Brennan has sole investment and
voting power, and 3,098,066 Class A Shares (16.9% of the Class
A Shares and 7.2% of the Common Stock outstanding as of April
15,1997) owned of record by Mr. Brennan as voting trustee and
with respect to which Mr. Brennan has sole voting power as
voting trustee but no investment power. Does not include
2,200,000 Class A Shares (12.0% of the Class A Shares and 5.1%
of the Common Stock outstanding as of April 15,1997) which are
owned by Myron Lieberman, as trustee of a trust (the "Family
Trust") for the benefit of members of Mr. Brennan's family with
respect to which Mr. Brennan has no voting or investment power,
but with respect to which Tamara Brennan, Mr. Brennan's wife,
may acquire shared voting and dispositive power. See Note (k)
below. Mr. Brennan disclaims beneficial ownership of such
2,200,000 Class A Shares. Mr. Brennan's business address is c/o
Montgomery Ward Holding Corp., Montgomery Ward Plaza, Chicago,
IL 60671.
(b) Includes 294,250 Class A Shares represented by Voting Trust
Certificates owned by Lieberman Investment Limited Partnership,
a limited partnership of which Mr. Lieberman is the sole
general partner. Also includes 2,200,000 Class A Shares with
respect to which Mr. Lieberman has sole voting and investment
power as trustee of the Family Trust. Such 2,200,000 Class A
Shares are not deposited in the voting trust under which Mr.
Brennan serves as voting trustee. See Note (c) below. All
shares other than the 2,200,000 Class A Shares as to which Mr.
Lieberman has beneficial ownership are represented by Voting
<PAGE>
Trust Certificates and such shares are held in a voting trust
as to which Mr. Brennan, as voting trustee, has sole voting
power. Includes 353 Class A Shares which Mr. Lieberman
acquired on April 8, 1997 pursuant to Conversion Rights which
arose on April 1, 1997 and which, pursuant to a prior election
by Mr. Lieberman, were automatically exercised on April 8,
1997. Mr. Lieberman's business address is 10 South Wacker
Drive, Chicago, Illinois 60606.
(c) Represents ownership of Voting Trust Certificates with respect
to shares held in a voting trust (the "Voting Trust") as to
which Mr. Brennan, as voting trustee, has sole voting power and
the persons indicated have sole investment power.
(d) Does not include 200,000 Class A Shares held by trusts for the
benefit of members of Mr. Pohlmann's family, with respect to
which Mr. Pohlmann has no voting or investment power.
(e) Includes 353 Class A Shares which Mr. Cathcart acquired on
April 8, 1997 pursuant to Conversion Rights which arose on
April 1, 1997 and which, pursuant to a prior election by Mr.
Cathcart, were automatically exercised on April 8, 1997.
(f) Includes 600,000 Class A Shares which may be acquired by Mr.
Reddington pursuant to options exercisable on April 15, 1997.
Mr. Reddington resigned from the Company in February 1997 and,
pursuant to the terms of the grant of such options, such
options will expire in April 1997 if not theretofore exercised.
(g) Includes 150,000 Class A Shares which may be acquired by Mr.
Searles pursuant to options which become exercisable on June 1,
1997, a date within 60 days after the date hereof.
(h) Includes 25,000 Class A Shares which may be acquired by Mr.
Stevenish pursuant to options exercisable on April 15, 1997.
(i) Does not include 10,000 Class A Shares held by trusts for the
benefit of Mr. Heine's family, with respect to which Mr. Heine
has no voting or investment power.
(j) Includes 50,000 Class A Shares which may be acquired by Mr.
Meiser pursuant to options exercisable on April 15, 1997. Mr.
Meiser resigned from the Company in February 1997 and, pursuant
to the terms of the grant of such options, such options will
expire in April 1997 if not theretofore exercised.
(k) Represents Class A Shares with respect to which Mrs. Brennan,
if she were to elect to become an advisor to the trustee of the
Family Trust, may acquire shared power to vote or direct the
vote of, and shared power to dispose or direct the disposition
of, such shares. See Notes (a) and (b) above.
(l) Represents all Class A Shares with respect to which executive
officers and directors have investment power, which is in each
case sole investment power. Does not include 1,526,750 Class
A Shares with respect to which Mr. Brennan has sole voting
power as voting trustee, but with respect to which neither he
nor any other executive officer or director of the Company has
investment power. Includes 163,500 Class A Shares which may be
acquired by executive officers or directors at purchase prices
ranging from $0.20 to $26.50 per share pursuant to options
exercisable on April 15, 1997. Includes 706 Class A Shares
which were acquired by directors on April 8, 1997 pursuant to
<PAGE>
Conversion Rights which arose on April 1, 1997 and which,
pursuant to prior elections by such directors, were
automatically exercised on April 8, 1997.
GE Capital owns 100% of the 25,000,000 Class B Shares currently
outstanding. Such shares represented 57.7% of the outstanding Common
Stock as of April 15, 1997. GE Capital has granted to Mr. Goddu an
option, which is not currently exercisable and which will not become
exercisable within 60 days of the date hereof, to purchase from GE
Capital that number of shares of Common Stock which equals 5% of the
issued and outstanding shares of Common Stock of the Company on a
fully-diluted basis. For purposes of this calculation, the number of
shares of Common Stock underlying such options is to be adjusted upwards
from time to time until the last day of the Company's 1998 fiscal year
to give effect to the grant of stock options after December 20, 1996 to
management employees of Montgomery Ward covering up to 10% of the
outstanding shares of Common Stock on a fully-diluted basis. GE
Capital's address is 260 Long Ridge Road, Stamford, Connecticut
06927.
GE Capital owns 100% of the 1,750 shares of Senior Preferred
Stock of the Company, having a liquidation value of $100,000 per
share (the "Senior Preferred Stock") outstanding as of the date
hereof. Such shares of Senior Preferred Stock represent 100% of the
Company's outstanding preferred stock. If the Certificate Amendment,
in support of which this Proxy Statement is issued, is adopted, the
Company intends to issue at least 211.2 of the authorized shares of
Series C Preferred Stock (as defined and described below), having a
liquidation value of $100,000 per share, to GE Capital as payment of
a fee as described below, which will represent 100% of the shares of
Series C Preferred Stock outstanding. See "APPROVAL OF AMENDMENT TO
CERTIFICATE OF INCORPORATION."
CONTROL MATTERS
Voting of Shares. In the event that a Voting Trust is not
in effect or in the event shares of Common Stock of the
Company deposited therein are not subject to a Voting Trust, all
such shares held by the stockholders, except those held by Mr.
Brennan and certain trusts for the benefit of members of his family,
are subject to a voting agreement under which the holders have
agreed to vote their shares in the same way Mr. Brennan votes his
shares until June 17, 1998.
Directors. The Board of Directors consists of ten members.
The Stockholders' Agreement provides that three of the Company's
directors shall be designated by Mr. Brennan (which three shall
include Mr. Brennan), two of the Company's directors shall be
designated by the Chief Executive Officer of Montgomery Ward
(including such Chief Executive Officer) and five of the Company's
directors shall be designated by GE Capital.
If GE Capital and its affiliates cease to own more than 50% of
the number of shares of Common Stock purchased by them in June 1988,
the number of directors which Mr. Brennan is permitted to designate
will be increased by one, and the number of directors which GE
Capital may designate shall be reduced by one. If GE Capital and its
affiliates cease to own 20% or more of such shares of Common Stock,
except as described below, GE Capital shall have no right to
designate any directors, and the number of directors shall be reduced
to nine, seven to be elected by the holders of Class A Common Stock,
voting as a class, and two to be elected by the holders of Class B
Common Stock, voting as a class, provided that, so long as the
Account Purchase Agreement between Montgomery Ward and Montgomery
Ward Credit Corporation, a wholly-owned subsidiary of GE Capital
("Montgomery Ward Credit"), relating to the purchase by Montgomery
Ward Credit of customer receivables of Montgomery Ward remains in
effect, and GE Capital or any of its affiliates owns any Common
Stock, GE Capital will have the right to elect one of the two
directors to be elected by the holders of Class B Common Stock.
<PAGE>
If Mr. Brennan and his permitted transferees cease to own more
than 50% of the number of shares of Common Stock held by them on
December 1, 1996, the number of directors which GE Capital is
permitted to designate will be increased by two and the number of
directors which Mr. Brennan may designate shall be reduced by two.
If Mr. Brennan and his permitted transferees cease to own 20% or more
of such shares of Common Stock, Mr. Brennan shall no longer have the
right to designate any directors and the directors that Mr. Brennan
would have been entitled to designate (after taking into account the
application of the preceding sentence) shall be designated by the
Chief Executive Officer of Montgomery Ward.
The holders of the Senior Preferred Stock have the right
to elect one director to be an additional member of the Board
of Directors (a) during the period following a default in the payment
of accrued dividends on the Senior Preferred Stock for four
consecutive quarters until such accrued dividends shall have been
paid in full and (b) during the period following any failure to make
a mandatory redemption of Senior Preferred Stock until such failure
shall have been cured.
The Company's By-laws contain supermajority provisions
which require that all actions to be taken by the Company, Montgomery
Ward or any of their subsidiaries which requires action by the Board
of Directors of the Company be undertaken only upon the affirmative
vote of two-thirds of the directors of the Company.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
On April __, 1997, by unanimous written consent, the Board of
Directors of the Company approved and authorized the Certificate
Amendment, a copy of which amendment is attached to this Proxy
Statement as Annex A. The Board of Directors recommends a vote FOR
approval of the Certificate Amendment.
The Certificate Amendment would authorize (i) 25,000 shares of
preferred stock of the Company (the "Additional Preferred Stock"),
which may be issued from time to time in one or more series, as
authorized by the Board of Directors, and with such designation,
powers, preferences and rights and such qualifications, limitations
and restrictions as the Board of Directors may from time to time
determine and (ii) an additional 10,000,000 shares of Class A Common
Stock, Series 3, $0.01 par value.
With respect to the authorization of the Additional Preferred
Stock, implementation of the Amendment would ensure that future
issuances of preferred stock by the Company could be effected through
action of the Board of Directors, without the need for further action
by the stockholders of the Company and without the need for the
filing with the Securities and Exchange Commission of preliminary
proxy statements, which delay the issuance of such securities and the
consummation of the transactions of which such issuances are a part.
Because of the Board of Directors' authority to issue shares of
Additional Preferred Stock without further stockholder action, the
voting power of the Common Stock could be adversely affected by the
issuance of Additional Preferred Stock with conversion rights or
voting power. The issuance of Additional Preferred Stock could, under
certain circumstances, have the effect of delaying, deferring or
preventing a change in control of the Company. Subject to the
approval of the Certificate Amendment by the stockholders of the
Company, and upon filing of the Certificate Amendment with the
Secretary of State of the State of Delaware, the Board of Directors
has designated 1,000 shares of the Additional Preferred Stock to be
Series C Preferred Stock of the Company having a liquidation value of
$100,000 per share (the "Series C Preferred Stock"), with
characteristics as described herein. Such shares will be designated
<PAGE>
pursuant to a Certificate of Stock Designation, which will be filed
with the Secretary of State of the State of Delaware following filing
of the Amendment, a copy of which is attached hereto as Annex B. The
Board of Directors expects to issue 211.2 shares of the Series C
Preferred Stock to GE Capital as payment in full of a fee payable to
GE Capital for agreeing to provide financing to Montgomery Ward and
Lechmere, Inc., a wholly-owned subsidiary of Montgomery Ward, in
connection with an amendment (the "Program Agreement Amendment") to
the Program Agreement dated as of October 12, 1989, as amended and as
being implemented, between GE Capital and Montgomery Ward. In the
Program Agreement Amendment, GE Capital agreed to provide an
additional $150 million of financing to Montgomery Ward and Lechmere
(up to a total of $500 million of such financing). See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." The issuance of the Series
C Preferred Stock to GE Capital as payment in full of the fee is
being made pursuant to an Agreement (the "Fee Agreement") dated March
6, 1997 among GE Capital, the Company and Montgomery Ward. The Board
of Directors has determined that it is in the best interests of the
Company to so issue the Series C Preferred Stock. If, from time to
time, the Program Agreement is amended further to provide for
additional financing, the Company anticipates that the number of
shares of Series C Preferred Stock which the Board of Directors will
authorize to be issued to GE Capital will be increased
proportionately. The Series C Preferred Stock will be preferred as to
dividends and upon liquidation to the Common Stock on the terms
discussed below. The Board of Directors has no present intention to
designate any other series of Additional Preferred Stock.
The additional Series 3 Shares will be added to and reserved
for issuance under the Plan for the granting of Awards, Purchase
Rights and Options (as such terms are defined in the Plan). See
"APPROVAL OF AMENDMENT TO STOCK OWNERSHIP PLAN." The Company expects
to grant Options to purchase a substantial portion of such additional
Series 3 Shares pursuant to the Plan during 1997, including those
grants which are to be approved by the stockholders of the Company at
the Annual Meeting, as more fully described below. See "APPROVAL OF
CERTAIN STOCK OPTION GRANTS." The additional Series 3 Shares shall
have all of the same rights and privileges as presently provided in
the Certificate of Incorporation for Series 3 Shares, as described
below.
RIGHTS OF THE SERIES C PREFERRED STOCK:
The Series C Preferred Stock will have the rights and
characteristics described herein.
Voting Rights. Except as required by law, the holders of the
Series C Preferred Stock will not have any voting rights.
Dividends. Holders of the Series C Preferred Stock are
entitled to receive, before any dividends may be declared and paid
upon or set aside for the Common Stock, cumulative cash dividends at
a rate per annum equal to 15% based on the then effective Liquidation
Payment (as defined below), in equal quarterly payments on the last
business day of March, June, September and December, with the first
payment based on the number of days from and including March 4, 1997.
Dividend payments made with respect to the Series C Preferred Stock
may be made only in cash. No dividends may be declared or paid on
the Series C Preferred Stock when such declaration or payment would
constitute a default under any agreements governing indebtedness for
borrowed money of the Company, Montgomery Ward or any of its
subsidiaries (collectively, the "Ward Group"). If for any reason the
full dividend on any payment date is not paid in cash on such date,
the unpaid amount thereof will automatically, without further action,
be deemed added to the Liquidation Payment.
<PAGE>
Optional Redemption. The Company may, upon ten business days
notice to the holders thereof, at any time redeem the whole or any
part of the Series C Preferred Stock. Any such optional redemption
shall be at a price of $100,000 per share of the Series C Preferred
Stock being redeemed plus unpaid accrued dividends thereon. No
redemption of Series C Preferred Stock may be made when such
redemption would constitute a default under any agreements governing
indebtedness for borrowed money of the Company or any other member of
the Ward Group.
Mandatory Redemption. The Company is required to redeem on
September 30, 2002 all of the Series C Preferred Stock at a
redemption price of $100,000 per share plus unpaid accrued dividends.
No redemption of Series C Preferred Stock may be made when such
redemption would constitute a default under any agreements governing
indebtedness for borrowed money of the Company or any other member of
the Ward Group.
Liquidation Rights. Upon any liquidation, dissolution or
winding up of the Company, the holders of Series C Preferred Stock
shall be entitled to be paid, before any distribution or payment is
made to any holder of Common Stock, an amount in cash equal to
$100,000 per share plus amounts added to such amount as described
above (the "Liquidation Payment") of Series C Stock outstanding.
RIGHTS OF SERIES 3 SHARES:
Series 3 Shares have the rights and characteristics described
herein:
Dividend and Liquidation Rights. Series 3 Shares have the same
dividend and liquidation rights as Series 1 Shares and Series 2
Shares. That is, the portion of dividends and liquidation amounts
which is payable to the holders of Class A Shares shall be allocated
among such holders in proportion to their respective holdings of
Class A Shares, without distinction as to series; provided, however,
that dividends paid in kind by series shall be payable only to the
holders of shares of the respective series.
Dividend and liquidation rights for Class A Shares
generally are more fully described below:
(i) The term "Class A Amount," as used below with respect to
a determination of dividends or proceeds, shall mean the number equal
to the lesser of 25,000,000 (the "Series 1 Amount") or the aggregate
number of outstanding Class A Shares of all series (the "Outstanding
Amount") as of the date of determination;
(ii) The portion of such dividends or proceeds which
is payable to the holders of Class A Shares, as a class, and
without distinction as to series, at any time when the Outstanding
Amount does not exceed the Series 1 Amount, shall be the amount
which bears the same ratio to the total amount of such dividends as
the Class A Amount bears to the sum of (A) the Class A Amount,
plus (B) the number of shares of Class B Common Stock outstanding
as of the date of the determination; and such portion of
such dividends or proceeds which is payable to the holders of
the Class A Shares shall be allocated among such holders
in proportion to their respective holdings of Class A Shares, without
distinction as to series;
(iii) The portion of such dividends or proceeds which
is payable to the holders of Class A Shares, as a class, and
without distinction as to series, at any time when the Outstanding
Amount exceeds the Series 1 Amount (but the Outstanding Amount less
the number of shares of Class A Common Stock, Series 3,
outstanding (such difference being the "Non-Series 3 Outstanding
<PAGE>
Amount") does not exceed the Series 1 Amount), shall be the product
of the amount which would be payable to holders of Class A Shares if
the immediately preceding paragraph (ii) were applicable and
the Class A Amount were equal to the Series 1 Amount multiplied by
a fraction the numerator of which is the Outstanding Amount and
the denominator of which is the sum of the Series 1 Amount plus
fifty percent (50%) of the excess of the Outstanding Amount over
the Series 1 Amount; and such portion of such dividends or
proceeds which is payable to the holders of the Class A Shares shall
be allocated among such holders in proportion to their
respective holdings of Class Shares, without distinction as to
series; and
(iv) The portion of such dividends or proceeds which
is payable to the holders of Class A Shares, as a class, and
without distinction as to series, at any time when the Outstanding
Amount exceeds the Series 1 Amount (and paragraph (iii)
immediately preceding is not applicable), shall be the product of (x)
the amount which would be payable to holders of Class A Shares
if paragraph (ii) above were applicable and the Class A Amount
were equal to the Series 1 Amount, multiplied by (y) a fraction
the numerator of which is the Non-Series 3 Outstanding Amount and
the denominator of which is the sum of the Series 1 Amount
plus eighty-one point five percent (81.5%) of the excess of the
Non- Series 3 Outstanding Amount over the Series 1 Amount,
and multiplied by (z) a fraction the numerator of which is
the Outstanding Amount and the denominator of which is the sum of
the Non-Series 3 Outstanding Amount plus fifty percent (50%) of
the number of shares of Class A Common Stock, Series 3,
outstanding at such time; and such portion of such dividends or
proceeds which is payable to the holders of the Class A Shares shall
be allocated among such holders in proportion to their
respective holdings of Class A Shares, without distinction as to
series.
(v) The portion of such dividends or proceeds which
is payable to the holders of Class B Shares shall be the portion
of the total amount of such dividends or proceeds that is not payable
to the holders of Class A Shares in accordance with paragraph (ii),
(iii) or (iv) above, as applicable, and such portion of such
dividends or proceeds which is payable to the holders of Class B
Shares shall be allocated among such holders in proportion to their
respective holdings of Class B Shares.
Voting Rights. All series of Class A Shares have the
same general voting rights. Notwithstanding the foregoing, Series
1 Shares currently have certain voting rights that Series 2
Shares and Series 3 Shares do not have. Accordingly, except
as described below, each Class A Share, without distinction as
to series, has the same number of votes per share and is entitled
to vote on the same matters.
So long as the Outstanding Amount is less than or equal to the
Series 1 Amount, each Class A Share, without distinction as to
series, is entitled to one (1) vote per share. If the Outstanding
Amount is greater than the Series 1 Amount, each Class A Share,
irrespective of series, is entitled to a fraction of a vote per share
determined by dividing the Series 1 Amount by the Outstanding Amount.
In addition to the voting rights specified above, amendments to
the Certificate of Incorporation of the Company increasing the number
of shares of any class or series of Class A Common Stock or Class B
Common Stock (including the Certificate Amendment) require the
affirmative vote of the holders of a majority of both (A) the Series
1 Shares then outstanding and (B) the Class B Shares then
outstanding, each voting as a class. In addition, amendments to the
Plan and the determination of the number of shares as to which
options to purchase thereunder shall be granted (including the Plan
Amendment) require the affirmative vote of the holders of a majority
of the Series 1 Shares then outstanding.
Preemptive Rights. Shares of Common Stock of the Company have
no pre-emptive rights.
<PAGE>
APPROVAL OF AMENDMENT TO STOCK OWNERSHIP PLAN
On April __, 1997, by unanimous written consent, the Board of
Directors of the Company approved and authorized the Plan Amendment,
which would increase the number of Class A Shares allocated to the
Plan to include the 10,000,000 Series 3 Shares to be
authorized pursuant to the Certificate Amendment. A copy of the
Plan Amendment is attached hereto as Annex C. The Board of
Directors recommends a vote FOR approval of the Plan Amendment.
The Plan was adopted by the Board of Directors and by
the Stockholders of the Company effective July 19, 1988, and
has subsequently been amended. Shares acquired by the holder
thereof pursuant to the Plan and such shares held by certain
permitted transferees are collectively referred to herein as "Plan
Shares." On September 9, 1993, the Plan was amended to provide for
two plans, the Associate Plan and the Director Plan. Pursuant to the
Associate Plan, key associates, and in certain limited instances,
advisors and consultants, of the Ward Group (excluding associates,
advisors and consultants who are also directors of the Company), may
be granted awards of Plan Shares ("Awards") or provided Purchase
Rights and/or granted Options to purchase Plan Shares. Pursuant to
the Director Plan, directors of the Company may be granted Awards of
Plan Shares or provided Purchase Rights and/or granted Options to
purchase Plan Shares. Purchase Rights are non-qualified stock
options to acquire Plan Shares identified as such and generally to be
exercised during a shorter period of time than Options. Options are
non-qualified stock options to acquire Plan Shares. A total of
1,000,000 Series 1 Shares, 5,412,000 Series 2 Shares and 2,000,000
Series 3 Shares have to date been reserved for issuance under the
Plan. Pursuant to an amendment to the Plan for which approval of
stockholders is sought hereby, 10,000,000 additional Series 3 Shares
will be reserved for issuance under the Plan. The number of Plan
Shares available for issuance, the number of Plan Shares subject
to outstanding Purchase Rights and Options and the exercise price for
outstanding Purchase Rights and Options are subject to adjustment in
the event of a stock dividend, recapitalization or other similar
change affecting the number of outstanding shares of the Company. In
1994, the Board of Directors established a limit of 1,000,000 Shares
on the number of Shares available to any participant under the Plan
through Awards, Purchase Rights and Options. The Plan Amendment
would amend this provision to revise such limit to 4,000,000 Shares.
The Associate Plan is designed to attract and
retain outstanding individuals as key associates, and, in
certain limited instances, advisors and consultants, of the Ward
Group (excluding associates, advisors and consultants who are
also directors of the Company), and to provide incentives for such
key associates, advisors and consultants to expand and improve
the profits and achieve the objectives of the Ward Group by
providing to such persons opportunities to acquire Plan Shares and
thereby provide such persons with a greater proprietary interest in
and closer identity with the Ward Group and its financial success.
The Director Plan is designed to attract and retain outstanding
individuals as directors of the Company, and to provide incentives
for such directors to expand and improve the profits and achieve the
objectives of the Ward Group by providing to such directors
opportunities to acquire Plan Shares and thereby provide such
directors with a greater proprietary interest in and closer identity
with the Ward Group and its financial success. It is intended that
directors who are members of the Director Committee, as herein
defined, shall not participate in the Director Plan at this time.
Key associates (currently approximately 3,500), consultants and
advisors (currently approximately five) and directors (currently ten)
of the Company or its subsidiaries or affiliates are eligible to
participate in the Plan.
<PAGE>
It is expected that the exercise price for Purchase Rights and
Options will generally be the fair market value of the Plan Shares
subject thereto as of the date of the grant of such Purchase Right or
Option.
No Awards, Purchase Rights or Options may be granted under the
Plan after July 19, 1998, without further action by the Board of
Directors or stockholders. Purchase Rights and Options granted prior
to July 19, 1998 will continue to be exercisable after such date
pursuant to the terms of the applicable grant. The Board of
Directors may at any time amend or terminate the Plan, except that no
such action by the Board of Directors may change the terms and
conditions of any Purchase Right or Option previously granted in a
manner adverse to the holder of the Purchase Right or the
optionee without the consent of the holder of the Purchase Right or
the optionee, and, approval by the stockholders of the Company
is required to the extent deemed appropriate by the Plan
Committee, as herein defined, if adoption of such amendment without
approval by the stockholders of the Company would cause the Plan to
no longer comply with Rule 16b-3 promulgated under Section 16(b) of
the Securities Exchange Act of 1934, as amended, or any successor
rule or regulatory requirement. Plan Shares will be subject either
to the provisions of the Montgomery Ward & Co., Incorporated Stock
Ownership Plan Terms and Conditions, as amended from time to time
(the "Terms and Conditions") or the Stockholders' Agreement. The
Terms and Conditions can be amended with the consent of the holders
of 66 2/3% of Shares subject thereto or subject to the Stockholders'
Agreement, but no such amendment shall adversely affect the method of
valuation of any participant's Shares without such party's specific
consent, and, except in certain limited circumstances, the
Stockholders' Agreement can be amended with the consent of the
holders of 66 2/3% of the Shares subject thereto, but no such
amendment shall adversely affect the method of valuation of a party's
Shares without such party's specific consent. With respect to Shares
which are subject to either the Voting Trust created by the Voting
Trust Agreement dated as of June 21, 1988 or the Voting Trust created
by the Voting Trust Agreement dated as of October 21, 1994, each
with respect to shares of Common Stock of the Company (each, a
"Voting Trust"), the power to exercise such stockholders'
consents, including with respect to amendments which adversely affect
the method of valuation, shall be held by the Voting Trustee
under such Voting Trust, except for purposes of certain amendments
to the provisions of the Stockholders' Agreement relating
to registration rights and for purposes of a vote to terminate
the Stockholders' Agreement or the Terms and Conditions. The
Stock Ownership Plan is not qualified under section 401(a) of
the Internal Revenue Code of 1986, as amended and is not subject
to the provisions of the Employee Retirement Income Security Act
of 1974, as amended.
The Plan is administered by two separate committees (each being
a "Plan Committee"). The Associate Plan is administered by the
Associate Plan Committee ("Associate Plan Committee") and the
Director Plan is administered by the Director Plan Committee
("Director Plan Committee"). Each Plan Committee is comprised of not
fewer than two directors who are appointed by the Board of Directors
and who serve at the pleasure of the Board of Directors. The
telephone number and address of each Plan Committee are (312)
467-2000 and Montgomery Ward Plaza, Chicago, Illinois, 60671,
respectively. The whole Board of Directors of the Company currently
constitutes each of the Associate Plan Committee and the Director
Plan Committee.
The Associate Plan Committee determines, within the limits of
the express provisions of the Associate Plan, those key associates,
advisors and consultants to whom, and the time or times at which,
Awards, Purchase Rights and Options shall be granted. The Director
Plan Committee determines, within the limits of the express
provisions of the Director Plan, those directors to whom, and the
time or times at which, Awards, Purchase Rights and Options shall be
granted. Each Plan Committee interprets its respective plan, adopts
<PAGE>
rules relating thereto and determines the terms and provisions of
Awards, Purchase Rights and Option grants thereunder, including
the number of Plan Shares to be subject to each Award, Purchase
Right and Option, the duration of each such Purchase Right and
Option, the exercise price under each such Option, the purchase
price under each such Purchase Right, the time or times within
which (during the term of the Option) all or portions of each
such Option may be exercised, and whether cash, Plan Shares or
Non- Plan Shares or other property may be accepted in full or
partial payment upon purchase of Plan Shares pursuant to a Purchase
Right or exercise of an Option. Each Plan Committee also has the
right to accelerate Purchase Rights or Option exercise rights or
make other adjustments, including, but not limited to the
cancellation of Purchase Rights or Options in exchange for cash
payments, if the Company or Montgomery Ward is a party to a
transaction involving certain mergers or consolidations, sales of all
or substantially all of its assets, or if Montgomery Ward or the
Company dissolves or is liquidated or upon the occurrence of a public
offering of shares of the Company. The Plan provides that any of the
foregoing actions by either Plan Committee will be final
and conclusive.
Each grant of an Award, Purchase Right or Option to
a participant in the Plan will be evidenced by a Notice. Each Notice
with respect to an Award will state (i) the number of Plan Shares
awarded and (ii) such other information as the Plan Committee deems
appropriate or necessary. Each Notice with respect to a Purchase
Right will state (i) the number of Plan Shares with respect to which
the Purchase Right is granted, (ii) the exercise price, (iii) the
duration of the Purchase Right, (iv) the method of purchasing such
Plan Shares, and (v) such other information as the Plan Committee
deems appropriate or necessary. Each Notice with respect to an
Option will state (i) the number of Plan Shares with respect to which
the Option is granted, (ii) the Option exercise price, (iii) the
Option exercise schedule, (iv) the Option term, (v) the method
of exercising such Option, and (vi) such other information as
the Plan Committee deems appropriate or necessary.
The following summary describes the material federal income tax
aspects of the grant of Plan Shares to recipients of Awards ("Award
Recipients") and the purchase by participants ("Purchasers") of Plan
Shares through the exercise of Purchase Rights or Options, with
respect to the Company, Award Recipients and Purchasers. The federal
income tax laws are technical and complex whereas the discussion
herein is in general terms. The following discussion is not tax
advice, but is instead a guide to assist participants in the Plan and
their advisors. Furthermore, the tax laws are subject to change
(even retroactively) by legislation, administrative rulings
and regulations, and judicial decisions.
Generally, neither the grant nor the expiration of a Purchase
Right or Option is a taxable event. The deposit of Plan Shares in
the Voting Trust also is not a taxable event.
The tax treatment of Plan Shares granted to Award
Recipients and Plan Shares purchased by exercising Purchase Rights
or Options depends on whether or not the stock so transferred
is "transferable" or not "subject to a substantial risk
of forfeiture" for purposes of the federal income tax laws. Stock is
generally considered subject to a substantial risk of forfeiture if
rights with respect to the stock are conditioned upon the future
performance of substantial services. Stock is treated as
nontransferable unless the rights in such stock of any transferee
will not be subject to a substantial risk of forfeiture. Because of
the restrictions on the sale of Plan Shares, it is anticipated that
Plan Shares granted to Award Recipients and Plan Shares purchased
pursuant to Purchase Rights under the Plan to the extent such Plan
Shares have not vested will be considered nontransferable and subject
to a substantial risk of forfeiture upon award or purchase of
Plan Shares for purposes of the federal income tax laws.
<PAGE>
Subject to the effect of a section 83(b) election,
discussed below, as long as the Plan Shares awarded or purchased
are nontransferable and subject to a substantial risk of
forfeiture, they will, in effect, be treated as not having been
transferred to the Award Recipient or Purchaser, respectively. Thus,
for example, dividends on such Plan Shares will be treated
as compensation and the sale of such Plan Shares will give rise
to ordinary income. When such Plan Shares become transferable or not
subject to a substantial risk of forfeiture they will, in effect, be
treated as having been transferred at such time, and the amount of
taxable compensation, if any, deemed to be paid by a member of the
Ward Group to the Award Recipient or Purchaser will be equal to the
excess, if any, of the fair market value (determined without regard
to any lapse restriction) of such Plan Shares at such time over the
amount paid for the Plan Shares. The Award Recipient or Purchaser
will include such compensation as ordinary income and the appropriate
member of the Ward Group will be entitled to a deduction for
compensation paid. The tax basis for Plan Shares will be the amount
paid for such Plan Shares plus the amount of such compensation, if
any, included as income. The holding period for long-term capital
gain purposes will commence on the next day after the date the Plan
Shares become transferable or are not subject to a substantial risk
of forfeiture. Any appreciation or decline in value of Plan
Shares after they become transferable or not subject to a
substantial risk of forfeiture generally will be taxed as a capital
gain or loss (either short-term or long-term, as applicable) upon a
sale, exchange or other taxable disposition of such Plan Shares.
As an alternative to the foregoing tax consequences, an Award
Recipient or Purchaser within 30 days after the Award or the purchase
of Plan Shares through the exercise of Purchase Rights or Options may
file an election under section 83(b) of the Code, to treat the
acquisition of such Plan Shares as a taxable compensation event. If
the Award Recipient or Purchaser files such election he or she will
include in his or her gross income as compensation for the year of
the Award or the purchase of Plan Shares, respectively, the excess,
if any, of the fair market value of such Plan Shares (determined
without regard to any lapse restriction) over the amount he or she
paid therefor, and the appropriate member of the Ward Group will be
entitled to a compensation deduction in the amount of such excess.
(A "lapse restriction" is any restriction, such as a vesting
requirement, whether imposed by agreement or by law, other than a
restriction which by its terms will never lapse.) Although the
Internal Revenue Service ("IRS") may consider Plan Shares vested
under the Stockholders Agreement and purchased by the exercise of
Options not subject to substantial risk of forfeiture for purposes of
the federal income tax laws, by making a section 83(b) election,
a Purchaser through the exercise of an Option can ensure inclusion in
income in the year the Option is exercised of the difference at
exercise between the fair market value (determined without regard to
any lapse restriction) of the Plan Shares with respect to which the
Option was exercised and the Option exercise price multiplied by the
number of Plan Shares with respect to which the Option was exercised.
In determining the fair market value of Plan Shares (determined
without regard to any lapse restriction) for the purpose of computing
the amount of compensation includable in an Award Recipient or
Purchaser's gross income, the IRS will not be bound by the fair
market value as determined by any other party and may consider all
the facts and circumstances.
The disadvantage of a section 83(b) election is that if
Plan Shares are subsequently forfeited or disposed of in a
transaction that is in substance a forfeiture while such Plan Shares
are in fact nontransferable and subject to a substantial risk
of forfeiture, then no loss or other deduction will be allowed
for the amount, if any, included as compensation at the time of
the transfer. Except for such limitation, if the Plan Shares
are subsequently sold, the Award Recipient or Purchaser
generally will recognize capital gain or loss (either short-term or
long- term, as applicable) on such sale equal to the difference
between the sales price and the tax basis of the Plan Shares, i.e.,
the fair market value of the Plan Shares (determined without
<PAGE>
regard to any lapse restriction) at the time of the Award or purchase
of Plan Shares, respectively.
Plan Shares acquired upon exercise of Options are generally
"vested shares" under the Stockholders' Agreement and the Terms and
Conditions. Vested shares, although subject to numerous
restrictions under the Stockholders' Agreement and the Terms and
Conditions, will probably not be considered nontransferable and
subject to substantial risk of forfeiture for purposes of the federal
income tax laws. Accordingly, to the extent the fair market value
of such Plan Shares exceeds the amount paid therefor, such
excess shall constitute compensation income to the Purchaser.
In general, amounts treated as compensation income to
a participant in the Plan (such as amounts treated as compensation
under the rules described above) constitute wages subject to
withholding of income taxes and social security taxes.
The following table sets forth the benefits which are currently
expected to be granted during 1997 under the Plan to the Named
Executive Officers, to the executive officers of the Company, as a
group, to the directors of the Company who are not executive
officers, as a group, and to the Company's associates who are not
executive officers, as a group, to the extent that such benefits have
been determined. Additional benefits may be granted during 1997, but
such grants are not determinable at this time.
NEW PLAN BENEFITS
Name and
Position or Group Number of Units
Bernard F. Brennan - 0
Chairman
G. Joseph Reddington 0
Michael Searles - 0
President, Softlines
Robert J. Stevenish 0
Spencer H. Heine - 225,000 1
Executive Vice President,
Secretary and General Counsel
Frederick E. Meiser 0
Executive Group 4,321,219 2
Non-Executive Director Group 0
Non-Executive Officer Employee Group 400,000 3
<PAGE>
____________________
1 See "EXECUTIVE COMPENSATION -- CERTAIN ARRANGEMENTS" and "APPROVAL
OF CERTAIN STOCK OPTION GRANTS."
2 Number of Class A Shares underlying options to be granted under
the Plan which executive officers have been informed they will
receive. Includes options to be granted to Messrs. Goddu, Donoho,
Grimes and Heine, upon stockholder approval at the Annual Meeting, as
provided herein. Further grants may be awarded to executive officers
of the Company during 1997 under the Plan as amended, but the numbers
of shares underlying such grants are not determinable at this time.
3 Number of Class A Shares underlying options to be granted under
the Plan which associates who are not executive officers have been
informed they will receive. Includes options to be granted to
Messrs. Taylor and Freeman upon stockholder approval at the Annual
Meeting, as provided herein. Further grants may be awarded to
associates of the Company during 1997 under the Plan as amended, but
the numbers of shares underlying such grants are not determinable at
this time.
APPROVAL OF CERTAIN STOCK OPTION GRANTS
In the Goddu Agreement, the Company agreed that, subject to
stockholder approvals which are to be obtained at the Annual Meeting
pursuant hereto, he would be granted an option to purchase Series 3
Shares representing 5% of the outstanding shares of Common Stock (on
a fully-diluted basis). For purposes of this calculation, the number
of Series 3 Shares underlying such options is to be adjusted upwards
from time to time until the last day of the Company's 1998 fiscal
year to give effect to grants of stock options after December 20,
1996 to management employees of Montgomery Ward covering up to 10% of
the outstanding shares of Common Stock on a fully-diluted basis.
Pursuant to the Goddu Agreement, Mr. Goddu's options are to have an
exercise price of $__.__ per share (the Fair Market Value per Share
of a Class A Share, as determined pursuant to the Stockholders'
Agreement) and become exercisable on the basis of cumulative
installments of 25% of the underlying Series 3 Shares on the last day
of each of the Company's 1997, 1998, 1999 and 2000 fiscal years,
provided that no portion of the option shall become exercisable
unless, at the applicable date of determination, Mr. Goddu is, and
has been at all times since the grant of the option, employed by
Montgomery Ward. The exercisable portion of the option shall remain
exercisable until the earliest of (i) three (3) months following the
date of cessation of Mr. Goddu's employment with Montgomery Ward,
which occurs due to his voluntary termination or the termination of
his employment by Montgomery Ward for cause; (ii) the third
anniversary of the date of cessation of Mr. Goddu's employment with
Montgomery Ward for any other reason; or (iii) the tenth anniversary
of the date of grant of the option.
As of April 15, 1997, the number of shares of Common Stock
outstanding, on a fully-diluted basis, and including the options to
be granted to Messrs. Donoho, Grimes, Heine, Taylor and Freeman, as
described herein, was 49,328,149. Therefore, Mr. Goddu's option will
initially be granted with respect to 2,596,219 Series 3 Shares,
subject to upward adjustment as described above.
On April __, 1997, the Board of Directors of the Company,
acting as the Director Plan Committee, approved the grant of such
option to Mr. Goddu, subject to approval by the stockholders of the
Company of the Certificate Amendment, the Plan Amendment and the
grant of such options. The Board of Directors recommends a vote FOR
approval of the options to be granted to Mr. Goddu.
<PAGE>
Mr. Donoho, the Company and Montgomery Ward entered into an
Employment Agreement dated as of January 31, 1997, which provides, in
part, that the Company would grant to Mr. Donoho an option
to purchase 1,000,000 Series 3 Shares. Such options will have an
exercise price of $__.__ per share (the Fair Market Value per Share
of a Class A Share, as determined pursuant to the Stockholders'
Agreement) and become exercisable based on the following schedule --
400,000 Series 3 Shares on February 1, 1998; 300,000 Series 3 Shares
on February 1, 1999; and 300,000 Series 3 Shares on February 1, 2000,
provided that no portion of the option will become exercisable unless
Mr. Donoho is, on the applicable date of determination, and has been
at all times since the grant of the option, employed by Montgomery
Ward. The exercisable portion of the option shall remain exercisable
until the earliest of (i) three (3) months following the date of
cessation of Mr. Donoho's employment with Montgomery Ward, which
occurs due to his voluntary termination or the termination of his
employment by Montgomery Ward for cause; (ii) the third anniversary
of the date of cessation of Mr. Donoho's employment with Montgomery
Ward for any other reason; or (iii) the tenth anniversary of the date
of grant of the option.
On April __, 1997, the Board of Directors of the Company,
acting as the Director Plan Committee, approved the grant of such
option to Mr. Donoho, subject to approval by the stockholders of the
Company of the Certificate Amendment, the Plan Amendment and the
grant of such options. The Board of Directors recommends a vote FOR
approval of the options to be granted to Mr. Donoho.
Mr. Grimes and Montgomery Ward entered into a letter agreement
dated as of January 28, 1997, which provides, in part, that the
Company would grant to Mr. Grimes an option to purchase 500,000
Series 3 Shares. Such options will have an exercise price of $__.__
per share (the Fair Market Value per Share of a Class A Share, as
determined pursuant to the Stockholders' Agreement) and become
exercisable based on the following schedule -- 200,000 Series 3
Shares on February 1, 1998; 150,000 Series 3 Shares on February 1,
1999; and 150,000 Series 3 Shares on February 1, 2000, provided that
no portion of the option will become exercisable unless Mr. Grimes
is, on the applicable date of determination, and has been at all
times since the grant of the option, employed by Montgomery Ward
(unless Montgomery Ward initiates a termination of Mr. Grimes'
employment without cause (as defined in such letter agreement), in
which case vesting of his options will continue through February 1,
2000). The exercisable portion of the option shall remain
exercisable until the earliest of (i) two (2) months following the
date of cessation of Mr. Grimes' employment with Montgomery Ward,
which occurs due to his voluntary termination or the termination of
his employment by Montgomery Ward for cause; (ii) the second
anniversary of the date of cessation of Mr. Grimes' employment with
Montgomery Ward for any other reason; or (iii) the tenth anniversary
of the date of grant of the option.
On April __, 1997, the Board of Directors of the Company,
acting as the Associate Plan Committee, approved the grant of such
option to Mr. Grimes, subject to approval by the stockholders of the
Company of the Certificate Amendment, the Plan Amendment and the
grant of such options. The Board of Directors recommends a vote FOR
approval of the options to be granted to Mr. Grimes.
Mr. Heine and Montgomery Ward entered into a letter agreement
dated as of April 11, 1997, which provides, in part, that the Company
would grant to Mr. Heine an option to purchase 225,000 Series 3
Shares. Such options will have an exercise price of $__.__ per share
(the Fair Market Value per Share of a Class A Share, as determined
pursuant to the Stockholders' Agreement) and become exercisable based
on the following schedule -- 75,000 Series 3 Shares on April 1, 1998;
75,000 Series 3 Shares on April 1, 1999; and 75,000 Series 3 Shares
on April 1, 2000, provided that no portion of the option will become
exercisable unless Mr. Heine is, on the applicable date of
determination, and has been at all times since the grant of the
<PAGE>
option, employed by Montgomery Ward (unless Montgomery Ward initiates
a termination of Mr. Heine's employment without cause (as defined in
such letter agreement), in which case vesting of his options will
continue through April 1, 2000). The exercisable portion of the
option shall remain exercisable until the earliest of (i) two (2)
months following the date of cessation of Mr. Heine's employment with
Montgomery Ward, which occurs due to his voluntary termination or the
termination of his employment by Montgomery Ward for cause; (ii) the
second anniversary of the date of cessation of Mr. Heine's employment
with Montgomery Ward for any other reason; or (iii) the tenth
anniversary of the date of grant of the option.
On April __, 1997, the Board of Directors of the Company,
acting as the Associate Plan Committee, approved the grant of such
option to Mr. Heine, subject to approval by the stockholders of the
Company of the Certificate Amendment, the Plan Amendment and the
grant of such options. The Board of Directors recommends a vote FOR
approval of the options to be granted to Mr. Heine.
Mr. Taylor and Montgomery Ward entered into a letter agreement
dated as of February 17, 1997, which provides, in part, that the
Company would grant to Mr. Taylor an option to purchase 200,000
Series 3 Shares. Such options will have an exercise price of $__.__
per share (the Fair Market Value per Share of a Class A Share, as
determined pursuant to the Stockholders' Agreement) and become
exercisable based on the following schedule -- 80,000 Series 3 Shares
on March 1, 1998; 60,000 Series 3 Shares on March 1, 1999; and 60,000
Series 3 Shares on March 1, 2000, provided that no portion of the
option will become exercisable unless Mr. Taylor is, on the
applicable date of determination, and has been at all times since the
grant of the option, employed by Montgomery Ward (unless Montgomery
Ward initiates a termination of Mr. Taylor's employment without cause
(as defined in such letter agreement), in which case vesting of his
options will continue through March 1, 2000). The exercisable
portion of the option shall remain exercisable until the earliest of
(i) two (2) months following the date of cessation of Mr. Taylor's
employment with Montgomery Ward, which occurs due to his voluntary
termination or the termination of his employment by Montgomery Ward
for cause; (ii) the second anniversary of the date of cessation of
Mr. Taylor's employment with Montgomery Ward for any other reason; or
(iii) the tenth anniversary of the date of grant of the option.
On April __, 1997, the Board of Directors of the Company,
acting as the Associate Plan Committee, approved the grant of such
option to Mr. Taylor, subject to approval by the stockholders of the
Company of the Certificate Amendment, the Plan Amendment and the
grant of such options. The Board of Directors recommends a vote FOR
approval of the options to be granted to Mr. Taylor.
Mr. Freeman and Montgomery Ward entered into a letter agreement
dated as of March 19, 1997, which provides, in part, that the Company
would grant to Mr. Freeman an option to purchase 200,000 Series 3
Shares. Such options will have an exercise price of $__.__ per share
(the Fair Market Value per Share of a Class A Share, as determined
pursuant to the Stockholders' Agreement) and become exercisable based
on the following schedule -- 80,000 Series 3 Shares on April 1, 1998;
60,000 Series 3 Shares on April 1, 1999; and 60,000 Series 3 Shares
on April 1, 2000, provided that no portion of the option will become
exercisable unless Mr. Freeman is, on the applicable date of
determination, and has been at all times since the grant of the
option, employed by Montgomery Ward (unless Montgomery Ward initiates
a termination of Mr. Freeman's employment without cause (as defined
in such letter agreement), in which case vesting of his options will
continue through April 1, 2000). The exercisable portion of the
option shall remain exercisable until the earliest of (i) two (2)
months following the date of cessation of Mr. Freeman's employment
with Montgomery Ward, which occurs due to his voluntary termination
<PAGE>
or the termination of his employment by Montgomery Ward for cause;
(ii) the second anniversary of the date of cessation of Mr. Freeman's
employment with Montgomery Ward for any other reason; or (iii) the
tenth anniversary of the date of grant of the option.
On April __, 1997, the Board of Directors of the Company,
acting as the Associate Plan Committee, approved the grant of such
option to Mr. Freeman, subject to approval by the stockholders of the
Company of the Certificate Amendment, the Plan Amendment and the
grant of such options. The Board of Directors recommends a vote FOR
approval of the options to be granted to Mr. Freeman.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1996, Montgomery Ward and the Northern Trust Company (the
"Bank"), replacing earlier lines of credit, arranged a line of credit
of which $614,364.18 is currently available to six associates,
including executive officers of the Company (the "Line of Credit
Program"). A committee of the Board of Directors of the Company
(consisting of Messrs. Brennan and Lieberman) determines which
associates are eligible to borrow money under the Line of Credit
program and the maximum amounts which each, respectively, can borrow.
Any executive officer desiring to borrow money from the Bank under
the Line of Credit Program is required to pledge to such Bank as
collateral a number of Class A Shares of vested stock of the Company
held by the individual, the fair market value of which is equal to
twice the amount the individual desires to borrow. All loans are
payable on June 21, 1998, and interest is payable monthly. Any loan
may be prepaid without penalty. Interest accrues at the Bank's prime
rate. The Company has agreed with the Bank that, in the event any
individual should default upon his or her repayment obligations, the
Company will purchase the note from the Bank or purchase the pledged
stock from the Bank at the fair market value with the entire amount
defaulted upon to be paid by the Company if, and to the extent, the
defaulted amount exceeds the amount of the payment for the Class A
Shares. As of December 28, 1996, one (1) loan in excess of $60,000
is outstanding to executive officers of the Company under the Line of
Credit Program: Robert A. Kasenter, Executive Vice President of the
Company, for $300,000.
Montgomery Ward entered into a Bank Credit Card Program
Agreement ("Card Agreement") effective April 1, 1996 with Monogram
Credit Card Bank of Georgia ("Monogram"), and an Account-Related
Agreement ("Account Related Agreement") effective April 1, 1996 with
Montgomery Ward Credit Corporation ("Montgomery Ward Credit")
(collectively referred to as the "Agreements") pursuant to which
Monogram and Montgomery Ward Credit (collectively referred to as the
"Credit Companies"), both of which are affiliates of GE Capital, make
payments to Montgomery Ward as to their 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 Credit Companies provide services to
Montgomery Ward. Set forth below is a description of various
transactions entered into in connection with the Agreements. Unless
otherwise specified, information given is for aggregate transactions
under both the Card Agreement and the Account Related Agreement. As
of December 28, 1996, there were $5.2 billion of Montgomery Ward
private label credit card receivables owned by the Credit Companies.
During the 1996, 1995 and 1994 fiscal years, the Credit Companies
paid to Montgomery Ward, pursuant to the Agreements and predecessor
agreements, approximately $3.6 billion, $3.9 billion, and $4.1
billion, respectively, in respect of such receivables. As of April
1, 1997, the Credit Companies have paid approximately $633 million to
Montgomery Ward in respect of such receivables during the current
fiscal year. Effective April 1, 1996, Montgomery Ward generally
bears the risk of credit losses due to non-payment by cardholders to
the extent of (i) the amount of credit losses that are between 3.9%
<PAGE>
and 5.0% of average outstanding receivables, plus (ii) 50% of credit
losses that are between 5.0% and 8.0% of average outstanding
receivables, subject to offsets described below relating to
Montgomery Ward's share of certain incremental increases in finance
charges and late fees payable by cardholders. Montgomery Ward has
executed notes which total $333 million for its unpaid share of
credit losses through 1996 under the current and prior arrangements.
Montgomery Ward's net unpaid liability for credit losses for 1991
through 1997 will be consolidated pursuant to a continuation note due
in early 2003, provided (i) the outstanding balance of such note
cannot exceed $300 million, (ii) monthly principal payments are
required as follows: $1.0 million, $1.417 million, $2.75 million,
$1.25 million, $417,000 and $417,000 for 1997, 1998, 1999, 2000, 2001
and 2002, respectively, and (iii) starter card losses are payable
currently. Interest on Montgomery Ward's unpaid liability for credit
losses is payable at a rate equal to rates on comparable borrowings
of Montgomery Ward. In exchange for Montgomery Ward's agreement to
allow the Credit Companies to increase finance charge rates and late
fees in selected states during and prior to 1996, Montgomery Ward
receives a share of incremental finance charges and late fees
resulting from such increases which is available for offset against
Montgomery Ward's unpaid liability for its share of credit losses.
To the extent not currently paid or offset, such amounts earn
interest at the same rate as amounts owned by Montgomery Ward to
Montgomery Ward Credit. The Credit Companies also provide
administrative services in connection with Signature products. Fees
paid by Signature to the Credit Companies were approximately $6
million, $6 million, and $5 million for Montgomery Ward's 1996, 1995
and 1994 fiscal years, respectively.
In addition to the Agreements, Lechmere Inc., a wholly-owned
subsidiary of Montgomery Ward ("Lechmere"), entered into an Interim
Consumer Credit Card Program Agreement (the "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 and
the execution of a long-term agreement between the parties. A term
sheet was executed as of March 7, 1997 outlining the major provisions
that the parties intend to incorporate in the long-term agreement.
The term sheet contemplates that Montgomery Ward will (i) be
responsible for 50% of credit losses that are between 3.9% and 5.0%
of average outstanding receivables, (ii) receive a one time payment
of $3.0 million in consideration of entering into the agreement,
(iii) be responsible for a payment to Monogram of approximately
$2.483 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.
Montgomery Ward and Lechmere also entered into an agreement on
April 3, 1996 for the sale of certain commercial customer receivables
to Montgomery Ward Credit. As of December 28, 1996, there were
$1.178 million of commercial customer receivables owned by Montgomery
Ward Credit. During 1996, Montgomery Ward Credit paid $2.596 million
to Montgomery Ward and Lechmere pursuant to this agreement and, as of
April 1, 1997, Montgomery Ward Credit has paid $1.436 million to
Montgomery Ward and Lechmere in respect of such receivables during
the current fiscal year.
Montgomery Ward and Lechmere have entered into a Program
Agreement dated October 12, 1989, as amended on March 6, 1997, with
GE Capital, under which GE Capital pays certain manufacturers and
distributors a discounted invoice price of products acquired by
Montgomery Ward and Lechmere and whereby Montgomery Ward and Lechmere
reimburse GE Capital for such payments according to an agreed-upon
schedule. The aggregate amount of outstanding payments and other
<PAGE>
amounts payable under the Program Agreement is not to exceed $550
million at any one time. During the Company's 1996 fiscal year,
Montgomery Ward and Lechmere reimbursed approximately $1.022 billion
to GE Capital under the Program Agreement and the largest amount
payable at any time during such fiscal year was approximately $405
million. As of April 1, 1997, Montgomery Ward and Lechmere have
reimbursed approximately $253 million under the Program Agreement
during the current fiscal year and the largest amount payable at any
time during the first quarter of the current fiscal year was
approximately $471 million. The Company anticipates continuing
reimbursement obligations pursuant to the Program Agreement, as
amended.
Montgomery Ward entered into a Credit Agreement (the "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 million, of which $55 million (representing one-third
of the total commitment) would be provided by GE Capital. Under the
Seasonal Credit Agreement, Montgomery Ward may select among several
interest rate options which are based on market rates. As of April
1, 1997, Montgomery Ward has never drawn upon the facility provided
by the Seasonal Credit Agreement.
General Electric Company, the indirect parent of GE Capital,
is, in the ordinary course of its business, a major supplier of
consumer goods to Montgomery Ward for sale at Montgomery Ward's
stores in the ordinary course of its business.
If the Certificate Amendment, in support of which this Proxy
Statement is issued, is adopted, GE Capital will own all of the
shares of Series C Preferred Stock issued and outstanding.
As more fully described above, Mr. Goddu is indebted to the
Company under the Goddu Note in the initial principal amount of
$2,000,000 and Mr. Brennan is indebted to the Company in connection
with the loan provided him pursuant to the Relationship Agreement in
the initial principal amount of $12,500,000. See "EXECUTIVE
COMPENSATION -- CERTAIN ARRANGEMENTS."
Myron Lieberman, a director of the Company and Montgomery Ward,
is a senior partner in the law firm of Altheimer & Gray. Altheimer &
Gray renders legal services to the Company and its subsidiaries as
the regular outside counsel to the Company and its subsidiaries.
During the Company's 1996 fiscal year, the Company paid fees of
$3,463,169 to Altheimer & Gray.
If the Certificate Amendment and the Plan Amendment, in support
of which this Proxy Statement is issued, are adopted, and if the
grants of options to Messrs. Goddu, Donoho, Grimes, Heine, Taylor and
Freeman are approved, the Company anticipates that it will grant
options to purchase a number of the additional Series 3 Shares
pursuant to the Plan to key associates, including such individuals,
and, in certain limited cases, consultants to the Company and its
subsidiaries. Executive officers and directors of the Company are
likely to be among the recipients of such Options.
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, and the
rules promulgated thereunder, requires the Company's executive
officers, directors and holders of 10% or more of the Common Stock to
file reports of ownership and changes in ownership with the
Securities and Exchange Commission. GE Capital did not timely file
with the SEC a Form 4, Statement of Changes in Beneficial Ownership,
with respect to the purchase by GE Capital of preferred stock of the
Company on March 29, 1996. The Form 4 with respect to such
<PAGE>
transaction was due no later than April 10, 1996. In addition,
neither Mr. Stewart nor Mr. Wendt timely filed with the SEC a Form 3,
Initial Statement of Beneficial Ownership of Securities, with respect
to their appointment to the Board of Directors of the Company in
December 1996. The Form 3 with respect to the appointments of
Messrs. Stewart and Wendt were due no later than December 20, 1996
and December 27, 1996, respectively.
INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur
Andersen LLP as independent auditors for the Company and its
subsidiaries for the fiscal year ending January 3, 1998. Arthur
Andersen LLP has served as the Company's independent auditors since
the Company's organization in 1988 and as independent auditors for
Montgomery Ward and its subsidiaries for many years.
It is not anticipated that representatives of Arthur Andersen
LLP will be present at the meeting.
FINANCIAL AND OTHER INFORMATION
The following information is incorporated by reference to the
Company's Annual Report on Form 10-K for its fiscal year ended
December 28, 1996, a copy of which is included herewith:
Information Page No.
Audited Financial Statements of the Company 28-78
Supplementary Financial Information N/A
Management's Discussion and Analysis of 20-27
Financial Condition and Results of Operations
The Company has not had, during the Company's two most recent
fiscal years, any disagreements with Arthur Andersen LLP, the
Company's independent accountants, with respect to accounting
matters.
OTHER BUSINESS
The Company is not aware of any business or matter other than
those indicated above which may properly be presented at the meeting.
PROXY SOLICITATION AND REVOCATION
The enclosed form of written consent is solicited on behalf of
the Board of Directors and is revocable at any time prior to the
filing of the amendment to the Certificate of Incorporation to be
authorized thereby. The cost of soliciting consents will be borne by
the Company.
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 1998
annual meeting of stockholders must have been received by the Company
no later than December ___, 1997, in order to be considered for
inclusion in the Company's proxy statement and form or proxy relating
to such meeting.
By Order of the Board of Directors,
Spencer H. Heine
Executive Vice President,
Secretary and General Counsel<PAGE>
<PAGE>
ANNEX A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
MONTGOMERY WARD HOLDING CORP.
MONTGOMERY WARD HOLDING CORP., a corporation organized and
existing under and by virtue of the General Corporation Law of the
State of Delaware (the "Corporation"), does hereby certify as
follows:
1. The original Certificate of Incorporation of the
Corporation was filed in the Office of the Secretary of State of
Delaware on February 8, 1988 and recorded in the Office of the
Recorder of Kent County, Delaware. The name under which the
Corporation was originally incorporated is BFB Acquisition Corp.
2. A Certificate of Correction of Certificate
of Incorporation of the Corporation was filed in the Office of
the Secretary of State of Delaware on February 9, 1988.
3. The original Restated Certificate of Incorporation
of the Corporation was filed in the Office of the Secretary of
State of Delaware on June 17, 1988 and amendments thereto were filed
on each of June 20, 1988; June 24, 1988; January 30, 1990; and
March 20, 1992.
4. The Second Restated Certificate of Incorporation of
the Corporation was filed in the Office of the Secretary of State
of Delaware on June 25, 1992 and an amendment thereto was filed
on April 27, 1994.
5. The Third Restated Certificate of Incorporation of
the Corporation was filed in the Office of the Secretary of State
of Delaware on June 28, 1994, and amendments thereto were filed on
each of October 25, 1994; and March 29, 1996.
6. The Board of Directors of the Corporation, at a
meeting duly called and held, authorized, adopted and
approved resolutions proposing and declaring advisable the Third
Amendment to the Third Restated Certificate of Incorporation of
the Corporation, setting forth amendments to Article FOURTH thereof
as follows:
The introduction to Article FOURTH thereof is amended in its
entirety to read as follows:
"FOURTH: The total number of shares of capital stock
which the Corporation shall have authority to issue is
sixty-seven million eight hundred thirty-eight thousand seven
hundred fifty (67,838,750) consisting of the following amounts
in the following designations:
1. Common Stock. Sixty-seven million eight
hundred twelve thousand (67,812,000) shares of Common
Stock, par value one cent ($0.01) per share (hereinafter
referred to as "Common Stock"), which shall consist of
the following classes:
<PAGE>
(a) forty-two million eight hundred twelve
thousand (42,812,000) shares of Class A Common
Stock (hereinafter referred to as "Class A Common
Stock"), which shall consist of the following
series:
(i) twenty-five million (25,000,000)
shares of Class A Common Stock, Series 1
(hereinafter referred to as "Class A Common
Stock, Series 1"), and
(ii) five million four hundred twelve
thousand (5,412,000) shares of Class A Common
Stock, Series 2 (hereinafter referred to as
"Class A Common Stock, Series 2"), and
(iii) twelve million four hundred
thousand (12,400,000) shares of Class A
Common Stock, Series 3 (hereinafter referred
to a "Class A Common Stock, Series 3"), and
(b) twenty-five million (25,000,000) shares
of Class B Common Stock (hereinafter referred to as
the "Class B Common Stock").
2. Preferred Stock. Twenty-six thousand seven
hundred fifty (26,750) shares of Preferred Stock, par
value one dollar ($1.00) per share (hereinafter referred
to as "Preferred Stock"), which shall consist of the
following classes:
(a) one thousand seven hundred fifty
(1,750) shares of Senior Preferred Stock
(hereinafter referred to as "Senior Preferred
Stock"), and
(b) twenty-five thousand (25,000) shares of
Preferred Stock, which may be issued from time to
time in one or more series ("Additional Preferred
Stock").
Such shares of Common Stock and Preferred Stock may be
issued for such consideration, not less than the par value
thereof, as shall be fixed from time to time by the Board of
Directors, and shares issued for not less than the
consideration so fixed shall be fully paid and non-assessable.
A statement of the powers, preferences, rights,
qualifications, limitations, restrictions and the relative,
participating, optional and other special rights in respect of
the shares of each class or series of stock is as follows."
Section A.2(a) is amended by deleting the words "nor less than
ten (10) days" where such words appear in such paragraph.
A new Part B is added after Part A to read as follows, and Part
B is hereby relettered as Part C and all references in such Part B to
Section B are similarly changed to Section C:
<PAGE>
"PART B. ADDITIONAL PREFERRED STOCK
1. Shares of Additional Preferred Stock may be issued from
time to time in one or more series and the Board of Directors
is authorized to provide for the issuance of the shares of
Additional Preferred Stock in series, and by filing a
certificate pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares
to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions
thereof.
2. The authority of the Board of Directors with respect to
each series shall include, but not be limited to, determination
of the following:
(i) The number of shares constituting that series and
the distinctive designation of that series;
(ii) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from
which date or dates, and the relative rights of priority,
if any, of payment of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if
so, the terms of such voting rights;
(iv) Whether that series shall have conversion
privileges, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors
shall determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or date upon or after
which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary
under different conditions and at different redemption
dates;
(vi) Whether that series shall have a sinking fund for
the redemption or purchase of shares of that series, and,
if so, the terms and amount of such sinking fund;
(vii) The rights of the shares of that series in the
event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares
of that series; and
(viii) Any other relative rights, preferences and
limitations of that series."
Section 2(b)(i) of Part C of Article FOURTH is amended in its
entirety to read as follows:
"(i) At such time, if any, as GE Capital and GE
Capital Affiliates shall cease to own, in the aggregate,
beneficially or of record, twenty percent (20%) or more
of the shares of Common Stock which GE Capital and GE
Capital Affiliates purchased in June 1988, the number of
directors shall be automatically changed to nine (9), the
holders of the Class A Common Stock, voting as a class,
shall be entitled to elect seven (7) of such directors,
<PAGE>
and the holders of the Class B Common Stock, voting as a
class, shall be entitled to elect two (2) of such
directors; provided, however, that as long as the Account
Purchase Agreement referred to in the Stockholders
Agreement is in effect and GE Capital or any GE Capital
Affiliate shall own beneficially or of record any shares
of Class B Common Stock, GE Capital shall have the right
to elect one (1) of the two (2) directors which the
holders of the Class B Common Stock shall be entitled to
elect and all other holders of Class B Common Stock in
the aggregate shall be entitled to elect the other of
the two (2) directors which the holders of Class B Common
Stock shall be entitled to elect. A vacancy in the
directorships to be elected, respectively, by the holders
of the Class A Common Stock or the Class B Common Stock
may be filled only by the vote or written consent of the
holders of Class A Common Stock or Class B Common Stock,
as the case may be."
The word "Senior" is hereby deleted in Section C.5 in each
place that it occurs.
7. The Stockholders of the Corporation, by written consent
of the holders of a majority of the outstanding Common Stock, adopted
resolutions authorizing, adopting and approving the aforesaid
amendments to Article FOURTH of the Third Restated Certificate of
Incorporation of the Corporation.
8. Except to the extent specifically provided to
the contrary in this Certificate of Amendment, the terms,
provisions and conditions of the Certificate of Incorporation of
the Corporation shall remain unamended and in full force and effect.
9. This Certificate of Amendment has been duly adopted
in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, MONTGOMERY WARD HOLDING CORP. has caused
this certificate to be signed by Roger V. Goddu, its Chief Executive
Officer, and attested by Spencer H. Heine, its Secretary, this
_____day of _______________, 1997.
MONTGOMERY WARD HOLDING CORP.
By:______________________
Roger V. Goddu,
Chief Executive Officer
(CORPORATE SEAL)
ATTEST:
By:_____________________
Spencer H. Heine
Secretary
<PAGE>
ANNEX B
CERTIFICATE OF STOCK DESIGNATION
OF
MONTGOMERY WARD HOLDING CORP.
Certificate of the Designation, preferences and relative
participating, optional and other special rights of the Series C
Preferred Stock, par value $1.00 per share, and the qualifications,
limitations and restrictions thereof which have not been set forth in
the Certificate of Incorporation, as amended.
_______________________________________
Pursuant to Sections 141 and 151 of the General
Corporation Law of the State of Delaware
_______________________________________
The undersigned, Roger V. Goddu, as Chief Executive Officer of
Montgomery Ward Holding Corp., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify that the Board of
Directors of the Corporation, by unanimous written consent, duly
adopted the following resolution:
RESOLVED: That the Board of Directors hereby provides for the issue
of a series of shares pursuant to the provisions of Part B of Article
FOURTH of the Certificate of Incorporation of $1.00 par value
Additional Preferred Stock of the Corporation and hereby fixes for
designation, preferences and relative participating, optional and
other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, as follows:
This series is designated as the Series C Preferred Stock of the
Corporation (the "Series C Preferred Stock"). Except as otherwise
provided herein, each share of Series C Preferred Stock shall be
identical in all respects to all other shares of Series C Preferred
Stock and shall entitle the holder thereof to the same rights and
privileges as to which the holders of the other shares of Series C
Preferred Stock are entitled. The Series C Preferred Stock shall
consist of 1,000 shares, as issued from time to time and as decreased
from time to time (but not below the number of shares of the Series C
Preferred Stock then outstanding), by further resolution of the Board
of Directors.
1. Rank. The Series C Preferred Stock shall, with respect
to dividend rights and rights on liquidation, winding up and
dissolution, rank prior to the Common Stock, but junior to the Senior
Preferred Stock.
2. Dividends.
(a) In each year, the holders of the shares of
Series C Preferred Stock shall be entitled to receive,
before any dividends shall be declared and paid upon
or set aside for the Common Stock or any other Stock
Junior to the Series C Preferred Stock (defined in
Section 2(a)(i)(A)), when and as declared by the Board
of Directors, except as may be prohibited by Section
5, out of funds legally available for that purpose,
cumulative cash dividends payable quarterly in arrears
on the last business day of March, June, September and
December (each of such dates being a "Dividend Payment
Date") at a rate per annum equal to 15% based on the
then effective Liquidation Payment (defined in Section
3(a)) (computed after taking into account Accrued
Dividends (defined in Section 2(c)(i)) (the "Dividend
Rate"); provided, however, that the dividend payable
<PAGE>
on the Dividend Payment Date with respect to any share
of Series C Preferred Stock first occurring after the
date of first issuance (the "Issuance Date") shall be
based upon the number of days from and including March
4, 1997 (the "Initial Accrual Date") up to and
including such Dividend Payment Date and a 365-day
year. The period from the Initial Accrual Date to the
initial Dividend Payment Date and each quarterly
period between consecutive Dividend Payment Dates,
shall hereinafter be referred to as a "Dividend
Period." Such dividends shall be paid to the holders
of record at the close of business on the date
specified by the Board of Directors of the Corporation
at the time such dividend is declared; provided,
however, that such date shall not be more than sixty
(60) days prior to the respective Dividend Payment
Date. Dividends on the Series C Preferred Stock shall
be cumulative from the Initial Accrual Date (whether
or not there shall be net profits or net assets of the
Corporation legally available for the payment of such
dividends). If for any reason the full dividend on
any Dividend Payment Date is not paid in cash, the
unpaid amount of such Accrued Dividend shall
automatically without any further action of the Board
of Directors be deemed added to the amount of the
Liquidation Payment on such Dividend Payment Date. It
is further provided that:
(i) except as provided in Section 2(a)(ii),
the Corporation shall not take any of the following
actions:
(A) declare, order or pay any dividend
on any class of stock ranking as to dividends or
on liquidation junior to the Series C Preferred
Stock (such junior stock being herein sometimes
referred to as the "Stock Junior to the Series C
Preferred Stock"), or
(B) redeem any Stock Junior to the
Series C Preferred Stock,
(each of such actions described in clauses
2(a)(i)(A) or (B) above being herein sometimes
referred to as a "Junior Distribution" and the
proposed date of each such action being herein
sometimes referred to as a "Proposed Junior
Distribution Date") if the Corporation shall not,
on or before the Proposed Junior Distribution Date,
have completed both of the following:
(1) declared on the outstanding shares of
Series C Preferred Stock, and paid or set apart
for payment, all "Accrued Dividends" (defined in
Section 2(c)(i)) to the Proposed Junior
Distribution Date and
(2) paid or deposited as required in this
Certificate of Designation all amounts payable
to holders of Series C Preferred Stock in
respect of the mandatory redemption required to
have been paid or deposited for their benefit on
the "Mandatory Redemption Date" (defined in
Section 4(i), if such Mandatory Redemption Date
occurs on or prior to such Proposed Junior
Distribution Date.
(ii) the Corporation may redeem or purchase any
shares of Common Stock in accordance with either
(x) the terms, conditions and provisions of the
"Stockholders Agreement" (defined in Section C.1 of
Article FOURTH of the Certificate of Incorporation)
or (y) the Terms and Conditions (as defined in the
<PAGE>
Stockholders Agreement), if on or before the date
of each such proposed Common Stock redemption or
purchase (each such time, with respect to
redemptions or purchases under either the
Stockholders Agreement or the Terms and Conditions,
being herein sometimes referred to as a "Proposed
Common Stock Repurchase Date"), the Corporation
shall have:
(A) declared on the outstanding shares of
Series C Preferred Stock, and paid or set apart
for payment, all Accrued Dividends (defined in
Section 2(c)(i)) through all Dividend Payment
Dates occurring on or prior to such Proposed
Common Stock Repurchase Date, and
(B) paid or deposited as required in this
Certificate of Designation all amounts payable
to holders of Series C Preferred Stock in
respect of the mandatory redemption required to
have been paid or deposited for their benefit on
the "Mandatory Redemption Date" (defined in
Section 4(i)), if such Mandatory Redemption Date
occurs on or prior to such Proposed Common Stock
Repurchase Date.
All dividends declared upon Series C Preferred Stock
and any other class of stock ranking on a parity as to
dividends with the Series C Preferred Stock shall be
declared pro rata per share.
(b) Each fractional share of the Series C
Preferred Stock outstanding shall be entitled to a
ratably proportionate amount of all dividends to which
each outstanding full share of the Series C Preferred
Stock is entitled pursuant to Section 2(a) hereof, and
all of such dividends with respect to such outstanding
fractional shares shall be fully cumulative and shall
accrue (whether or not declared) and shall be payable
in the same manner and at such times as provided for
in Section 2(a) with respect to dividends on each
outstanding full share of the Series C Preferred
Stock.
(c) Definitions.
(i) The term "Accrued Dividends" with respect
to the Series C Preferred Stock shall mean, as of
any given time, the then "Full Cumulative
Dividends" (defined in Section 2(c)(ii)) less the
amount of all dividends theretofore paid in cash
upon the relevant shares of Series C Preferred
Stock.
(ii) The term "Full Cumulative Dividends" with
respect to the Series C Preferred Stock shall mean
(whether or not in any Dividend Period, or any part
thereof, in respect of which such term is used
there shall have been net profits or net assets of
the Corporation legally available for the payment
of such dividends) that amount which shall be equal
to dividends upon the relevant shares at the full
rate fixed for Series C Preferred Stock as provided
herein for the period of time elapsed from the
Initial Accrual Date to the date as of which Full
Cumulative Dividends are computed.
(d) Shares of Series C Preferred Stock which
have been issued and reacquired in any manner,
including shares purchased or exchanged, shall not be
reissued.
<PAGE>
3. Rights on Liquidation, Dissolution or Winding
Up.
(a) In the event of any liquidation,
dissolution or winding up of the Corporation, the
holders of shares of Series C Preferred Stock then
outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution
to its stockholders, whether from capital, surplus or
earnings, except as may be prohibited by Section 5,
but after payments required to be made to the holders
of any stock ranking senior upon liquidation to the
Series C Preferred Stock and before any payment shall
be made to the holders of any stock ranking on
liquidation junior to the Series C Preferred Stock, an
amount equal to one hundred thousand dollars
($100,000) per share, plus an amount equal to Accrued
Dividends (as defined in Section 2(c)(i)) to the date
of payment (the "Liquidation Payment"). If upon any
liquidation, dissolution or winding up of the
Corporation the assets of the Corporation available
for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series C
Preferred Stock the full amounts to which they
respectively shall be entitled, the holders of shares
of Series C Preferred Stock, and any class of stock
ranking on liquidation on a parity with the Series C
Preferred Stock, shall share ratably in any
distribution of assets according to the respective
amounts which would be payable in respect of the
shares held by them upon such distribution if all
amounts payable on or with respect to said shares were
paid in full. In the event of any liquidation,
dissolution or winding up of the Corporation after
payment shall have been made to the holders of shares
of Series C Preferred Stock and any class of stock
ranking on liquidation on a parity with the Series C
Preferred Stock of the full amount to which they shall
be entitled as aforesaid, the holders of any class or
classes of stock ranking on liquidation junior to the
Senior Preferred Stock shall be entitled, to the
exclusion of the holders of shares of Series C
Preferred Stock, to share, according to their
respective rights and preferences, in all remaining
assets of the Corporation available for distribution
to its stockholders.
(b) The Liquidation Payment with respect to
each fractional share of the Series C Preferred Stock
outstanding shall be equal to a ratably proportionate
amount of the Liquidation Payment with respect to each
outstanding share of Series C Preferred Stock.
(c) For the purposes of this Section 3,
neither the consolidation or merger of the Corporation
into or with any other corporation or corporations,
nor the sale or transfer by the Corporation of all or
any part of its assets shall be deemed to be a
liquidation, dissolution or winding up of the
Corporation, unless such transaction shall be in
connection with the liquidation, dissolution or
winding up of the Corporation.
4. Redemption
(a) Mandatory Redemption.
(i) Except as may be prohibited by Section 5,
on September 30, 2002, the Corporation shall redeem
all of the outstanding shares of Series C Preferred
Stock at a redemption price of (A) one hundred
thousand dollars ($100,000) per share (payable in
cash or other consideration as the Corporation and
holders of a majority of the Series C Preferred
Stock may agree), plus (B) an amount equal to
Accrued Dividends (defined in Section 2(c)(i)) to
the date of payment (the "Redemption Price") (each
such date being herein sometimes referred to as the
"Mandatory Redemption Date")
<PAGE>
(ii) On and after the Mandatory Redemption Date
(unless default shall be made by the Corporation
in depositing moneys for the payment of the
Redemption Price as hereinafter provided), all
rights of the holders of shares of Series C
Preferred Stock as stockholders of the Corporation
with respect to those shares of Series C Preferred
Stock to be redeemed, except the right to receive
the Redemption Price as hereinafter provided, shall
cease and terminate.
(iii) The Corporation shall provide moneys for
the payment of the Redemption Price by depositing
on the Mandatory Redemption Date the amount thereof
for the account of the holders of record of the
Series C Preferred Stock entitled thereto with Bank
of America Illinois, or such other bank or trust
company doing business in the City of Chicago, as
may be designated by (A) the holders of not less
than a majority of the outstanding shares of Series
C Preferred Stock, and, failing said designation,
(B) the Corporation, as paying agent for the
benefit of such holders. The holders of the shares
of Series C Preferred Stock redeemed shall
surrender to the Corporation the certificates for
the shares of Series C Preferred Stock so redeemed.
Upon notification by such designated bank or trust
company to the holders of the Series C Preferred
Stock that such moneys representing the Redemption
Price have been deposited by the Corporation, the
shares designated for redemption shall no longer be
outstanding, whether or not the certificates for
the shares so redeemed have been received by the
Corporation on the date of such notification and
all rights relating thereto shall cease and
terminate.
(b) Optional Redemption.
(i) So long as any shares of Series C
Preferred Stock are outstanding, except as may be
prohibited by Section 5, the Corporation may, at
the option of the Board of Directors, at any time
or from time to time after the Issuance Date,
redeem the whole or any part of such Series C
Preferred Stock. Any redemption pursuant to this
Section 4(b)(i) shall be at the Redemption Price.
If less than all the shares of Series C Preferred
Stock at any time outstanding shall be called for
redemption, the redemption shall be made pro rata
with respect to such shares and in such manner as
may be prescribed by resolution of the Board of
Directors. The date of each such redemption is
herein sometimes referred to as an "Optional
Redemption Date".
(ii) Notice of every redemption pursuant to
this Section 4(b) shall be sent by first-class
mail, postage prepaid, to the holders of record of
the shares of Series C Preferred Stock so to be
redeemed at their respective addresses as the same
shall appear on the books of the Corporation. Such
notice shall be mailed not less than ten (10)
business days in advance of the Optional Redemption
Date to the holders of record of the shares of
Series C Preferred Stock so to be redeemed. On and
after the Optional Redemption Date, unless default
shall be made by the Corporation in providing
moneys to the bank or trust company for the account
of the holders of record of the Series C Preferred
Stock as provided in Section 4(a)(iii) for the
payment of the Redemption Price, all rights of the
holders of Series C Preferred Stock as stockholders
of the Corporation with respect to those shares of
Series C Preferred Stock to be redeemed, except the
right to receive the Redemption Price, shall cease
and terminate whether or not the certificates for
the shares so redeemed have been received by the
Corporation as provided in Section 4(a)(iii). In
<PAGE>
this Section 4(b)(ii), a business day refers to any
day, except a Saturday, Sunday or any day on which
banks in the City of Chicago are authorized or
required by law to close.
(c) Each fractional share of the Series C
Preferred Stock outstanding shall be entitled to a
ratably proportionate fraction of the Redemption Price
payable in respect of each outstanding full share of
the Series C Preferred Stock pursuant to this Section
4, and such fraction of the price shall be payable in
the same manner and at such times as provided for in
this Section 4 with respect to redemptions of each
outstanding full share of the Series C Preferred
Stock.
(d) The foregoing provisions of this Section 4
to the contrary notwithstanding but without limitation
of the Corporation's obligations to make mandatory
redemptions as required by Section 4(a), unless the
Accrued Dividends on all outstanding shares of Series
C Preferred Stock shall have been paid in cash or
contemporaneously are declared and paid through the
date of a proposed optional redemption, none of the
shares of Series C Preferred Stock shall be redeemed
unless all outstanding shares of Series C Preferred
Stock are simultaneously redeemed and the Corporation
shall not purchase by optional redemption or otherwise
acquire any shares of Series C Preferred Stock;
provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of
Series C Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of
all outstanding shares of Series C Preferred Stock.
(e) If fewer than all the outstanding shares
of Series C Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by
the Board of Directors in accordance with the
provisions of this Certificate of Designation, and the
shares to be redeemed shall be determined by lot or
pro rata as may be determined by the Board of
Directors.
5. Restriction on Payments. Anything contained in
this Article to the contrary notwithstanding, no cash
dividends or dividends paid by transfer of any other
property on shares of the Series C Preferred Stock shall be
declared by the Board of Directors or paid or set apart for
payment by the Corporation, no distribution in respect of
the Series C Preferred Stock shall be paid or set apart for
payment by the Corporation, and no payment shall be made by
the Corporation with respect to any redemption of Series C
Preferred Stock (such payments, distributions and settings
aside being herein sometimes referred to collectively as
"Distributions") at any time when the terms and provisions
of any agreement to which the Corporation or any other
member of the "Ward Group" (defined in Section C.1 of
Article FOURTH of the Certificate of Incorporation) is a
party relating to indebtedness for money borrowed
specifically prohibits or limits such Distribution (and such
Distribution exceeds said limits), or such Distribution
would constitute a breach, default or event of default
thereunder.
6. Voting Rights. Except as expressly provided in
the Certificate of Incorporation, this Certificate of
Designation or as required by law (in relation to which the
holders of shares of Series C Preferred Stock shall be
treated as a class), the holders of shares of Series C
Preferred Stock shall not have voting rights and at every
meeting of the stockholders of the Corporation, or by
written consent in lieu of any such meeting, all voting
power in the election of directors and/or for all other
purposes shall be vested exclusively in the holders of
shares of Common Stock. Without limitation of the next
<PAGE>
preceding sentence and without implication that the contrary
would otherwise be true, no consent of the holders of Series
C Preferred Stock shall be required for (a) the creation of
any indebtedness of any kind of the Corporation, (b) the
creation of any class of stock of the Corporation junior in
right as to dividends and upon liquidation to the Series C
Preferred Stock, or (c) any increase or decrease in the
amount of authorized Common Stock or any increase, decrease
or change in the par value thereof.
7. Amendment. The Certificate of Incorporation of
the Corporation shall not be amended in any manner which
would alter or change the powers, preferences or special
rights of the Series C Preferred Stock so as to affect the
holders thereof adversely (including, without limitation,
providing for the creation of any new class of capital stock
senior to, or on a parity with, the Series C Preferred Stock
as to dividend, redemption rights or on liquidation) without
the affirmative vote of the holders of at least a majority
of the outstanding shares of Series C Preferred Stock,
voting together as a single class. The Board of Directors
reserves the right to act by resolution from time to time to
decrease the number of shares which constitute Series C
Preferred Stock (but not below the number of shares thereof
outstanding).
<PAGE>
IN WITNESS WHEREOF, MONTGOMERY WARD HOLDING CORP. has caused
this certificate to be signed by Roger V. Goddu, its Chief Executive
Officer, and attested by Spencer H. Heine, its Secretary, this
day of _____________, 1997.
MONTGOMERY WARD HOLDING CORP.
By:_________________________
Roger V. Goddu
Chief Executive Officer
(CORPORATE SEAL)
ATTEST:
By:_______________________
Spencer H. Heine
Secretary
<PAGE>
ANNEX C
AMENDMENT NO. 2 TO THE AMENDED AND RESTATED
MONTGOMERY WARD & CO., INCORPORATED STOCK OWNERSHIP PLAN
This Amendment No. 2 to the amended and restated
Montgomery Ward & Co., Incorporated Stock Ownership Plan (the "Plan")
is made as of the _____ day of _______________, 1997.
WHEREAS, MONTGOMERY HOLDING CORP., a Delaware corporation,
(the "Company") has previously amended and restated the Plan; and
WHEREAS, pursuant to Section 16 of the Plan the Company has
reserved the right to amend the Plan; and
WHEREAS, the Company desires to amend the Plan.
NOW, THEREFORE, the Plan is hereby amended in the following
manner:
1. The first sentence of Section 7 is deleted in its
entirety and the following is inserted in lieu thereof: "The total
number of Shares allocated to this Program and available to
designated Participants under this Program is One Million (1,000,000)
Series 1 Shares, Five Million Four Hundred Twelve Thousand
(5,412,000) Series 2 Shares and Twelve Million (12,000,000) Series 3
Shares, except as such numbers of Shares shall be adjusted in
accordance with the provisions of Section 11."
2. The second sentence of Section 7 is deleted in its
entirety and the following is inserted in lieu thereof: "The maximum
number of Shares available to any Participant under this Program for
Awards, Purchase Rights and Options is four million (4,000,000)
Shares, except as such number of Shares shall be adjusted in
accordance with the provisions of Section 11."
<PAGE>
MONTGOMERY WARD HOLDING CORP.
One Montgomery Ward Plaza
Chicago, Illinois 60671
Proxy for Annual Meeting of Stockholders on May 29, 1997
This Proxy is solicited on behalf of the Board of Directors
Roger V. Goddu and Spencer H. Heine, or either of them, with
full power of substitution, are hereby authorized to vote the shares
of Common Stock of Montgomery Ward Holding Corp. which the
undersigned is entitled to vote at the 1997 Annual Meeting of
Stockholders to be held at the corporate offices of Montgomery Ward
Holding Corp., One Montgomery Ward Plaza, Chicago, Illinois 60671 on
Thursday, May 29, 1997 at 9:00 a.m., and at all adjournments thereof
as indicated on this card for the proposals described in the Notice
and Proxy Statement for such meeting and in their discretion on other
matters which may properly come before the meeting.
Unless otherwise instructed, this proxy will be voted FOR
the nominees listed in Proposal 1 and for approval of the matters set
forth in Proposals 2, 3, 4, 5, 6, 7, 8 and 9.
Please mark, sign and mail this proxy promptly in the enclosed
envelope.
1. Election of Director Nominees:
Messrs. Goddu, Donoho, Brennan, Pohlmann, Lieberman,
Cathcart, Porter, Nayden, Wendt and Stewart.
FOR nominees WITHHELD from nominees FOR, except
vote WITHHELD
from the following
nominee(s):
2. Approval of the amendment to the Certificate of
Incorporation of Montgomery Ward Holding Corp.:
FOR approval AGAINST approval ABSTAIN
<PAGE>
3. Approval of the amendments to the Montgomery Ward & Co.,
Incorporated Stock Ownership Plan:
FOR approval AGAINST approval ABSTAIN
4. Approval of options granted to Roger V. Goddu:
FOR approval AGAINST approval ABSTAIN
5. Approval of options granted to Burnett W. Donoho:
FOR approval AGAINST approval ABSTAIN
6. Approval of options granted to Thomas Grimes:
FOR approval AGAINST approval ABSTAIN
7. Approval of options granted to Spencer H. Heine:
FOR approval AGAINST approval ABSTAIN
8. Approval of options granted to Karl S. Taylor:
FOR approval AGAINST approval ABSTAIN
9. Approval of options granted to Kevin Freeman:
FOR approval AGAINST approval ABSTAIN
Signature:_______________________
Capacity/Title:__________________
Date:____________________________
Sign the exact name of the shareholder as it appears on your
certificate(s). If acting as administrator, trustee or in
representative capacity, sign name and title.
