<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
____________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
-
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 4, 1998
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17540
MONTGOMERY WARD HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 36-3571585
(State of incorporation) (I.R.S. Employer Identification No.)
Montgomery Ward Plaza, Chicago, Illinois 60671
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 312/467-2000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of August 18, 1998 the Registrant had 18,322,152 shares of Class A Common
Stock and 25,000,000 shares of Class B Common Stock outstanding.
================================================================================
<PAGE>
Montgomery Ward Holding Corp.
For the Quarter Ended July 4, 1998
Index to Quarterly Report on Form 10-Q
Page
Part I - Financial Information.
Item 1. Financial Statements (Unaudited).
Consolidated Statements of Income. 3
Consolidated Balance Sheets. 4
Consolidated Statements of Cash Flows. 5
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13
Part II - Other Information. 19
2
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the 13-week For the 26-week
Periods Ended Periods Ended
--------------------- ---------------------
July 4, June 28, July 4, June 28,
(In millions, except per share amounts) 1998 1997 1998 1997
------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues
Net sales, including leased and licensed department
sales $ 841 $1,151 $1,613 $ 2,270
Direct response marketing revenues, including
insurance 214 214 433 424
------ ------ ------ -------
Total Revenues 1,055 1,365 2,046 2,694
------ ------ ------ -------
Costs and expenses
Cost of goods sold, including net occupancy and
buying expense 678 1,070 1,303 2,067
Operating, selling, general and administrative
expenses, including benefits and losses of
direct response operations (Note 5) 438 594 885 1,112
Interest expense 15 46 28 86
------ ------ ------ -------
Total Costs and Expenses 1,131 1,710 2,216 3,265
------ ------ ------ -------
Loss before Reorganization Costs and Income Taxes (76) (345) (170) (571)
Reorganization Costs (Note 6) 58 - 74 -
------ ------ ------ -------
Loss before Income Taxes (134) (345) (244) (571)
Income Tax Benefit - (129) - (214)
------ ------ ------ -------
Net Loss (134) (216) (244) (357)
Preferred Stock Dividend Requirements - 5 - 8
------ ------ ------ -------
Net Loss Applicable to Common Shareholders $ (134) $ (221) $ (244) $ (365)
====== ====== ====== =======
Net Loss per Common Share (Note 7)
Class A $(3.68) $(6.10) $(6.67) $(10.08)
Class B (2.70) (4.36) (4.89) (7.21)
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 4, January 3,
(In millions) 1998 1998
---------- ---------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 178 $ 189
Short-term investments 1 1
Investments of insurance operations 370 358
------ ------
Total cash and investments 549 548
Trade and other accounts receivable 277 234
Accounts and notes receivable from affiliates 17 6
------ ------
Total Receivables 294 240
Merchandise inventories 1,058 1,120
Prepaid pension cost 384 366
Properties, plant and equipment, net of accumulated depreciation
and amortization 1,044 1,088
Direct response and insurance acquisition costs 528 559
Other assets 292 352
Deferred income taxes 301 299
------ ------
Total Assets $4,450 $4,572
====== ======
Liabilities
Short-term debt (Note 3) $ 102 $ 102
Trade accounts payable 360 442
Accrued liabilities and other obligations 722 736
Insurance policy claim reserves 244 241
Long-term debt 371 122
Liabilities subject to compromise (Note 4) 3,433 3,468
------ ------
Total Liabilities 5,232 5,111
Commitments and Contingent Liabilities (Note 8)
Redeemable Preferred Stock 177 177
Shareholders' Deficit
Common stock 1 1
Capital in excess of par value 65 64
Retained deficit (895) (651)
Unrealized gain on marketable equity securities 9 9
Less: Treasury stock, at cost (139) (139)
------ ------
Total Shareholders' Deficit (959) (716)
------ ------
Total Liabilities and Shareholders' Deficit $4,450 $4,572
====== ======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the 26-Week
Periods Ended
------------------------------------------------
July 4, June 28,
(In millions) 1998 1997
------------------ ------------------
Cash flows used for operating activities:
<S> <C> <C>
Net loss $(244) $(357)
Adjustments to reconcile net loss to net cash used for operating
activities:
Net receipts of cash relating to disposition of assets of
Lechmere, Inc. and closing of Wards and Electric Avenue & More stores 45 -
Provision for reorganization costs 42 -
Depreciation and goodwill amortization 56 69
Amortization of direct response and insurance acquisition costs 120 123
Deferred income taxes (2) (210)
Other 1 -
Changes in operating assets and liabilities:
Trade and other accounts receivable (43) 47
Accounts and notes receivable from affiliates (11) 10
Merchandise inventories 59 269
Prepaid pension cost (18) (8)
Direct response and insurance acquisition costs (89) (109)
Other assets 17 17
Trade accounts payable (57) (73)
Accrued liabilities and other obligations (36) (147)
Federal income taxes payable - (4)
Insurance policy claim reserves 3 2
Liabilities subject to compromise (39) -
------------------ ------------------
Net cash used for operating activities (196) (371)
------------------ ------------------
Cash flows provided by (used for) investing activities:
Purchase of investments of insurance operations (513) (289)
Sale of investments of insurance operations 501 325
Purchase of short-term investments - (85)
Sale of short-term investments - 87
Capital expenditures (34) (35)
Disposition of properties, plants and equipment, net 1 3
------------------ ------------------
Net cash provided by (used for) investing activities $ (45) $ 6
------------------ ------------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the 26-Week
Periods Ended
------------------------------------------------
July 4, June 28,
(In millions) 1998 1997
-------------------- --------------------
Cash flows provided by financing activities:
<S> <C> <C>
Borrowings under Post-Petition Loan and Guaranty Agreement, net $ 250 $ -
Restricted cash applied as payments under Long Term Credit
Agreement (14) -
Proceeds from short-term borrowings, net - 409
Payments of long-term debt (1) (5)
Payments of obligations under capital leases (5) (3)
Cash dividends paid - (4)
-------------------- --------------------
Net cash provided by financing activities 230 397
-------------------- --------------------
Increase (decrease) in cash and cash equivalents (11) 32
Cash and cash equivalents at beginning of period 189 32
-------------------- --------------------
Cash and cash equivalents at end of period $ 178 $ 64
==================== ====================
Supplemental disclosure of cash flow information:
Income taxes paid $ 2 $ -
Interest paid 20 65
Non-cash investing activity:
Change in unrealized gain on marketable equity securities $ - $ (5)
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements are unaudited. The
consolidated financial statements reflect all adjustments (consisting only
of normal recurring accruals) which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
filed with the Securities and Exchange Commission in the 1997 Annual Report
on Form 10-K of Montgomery Ward Holding Corp. ("MW Holding" or, together
with its subsidiaries, the "Company"). Capitalized terms not otherwise
defined herein have the meaning ascribed to such terms in the 1997 Annual
Report on Form 10-K. Certain prior period amounts have been reclassified to
be comparable with the current period presentation.
Comprehensive Income
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130 ("SFAS 130"), Reporting Comprehensive Income. This statement establishes
rules for the reporting of comprehensive income and its components.
Comprehensive income (loss) consists of net income (loss) plus unrealized
holding gains and losses on available-for-sale securities. The adoption of
SFAS 130 had no impact on total shareholders' equity. Comprehensive loss was
$135 million and $223 million for the quarterly periods ended July 4, 1998
and June 28, 1997, respectively, and $244 million and $363 million for the
26-week periods then ended, respectively.
2. Reorganization
At the close of business on July 7, 1997 (the "Petition Date"), MW Holding
and certain of its U.S. subsidiaries filed petitions for reorganization
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the District of Delaware. These related proceedings are being
jointly administered under the caption "In re Montgomery Ward Holding Corp.,
a Delaware corporation, et. al.", Case No. 97-1409 (PJW). The following U.S.
subsidiaries were not included in the bankruptcy filings: Signature
Financial/Marketing, Inc. and its direct and indirect subsidiaries
("Signature"); Marinco Insurance U.S.A., Inc. ("Marinco"); and Montgomery
Ward Foundation.
The Company expects to reorganize its affairs under the protection of
Chapter 11 and to propose a Chapter 11 plan of reorganization for itself and
the other filing subsidiaries, including Montgomery Ward & Co., Incorporated
("Wards"). The Bankruptcy Court has granted the Company's request to extend
its exclusive right to file a plan of reorganization through September 15,
1998. The Company expects to file a motion to further extend such exclusive
right to file a plan of reorganization. Although management expects to file
a plan of reorganization in late 1998 or 1999, which would contemplate
emergence in 1999, there can be no assurance at this time that a plan of
reorganization will be proposed by the Company or approved or confirmed by
the Bankruptcy Court, or that such plan will be consummated. After the
expiration of the exclusivity period, creditors of the Company have the
right to propose alternative plans of reorganization. Any plan of
reorganization, among other things, is likely to result in elimination of
the equity of existing shareholders, as a result of the issuance of equity
to creditors or new investors.
7
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Reorganization (continued)
The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. However,
as a result of the Chapter 11 filing and circumstances relating to this
event, including the Company's leveraged financial structure and losses from
operations, such realization of assets and liquidation of liabilities is
subject to uncertainty. While under the protection of Chapter 11, the
Company may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the financial
statements. Further, a plan of reorganization could materially change the
amounts reported in the financial statements, which do not give effect to
all adjustments of the carrying value of assets or liabilities that might be
necessary as a consequence of a plan of reorganization.
The appropriateness of using the going concern basis is dependent upon,
among other things, confirmation of a plan of reorganization, future
profitable operations, the ability to comply with the terms of the DIP
Facility and the ability to generate sufficient cash from operations and
financing arrangements to meet obligations.
3. Short-term Debt
Signature borrowed $102 under a Credit Agreement ("Signature Credit
Agreement") dated as of September 27, 1996 as amended and restated October
21, 1996 between Signature and various lenders, as further modified and
amended. The proceeds were used to repay the intercompany loan from Wards to
Signature arising from Signature's acquisition of the Amoco Motor Club. The
loan matured on January 31, 1998 and has not been repaid. The lenders agreed
to extend the maturity date of the loan under the Signature Credit Agreement
to the earlier of July 31, 1998 or the funding of the replacement loan
facility provided Signature, as part of such extension, pledges the stock of
certain Signature subsidiaries, provides limited guarantees from certain
Signature subsidiaries, and agrees to certain additional terms specified by
the lenders. Signature has requested a further extension of the maturity
date of the loan through September 1998 from the lenders. Although the
Company believes the lenders will extend the maturity date of the loan, it
cannot assure that such request will be granted. On August 13, 1998, the
Company filed a motion with the Bankruptcy Court to permit a debtor
subsidiary of the Company to lend Signature the funds to repay its loan. The
Creditors Committee has indicated it will support the Company's motion. Any
such loan will require approval of the DIP Facility lenders.
8
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Liabilities Subject to Compromise
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All
amounts below may be subject to future adjustment depending on Bankruptcy
Court action, further developments with respect to disputed claims,
determination as to the value of any collateral securing claims, or other
events. Additional claims may arise resulting from rejection of additional
executory contracts or unexpired leases by the Company.
<TABLE>
<CAPTION>
July 4, January 3,
(In millions) 1998 1998
------- ----------
<S> <C> <C>
Accounts payable $1,364 $1,340
Long Term Credit Agreement 603 603
Short Term Credit Agreement 442 456
Note Purchase Agreements 276 276
Other Long-term Debt 9 9
Obligations under capital leases 46 51
Lease and other contract rejection claims 103 104
Other liabilities 590 629
------ ------
$3,433 $3,468
====== ======
</TABLE>
The Company has $80 million of liabilities due Signature and Marinco which
have been eliminated in consolidation but are subject to compromise.
As a result of the bankruptcy filing, no principal or interest payments will
be made on any pre-petition debt without Bankruptcy Court approval or until
a reorganization plan defining the repayment terms has been approved. In
June 1998, upon approval of the Bankruptcy Court, cash held in segregated
accounts by various banks, who were lenders to the Company under the Long
Term Credit Agreement and Short Term Credit Agreement, totaling $24 million
was offset against pre-petition debt ($14 million) and interest ($10
million) claims.
Contractual interest expense not recorded on certain pre-petition debt
totaled $31 million and $61 million for the 13-week and 26-week periods
ended July 4, 1998.
5. Insurance, Benefits and Losses
Operating, selling, general and administrative expenses include benefits and
losses related to direct response marketing operations of $26 million and
$37 million for the 13-week periods ended July 4, 1998 and June 28, 1997,
respectively, and $65 million and $71 million for the 26-week periods then
ended, respectively.
9
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Reorganization Costs
Reorganization costs recorded in fiscal 1998 consisted of the following (in
millions):
<TABLE>
<CAPTION>
13-Week 26-Week
Period Ended Period Ended
July 4, 1998 July 4, 1998
------------ ------------
<S> <C> <C>
Wards store closings 26 $26
Interim Account Agreement Fees (Note 9) 6 12
Professional fees 5 10
Distribution center closings 8 8
Other 14 21
Interest income (1) (3)
------------ ------------
$58 $74
============ ============
</TABLE>
In June 1998, the Bankruptcy Court approved a motion filed by Wards to close
an additional nine underperforming stores. The Company recorded a pre-tax
charge of $26 million associated with the closing of these stores, which
includes losses and costs associated with the liquidation of assets, lease
rejection claims, severance payments, and other related expenses.
Professional fees incurred consisted of consulting and legal fees for
bankruptcy activity and restructuring efforts on behalf of the Company and
Creditors' Committee.
Restructuring of distribution facilities includes expenses associated with
the closing and downsizing of facilities including the losses on liquidation
of assets, lease rejection claims, severance payments, and other related
expenses.
Other reorganization costs represent expenses associated with retention
bonuses not yet paid, the exit of certain product lines and other expenses.
10
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Net Loss Per Common Share
Net loss per common share is computed as follows:
<TABLE>
<CAPTION>
For the 13-Week For the 13-Week
Period Ended Period Ended
July 4, 1998 June 28, 1997
------------------------------- ------------------------------
<S> <C> <C> <C> <C>
(In millions, except share and per
share amounts) Class A Class B Class A Class B
------------- ------------- ------------ -------------
Net loss applicable to common
shareholders $ (67) $ (67) $ (112) $ (109)
Weighted-average number of common
shares outstanding 18,322,174 25,000,000 18,322,248 25,000,000
Net loss per share $ (3.68) $ (2.70) $ (6.10) $ (4.36)
</TABLE>
<TABLE>
<CAPTION>
For the 26-Week For the 26-Week
Period Ended Period Ended
July 4, 1998 June 28, 1997
-------------------------------- ------------------------------
<S> <C> <C> <C> <C>
(In millions, except share and per
share amounts) Class A Class B Class A Class B
------------- ------------- ------------ -------------
Net loss applicable to common
shareholders $ (122) $ (122) $ (185) $ (180)
Weighted-average number of common
shares outstanding 18,322,195 25,000,000 18,322,248 25,000,000
Net loss per share $ (6.67) $ (4.89) $ (10.08) $ (7.21)
</TABLE>
Basic and diluted earnings per share are the same for the 13-week and 26-
week periods ended July 4, 1998 and June 28, 1997, as all common stock
equivalents are antidilutive due to the net loss incurred during these
periods.
8. Commitments and Contingent Liabilities
MW Holding, Wards and its subsidiaries are engaged in various litigation and
have a number of unresolved claims, as set forth in the 1997 Annual Report
on Form 10-K. While the amounts claimed are substantial and the ultimate
liability with respect to such litigation and claims cannot be determined at
this time, management is of the opinion that such liability, to the extent
not provided for through insurance or otherwise, is not likely to have a
material impact on the financial condition and the results of operations of
the Company.
11
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. Customer Credit Agreements
On April 3, 1998, the Bankruptcy Court approved an interim amendment to the
Bank Program and Account-Related Agreements ("Interim Account Agreement")
that provides the Company the ability to utilize the private label credit
card through the expected duration of the Company's Chapter 11 status. The
Interim Account Agreement provides for additional payments to Montgomery
Ward Credit Corporation ("Montgomery Ward Credit"), an affiliate of General
Electric Capital Corporation, of $2.5 million for the months of January 1998
through June 1998, $3.0 million per month for the remainder of 1998, $2.5
million per month from January 1999 though June 1999, and $2.0 million per
month from July 1999 through December 1999.
Wards is obligated to make all such payments through December 1999, except
in the circumstance where the Company would be liquidated, then payments
shall be made through the later of the date of termination or the last
Thursday in June 1999. The Interim Account Agreement will terminate on the
earliest of the following events: (a) the date the Bankruptcy Court enters
an order for rejection of the Agreements, (b) the sale of the portfolio of
receivables covered by the Agreements, (c) the date the Bankruptcy Court
enters an order for assumption of the Agreements, provided Montgomery Ward
Credit may withdraw its consent to assumption at any time prior to such an
order, (d) if the Bankruptcy Court enters an order after March 18, 1998,
whereby over 100 retail stores are to close, (e) upon adoption by the
Company's or Wards' Board of Directors a resolution for liquidation, or (f)
December 31, 1999.
12
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of results of operations for the
Company compares the second quarter of 1998 to the second quarter of 1997,
as well as the first six months of 1998 to the first six months of 1997. All
dollar amounts referred to in this discussion are in millions and all income
and expense items are shown before income taxes, unless specifically stated
otherwise.
The Company's business is seasonal, with approximately one-third of the
sales traditionally occurring in the fourth quarter. Accordingly, the
results of operations for the quarter are not necessarily indicative of the
results for the entire year.
Forward-Looking Statements
Information included in this Report on Form 10-Q may constitute forward-
looking statements that involve a number of risks and uncertainties. From
time to time, information provided by the Company or statements made by its
employees may contain other forward-looking statements. Factors that could
cause actual results to differ materially from the forward-looking
statements include but are not limited to: Bankruptcy Court actions or
proceedings related to the bankruptcy, general economic conditions including
inflation, consumer debt levels, trade restrictions and interest rate
fluctuations; competitive factors including pricing pressures, technological
developments and products offered by competitors; inventory risks due to
changes in market demand or the Company's business strategies; and changes
in effective tax rates.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date made. The Company undertakes no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
Results of Operations
Second Quarter 1998 Compared with Second Quarter 1997
Consolidated total revenues (net sales and direct response marketing
revenues, including insurance) were $1,055, compared with $1,365 in the
second quarter 1997, decreasing by $310, or 23%. The decrease was caused by
the decline in net sales (a 27% decrease). Sales on a comparable store basis
decreased approximately 5% after adjusting for the closing of stores and the
exit of the personal computer product line. The decrease in net sales is
attributable to the closing of 101 retail stores and liquidation and outlet
centers in the second half of 1997 as a result of the Company's decision to
exit its non-core retail businesses and to close certain underperforming
Wards retail stores. The closed stores reported net sales of $242 in the
second quarter of 1997. The sales decrease was also caused by the Company's
decision in the third quarter of 1997 to exit its personal computer product
offerings which reported sales of $26 in the second quarter of 1997. Wards'
management also believes that the decline in promotional offers to Wards'
credit cardholders and an aggressive markdown and promotional advertising
strategy to liquidate inventory during the second quarter of 1997
contributed to the second quarter 1998 sales decrease.
13
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations (continued)
Second Quarter 1998 Compared with Second Quarter 1997 (continued)
Gross margin (net sales less cost of goods sold) dollars were $163, an
increase of $82, or 101%, from the second quarter 1997. This increase was
due to an increase in the gross margin rate on sales of $140 and decreased
occupancy and other margin-related expenses of $31 primarily related to the
closed stores, offset by the gross margin impact of decreased sales of $89.
The improvement of 12 percentage points in the gross margin rate in the
second quarter of 1998 as compared to the second quarter of 1997 was due to
the effects of the increase in the margin rates in all categories of
merchandise and the impact of closing Lechmere and Electric Avenue & More
stores, which historically reported lower gross margin rates. The increase
in the margin rate for comparable stores was attributable to a more
profitable, trend-right product offering, as well as the negative impact of
the aggressive markdowns strategy employed in the second quarter of 1997 to
liquidate inventories.
Operating, selling, general and administrative expenses decreased $156, or
26%, from the second quarter 1997. The decrease is due to decreased payroll
costs primarily related to the closing of the Wards and Electric Avenue &
More stores of $41, write-downs of investments and other unrealizable assets
in the prior year of $38, 1997 operating, selling, general and
administrative costs incurred by Lechmere of $39, decreased advertising and
other promotional costs of $32, increased pension income of $5, and a
decrease in all other costs of $16, offset by increased bad debt expense of
$10 and decreased product service income of $5.
Net interest expense decreased $31, or 67%, from the prior year. The Company
stopped accruing interest on its pre-petition short-term debt in connection
with the Chapter 11 filing. The weighted-average borrowings for the second
quarter of 1998, excluding pre-petition debt, decreased by approximately
$1,000 as compared to the second quarter of 1997.
No income tax benefit was recorded for the second quarter of 1998 as
compared to a benefit of $129 for the second quarter of 1997 due to the
Company's substantial net operating loss carryforwards.
First Six Months of 1998 Compared with First Six Months of 1997
Consolidated total revenues (net sales and direct response marketing
revenues, including insurance) were $2,046, compared with $2,694 in the
first six months of 1997, decreasing by $648, or 24%. The $648 total revenue
decrease consisted of a $657 decrease in net sales (a 29% decrease) and a $9
increase in direct marketing revenues (a 2% increase). Sales on a comparable
store basis decreased approximately 7% after adjusting for the closing of
stores and the exit of the personal computer product line. The increase in
direct response marketing revenues was primarily due to new product line
sales. The decrease in net sales is attributable to the closing of 101
retail stores and liquidation and outlet centers in the second half of 1997
as a result of the Company's decision to exit its non-core retail businesses
and to close certain underperforming Wards retail stores. The closed stores
reported net sales of $487 in the first six months of 1997. The sales
decrease was also caused by the Company's decision in the third quarter of
1997 to exit its personal computer product offerings which reported sales of
$53 in the first six months of 1997. Wards' management also believes that
the decline in promotional offers to Wards' credit cardholders and an
aggressive markdown and promotional advertising strategy to liquidate
inventory during the first six months of 1997 contributed to the 1998 year-
to-date sales decrease.
14
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
First Six Months of 1998 Compared with First Six Months of 1997 (continued)
Gross margin (net sales less cost of goods sold) dollars were $310, an
increase of $107, or 53%, from the first six months of 1997. This increase
was due to an increase in the gross margin rate on sales of $230 and
decreased occupancy and other margin-related expenses of $66 primarily
related to the closed stores, offset by the gross margin impact of decreased
sales of $189. The improvement of 10 percentage points in the gross margin
rate in the first six months of 1998 as compared to the first six months of
1997 was due the effects of the increase in the margin rates in all
categories of merchandise and the impact of closing Lechmere and Electric
Avenue & More stores, which historically reported lower gross margin rates.
The increase in the margin rate for comparable stores was attributable to a
more profitable, trend-right product offering, as well as the negative
impact of the aggressive markdowns strategy employed in the first six months
of 1997 to liquidate inventories.
Operating, selling, general and administrative expenses decreased $227, or
20%, from the first six months of 1997. The decrease is primarily due to the
closing of the Lechmere, Inc. stores of $80, decreased payroll costs
primarily related to the closing of the Wards and Electric Avenue & More
stores of $73, decreased advertising and other promotional costs of $57,
write-downs of investments and other unrealizable assets in the prior year
of $38, increased pension income of $9, and a decrease in all other costs of
$10, offset by increased bad debt expense of $20 and decreased product
service income of $20.
Net interest expense decreased $58, or 67%, from the prior year. The Company
stopped accruing interest on its pre-petition short-term debt in connection
with the Chapter 11 filing. The weighted-average borrowings for the first
six months of 1998, excluding pre-petition debt, decreased by approximately
$1,000 as compared to the first six months of 1997.
No income tax benefit was recorded for the first six months of 1998 as
compared to a benefit of $214 for the first six months of 1997 due to the
Company's substantial net operating loss carryforwards.
Discussion of Financial Condition
As discussed in Note 2 to the Consolidated Financial Statements, due to the
inability of Wards to negotiate an out-of-court settlement with its lenders,
MW Holding and certain of its subsidiaries have filed petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Court. As a result of
the Chapter 11 filing the Company and those subsidiaries have ceased making
certain debt, interest, trade payable and other liability payments that
arose prior to the Chapter 11 filing. Payments related to these liabilities
are deferred, in most cases, until a plan for reorganization is confirmed by
the Bankruptcy Court.
15
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Discussion of Financial Condition (continued)
Net cash used in the Company's operating activities totaled $196 compared to
$371 for the first six months of 1998, a decrease of $175. The lower cash
usage is summarized as follows:
<TABLE>
<S> <C>
Cash impact of smaller operating loss $ 348
Net cash received from facility closings 45
Lower cash provided by inventory (210)
All other cash from operations (8)
--------
$ 175
========
</TABLE>
The lower cash provided by inventory was due to the significant amount of
discontinued merchandise sold in the second quarter of 1997 as part of the
Company's effort to reduce discontinued merchandise.
Net cash provided by financing activities totaled $230 for the first six
months of 1998, compared to $397 for the first six months of 1997. The
Company had borrowed to the full extent of its financing facilities
(excluding the Seasonal Credit Agreement) prior to the Chapter 11 filing.
Net borrowings under the DIP facility were $250 in the first six months of
1998.
Wards is the only subsidiary of the Company and, therefore, Wards and its
subsidiaries are the Company's sole source of funds.
Wards entered into the DIP Facility on July 8, 1997, as amended, which was
approved by the Bankruptcy Court on July 31, 1997. Under the DIP Facility,
the lenders have agreed to provide a revolving credit and letter of credit
facility, the maximum amount of which is based on the book value of eligible
inventory (as defined in the DIP Facility), the fair market value of
eligible real property (as defined in the DIP Facility) and the earnings of
Signature. In no case may borrowings exceed $1,000. Under the DIP Facility,
Wards may select among several interest rate options, all of which are based
on market rates plus a margin.
A commitment fee is payable based on the unused amount of the facility. The
facility expires on July 7, 1999, or earlier in the case of an event of
default. Total borrowings outstanding were $300 and letters of credit
outstanding were $141 at July 4, 1998. The Company had $437 of borrowing
availability under the DIP Facility at July 4, 1998.
On February 20, 1998, Wards obtained a waiver and second amendment to the
DIP Facility (the "Waiver and Second Amendment Agreement") which was
approved by the Bankruptcy Court on March 31, 1998. The Waiver and Second
Amendment Agreement waived and amended certain provisions of the DIP
Facility, including a reduction in the level of earnings required, as
defined in the DIP Agreement.
The Company is currently in default of the terms of each of the Long-Term
Credit Agreement, the Short-Term Credit Agreement and the Note Purchase
Agreements and no future amounts may be drawn thereunder. The Company was in
default of the Seasonal Credit Agreement, which was terminated as a result
of the Chapter 11 filings. There were no borrowings outstanding under this
agreement.
16
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Discussion of Financial Condition (continued)
Signature borrowed $102 under a Credit Agreement ("Signature Credit
Agreement") dated as of September 27, 1996 as amended and restated October
21, 1996 between Signature and various lenders, as further modified and
amended. The proceeds were used to repay the intercompany loan from Wards to
Signature arising from Signature's acquisition of the Amoco Motor Club. The
loan matured on January 31, 1998 and has not been repaid. The lenders agreed
to extend the maturity date of the loan under the Signature Credit Agreement
to the earlier of July 31, 1998 or the funding of the replacement loan
facility provided Signature, as part of such extension, pledges the stock of
certain Signature subsidiaries, provides limited guarantees from certain
Signature subsidiaries, and agrees to certain additional terms specified by
the lenders. Signature has requested a further extension of the maturity
date of the loan through September 1998 from the lenders. Although the
Company believes the lenders will extend the maturity date of the loan, it
cannot assure that such request will be granted. On August 13, 1998, the
Company filed a motion with the Bankruptcy Court to permit a debtor
subsidiary of the Company to lend Signature the funds to repay its loan. The
Creditors Committee has indicated it will support the Company's motion. Any
such loan will require approval of the DIP Facility lenders.
In 1997, Wards had facilities available under vendor financing programs
(which are reflected in liabilities subject to compromise) which totaled
$725. At June 28, 1997, these facilities were principally drawn. These
facilities are no longer available due to the Chapter 11 filing.
The Company intends to improve its financial condition and reduce its
dependence on borrowing by increasing its sales base, continuing to improve
its gross margin rates and controlling expenses. In addition, the financial
performance of the remaining retail stores will be reviewed on a continuing
basis and additional stores may be closed if warranted. Management has also
reevaluated the Company's merchandising, marketing, store operations and
logistics strategies, and is in the early stages of implementing the new
strategy.
Future cash is expected to continue to be provided by ongoing operations,
receipt of payment for credit sales under the agreements with Montgomery
Ward Credit Companies and borrowings under the DIP Facility.
On June 25, 1998, Wards entered into a Purchase and Sale Agreement
("Agreement") with respect to the sale of its corporate complex in Chicago,
Illinois and the leaseback of certain office space. On July 15, 1998, the
Bankruptcy Court approved the "First Sale Order" which authorized the sale
of the property, pursuant to the terms of the Agreement. The purchaser has
until September 13, 1998 to conduct due diligence and notify Wards whether
they will proceed with the terms of the Agreement. An auction will be held,
pursuant to the terms of the Agreement and a Bankruptcy Court order, between
60 and 63 days after such approval is provided. If such sale were to occur
based on the terms of the Agreement, the Company would expect to recognize a
gain, although such amount has not yet been quantified.
The Company continues to incur costs as a result of modifying existing
software programs and the purchase and installation of new software
associated with the Year 2000 date change issue. Based on the Company's
plans and amounts expended, the total future costs to address the date
change issue are not expected to materially impact future cash flows.
17
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Discussion of Financial Condition (continued)
As discussed in Note 2 to the Consolidated Financial Statements, the
accompanying financial statements have been prepared on a going concern
basis. The appropriateness of using the going concern basis is dependent
upon, among other things, confirmation of a plan of reorganization, future
profitable operations, the ability to comply with the terms of the DIP
Facility and the ability to generate sufficient cash from operations and
financing arrangements to meet obligations.
18
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Part II - Other Information
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
On June 21, 1998, the Voting Trust Agreement dated as of June 21, 1998,
under which Voting Trust Certificates representing shares of Class A Common
Stock, Series 1 and Series 2, of the Company had been issued, expired
pursuant to its terms.
Item 3. Defaults Upon Senior Securities
The Company's Certificate of Incorporation provides that the holders of
shares of Senior Preferred Stock of the Company are entitled to receive,
before any dividends may be declared or paid upon or set aside for the
Common Stock, cash dividends in quarterly payments on the last business day
of March, June, September and December. The Company did not make any
dividend payment with respect to the Senior Preferred Stock on June 30,
1997. The holder of all 1,750 outstanding shares of the Senior Preferred
Stock would have been entitled to receive $3,066,875 in such dividend on
such date. Such amount also represents the total arrearage on the payment of
dividends on the Senior Preferred Stock as of the date of filing of this
report.
The redemption provisions of the Senior Preferred Stock have been stayed by
the Chapter 11 proceedings. No further dividends will be declared or paid
prior to the approval of a plan of reorganization.
The Company's Certificate of Incorporation provides that the holders of
shares of Series C Preferred Stock of the Company are entitled to receive,
before any dividends may be declared or paid upon or set aside for the
Common Stock, cash dividends in quarterly payments on the last business day
of March, June, September and December. If for any reason the full dividend
on any payment date is not paid in cash on such date, the unpaid amount
thereof will be automatically, without further action, be deemed added to
the Liquidation Value. The Company did not make any dividend payment with
respect to the Series C Preferred Stock on June 30, 1997. The holder of all
352 shares would have been entitled to receive $1,726,154 in such dividend
on such date. This amount was added to the Liquidation Value.
The redemption provisions of the Series C Preferred Stock have been stayed
by the Chapter 11 proceedings. No further dividends will be declared or paid
prior to the approval of a plan of reorganization.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
19
<PAGE>
MONTGOMERY WARD HOLDING CORP.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
10. (i) (H) (6) Fifth Amendment to the Long Term Credit Agreement
dated as of May 22, 1998 among Montgomery Ward and
Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of
Nova Scotia, as Administrative Agent, The Bank of New
York, as Negotiated Loan Agent and Bank of America
National Trust and Savings Association, as Advisory
Agent.
10. (i) (I) (7) Fifth Amendment to the Short Term Credit Agreement
dated as of May 22, 1998 among Montgomery Ward and
Co., Incorporated, various banks, the First National
Bank of Chicago, as Documentary Agent, The Bank of
Nova Scotia, as Administrative Agent, The Bank of New
York, as Negotiated Loan Agent and Bank of America
National Trust and Savings Association, as Advisory
Agent.
10. (i) (L) (6) Waiver, Amendment and Extension Agreement dated as of
January 31, 1998, among Signature
Financial/Marketing, Inc., various lenders, The Bank
of New York, as Documentation Agent, and The Bank of
Nova Scotia, as Administrative Agent.
27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGISTRANT MONTGOMERY WARD HOLDING CORP.
BY /s/ Thomas J. Paup
--------------------------------------------------
NAME AND TITLE Thomas J. Paup, Executive Vice President and Chief
Financial Officer
DATE: August 18, 1998
20
<PAGE>
EXHIBIT INDEX
-------------
10. (i) (H) (6) Fifth Amendment to the Long Term Credit Agreement dated as
of May 22, 1998 among Montgomery Ward and Co., Incorporated,
various banks, The First National Bank of Chicago, as
Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, the Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent.
10. (i) (I) (7) Fifth Amendment to the Short Term Credit Agreement dated as
of May 22, 1998 among Montgomery Ward and Co., Incorporated,
various banks, The First National Bank of Chicago, as
Documentary Agent, the Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent.
10. (i) (L) (6) Waiver, Amendment and Extension Agreement dated as of
January 31, 1998, among Signature Financial/Marketing, Inc.,
various lenders, The Bank of New York, as Documentation
Agent, and The Bank of Nova Scotia, as Administrative Agent.
27. Financial Data Schedule.
<PAGE>
10(I)(H)(6)
FIFTH AMENDMENT TO LONG TERM CREDIT AGREEMENT
This Fifth Amendment to Long Term Credit Agreement (this "Amendment")
---------
is entered into as of May 22, 1998 by and among Montgomery Ward & Co.,
Incorporated (the "Company"), the undersigned financial institutions, The Bank
-------
of Nova Scotia, as Administrative Agent (in such capacity, the "Administrative
--------------
Agent"), The First National Bank of Chicago, as Documentary Agent (in such
- -----
capacity, the "Documentary Agent"), The Bank of New York, as Negotiated Loan
-----------------
Agent (in such capacity, the "Negotiated Loan Agent") and Bank of America
---------------------
National Trust and Savings Association, as Advisory Agent (in such capacity, the
"Advisory Agent," and together with the Administrative Agent, the Documentary
--------------
Agent and the Negotiated Loan Agent, the "Agents").
------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, the undersigned financial institutions and the
Agents are party to that certain Long Term Credit Agreement, dated as of
September 15, 1994 (as amended, supplemented or otherwise modified, the "Long
----
Term Credit Agreement"); capitalized terms used herein and not otherwise defined
- ---------------------
shall have the meanings assigned to them in the Long Term Credit Agreement; and
WHEREAS, the parties hereto desire to amend certain provisions of the
Long Term Credit Agreement relating to the sale of participations in and
assignments of Loans;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Amendment to Long Term Credit Agreement. Effective as of the date
---------------------------------------
hereof and subject to Section 3 hereof, the Long Term Credit Agreement is
amended as follows:
A. Section 15.4 is amended and restated as follows:
15.4 Participations: Assignments; Replacement of Banks.
-------------------------------------------------
(a) Participations. Subject to the provisions of this Section
-------------- -------
15.4, any Bank may at any time, in the ordinary course of its business
----
and in accordance with applicable law, sell to one or more banks or
other entities (a "Participant") participating interests in any Loan
-----------
owing to such Bank, or any Note held by such Bank. In the event of
any such sale to a Participant the selling Bank shall give written
notice to the Company and the Administrative Agent stating the
Participant's name and address and the amount of the participation
purchased, but
(i) the Company and the Administrative Agent shall
continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under
this Agreement,
1
<PAGE>
(ii) all amounts payable by the Company shall be
determined as if such Bank had not sold such participation,
and
(iii) any Participant which is not an Affiliate of
the selling Bank shall have no right to require the selling
Bank to take or omit to take any action under this Agreement
or any Note other than action directly affecting the
extension of the stated maturity of any Loan, directly
affecting any scheduled installment of principal or any
scheduled reduction in the stated amount of, or interest on,
any Loan in which such participation was sold, or reducing
the principal or stated amount thereof or the rate of
interest thereon or fees payable hereunder.
Each Bank agrees to incorporate the requirements set forth in the
preceding sentence into each participation agreement which such Bank
enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, if its
participation agreement with the selling Bank so provides, be deemed
to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement or any Note to the same extent
as if the amount of its participating interest were owing directly to
it as a Bank under this Agreement or any Note; provided that such
--------
right of setoff shall be subject to such Participant's obligation to
share with the Banks, and the Banks agree to share with such
Participant, as provided in Section 8.2(c). No participation
--------------
contemplated in this Section 15.4 shall relieve any Bank either from
------------
its Commitment hereunder or from any of its other obligations
hereunder and such Bank shall remain solely responsible for the
performance thereof.
(b) Assignments. Subject to the provisions of this Section 15.4,
----------- ------------
any Bank may assign to one or more banks or other entities (an
"Assignee") all or any part of such Bank's rights and benefits, and
---------
delegate all or any part of such Bank's obligations under this
Agreement and its Notes; provided, however, that
-------- -------
(i) except in the case of an assignment to another
Bank, the amount of the Loans of the assignor Bank subject
to such assignment shall be in an amount not less than
$5,000,000 and an integral multiple of $1,000,000 in excess
thereof or shall be the entire remaining amount of Loans of
such assignor Bank,
(ii) unless the assignor Bank is assigning all of its
Loans, the aggregate amount of the Loans of such assignor
Bank after giving effect to such assignment and any
assignments agreed to contemporaneously therewith by such
assignor Bank shall be not less than $5,000,000,
(iii) the assignor Bank shall advise the Assignee
that the Company shall not be obligated to execute any
replacement Notes and shall add a legend to any of its Notes
which evidence all or part of the Loans assigned to the
effect that rights thereunder have been assigned,
2
<PAGE>
(iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an assignment and
acceptance substantially in the form of Exhibit L, with
---------
appropriate insertions (an "Assignment"),
----------
(v) upon request of the Administrative Agent, if the
Company is not authorized by court order to pay the Transfer
Fee referred to in Section 15.4(e) or fails to honor its
---------------
obligations under Section 15.4(e), the parties to the
---------------
Assignment shall deliver to the Administrative Agent a
processing and recordation fee of $3,500 for such
Assignment,
(vi) if the assignor Bank is assigning all of its
Loans, it shall deliver to the Administrative Agent an
amount, determined by the Administrative Agent, equal to the
unpaid amount for which no reserve has been established of
such Bank's pro rata share (based upon the aggregate unpaid
--- ----
principal amount of the Loans) of any reasonable costs or
expenses payable by such assignor Bank pursuant to the
Credit Agreement, including, without limitation,
Section 14.2 and Section 15.5,
------------ ------------
(vii) the Assignee shall advise the Administrative
Agent in writing as to whether it is a Non-United States
Person and if it is a Non-United States Person, it shall
deliver to the Company and the Administrative Agent a
written representation and undertaking similar to
Section 8.4(b), and
--------------
(viii) the assignor Bank shall provide written
notice to the Company (with a copy to the Administrative
Agent) of the name and address of the Assignee, shall
deliver to the Company a copy of the duly executed
Assignment and shall deliver to the Administrative Agent
evidence of such deliveries to the Company.
(c) Acceptance of Assignment by Administrative Agent. An
------------------------------------------------
Assignment shall be accepted by the Administrative Agent only if all
of the requirements of subsection (b) of this Section 15.4 have been
------------
fulfilled to the Administrative Agent's satisfaction. Each Agent and
each Bank shall be entitled to continue to deal solely and directly
with the assignor Bank in connection with any interests assigned or
delegated to an Assignee until the Administrative Agent has accepted
the Assignment. Upon the Administrative Agent's acceptance of an
Assignment, it shall record the Assignment in the Master Register.
All entries in the Master Register shall be conclusive, in the absence
of manifest error, and the Company, each Agent and each Bank shall
treat each person whose name is recorded in the Master Register as the
owner of the Loans recorded therein for all purposes of this
Agreement. The Administrative Agent shall from time to time
distribute a Schedule to each of the Banks and the Company giving
effect to any Assignments.
(d) Rights and Obligations of Assignor Bank and Assignee. On
----------------------------------------------------
the date the Administrative Agent accepts an Assignment (the
"Assignment Effective Date"), the Company, the Agents and the Banks
--------------------------
agree that, to the extent of any such Assignment,
3
<PAGE>
(i) the Assignee thereunder shall be a Bank hereunder
and, in addition to any rights, benefits and obligations
hereunder held by it immediately prior to such Assignment
Effective Date, have the rights, benefits and obligations of
a Bank under this Agreement and the assignor Bank's Notes
(including, without limitation, rights and benefits arising
out of Section 9) and the same rights of setoff pursuant to
---------
Section 8.3 and obligation to share pursuant to Section 8.2
----------- -----------
as a Bank hereunder to the extent that the same have been
assigned and delegated to it pursuant to such Assignment,
and
(ii) the assignor Bank shall, to the extent that
rights, benefits and obligations hereunder have been
assigned and delegated by it pursuant to such Assignment,
relinquish its rights and benefits and be released from its
obligations under this Agreement (and, in the case of an
Assignment covering all or the remaining portion of an
assignor Bank's rights, benefits and obligations under this
Agreement, such Bank shall cease to be a party hereto),
except that in all cases the assignor Bank shall remain
entitled to the rights and benefits arising under
Sections 6, 8.4, 9, 15.5 and 15.6 with respect to any period
---------- --- - ---- ----
of time prior to the Assignment Effective Date, and shall
remain liable with respect to any of its unpaid obligations
arising under Sections 6.9, 8.4(c), 14.2 and 15.5, with
------------ ------ ---- ----
respect to any matters arising prior to the Assignment
Effective Date; provided, the Company shall not be required
--------
to pay any costs, fees or taxes of any kind or nature with
respect to the interest(s) assigned in excess of those
payable by the Company in connection with such interest(s)
prior to such assignment except for any costs, fees or taxes
described in Section 8.4, 9 or 15.6.
----------- - ----
(e) Transfer Fee. In consideration of the services to be
------------
performed by the Administrative Agent hereunder, the Company shall pay
to the Administrative Agent a quarterly fee of $18,750 (the "Transfer
--------
Fee"), payable quarterly in advance on May 1, August 1, November 1 and
---
February 1 of each year, provided that the Company shall pay the fee
--------
payable on May 1, 1998 within three Business Days after the entry of
an order by the United States Bankruptcy Court for the District of
Delaware approving the Fifth Amendment to Long Term Credit Agreement.
If the Company is not authorized to pay such fee or fails to pay such
fee, the Administrative Agent may impose a processing and recordation
fee on the parties to each Assignment of $3,500 for each Assignment.
(f) Federal Reserve. Anything contained in this Agreement to the
---------------
contrary notwithstanding, and without the need to comply with any of
the formal or procedural requirements set forth in this Agreement, any
Bank may at any time and from time to time grant a participation in,
assign, deposit or pledge all or any portion of its rights under this
Agreement or the Notes to a Federal Reserve Bank; provided, however,
-------- -------
no such participation, assignment, deposit or pledge shall relieve
such Bank of any of its obligations under this Agreement.
4
<PAGE>
(g) Information. Notwithstanding the terms of any previous
-----------
confidentiality agreements with respect to the subject matter hereof
between the Company and any Bank, from and after the Effective Date
any Bank may furnish any information concerning the Parent, the
Company and the Subsidiaries which has been furnished to such Bank
pursuant hereto to any Assignee, Participant, or potential Assignee or
Participant; provided, however, that the recipient of such information
-------- -------
shall, prior to being furnished with any such information, agree to
maintain the confidentiality of such information. Notwithstanding the
foregoing sentence, any Agent, Bank, Assignee, Participant or
potential Assignee or Participant shall be permitted to disclose
information regarding the Company and its Subsidiaries (i) to any
other Agent or Bank, or to any Assignee or Participant, (ii) to any
Affiliate, agent or employee that agrees to be bound by this Section
-------
15.4(g), (iii) upon order of any court or administrative agency, (iv)
-------
upon the request or demand of any regulatory agency or authority
having jurisdiction over such party, (v) which has been publicly
disclosed, (vi) which has been obtained from any Person that is not a
party hereto or an Affiliate, agent or employee of any such party,
(vii) in connection with the exercise of any remedy hereunder, or
(viii) to such Person's certified public accountants and its
attorneys.
B. Exhibit L is replaced with the Exhibit L annexed hereto.
--------- ---------
2. Waiver. The undersigned Banks hereby waive the requirement set
------
forth in the proviso in Section 15.4(b) of the Long Term Credit Agreement that
an assignor Bank shall assign equal percentage amounts of its commitment under
the Long Term Credit Agreement and Short Term Credit Agreement with respect to
any trades entered into by any of the Banks prior to the date of this Amendment.
This waiver is limited precisely to its terms and shall not constitute an
amendment, modification or waiver generally or for any other purpose.
3. Effectiveness. Section 1 of this Amendment shall become effective
-------------
with respect to trades entered into after the date of this Amendment, upon the
execution and delivery of this Amendment by the Company and the Required Banks,
provided, however, the requirement that the Company pay the Transfer Fee
- -------- -------
referred to in the amended Section 15.4(e) shall not be effective until the
entry of an order of the United States Bankruptcy Court for the District of
Delaware approving this Amendment. Section 2 of this Amendment shall become
effective upon the execution and delivery of this Amendment by the Required
Banks.
4. Entire Agreement. This Amendment contains the entire agreement
----------------
among the parties with respect to the matters set forth herein and supersedes
all prior agreements, arrangements or understandings with respect thereto.
5. Reference to and Effect on the Long Term Credit Agreement. Upon
---------------------------------------------------------
the effectiveness of this Amendment, on and after the date hereof, each
reference in the Long Term Agreement to "this Agreement," "hereunder," "hereof,"
"herein" and words of like import, shall mean and be a reference to the Long
Term Credit Agreement as amended hereby. Except as specifically amended or
waived hereby, all of the terms and provisions of the Long Term Credit Agreement
shall remain in full force and effect and are hereby ratified and confirmed.
6. Descriptive Headings. The descriptive headings in this Amendment
--------------------
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Amendment.
5
<PAGE>
7. Counterpart Execution. This Amendment may be executed by
---------------------
telecopier and in any number of counterparts, each of which, when so executed
and delivered, shall be an original, but all of which together shall constitute
one agreement binding all of the parties hereto.
8. Successors. This Amendment shall be binding upon and inure to the
----------
benefit of each of the parties hereto, and each of the Banks and their
respective successors and assigns.
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment as of the date first set forth above.
MONTGOMERY WARD & CO.
INCORPORATED
By: /s/ Douglas V. Gathany
-------------------------
Name: Douglas V. Gathany
Title: Vice President & Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
in its individual capacity and in its capacity as
Documentary Agent
By: /s/ Linda M. Thompson
-------------------------
Name: Linda M. Thompson
Title: First Vice President
THE BANK OF NEW YORK, in its individual
capacity and in its capacity as Negotiated
Loan Agent
By: /s/ Mark R. Slane
-------------------------
Name: Mark R. Slane
Title: Senior Vice President
THE BANK OF NOVA SCOTIA, in its individual
capacity and in its capacity as
Administrative Agent
By: /s/ D.N. Gillespie
-------------------------
Name: D.N. Gillespie
Title: Assistant General Manager
6
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, in its individual capacity and in
its capacity as Advisory Agent
By: /s/ Ronald A. Prince
-------------------------
Name: Ronald A. Prince
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ S.L. Wimpenny
-------------------------
Name: S.L. Wimpenny
Title: Senior Vice President
By: /s/ William J. Fitzgerald
-------------------------
Name: William J. Fitzgerald
Title: Senior Vice President
BANCA COMMERCIALE ITALIANA,
Chicago Branch
By: /s/ Julian M. Teodori
-------------------------
Name: Julian M. Teodori
Title: Senior Vice President & Manager
By: /s/ Matthew V. Trujillo
-------------------------
Name: Matthew V. Trujillo
Title: Vice President
BANCA DI ROMA, S.P.A.
By: /s/ Joyce Montgomery
-------------------------
Name: Joyce Montgomery
Title: AVP
By: /s/ Luigi Rocchi
-------------------------
Name: Luigi Rocchi
Title: Vice President
7
<PAGE>
BANKBOSTON, N.A.
By: _________________________
Name:
Title:
BANKERS TRUST COMPANY
By: /s/ Rosemary F. Dunne
-------------------------
Name: Rosemary F. Dunne
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
Chicago Branch
By: /s/ Hajime Watanabe
-------------------------
Name: Hajime Watanabe
Title: Deputy General Manager
BAY HARBOUR PARTNERS, LTD.
By: _________________________
Name:
Title:
CIBC INC.
By: _________________________
Name:
Title:
COMERICA BANK
By: /s/ Cynthia B. Jones
-------------------------
Name: Cynthia B. Jones
Title: Vice President
8
<PAGE>
CREDIT LYONNAIS Chicago Branch and
CREDIT LYONNAIS Cayman Island Branch
By: /s/ Alan Sidrane
-------------------------
Name: Alan Sidrane
Title: Senior Vice President
DAYSTAR SPECIAL SITUATIONS FUND L.P.
By: ________________________
Name:
Title:
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Linda J. Weinberg
------------------------
Name: Linda J. Weinberg
Title: Vice President
ING BARING (U.S.) CAPITAL CORPORATION
By: ________________________
Name:
Title:
ISTITUTO BANCARIO SAN PAOLO
DI TORINO, S.P.A.
By: _________________________
Name:
Title:
9
<PAGE>
KREDIETBANK N.V.
By: /s/ Robert Snauffer
-------------------------
Name: Robert Snauffer
Title: Vice President
By: /s/ Tod R. Angus
------------------------
Name: Tod R. Angus
Title: Vice President
LOEB PARTNERS CORPORATION
By: /s/ Giagon B. Ving
-------------------------
Name: Giagon B. Ving
Title: AVP
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By: /s/ Armund J. Schoen, Jr.
-------------------------
Name: Armund J. Schoen, Jr.
Title: Senior Vice President
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Neil Brisson
-------------------------
Name: Neil Brisson
Title: Director
NATIONSBANK, N.A.
By: /s/ Charles A. Kerr
-------------------------
Name: Charles A. Kerr
Title: Senior Vice President
10
<PAGE>
THE NORTHERN TRUST COMPANY
By: _________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By: _________________________
Name:
Title:
THE SAKURA BANK, LTD.
By: /s/ Yukiharu Sakumoto
--------------------------
Name: Yukiharu Sakumoto
Title: Joint General Manager
SWISS BANK CORPORATION
By: /s/ David C. Hemingway
-------------------------
Name: David C. Hemingway
Title: Director - Global Project Finance
By: /s/ William A. Roche
-------------------------
Name: William A. Roche
Title: Director - Restructuring
UNION BANK OF CALIFORNIA, N.A.
By: _________________________
Name:
Title:
11
<PAGE>
UNION BANK OF SWITZERLAND
By: /s/ G. Christian Ullrich
-------------------------
Name: G. Christian Ullrich
Title: Managing Director
By: /s/ M. Terri Reilly
-------------------------
Name: M. Terri Reilly
Title: Assistant Treasurer
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Jack L. Quitmeyer
-------------------------
Name: Jack L. Quitmeyer
Title: Vice President
WELLS FARGO BANK, N.A.
By: _________________________
Name:
Title:
12
<PAGE>
EXHIBIT L
---------
ASSIGNMENT AND ACCEPTANCE
-------------------------
Reference is made to the Long Term Credit Agreement, dated as of
September 15, 1994 (herein, as heretofore amended, modified or supplemented,
called the "Credit Agreement") among Montgomery Ward & Co., Incorporated, an
Illinois corporation (the "Company") and the Banks and Agents parties thereto.
Terms used but not otherwise defined herein are used herein as defined in the
Credit Agreement.
_________________________________________ (the "Assignor") and
_____________________________ (the "Assignee") hereby agree as follows:
1. The Assignee hereby purchases and assumes from the Assignor, and
the Assignor hereby sells and assigns and delegates to the Assignee, without
recourse and without representation or warranty except as specifically set forth
in paragraph 2 below, an interest (the "Assigned Interest") in and to all of the
Assignor's rights, benefits and obligations under the Credit Agreement,
including, without limitation, rights of setoff pursuant to Section 8.3 of the
Credit Agreement, and obligations to share pursuant to Section 8.2 of the Credit
Agreement and under the Revolving Note, if any, held by the Assignor. The
Assigned Interest is a percentage equal to the total principal amount of the
Loans assigned to the Assignee pursuant hereto divided by the total principal
amount of all of the Loans owing to the Assignor on the date hereof as recorded
on the Master Register (without giving effect to any other assignments made on
the date hereof). The total principal amount of Loans being assigned to the
Assignee pursuant hereto is $_____.
2. (a) The Assignor represents and warrants that the Assignor shall
provide written notice of the name and address of the Assignee to
the Company (with a copy to the Administrative Agent) shall
deliver to the Company a copy of this Assignment duly executed
and shall deliver to the Administrative Agent evidence of such
deliveries to the Company.
(b) The Assignor represents and warrants that it is the legal
and beneficial owner of the Assigned Interest and that such
interest is free and clear of any adverse claim.
(c) The Assignee acknowledges and agrees that neither the
Assignor nor any Agent nor any other Bank makes any
representation or warranty or assumes any responsibility with
respect to any statements, warranties or representations made in
or in connection with the Credit Agreement or any other
instrument or document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto.
1
<PAGE>
(d) The Assignee acknowledges and agrees that neither the
Assignor nor any Agent nor any other Bank makes any
representation or warranty or assumes any responsibility with
respect to the financial condition or creditworthiness of the
Company or the performance or observance by the Company of any of
its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto. The Assignee
acknowledges and agrees that (i) the Assignee has made and will
continue to make such inquiries and has taken and will continue
to take such care on its own behalf as would have been the case
had it made Loans directly to the Company without the
intervention of the Assignor, any Agent or any other Person, and
(ii) the Assignee has made and will continue to make its own
credit analysis and decisions relating to the Credit Agreement
independently and without reliance upon the Assignor, any Agent
or any other Person, and based on such documents and information
as it has deemed appropriate.
(e) No Negotiated Loans are currently owing to the Assignor.
(f) The Assignor represents and warrants that it has advised the
Assignee that the Company is not obligated to execute any
replacement Notes and will add a legend to any of its Notes which
evidence all or part of the Loans assigned to the effect that the
rights thereunder have been assigned.
(g) If the Assignor is assigning all of its Loans, it represents
and warrants that it has paid in full all amounts owing by the
Assignor under the Credit Agreement for which no reserve has been
established.
3. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered for acceptance to the
Administrative Agent Att: D. Norman Gillespie by telecopier at (212) 225-5205 or
such other number as may be provided by the Administrative Agent. At such time,
the parties shall also (a) deliver to the Administrative Agent a written
representation and warranty from the Assignee as to whether the Assignee is a
Non-United States Person and if it is a Non-United States Person the Assignee
shall also deliver to the Administrative Agent a written representation and
warranty substantially similar to that contained in Section 8.4(b) of the Credit
Agreement, (b) if required pursuant to Section 15.4(b)(v) of the Credit
Agreement, wire transfer to the Administrative Agent a processing and
recordation fee of $3,500 and (c) wire transfer to the Administrative Agent an
amount equal to all amounts owing by the Assignor under the Credit Agreement for
which no reserve has been established.
4. The effective date for this Assignment and Acceptance shall
be __________(the "Assignment Date")./1/
5. Upon such acceptance by the Administrative Agent, as of the
Assignment Date,
- ---------------------
/1/ To be completed by the Administrative Agent after compliance by the parties
with paragraph 3.
2
<PAGE>
(a) the Assignee shall, in addition to any rights, benefits and
obligations under the Credit Agreement held by it immediately
prior to the Assignment Date, have the rights, benefits and
obligations under the Credit Agreement that have been assigned to
it pursuant to this Assignment and Acceptance, and
(b) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and benefits and
be released from its obligations under the Credit Agreement,
except that the Assignor shall remain entitled to the rights and
benefits arising under Sections 6, 8.4, 9 and 15.6 of the Credit
Agreement, and shall remain liable with respect to any of its
obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5 of
the Credit Agreement, with respect to any matters arising prior
to the Assignment Date.
6. Upon such acceptance by the Administrative Agent, from and after
the Assignment Date, the Administrative Agent shall make all payments under the
Credit Agreement and the Revolving Note in respect of the Assigned Interest
(including, without limitation, all payments of principal, interest and
commitment and other fees with respect thereto) to the Assignee. The Assignor
and the Assignee shall make all appropriate adjustments in payments under the
Credit Agreement and the Revolving Note, for periods prior to (and, if agreed
to, in the case of commitment fees or interest, after) the Assignment Date
directly between themselves.
7. This Assignment and Acceptance may be executed by telecopier and
in any number of counterparts, each of which when so executed and delivered,
shall be an original, but all which together shall constitute one agreement
binding all of the parties hereto.
8. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois without regard
to conflict of laws principles.
ASSIGNOR:
______________________________________________
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
Copies of all notices, etc. should be sent to:
______________________________________________
______________________________________________
______________________________________________
Telecopier No.: ______________________________
ASSIGNEE:
______________________________________________
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
3
<PAGE>
Copies of all notices, etc. should be sent to:
______________________________________________
______________________________________________
______________________________________________
Telecopier No.: ______________________________
Accepted this _____ day
of __________, 1998
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By: _________________________
Name: _________________________
Title: _________________________
4
<PAGE>
10(I)(I)(7)
FIFTH AMENDMENT TO SHORT TERM CREDIT AGREEMENT
This Fifth Amendment to Short Term Credit Agreement (this
"Amendment") is entered into as of May 22, 1998 by and among Montgomery Ward &
---------
Co., Incorporated (the "Company"), the undersigned financial institutions, The
-------
Bank of Nova Scotia, as Administrative Agent (in such capacity, the
"Administrative Agent"), The First National Bank of Chicago, as Documentary
--------------------
Agent (in such capacity, the "Documentary Agent"), The Bank of New York, as
-----------------
Negotiated Loan Agent (in such capacity, the "Negotiated Loan Agent") and Bank
---------------------
of America National Trust and Savings Association, as Advisory Agent (in such
capacity, the "Advisory Agent," and together with the Administrative Agent, the
--------------
Documentary Agent and the Negotiated Loan Agent, the "Agents").
------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, the undersigned financial institutions and the
Agents are party to that certain Short Term Credit Agreement, dated as of
September 15, 1994 (as amended, supplemented or otherwise modified, the "Short
-----
Term Credit Agreement"); capitalized terms used herein and not otherwise defined
- ---------------------
shall have the meanings assigned to them in the Short Term Credit Agreement; and
WHEREAS, the parties hereto desire to amend certain provisions of the
Short Term Credit Agreement relating to the sale of participations in and
assignments of Loans;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Amendment to Short Term Credit Agreement. Effective as of the
----------------------------------------
date hereof and subject to Section 3 hereof, the Short Term Credit Agreement is
amended as follows:
A. Section 15.4 is amended and restated as follows:
15.4 Participations: Assignments; Replacement of Banks.
-------------------------------------------------
(a) Participations. Subject to the provisions of this
--------------
Section 15.4, any Bank may at any time, in the ordinary course of its
------------
business and in accordance with applicable law, sell to one or more
banks or other entities (a "Participant") participating interests in
------------
any Loan owing to such Bank, or any Note held by such Bank. In the
event of any such sale to a Participant the selling Bank shall give
written notice to the Company and the Administrative Agent stating the
Participant's name and address and the amount of the participation
purchased, but
(i) the Company and the Administrative Agent shall
continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement,
1
<PAGE>
(ii) all amounts payable by the Company shall be
determined as if such Bank had not sold such participation, and
(iii) any Participant which is not an Affiliate of the
selling Bank shall have no right to require the selling Bank to
take or omit to take any action under this Agreement or any Note
other than action directly affecting the extension of the stated
maturity of any Loan, directly affecting any scheduled
installment of principal or any scheduled reduction in the stated
amount of, or interest on, any Loan in which such participation
was sold, or reducing the principal or stated amount thereof or
the rate of interest thereon or fees payable hereunder.
Each Bank agrees to incorporate the requirements set forth in the
preceding sentence into each participation agreement which such Bank
enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, if its
participation agreement with the selling Bank so provides, be deemed
to have the right of setoff in respect of its participating interest
in amounts owing under this Agreement or any Note to the same extent
as if the amount of its participating interest were owing directly to
it as a Bank under this Agreement or any Note; provided that such
--------
right of setoff shall be subject to such Participant's obligation to
share with the Banks, and the Banks agree to share with such
Participant, as provided in Section 8.2(c). No participation
--------------
contemplated in this Section 15.4 shall relieve any Bank either from
------------
its Commitment hereunder or from any of its other obligations
hereunder and such Bank shall remain solely responsible for the
performance thereof.
(b) Assignments. Subject to the provisions of this Section 15.4,
-----------
any Bank may assign to one or more banks or other entities (an
"Assignee") all or any part of such Bank's rights and benefits, and
--------
delegate all or any part of such Bank's obligations under this
Agreement and its Notes; provided, however, that
-------- -------
(i) except in the case of an assignment to another
Bank, the amount of the Loans of the assignor Bank subject to
such assignment shall be in an amount not less than $5,000,000
and an integral multiple of $1,000,000 in excess thereof or shall
be the entire remaining amount of Loans of such assignor Bank,
(ii) unless the assignor Bank is assigning all of its
Loans, the aggregate amount of the Loans of such assignor Bank
after giving effect to such assignment and any assignments agreed
to contemporaneously therewith by such assignor Bank shall be not
less than $5,000,000,
(iii) the assignor Bank shall advise the Assignee that
the Company shall not be obligated to execute any replacement
Notes and shall add a legend to any of its Notes which evidence
all or part of the Loans assigned to the effect that rights
thereunder have been assigned,
2
<PAGE>
(iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an assignment and acceptance
substantially in the form of Exhibit L, with appropriate
---------
insertions (an "Assignment"),
----------
(v) upon request of the Administrative Agent, if the
Company is not authorized by court order to pay the Transfer Fee
referred to in Section 15.4(e) or fails to honor its obligations
---------------
under Section 15.4(e), the parties to the Assignment shall
---------------
deliver to the Administrative Agent a processing and recordation
fee of $3,500 for such Assignment,
(vi) if the assignor Bank is assigning all of its
Loans, it shall deliver to the Administrative Agent an amount,
determined by the Administrative Agent, equal to the unpaid
amount for which no reserve has been established of such Bank's
pro rata share (based upon the aggregate unpaid principal amount
--- ----
of the Loans) of any reasonable costs or expenses payable by such
assignor Bank pursuant to the Credit Agreement, including,
without limitation, Section 14.2 and Section 15.5,
------------ ------------
(vii) the Assignee shall advise the Administrative
Agent in writing as to whether it is a Non-United States Person
and if it is a Non-United States Person, it shall deliver to the
Company and the Administrative Agent a written representation and
undertaking similar to Section 8.4(b), and
--------------
(viii) the assignor Bank shall provide written notice
to the Company (with a copy to the Administrative Agent) of the
name and address of the Assignee, shall deliver to the Company a
copy of the duly executed Assignment and shall deliver to the
Administrative Agent evidence of such deliveries to the Company.
(c) Acceptance of Assignment by Administrative Agent. An
------------------------------------------------
Assignment shall be accepted by the Administrative Agent only if all
of the requirements of subsection (b) of this Section 15.4 have been
------------
fulfilled to the Administrative Agent's satisfaction. Each Agent and
each Bank shall be entitled to continue to deal solely and directly
with the assignor Bank in connection with any interests assigned or
delegated to an Assignee until the Administrative Agent has accepted
the Assignment. Upon the Administrative Agent's acceptance of an
Assignment, it shall record the Assignment in the Master Register. All
entries in the Master Register shall be conclusive, in the absence of
manifest error, and the Company, each Agent and each Bank shall treat
each person whose name is recorded in the Master Register as the owner
of the Loans recorded therein for all purposes of this Agreement. The
Administrative Agent shall from time to time distribute a Schedule to
each of the Banks and the Company giving effect to any Assignments.
(d) Rights and Obligations of Assignor Bank and Assignee. On the
----------------------------------------------------
date the Administrative Agent accepts an Assignment (the "Assignment
----------
Effective Date"), the Company, the Agents and the Banks agree that, to
--------------
the extent of any such Assignment,
3
<PAGE>
(i) the Assignee thereunder shall be a Bank hereunder and, in
addition to any rights, benefits and obligations hereunder held by it
immediately prior to such Assignment Effective Date, have the rights,
benefits and obligations of a Bank under this Agreement and the
assignor Bank's Notes (including, without limitation, rights and
benefits arising out of Section 9) and the same rights of setoff
---------
pursuant to Section 8.3 and obligation to share pursuant to Section
----------- -------
8.2 as a Bank hereunder to the extent that the same have been assigned
---
and delegated to it pursuant to such Assignment, and
(ii) the assignor Bank shall, to the extent that rights,
benefits and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment, relinquish its rights and benefits and
be released from its obligations under this Agreement (and, in the
case of an Assignment covering all or the remaining portion of an
assignor Bank's rights, benefits and obligations under this Agreement,
such Bank shall cease to be a party hereto), except that in all cases
the assignor Bank shall remain entitled to the rights and benefits
arising under Sections 6, 8.4, 9, 15.5 and 15.6 with respect to any
---------- --- - ---- ----
period of time prior to the Assignment Effective Date, and shall
remain liable with respect to any of its unpaid obligations arising
under Sections 6.9, 8.4(c), 14.2 and 15.5, with respect to any matters
------------ ------ ---- ----
arising prior to the Assignment Effective Date; provided, the Company
--------
shall not be required to pay any costs, fees or taxes of any kind or
nature with respect to the interest(s) assigned in excess of those
payable by the Company in connection with such interest(s) prior to
such assignment except for any costs, fees or taxes described in
Section 8.4, 9 or 15.6.
----------- - ----
(e) Transfer Fee. In consideration of the services to be performed by
------------
the Administrative Agent hereunder, the Company shall pay to the
Administrative Agent a quarterly fee of $18,750 (the "Transfer Fee"),
------------
payable quarterly in advance on May 1, August 1, November 1 and February 1
of each year, provided that the Company shall pay the fee payable on May 1,
--------
1998 within three Business Days after the entry of an order by the United
States Bankruptcy Court for the District of Delaware approving the Fifth
Amendment to Short Term Credit Agreement. If the Company is not authorized
to pay such fee or fails to pay such fee, the Administrative Agent may
impose a processing and recordation fee on the parties to each Assignment
of $3,500 for each Assignment.
(f) Federal Reserve. Anything contained in this Agreement to the
---------------
contrary notwithstanding, and without the need to comply with any of the
formal or procedural requirements set forth in this Agreement, any Bank may
at any time and from time to time grant a participation in, assign, deposit
or pledge all or any portion of its rights under this Agreement or the
Notes to a Federal Reserve Bank; provided, however, no such participation,
-------- -------
assignment, deposit or pledge shall relieve such Bank of any of its
obligations under this Agreement.
4
<PAGE>
(g) Information. Notwithstanding the terms of any previous
-----------
confidentiality agreements with respect to the subject matter hereof
between the Company and any Bank, from and after the Effective Date any
Bank may furnish any information concerning the Parent, the Company and the
Subsidiaries which has been furnished to such Bank pursuant hereto to any
Assignee, Participant, or potential Assignee or Participant; provided,
--------
however, that the recipient of such information shall, prior to being
-------
furnished with any such information, agree to maintain the confidentiality
of such information. Notwithstanding the foregoing sentence, any Agent,
Bank, Assignee, Participant or potential Assignee or Participant shall be
permitted to disclose information regarding the Company and its
Subsidiaries (i) to any other Agent or Bank, or to any Assignee or
Participant, (ii) to any Affiliate, agent or employee that agrees to be
bound by this Section 15.4(g), (iii) upon order of any court or
---------------
administrative agency, (iv) upon the request or demand of any regulatory
agency or authority having jurisdiction over such party, (v) which has been
publicly disclosed, (vi) which has been obtained from any Person that is
not a party hereto or an Affiliate, agent or employee of any such party,
(vii) in connection with the exercise of any remedy hereunder, or (viii) to
such Person's certified public accountants and its attorneys.
B. Exhibit L is replaced with the Exhibit L annexed hereto.
--------- ---------
2. Waiver. The undersigned Banks hereby waive the requirement set forth
------
in the proviso in Section 15.4(b) of the Short Term Credit Agreement that an
assignor Bank shall assign equal percentage amounts of its commitment under the
Short Term Credit Agreement and Long Term Credit Agreement with respect to any
trades entered into by any of the Banks prior to the date of this Amendment.
This waiver is limited precisely to its terms and shall not constitute an
amendment, modification or waiver generally or for any other purpose.
3. Effectiveness. Section 1 of this Amendment shall become effective with
-------------
respect to trades entered into after the date of this Amendment, upon the
execution and delivery of this Amendment by the Company and the Required Banks,
provided, however, the requirement that the Company pay the Transfer Fee
- -------- -------
referred to in the amended Section 15.4(e) shall not be effective until the
entry of an order of the United States Bankruptcy Court for the District of
Delaware approving this Amendment. Section 2 of this Amendment shall become
effective upon the execution and delivery of this Amendment by the Required
Banks.
4. Entire Agreement. This Amendment contains the entire agreement among
----------------
the parties with respect to the matters set forth herein and supersedes all
prior agreements, arrangements or understandings with respect thereto.
5. Reference to and Effect on the Short Term Credit Agreement. Upon the
----------------------------------------------------------
effectiveness of this Amendment, on and after the date hereof, each reference in
the Short Term Agreement to "this Agreement," "hereunder," "hereof," "herein"
and words of like import, shall mean and be a reference to the Short Term Credit
Agreement as amended hereby. Except as specifically amended or waived hereby,
all of the terms and provisions of the Short Term Credit Agreement shall remain
in full force and effect and are hereby ratified and confirmed.
6. Descriptive Headings. The descriptive headings in this Amendment are
--------------------
for convenience only and shall not control or affect the meaning or construction
of any provision of this Amendment.
5
<PAGE>
7. Counterpart Execution. This Amendment may be executed by telecopier
---------------------
and in any number of counterparts, each of which, when so executed and
delivered, shall be an original, but all of which together shall constitute one
agreement binding all of the parties hereto.
8. Successors. This Amendment shall be binding upon and inure to the
----------
benefit of each of the parties hereto, and each of the Banks and their
respective successors and assigns.
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Amendment as of the date first set forth above.
MONTGOMERY WARD & CO.
INCORPORATED
By: /s/ Douglas V. Gathany
---------------------------------------------
Name: Douglas V. Gathany
Title: Vice President & Treasurer
THE FIRST NATIONAL BANK OF CHICAGO,
in its individual capacity and in its capacity as
Documentary Agent
By: /s/ Linda M. Thompson
---------------------------------------------
Name: Linda M. Thompson
Title: First Vice President
THE BANK OF NEW YORK, in its individual
capacity and in its capacity as Negotiated Loan
Agent
By: /s/ Mark R. Slane
---------------------------------------------
Name: Mark R. Slane
Title: Senior Vice President
THE BANK OF NOVA SCOTIA, in its individual
capacity and in its capacity as Administrative Agent
By: /s/ D. N. Gillespie
---------------------------------------------
Name: D.N. Gillespie
Title: Assistant General Manager
6
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its individual
capacity and in its capacity as Advisory Agent
By: /s/ Ronald A. Prince
---------------------------------------------
Name: Ronald A. Prince
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ S.L. Wimpenny
---------------------------------------------
Name: S.L. Wimpenny
Title: Senior Vice President
By: /s/ William J. Fitzgerald
---------------------------------------------
Name: William J. Fitzgerald
Title: Senior Vice President
BANCA COMMERCIALE ITALIANA,
Chicago Branch
By: /s/ Julian M. Teodori
---------------------------------------------
Name: Julian M. Teodori
Title: Senior Vice President & Manager
By: /s/ Matthew V. Trujillo
---------------------------------------------
Name: Matthew V. Trujillo
Title: Vice President
BANKBOSTON, N.A.
By: _____________________________________________
Name:
Title:
BANKERS TRUST COMPANY
By: /s/ Rosemary F. Dunne
---------------------------------------------
Name: Rosemary F. Dunne
Title: Vice President
7
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.,
Chicago Branch
By: /s/ Hajime Watanabe
---------------------------------------------
Name: Hajime Watanabe
Title: Deputy General Manager
BAY HARBOUR PARTNERS, LTD.
By: _____________________________________________
Name:
Title:
CIBC INC.
By: _____________________________________________
Name:
Title:
COMERICA BANK
By: /s/ Cynthia B. Jones
---------------------------------------------
Name: Cynthia B. Jones
Title: Vice President
CREDIT LYONNAIS Chicago Branch and
CREDIT LYONNAIS Cayman Island Branch
By: /s/ Alan Sidrane
---------------------------------------------
Name: Alan Sidrane
Title: Senior Vice President
DAYSTAR SPECIAL SITUATIONS FUND L.P.
By: _____________________________________________
Name:
Title:
8
<PAGE>
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Linda J. Weinberg
---------------------------------------------
Name: Linda J. Weinberg
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO
DI TORINO, S.P.A.
By: ____________________________________________
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ Armand J. Schoen, Jr.
---------------------------------------------
Name: Armand J. Schoen, Jr.
Title: Senior Vice President
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By: /s/ Neil Brisson
---------------------------------------------
Name: Neil Brisson
Title: Director
NATIONSBANK, N.A.
By: /s/ Charles A. Kerr
---------------------------------------------
Name: Charles A. Kerr
Title: Senior Vice President
THE NORTHERN TRUST COMPANY
By: _____________________________________________
Name:
Title:
9
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: _____________________________________________
Name:
Title:
THE SAKURA BANK, LTD.
By: /s/ Yukinaru Sakumoto
---------------------------------------------
Name: Yukinaru Sakumoto
Title: Joint General Manager
SWISS BANK CORPORATION
By: /s/ David C. Hemingway
---------------------------------------------
Name: David C. Hemingway
Title: Director - Global Project Finance
By: /s/ William A. Roche
---------------------------------------------
Name: William A. Roche
Title: Director - Restructuring
UNION BANK OF CALIFORNIA, N.A.
By: _____________________________________________
Name:
Title:
UNION BANK OF SWITZERLAND
By: /s/ G. Christian Ullrich
---------------------------------------------
Name: G. Christian Ullrich
Title: Managing Director
By: /s/ M. Terri Reilly
---------------------------------------------
Name: M. Terri Reilly
Title: Assistant Treasurer
10
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Jack L. Quitmeyer
---------------------------------------------
Name: Jack L. Quitmeyer
Title: Vice President
WELLS FARGO BANK, N.A.
By:
Name: _____________________________________________
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
CHICAGO BRANCH
By: /s/ Walter Wolff
---------------------------------------------
Name: Walter Wolff
Title: Senior Vice President & Deputy General
Manager
11
<PAGE>
EXHIBIT L
---------
ASSIGNMENT AND ACCEPTANCE
-------------------------
Reference is made to the Short Term Credit Agreement, dated as of
September 15, 1994 (herein, as heretofore amended, modified or supplemented,
called the "Credit Agreement") among Montgomery Ward & Co., Incorporated, an
Illinois corporation (the "Company") and the Banks and Agents parties thereto.
Terms used but not otherwise defined herein are used herein as defined in the
Credit Agreement.
_________________________________________ (the "Assignor") and
_____________________________ (the "Assignee") hereby agree as follows:
1. The Assignee hereby purchases and assumes from the Assignor, and
the Assignor hereby sells and assigns and delegates to the Assignee, without
recourse and without representation or warranty except as specifically set forth
in paragraph 2 below, an interest (the "Assigned Interest") in and to all of the
Assignor's rights, benefits and obligations under the Credit Agreement,
including, without limitation, rights of setoff pursuant to Section 8.3 of the
Credit Agreement, and obligations to share pursuant to Section 8.2 of the Credit
Agreement and under the Revolving Note, if any, held by the Assignor. The
Assigned Interest is a percentage equal to the total principal amount of the
Loans assigned to the Assignee pursuant hereto divided by the total principal
amount of all of the Loans owing to the Assignor on the date hereof as recorded
on the Master Register (without giving effect to any other assignments made on
the date hereof). The total principal amount of Loans being assigned to the
Assignee pursuant hereto is $_____.
2. (a) The Assignor represents and warrants that the Assignor shall
provide written notice of the name and address of the Assignee to
the Company (with a copy to the Administrative Agent) shall
deliver to the Company a copy of this Assignment duly executed
and shall deliver to the Administrative Agent evidence of such
deliveries to the Company.
(b) The Assignor represents and warrants that it is the legal
and beneficial owner of the Assigned Interest and that such
interest is free and clear of any adverse claim.
(c) The Assignee acknowledges and agrees that neither the
Assignor nor any Agent nor any other Bank makes any
representation or warranty or assumes any responsibility with
respect to any statements, warranties or representations made in
or in connection with the Credit Agreement or any other
instrument or document furnished pursuant thereto or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto.
1
<PAGE>
(d) The Assignee acknowledges and agrees that neither the
Assignor nor any Agent nor any other Bank makes any
representation or warranty or assumes any responsibility with
respect to the financial condition or creditworthiness of the
Company or the performance or observance by the Company of any of
its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto. The Assignee
acknowledges and agrees that (i) the Assignee has made and will
continue to make such inquiries and has taken and will continue
to take such care on its own behalf as would have been the case
had it made Loans directly to the Company without the
intervention of the Assignor, any Agent or any other Person, and
(ii) the Assignee has made and will continue to make its own
credit analysis and decisions relating to the Credit Agreement
independently and without reliance upon the Assignor, any Agent
or any other Person, and based on such documents and information
as it has deemed appropriate.
(e) No Negotiated Loans are currently owing to the Assignor.
(f) The Assignor represents and warrants that it has advised the
Assignee that the Company is not obligated to execute any
replacement Notes and will add a legend to any of its Notes which
evidence all or part of the Loans assigned to the effect that the
rights thereunder have been assigned.
(g) If the Assignor is assigning all of its Loans, it represents
and warrants that it has paid in full all amounts owing by the
Assignor under the Credit Agreement for which no reserve has been
established.
3. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered for acceptance to the
Administrative Agent Att: D. Norman Gillespie by telecopier at (212) 225-5205 or
such other number as may be provided by the Administrative Agent. At such time,
the parties shall also (a) deliver to the Administrative Agent a written
representation and warranty from the Assignee as to whether the Assignee is a
Non-United States Person and if it is a Non-United States Person the Assignee
shall also deliver to the Administrative Agent a written representation and
warranty substantially similar to that contained in Section 8.4(b) of the Credit
Agreement, (b) if required pursuant to Section 15.4(b)(v) of the Credit
Agreement, wire transfer to the Administrative Agent a processing and
recordation fee of $3,500 and (c) wire transfer to the Administrative Agent an
amount equal to all amounts owing by the Assignor under the Credit Agreement for
which no reserve has been established.
4. The effective date for this Assignment and Acceptance shall be
__________(the "Assignment Date")./1/
5. Upon such acceptance by the Administrative Agent, as of the
Assignment Date,
_________________________
/1/ To be completed by the Administrative Agent after compliance by the parties
with paragraph 3.
2
<PAGE>
(a) the Assignee shall, in addition to any rights, benefits and
obligations under the Credit Agreement held by it immediately
prior to the Assignment Date, have the rights, benefits and
obligations under the Credit Agreement that have been assigned to
it pursuant to this Assignment and Acceptance, and
(b) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and benefits and
be released from its obligations under the Credit Agreement,
except that the Assignor shall remain entitled to the rights and
benefits arising under Sections 6, 8.4, 9 and 15.6 of the Credit
Agreement, and shall remain liable with respect to any of its
obligations arising under Sections 6.9, 8.4(c), 14.2 and 15.5 of
the Credit Agreement, with respect to any matters arising prior
to the Assignment Date.
6. Upon such acceptance by the Administrative Agent, from and after
the Assignment Date, the Administrative Agent shall make all payments under the
Credit Agreement and the Revolving Note in respect of the Assigned Interest
(including, without limitation, all payments of principal, interest and
commitment and other fees with respect thereto) to the Assignee. The Assignor
and the Assignee shall make all appropriate adjustments in payments under the
Credit Agreement and the Revolving Note, for periods prior to (and, if agreed
to, in the case of commitment fees or interest, after) the Assignment Date
directly between themselves.
7. This Assignment and Acceptance may be executed by telecopier and
in any number of counterparts, each of which when so executed and delivered,
shall be an original, but all which together shall constitute one agreement
binding all of the parties hereto.
8. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois without regard
to conflict of laws principles.
ASSIGNOR:
______________________________________________
By: _______________________________________
Name: _______________________________________
Title:_______________________________________
Copies of all notices, etc. should be sent to:
______________________________________________
______________________________________________
______________________________________________
Telecopier No.: ____________________________
ASSIGNEE:
______________________________________________
By: _______________________________________
Name: _______________________________________
Title:_______________________________________
3
<PAGE>
Copies of all notices, etc. should be sent to:
_________________________________________________
_________________________________________________
_________________________________________________
Telecopier No.: _______________________________
Accepted this _____ day
of __________, 1998
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By: ________________________________
Name: ________________________________
Title: ________________________________
4
<PAGE>
10(I)(L)(6)
WAIVER, AMENDMENT AND
EXTENSION AGREEMENT
THIS WAIVER, AMENDMENT AND EXTENSION AGREEMENT ("Agreement"), dated as of
January 31, 1998, is made and entered into among SIGNATURE FINANCIAL/MARKETING,
INC. (the "Borrower") and the banks listed on the signature pages hereof
(herein, together with their respective successors and assigns, collectively
called the "Banks" and individually called a "Bank").
WHEREAS, the Banks are parties to that certain Credit Agreement dated as of
September 27, 1996, as amended and restated as of October 21, 1996, and as
further amended or modified as of December 23, 1996, March 27, 1997, July 15,
1997, and August 29, 1997 (as heretofore amended or modified, the "Credit
Agreement"), among Signature Financial/Marketing, Inc., various Banks, The Bank
of New York as Documentation Agent, and The Bank of Nova Scotia, as
Administrative Agent; and
WHEREAS, the Borrower desires to extend the Maturity Date of the Credit
Agreement from January 31, 1998, to July 31, 1998;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
WAIVER, AMENDMENT AND EXTENSION
I.1 The Banks hereby waive an Event of Default (the "Specified Default")
arising solely by reason of the failure of the Borrower on January 31, 1998,
through the Effective Date of this Agreement to pay in full all Notes and other
Obligations.
I.2 The Preamble to the Credit Agreement is hereby amended to add The Bank
of Nova Scotia as the Collateral Agent, and reads in its entirety as follows:
This CREDIT AGREEMENT dated as of September 27, 1996, as amended
and restated as of October 21, 1996 (the "Restatement Effective
Date"), among Signature Financial/Marketing, Inc., a Delaware
corporation (the "Borrower"), the banks listed on the signature pages
--------
hereof (herein, together and with their respective successors and
assigns, collectively called the "Banks" and individually called a
"Bank"), The Bank of New York ("BNY"), as documentation agent for the
Banks (herein, in such capacity, together with its successors and
assigns in such
<PAGE>
capacity, called the "Documentation Agent"), The Bank of Nova Scotia
("BNS"), as administrative agent to the Banks (herein in such
capacity, together with its successors and assigns in such capacity,
called the "Administrative Agent"), and BNS, as collateral agent for
the Banks (herein, in such capacity, together with its successors and
assigns in such capacity, called the "Collateral Agent") (the
Documentation Agent, the Administrative Agent, and the Collateral
Agent are herein collectively called the "Agents" and individually
called an "Agent").
I.3 Section 1.1 of the Credit Agreement is hereby amended by amending the
definition of "Guarantors," "Guaranty," and "Loan Documents," and by adding the
definitions of "Collateral Agent," "Pledge Agreements," "Pledged Securities,"
"Pledgors," and "Regulated Subsidiary" as follows:
"Guarantors" means MW and each Subsidiary of the Borrower listed
----------
on Schedule 1.1 hereto except that the term "Guarantors" when used in
------------
Section 2.15 and clauses (c) and (i) of Section 7.4 shall be deemed
not to include any Regulated Subsidiary or AM Industries, Inc.
"Guaranty" means the guaranty executed by the Guarantors in
--------
substantially the form of Exhibit F-1, F-2, or F-3, as the same may be
----------- --- ---
amended or modified from time to time.
"Loan Documents" means this Agreement, the Guaranties, the Pledge
--------------
Agreements, the Notes, and any fee letter and all other documents
delivered to any Agent or any Bank in connection herewith.
"Collateral Agent" means -- see Preamble.
----------------
"Pledge Agreements" means those certain Pledge Agreements, dated
-----------------
as of January 31, 1998, executed by Borrower and Montgomery Ward
Enterprises, Inc., respectively, in favor of the Banks and the
Collateral Agent, and granting to such Banks a first priority lien in
the Pledged Securities, as collateral security for the repayment of
the Obligations, each in substantially the form of Exhibit I-1, I-2,
----------- ---
or I-3, as the same may be amended or modified from time to time.
---
"Pledged Securities" shall have the meaning specified in Section
------------------
1 in the Pledge Agreements.
"Pledgors" means Borrower and Montgomery Ward Enterprises, Inc.
--------
"Regulated Subsidiary" means any Subsidiary of the Borrower
--------------------
listed on Schedule 1.1 hereto under the caption "Regulated
------------
Subsidiaries."
2
<PAGE>
I.4 The words "calendar quarter" appearing in the fourth line of the first
sentence of the definition of "Interest Payment Date" in Section 1.1 of the
Credit Agreement is hereby changed to "calendar month."
I.5 The Maturity Date is hereby extended by substituting "July 31, 1998"
for "January 31, 1998" in the definition of Maturity Date as set forth in
Section 1.1 of the Credit Agreement.
I.6 Section 2.12 of the Credit Agreement is amended to read in its
entirety as follows:
2.12 Extension Fee. (a) Concurrent with the execution by each
-------------
Bank of the Waiver, Amendment and Extension Agreement dated as of
January 31, 1998 ("Extension Agreement") among the Banks and the
Borrower, the Borrower agrees to pay directly to each Bank in
immediately available funds a fee equal to 1/8th% of the aggregate
outstanding principal amount of the Loans then outstanding from each
Bank (it being understood that such fee shall be retained by such Bank
regardless of whether the Extension Agreement becomes effective).
(b) The Borrower agrees to pay to the Administrative Agent in
immediately available funds, for the prorata account of each Bank, a
fee of $2,000 per day for each day the Loans (or any principal amount
thereof) remain outstanding during the month of June 1998. Such fee
shall be payable on the earlier of the day all the Loans are repaid in
full or June 30, 1998.
I.7 Article II of the Credit Agreement is amended by adding the following
Sections 2.13, 2.14, 2.15, and 2.16 thereto:
2.13 Subsidiary Guaranties. Each of the Subsidiary Guarantors
---------------------
identified on Schedule 1.1 have executed and delivered, or are
executing and delivering, to the Banks either a Guaranty (Non-
Insurance Subsidiaries) or a Guaranty (Regulated Subsidiaries), as
indicated on Schedule 1.1, in the form of Exhibits F-2 and F-3,
------------ ------------- ---
respectively.
2.14 Pledge of Securities. Borrower and Montgomery Ward
--------------------
Enterprises, Inc. are executing and delivering to the Banks the Pledge
Agreements, in the form of Exhibits I-1, I-2, or I-3.
------------ --- ---
2.15 Additional Collateral. Borrower and each Subsidiary
---------------------
Guarantor except AM Industries Inc. (formerly known as Amoco Motor
Club, Inc.) shall furnish Banks with such additional guaranties,
collateral, and credit enhancement as the Banks may request from time
to time.
2.16 Collateral Agent. The Collateral Agent will have such
----------------
duties as are set
3
<PAGE>
forth in that certain Collateral Agent Agreement, dated as of January
31, 1998, among BNY, BNS, and the Collateral Agent.
I.8 Section 5.3 of the Credit Agreement is amended by adding the phrase
"and the Pledge Agreements" after the words "Section 6.13" and before the comma.
I.9 Section 7.8(d) of the Credit Agreement is amended to read in its
entirety as follows:
(d) the Pledge Agreement executed by Montgomery Ward
Enterprises, Inc. and the Guaranties.
I.10 Sections 8.1(m) and 8.1(r) of the Credit Agreement are amended to read
in their entirety as follows:
(m) Guarantor or Pledgor Defaults. Any Guarantor or Pledgor
-----------------------------
fails in any material respect to perform or observe any term, covenant
or agreement in its Guaranty or Pledge Agreement, as applicable; or
the Guaranty of any Guarantor or the Pledge Agreement of any Pledgor
is for any reason partially (including, with respect to future
advances) or wholly revoked or invalidated, or otherwise ceases to be
in full force and effect, or any Guarantor, Pledgor, or any other
Person contests in any manner the validity or enforceability of such
Guaranty or Pledge Agreement or denies that it has any further
liability or obligation thereunder; or any event described in
subsections (f) or (g) of this Section occurs with respect to any
Guarantor or Pledgor.
(r) Citicorp Commitment Letter. (i) Any party to that certain
--------------------------
Commitment Letter, dated as of March 24, 1998, between Citicorp USA,
Inc. and the Borrower, as extended by letter agreement dated May 6,
1998 (the "Commitment Letter") revokes, withdraws, or terminates the
Commitment Letter, or (ii) any amendment, modification or waiver is
made to the Commitment Letter which is not acceptable to the Banks, or
(iii) the Commitment Letter shall cease to be in full force and
effect.
I.11 Schedule 1.1 of the Credit Agreement is hereby amended and replaced in
its entirety with Schedule 1.1 attached hereto, and new Exhibits F-3., I-1, I-2,
------------ --- ---
and I-3 are hereby added to the Credit Agreement in the form of Exhibits F-3, I-
--- ------------ -
1, I-2, and I-3 attached hereto.
- - --- ---
I.12 Schedules 5.5, 5.7, 5.11, 5.12, 5.16(a), 5.16(b), and 5.17 are each
------------- --- ---- ---- ------- ------- ----
hereby amended by adding thereto the items set forth in the applicable section
of Schedule J attached hereto.
----------
I.13 Notwithstanding the provisions of Section 2.4 of the Credit Agreement,
from and after January 31, 1998, Borrower shall not be entitled to elect to
convert any Base Rate Loans to
4
<PAGE>
LIBO Rate Loans, and any LIBO Rate Loans outstanding on January 31, 1998, shall,
effective as of the end of the applicable Interest Period, be converted into
Base Rate Loans.
I.14 Notwithstanding the provisions of Section 2.7 of the Credit Agreement,
for the period from January 31, 1998, until May 31, 1998, interest on the unpaid
principal amount shall accrue and be payable at a rate per annum equal to the
sum of two percent (2%) per annum plus the rate otherwise in effect pursuant to
Section 2.7(a) of the Credit Agreement; and from and after June 1, 1998,
interest on the unpaid principal amount shall accrue and be payable pursuant to
Section 2.7(a)(i) of the Credit Agreement, except that if an Event of Default
exists after the Effective Date of this Agreement, then interest on the unpaid
principal amount shall accrue and be payable pursuant to Section 2.7(c) of the
Credit Agreement.
I.15 The waiver, amendment and extension contained herein are limited
precisely to their terms and shall not constitute a waiver, amendment or other
modification generally or for any other purpose.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Agents and the Banks as
follows:
II.1 No Default. No Default or Event of Default has occurred and is
----------
continuing, other than the Specified Default, or will exist after giving effect
to this Agreement.
II.2 Due Execution. The execution, delivery and performance of this
-------------
Agreement, (i) are within the Borrower's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not require any
governmental approval which has not been previously obtained (and each such
governmental approval that has been previously obtained remains effective), (iv)
do not and will not contravene or conflict with any provision of law, or of any
judgment, decree or order, or of the Borrower's charter or by-laws, and (v) do
not and will not contravene or conflict with, or cause any Lien to arise under,
any provision of any agreement binding upon the Borrower, any Subsidiary or any
of their respective properties.
II.3 Validity. The Credit Agreement as extended by this Agreement
--------
constitutes the legal, valid and binding obligations of the Borrower,
enforceable against it in accordance with its respective terms, without defense,
counterclaim or offset.
II.4 Credit Agreement. All representations and warranties of the Borrower
----------------
contained in Article 5 (except Section 5.11(b) of the Credit Agreement) are true
--------- ---------------
and correct as of the date hereof with the same effect as though made on the
date hereof. Since December 31, 1995, there has not occurred any event which
(i) materially impairs the ability of the Borrower to perform its
5
<PAGE>
obligations under any Loan Document or to avoid, after the Effective Date
hereof, any Event of Default, or (ii) materially adversely effects the legality,
validity, binding effect or enforceability against the Borrower of any Loan
Document.
ARTICLE III
GENERAL
III.1 Expenses. The Borrower agrees to pay all fees and expenses of each
--------
of the Agents and the Banks (including all legal fees and related expenses of
separate counsel for each of the Banks and the Agents) in connection with the
preparation, execution and delivery of this Agreement.
III.2 Effectiveness. This Agreement shall become effective on the date
-------------
(the "Effective Date") on which the Administrative or Collateral Agent shall
have received each of the following:
(a) Agreements. Counterparts of this Agreement, the Guaranty of each
----------
Subsidiary Guarantor, and the Pledge Agreements, whether on the same
or different counterparts, executed by the Borrower, the Subsidiary
Guarantors, and the Pledgors, as appropriate, and by the Required
Banks (or in the case of any Bank as to which an executed counterpart
shall not have been so received, telegraphic, telefax, telex or other
written confirmation of execution of a counterpart hereof by such
Bank);
(b) MW Court Order. The entry of an order by the United States
--------------
Bankruptcy Court, District of Delaware, In Re Montgomery Ward Holding
Corp., a Delaware corporation, et al., Case No. 97-1409 (PJW)
substantially in the form attached hereto as Exhibit X, or the
---------
written waiver of this requirement by the Banks;
(c) Agreement Fee. Evidence of payment from the Borrower to each Bank of
-------------
the fees provided for in Section 2.12 of the Credit Agreement as
herein amended; and
(d) Pledged Securities. All stock certificates evidencing the Pledged
------------------
Securities, all financing statements relating thereto, and all stock
powers relating thereto executed by Pledgors.
(e) Legal Opinions. Favorable opinions of counsel of Borrower and its
--------------
subsidiaries, in form and substance acceptable to the Banks, opining
on the enforceability of this Agreement, the Guaranty of each
Subsidiary Guarantor, and the Pledge Agreements.
6
<PAGE>
III.3 Definitions. Except as otherwise herein specifically defined, all
-----------
the capitalized terms contained herein shall have the meaning ascribed to such
terms in the Credit Agreement.
III.4 Reaffirmation. Except as hereinabove expressly provided, all the
-------------
terms and provisions of the Credit Agreement shall remain in full force and
effect and all references therein and in any related documents to the Credit
Agreement shall henceforth refer to the Credit Agreement as extended by this
Agreement. This Agreement shall be deemed incorporated into, and a part of, the
Credit Agreement.
III.5 Successors. This Agreement shall be binding upon and inure to the
----------
benefit of, the parties hereto and their respective successors and assigns.
III.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Illinois.
III.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same agreement.
Dated at Chicago, Illinois as of the date, month and year first above
written but executed and delivered on or after June 26, 1998.
SIGNATURE FINANCIAL/MARKETING, INC.
By: /s/ John Workman
---------------------------------
Name: Acting Chief Financial Officer
---------------------------------
ACCEPTED AND APPROVED:
THE BANK OF NEW YORK, in its
individual capacity and in its
capacity as Documentation Agent
By: /s/ Julie B. Follosco
----------------------------
Name: Vice President
----------------------------
7
<PAGE>
THE BANK OF NOVA SCOTIA, in its
individual capacity, in its capacity
as Administrative Agent and in its
capacity as Collateral Agent
By: /s/ D.N. Gillespie
-------------------------------
Name: Assistant General Manager
-------------------------------
8
<PAGE>
REAFFIRMATION OF GUARANTY:
Each Guarantor hereby confirms and agrees that (i) its Guaranty dated as of
September 27, 1996, as heretofore reaffirmed from time to time, is, and shall
continue to be in full force and effect and is hereby ratified and confirmed in
all respects, as applied to the Credit Agreement as modified above; (ii) to the
extent the liability of any Guarantor under its Guaranty is limited by
applicable law, such Guarantor shall be nonetheless liable under its Guaranty to
the maximum extent permitted by applicable law, and (iii) to the extent that a
Guarantor shall have paid more than its proportionate share of any payment made
under its Guaranty, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor which has not paid its
proportionate share of such payment (it being understood that (a) such
Guarantor's right of contribution shall be subordinated to the obligations of
such Guarantor to the Banks and shall not be paid until all of the Obligations
under the Credit Agreement have been indefeasibly paid in full, and (b) the
provisions of this clause (iii) shall in no respect limit the obligations and
liabilities of any Guarantor to the Banks, and each Guarantor shall remain
liable to the Banks for the full amount guaranteed by such Guarantor under its
Guaranty).
CREDIT CARD SENTINEL, INC.
ISS AGENCY, INC.
MONTGOMERY WARD CLUBS, INC.
MONTGOMERY WARD ENTERPRISES, INC.
SIGNATURECARD, INC.
MONTGOMERY WARD FINANCIAL CENTER, INC.
MONTGOMERY WARD AGENCY, INC.
NATIONAL DENTAL SERVICE, INC.
SIGNATURE DIRECT, INC.
SIGNATURE INVESTMENT ADVISORS, INC.
AM INDUSTRIES, INC. (FORMERLY KNOWN AS AMOCO MOTOR CLUB, INC.)
By: /s/ John Workman
---------------------------------------
Name: Acting Chief Financial Officer
---------------------------------------
9
<PAGE>
SCHEDULE 1.1
------------
GUARANTOR SUBSIDIARIES
----------------------
A. Non-Insurance Subsidiaries:
--------------------------
1. Credit Card Sentinel, Inc.
2. ISS Agency, Inc.
3. Montgomery Ward Clubs, Inc.
4. Montgomery Ward Enterprises, Inc.
5. SignatureCard, Inc.
6. Montgomery Ward Financial Center, Inc.
7. Montgomery Ward Agency, Inc.
8. National Dental Service, Inc.
9. Signature Direct, Inc.
10. Signature Investment Advisors, Inc.
11. AM Industries, Inc., formerly known as Amoco Motor Club, Inc.
B. Regulated Subsidiaries:
----------------------
1. Montgomery Ward Auto Club, Inc.
2. Greater California Dental Plan
3. Signature Dental Plan of Florida, Inc.
4. Ocoma Industries, Inc.
5. Signature's Nationwide Auto Club, Inc.
6. Signature Agency, Inc.
7. Signature Agency - Wyoming, Inc.
8. AEC Signature Industries, Limited
10
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<PAGE>
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<PERIOD-START> JAN-04-1998
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