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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
_____________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 52-Week Period Ended Commission file number
January 2, 1999 No. 0-17540
_____________________
MONTGOMERY WARD HOLDING CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3571585
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
MONTGOMERY WARD PLAZA, 60671-0042
CHICAGO, ILLINOIS (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (312) 467-2000
_____________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Not Applicable None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Series 1, $.01 Par Value
(Title of class)
Class A Common Stock, Series 2, $.01 Par Value
(Title of class)
Class B Common Stock, $.01 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X. No ___.
---
At April 2, 1999, there were 18,322,152 shares of Class A Common Stock and
25,000,000 shares of Class B Common Stock of the Registrant outstanding.
________________________________________________________________________________
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ITEM 1. BUSINESS
Forward-Looking Statements
Information included in this Report on Form 10-K 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.
General
Montgomery Ward Holding Corp., a Delaware corporation ("the Company" or "MW
Holding"), and its wholly-owned subsidiary, Montgomery Ward & Co.,
Incorporated ("Wards"), are engaged in retail merchandising in the United
States. Signature Financial/Marketing, Inc. ("Signature"), a wholly-owned
subsidiary of Wards, is engaged in direct marketing in the United States.
On February 1, 1999, Wards announced its intention to sell Signature to
General Electric Capital Corporation ("GE Capital") (see Business -
Signature).
Founded in 1872 and incorporated in Illinois in 1968, Wards is one of the
nation's largest retail merchandising organizations. After the planned
closing of 39 retail stores in early 1999, Wards will operate 252 retail
stores in 32 states with approximately 20 million square feet of selling
space. In addition, Wards operates six outlet and liquidation centers, 16
distribution facilities and 51 product service centers.
Chapter 11 Filing
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 (the "Bankruptcy Court"). 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), pursuant
to an order of the Bankruptcy Court. The following U.S. subsidiaries were
not included in the bankruptcy filings: Signature and its direct and
indirect subsidiaries; Marinco Insurance U.S.A., Inc. ("Marinco"); and
Montgomery Ward Foundation.
After a long period of negotiation, Wards was unable to reach an out-of-
court settlement with its lenders. Accordingly, bankruptcy petitions were
filed in order to obtain an opportunity to reorganize and begin
implementing the Company's strategies while working to restructure its
indebtedness. Pursuant to the Post-Petition Loan and Guaranty Agreement
dated July 8, 1997, among Wards and Lechmere, Inc. ("Lechmere"), as
borrowers; MW Holding and other debtor subsidiaries of MW Holding, as
guarantors; GE Capital, as agent and lender; and various lenders, as
amended (the "DIP Facility"), the lenders have agreed to provide up to $1
billion in post-petition financing to Wards.
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ITEM 1. BUSINESS (CONTINUED)
Chapter 11 Filing (continued)
As a result of the Chapter 11 filings, absent approval of the Bankruptcy
Court, the Company is prohibited from paying, and creditors are prohibited
from attempting to collect, claims or debts arising prior to the Petition
Date.
On February 1, 1999, the Company announced its intention to emerge from
Chapter 11 bankruptcy protection in mid-1999. The Company will file its
plan of reorganization and disclosure statement with the Bankruptcy Court
shortly. The plan of reorganization will set forth the means for satisfying
claims and interests in the Company and its debtor subsidiaries, including
the Liabilities subject to compromise. Under the reorganization plan, when
filed, secured and non-tax priority claimholders will generally receive
cash equal to the amount of their allowed claim. Claims held by unsecured
creditors and certain allowed vendor claims held by GE Capital will be
satisfied by cash distributions for a portion of the allowed claims. GE
Capital will receive a significant equity interest in the Company in
exchange for its remaining claims. The Company intends to fund its
distributions under the plan of reorganization principally through funds
placed in escrow by GE Capital and through the termination of its over-
funded defined benefit pension plan. The Company expects to repay GE for
the funds placed in escrow by GE with the proceeds from the sale of
Signature (see Business - Signature). The consummation of a plan of
reorganization for the Company and its debtor subsidiaries will require the
requisite vote of impaired creditors and stockholders and confirmation by
the Bankruptcy Court, which is expected to be completed by the Summer of
1999.
Merchandising
The major product offerings by the Company are apparel, furniture and home
furnishings, appliances and electronics, fine jewelry, and automotive,
including service.
The apparel offering includes branded, value-oriented merchandise in
women's, men's, children's and intimate apparel as well as footwear and
accessories. The apparel brand and price point offering is targeted at the
large middle market between department stores and discounters. An offering
of prominent name brands has been built, including Lee, Playtex, Bugle Boy,
Bestform, Converse, Gloria Vanderbilt, Hanes, New Balance, LEI, Zana-Di,
Munsingwear, Starter, Tan-jay, Teddy, Wilson and others. In addition, the
Company has developed licensed and proprietary brands for certain product
categories, such as Ship 'N Shore in women's apparel and BIKE in men's and
children's activewear.
Furniture and home furnishings include broad selections emphasizing
furniture, textiles and housewares. Furniture includes name brand
offerings, such as Broyhill, Bassett and La-Z-Boy, displayed in
accessorized room groupings to provide customers shopping and decorating
convenience. Furniture also includes a wide selection of mattresses from
prominent name brands such as Sealy, Serta, Simmons and Stearns and Foster.
The Company offers combined consumer electronics and appliance product
categories, including video, audio, telephones, electronic games and
kitchen, laundry and other major appliances. The product offering includes
significant national brands including, but not limited to, Sony and
Panasonic in electronics and Maytag, Whirlpool and General Electric in
appliances.
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ITEM 1. BUSINESS (CONTINUED)
Merchandising (continued)
Fine jewelry offers all major merchandise categories: diamonds, gemstones,
gold and watches. Wards has become one of the largest jewelry retailers in
the country, and its major vendor relationships enable it to offer highly
featured products at outstanding prices.
Automotive focuses on the sale and installation of tires, batteries, brakes
and shocks. Wards is one of the leading retailers of branded tires,
including Goodyear, Firestone, Bridgestone and General.
Wards' retail business is seasonal, with approximately one-third of sales
occurring in the fourth quarter. The results of Wards' operations are also
subject to changes in consumer demand associated with general economic
conditions, which is especially true with respect to demand for durable
goods and other "big ticket" merchandise. Wards' retail operations are
supported by its corporate buying division which has its principal office
in Chicago, and includes foreign purchasing offices in Hong Kong, Taiwan,
Japan, and Korea.
Performance Initiatives
Facility Closings and Divestitures
In 1997, management undertook a review of the retail operations of Wards,
and determined that the number of different retail formats then in
operation resulted in a lack of focus on Wards' core business. In August
1997, Wards announced its exit of its non-core specialty retail
businesses - Lechmere, Home Image by Lechmere and Electric Avenue & More.
Management also reviewed the performance of retail stores operating under
the core retail format and closed 53 underperforming retail stores and four
outlet and liquidation centers in 1997, and nine underperforming retail
stores in 1998. In 1999, Wards will complete the closing of 39
underperforming retail stores. In addition, sales of automotive products
and services were discontinued in 17 operating retail stores in January
1999. The financial performance of the remaining retail stores will be
reviewed on a continuing basis and additional stores may be closed, if such
closures are warranted.
Other Divestitures
In December 1997, the Bankruptcy Court approved the disposition of Wards'
investment in the common stock and warrants to purchase common stock of
ValueVision International, Inc. ("ValueVision"). In addition, the
agreements relating to ValueVision's sales promotion rights with regard to
the Wards credit cardholder file were restructured. Under the restructured
agreements, Wards' obligation to purchase advertising from ValueVision was
significantly reduced. Additionally, ValueVision and its affiliates agreed
to cease direct mail solicitations to its customers using the Wards
servicemarks after March 31, 1998. ValueVision may continue to use the
servicemark in connection with televised home shopping through July 31,
2008. The transaction was consummated on January 15, 1998.
New Merchandising Strategy
Middle-income females aged 30 to 55 with family incomes of $25,000 to
$50,000 have been targeted as Wards' core fashion customer. Wards' core
hardlines customer is defined more broadly, representing both males and
females with higher income levels and wider age distributions than the core
fashion customer.
Management believes that these core customers share lifestyle
characteristics and shopping preferences typical of today's time-pressed,
value-conscious families with traditional/conservative values and fashion
tastes.
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ITEM 1. BUSINESS (CONTINUED)
Performance Initiatives (continued)
New Merchandising Strategy (continued)
Wards' strategic plan has been developed to focus its merchandise offering
around categories of business that meet the needs of the targeted customer,
as well as those categories that also offer opportunities to drive sales
and gross margin rate improvements. Wards intends to leverage current areas
of merchandising strength (major appliances, fine jewelry and furniture,
for example) to drive near-term profit improvements and capture additional
market share. Additionally, Wards has targeted certain categories,
primarily family apparel, domestics, seasonal and home theater, as areas in
which growth in terms of penetration and market position must be
dramatically improved. Resources will be focused on developing "trend-
right" assortments and substantially improving merchandising and marketing
in these businesses. Finally, Wards will strive to improve the in-store
execution of its important electronics, automotive and housewares
businesses in order to maintain its market share, improve margins and
achieve a service level comparable to its competitors.
In September 1998, Wards introduced its new prototype store in Las Vegas,
Nevada; Bloomingdale, Illinois; and Towson, Maryland. The prototype
features a circular, racetrack design which creates a comfortable and
aesthetically pleasing environment. It incorporates wide aisles, clear site
lines and easy navigation providing customers with an efficient shopping
experience while promoting cross-shopping and the total merchandising
solutions offered by Wards. The prototype stores also incorporate bright
lighting, warm colors, improved fixturing and display, expanded fitting
rooms, increased customer service facilities, and clear, educational
signage highlighting value, trend-right merchandise. These three stores
have reflected sales increases over the prior year in excess of 40
percentage points above the combined performance of the entire chain from
September 1998 through February 1999. Wards is remodeling an additional 40
stores in 1999 and anticipates remodeling a minimum of 40 stores in each of
2000 and 2001.
Store Operations/Customer Service Strategy
Wards continues to focus on improving the presentation of its retail stores
and improving overall customer satisfaction. In addition to the remodeling
of the three stores in 1998, Wards evaluated the appearance of all stores
and cleaned, relamped and painted where necessary. In addition, new
fixtures were added in several departments including apparel, shoes, fine
jewelry, housewares and furniture. Store policies and procedures continued
to be reviewed in order to redeploy time spent from non-service oriented
tasks to customer-directed activities.
A customer-service culture is being instilled in both corporate
headquarters and store associates. As a first step, a Director of Customer
Service was appointed in 1997. The primary focus of this position is to
improve service and coordination at all levels of the organization. Also in
1997, the "Kick It Up A Notch" program was initiated to reward store
associates who provide exceptional customer service. In 1998, Wards has
been closely monitoring customer satisfaction through independent surveys.
Overall, Wards has experienced improvements during the year in ratings on
merchandise availability, the friendliness, knowledge and availability of
associates, wait time and accuracy of check-out, store appearance, the
value of merchandise for price paid, and the recommendation of Wards to
others.
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ITEM 1. BUSINESS (CONTINUED)
Performance Initiatives (continued)
Logistics Strategy
Wards is continually reviewing its logistics network to better serve the
retail stores at an optimal cost. Improved management of the flow of goods
through the network is expected to result in improved product velocity and
reduced inventory levels, while still maintaining an optimal in-stock level
at the retail stores. A particular focus is improvement in the home
delivery process, including the simplification of the current computer
systems and implementation of an automated routing process. These changes
are expected to allow a customer delivery to be scheduled for a more
precise time window, thereby improving customer service while maximizing
the productivity of routing staffs.
In 1998, Wards closed distribution facilities in Grand Ledge, Michigan, and
Pennsauken, New Jersey, and distribution facilities in Portland, Oregon and
Phoenix, Arizona were converted to cross-dock facilities. In early 1999,
Wards will close its distribution facility in Garden Grove, California and
open a new distribution facility in Chino, California.
Systems Strategy
In February 1999, Wards entered into a post-petition contract with Axciom
Corporation ("Axciom") to outsource most of its information processing
services. Wards management believes that the benefits of the outsourcing
agreement include gaining the knowledge and economics of scale of Axciom,
who is engaged in data processing and related activities as its core
business; maintaining and improving service levels to Wards; and obtaining
fixed pricing, to the extent possible, for information technology services.
The transition of information technology services is anticipated to be
completed by the Summer of 1999.
Computerized information systems are currently under development that will
support the merchandising, customer service and logistics strategies
previously discussed. The systems under development are primarily focused
on supply chain efficiencies (through the implementation of state-of-the-
art buying and warehouse management systems) and customer service
improvements (through the implementation of a new point of sale system and
the enhancement of customer delivery systems). Additionally, a major
initiative is underway to assure the ability of all continuing systems to
process dates that occur in the next century.
The Company began addressing Year 2000 date conversion issues in the fall
of 1996 and has developed a plan to assess and remediate both information
technology ("IT") and non-IT systems. The Company's plan consists of two
phases. The assessment phase includes the inventory of all systems (IT and
non-IT) subject to the Year 2000 issue and developing a plan for addressing
the problem as related to each system. The remediation phase includes the
implementation of the identified changes required and testing of these
changes before implementation.
For IT systems, the Company has completed its assessment phase and the
remediation phase is 90% complete. The remainder of the remediation phase
is expected to be completed in the first half of 1999. For non-IT systems,
the Company anticipates the assessment phase to be completed in early 1999
and the remediation phase to be completed by September 30, 1999. The
Company is also in the process of assessing the Year 2000 readiness of its
suppliers and service providers and is participating in a National Retail
Federation survey of such providers.
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ITEM 1. BUSINESS (CONTINUED)
Performance Initiatives (continued)
Systems Strategy (continued)
In 1998, the Company expensed $22 million related to Year 2000 readiness.
Prior to 1998, the Company expensed $12 million. The Company estimates an
additional $3 million will be expensed as incurred to become Year 2000
ready. In addition, the Year 2000 issue has accelerated the timing of an
estimated $26 million of capital expenditures of which $17 million has been
capitalized as of January 2, 1999. No significant capital projects have
been delayed as a result of addressing the Year 2000 issue. Based on the
Company's plan, the remaining costs to be expended to become Year 2000
ready are not expected to materially impact future cash flows.
The Company believes that its program will result in Year 2000 readiness.
However, due to the complexity of the issue, there can be no assurances
given that the Company's plan will be fully effective. The Company could
experience interruptions of business at some of its operations, including
those caused by, but not limited to, the inability of utility companies to
provide telecommunications and electrical services, the failure of
financial institutions to process transactions, and the inability of
vendors to deliver products on a timely basis. The Company is in the
process of developing contingency plans which are anticipated to be
completed by September 30, 1999, with respect to the Company's facilities
and merchandise supply and distribution networks.
Signature
On February 1, 1999, Wards announced its intention to sell Signature to GE
Capital. The sale is expected to close in the second half of 1999 after the
receipt of all required insurance regulatory approvals. Subsequent to the
sale, Wards will continue to receive a marketing fee for allowing Signature
to market its credit cardholder file.
The Signature Group, headquartered in Schaumburg, Illinois, is a leading
provider of fee-based membership services offered to consumers through
direct response marketing. Signature provides consumers with a broad range
of continuity club products including credit card registration, auto,
dental and legal services as well as insurance products, including credit
insurance and various supplemental life and health insurance policies.
Signature's products typically are sold through affiliations with major
bank, oil or retail credit cards, including the Wards proprietary credit
card. Signature's clients include seven of the top 10 issuers of bank
credit cards, nine of the top 10 issuers of oil company credit cards, all
major airlines and a number of leading retailers and affinity groups such
as Home Depot, Disney and AARP. Signature's teleservices unit also provides
a variety of inbound and outbound telemarketing services as well as
customer retention services to various financial, insurance and
telecommunications clients.
Established in 1966 as a wholly-owned subsidiary of Wards, Signature has
over 30 years of expertise developing targeted marketing programs.
Signature is the largest outbound telemarketer for the credit card industry
in the country, with over 5,800 employees in 26 locations. It operates 26
call centers with 2,000 workstations and annually conducts over 66 million
carefully scripted telemarketing presentations. Signature also mails over
232 million solicitations annually. The combination of leading-edge
technology and marketing expertise allows Signature to offer a completely
integrated marketing plan to its customers. Signature assigns a multi-
functional account team to each client to manage every aspect of their
marketing program, from the development and execution of marketing plans to
the establishment of billing, fulfillment, customer service and post-
marketing analysis. In addition to its proven experience marketing directly
to consumers, Signature's auto, dental and legal services plans utilize
networks of Signature-managed independent service providers and
professionals to deliver value and quality customer service to the
Company's customer. These networks have been developed over many years and
are integral to the successful delivery of Signature's products.
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ITEM 1. BUSINESS (CONTINUED)
Signature (continued)
Signature works in partnership with its clients and other organizations to
offer consumers convenience and significant savings when purchasing a wide
array of high-quality goods and services. Signature has a total of 12.2
million consumer members including 3.7 million Wards credit card customers
and 8.5 million other credit card customers. Signature has exclusive
marketing rights to the entire Wards credit card file. It also markets on
behalf of approximately 130 other clients, including some of the nation's
largest financial institutions, retailers, airlines, oil companies,
associates, unions and employer groups. Signature's major third party
clients include American Airlines, AARP, American Express, Amoco, BankOne,
Brylane, Chase, Citigroup, Delta, Discover, Exxon, General Electric, MBNA,
Merrill Lynch, Mobil, Shell, Texaco, TWA, United Airline, Wachovia and
Wells Fargo.
On March 18, 1999, Signature entered into a definitive agreement whereby
Transmedia Network Inc. acquired the assets of Dining a la Card from
Signature. As part of the Agreement, Signature will continue to acquire
dining members from its airline frequent flyer partner programs as well as
other client programs.
Since 1994, Signature has aggressively sought to diversify its customer
account base through the development of new third-party client (non-Wards)
relationships and business acquisitions. As of December 31, 1998, 8.5
million, or 69% of the Company's total members were from third-party
clients, up significantly from 3.1 million, or 33%, of total members at the
end of 1994.
Competition and Regulation
The sale of merchandise by Wards is conducted under highly competitive
conditions. Buying and selling are each done in open competitive markets.
Wards' stores are in competition with specialty stores, department stores
and other types of retail outlets in the areas in which they operate. The
Company believes that merchandise assortments, brand names, competitive
pricing and availability of services such as credit, delivery, installation
and repair, are the principal factors which differentiate it from
competitors.
Certain of Signature's operations are highly regulated and conducted under
highly competitive conditions. To date, Signature has been able to compete
effectively with other companies which offer programs similar to those
provided by Signature. Signature also competes with traditional methods of
marketing by unaffiliated dentists and lawyers. Insurance companies operate
pursuant to specific state statutes, rules and regulations and are required
to file reports with such agencies at least quarterly.
Telemarketing and direct mail solicitations are regulated at state and
federal levels, and management believes that these activities will
increasingly be subject to such regulation. Such regulation may limit
Signature's ability to solicit new members or to offer more products and
services to existing members and may materially adversely affect
Signature's business and revenues.
The requirements of environmental protection laws and regulations have not
had a material effect upon Wards' operations. Compliance may, in certain
cases, lengthen the lead-time of expansion plans and could increase
construction and operating costs.
Account Purchase Agreements
Credit is extended to Wards' customers under an open-end revolving credit
plan and is an important element in generating sales, especially in the big
ticket businesses. Wards' private label credit card sales were 43.9% and
46.9% of total sales for 1998 and 1997, respectively. Bankcard sales were
an additional 23.6% and 21.2% of total sales for 1998 and 1997,
respectively.
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ITEM 1. BUSINESS (CONTINUED)
Account Purchase Agreements (continued)
Wards entered into a Bank Credit Card Program Agreement ("Card Agreement")
effective April 1, 1996 with Monogram Credit Card Bank of Georgia
("Monogram"), and an Account-Related Agreement ("Account Related
Agreement") effective April 1, 1996 with Montgomery Ward Credit Corporation
("Montgomery Ward Credit") (collectively referred to as the "Agreements")
pursuant to which Monogram and Montgomery Ward Credit (collectively
referred to as the "Montgomery Ward Credit Companies" or "MWCC"), both of
which are affiliates of GE Capital, make payments to Wards as to their
receivables generated by sales to customers of Wards, its affiliates and
licensees who utilize the Wards private label credit card, and provide
services to Wards, all of which are guaranteed by GE Capital. Under the
Agreements, Monogram has the exclusive right to operate the Wards private
label credit card system and the obligation to pay to Wards the face amount
of Monogram's receivables generated by the Wards private label credit card
system, up to $7 billion outstanding at any time. If Wards desires to
receive payment for receivables generated by the Wards private label credit
card system at any time when Montgomery Ward Credit Companies own $7
billion or more of such receivables and do not desire to finance additional
receivables, alternative arrangements, such as the sale of receivables to
banks or other financial institutions, would be required unless Monogram
agrees to fund the excess. As of January 2, 1999, there were $3.3 billion
of Wards private label credit card receivables owned by Montgomery Ward
Credit Companies, and the average outstanding amount of such receivables
owned by Montgomery Ward Credit Companies during 1998 was $3.6 billion.
Under the Card Agreement, Wards is required to pay Monogram the excess
interest costs on a monthly basis if a blended interest rate applicable to
funding costs with respect to the receivables exceeds 10% per annum. This
blended interest rate has been less than 10% since 1988.
Wards generally bears the risk of credit losses due to non-payment by
cardholders to the extent of (i) the amount of credit losses that are
between 3.9% and 5.0% of average outstanding receivables, plus (ii) 50% of
credit losses that are between 5.0% and 8.0% of average outstanding
receivables, subject to offsets described below relating to Wards' share of
certain incremental increases in finance charges and late fees payable by
cardholders. Wards is also responsible for losses on certain higher risk
starter card accounts to the extent the loss percentage as to those
accounts exceeds the loss percentage experience on the rest of the
portfolio. Wards' net unpaid liability for credit losses for 1991 through
1998 is to be payable to Montgomery Ward Credit pursuant to a note
(Continuation Note) due in early 2003, which provides that: (i) the
outstanding balance of such note cannot exceed $300 million, (ii) scheduled
monthly principal payments ranging from $.4 million to $2.8 million are
required through 2002, and (iii) starter card losses are payable currently.
Interest on Wards' unpaid liability for credit losses is payable at the
monthly GE Capital commercial paper rate. Notes consisting of $285 million
for losses incurred prior to July 8, 1997 were executed. A remaining note
of $15 million, consisting of losses incurred after July 7, 1997 for the
remaining portion of 1997, was executed which provides for monthly
principal payments in the amount of 5% of the scheduled monthly principal
payments for the Continuation Note. Payments of principal and interest on
notes outstanding as of July 7, 1997, has been stayed by the Chapter 11
proceedings.
In exchange for Wards' agreement to allow Montgomery Ward Credit to
increase finance charge rates and late fees in selected states, Wards
receives a share of incremental finance charges and late fees resulting
from such increases. Such amount is available for offset against Wards'
unpaid liability for its share of credit losses, and to the extent not
currently paid or offset earns interest at the same rate as amounts owed by
Wards to Montgomery Ward Credit. Effective April 1996, Monogram implemented
additional finance charge and late fee increases in various states. The
amount of these additional incremental finance charges and late fees are
calculated each year pursuant to a formula specified in the Account Related
Agreement, which makes certain of these amounts available to Wards. As the
increased finance charge rate and late fees are added to the credit card
balances, this will cause the amount of losses to increase. The higher
finance charges and late fees also decrease the credit available by the
credit card customer.
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ITEM 1. BUSINESS (CONTINUED)
Account Purchase Agreements (continued)
In the event that, due to the increase in finance charge rates and late
fees, refunds are required to be made, Wards and Montgomery Ward Credit
have agreed in certain cases to share the financial risk. Legislation has
from time-to-time been introduced in certain jurisdictions, which if
enacted, may require rescinding all or a portion of such increases, in
which case Wards' share of such increases may be substantially reduced.
In connection with the foregoing arrangements, Wards owes $72 million for
1998 credit losses offset by incremental finance charges and late fee
assessments. Wards has previously executed notes for certain of its unpaid
share of credit losses through 1997, offset by incremental finance charges
and late fee assessments due to Wards for a net obligation of $300 million.
Monogram has the right of first refusal to implement certain new financing
programs proposed by Wards.
The Agreements are scheduled to expire on December 31, 2011, provided the
terms shall continue thereafter from year to year unless either party gives
ten years prior notice of its election to terminate. Except upon the
occurrence of certain events of default, the Agreements may generally not
be terminated by either party prior to December 31, 2011.
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 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 whether
the Interim Amount Agreement is terminated or not, except in the
termination circumstance where the Company would be liquidated or when
certain defaults occur, 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 authorizing Wards to discontinue all of
its retail operations or converts the case to Chapter 7, (e) upon certain
defaults by the Company or Wards or default by Monogram or Montgomery Ward
Credit, or (f) December 31, 1999.
Associates
At January 2, 1999, Wards and its subsidiaries employed the equivalent of
34,000 full-time associates. During certain seasons, temporary associates
are added and peak employment is approximately 49,000 associates during the
Christmas season. Approximately 1,500 Wards associates are covered by
various collective bargaining agreements. Wards has experienced no major
labor-related interruption or curtailment of operations during the last 15
years.
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ITEM 2. PROPERTIES
At January 2, 1999, excluding the retail stores announced to be closed in
early 1999, the Company owned or leased 325 retail, distribution and other
operating facilities. The Company's properties are located throughout the
continental United States and cover approximately 44 million square feet.
These properties are summarized as follows:
<TABLE>
<CAPTION>
Number of Approximate Total
Use Locations Square Feet
- - --------------------------------- --------- -----------
<S> <C> <C>
Montgomery Ward Retail Stores:
Full Line 248 33,916,000
Limited Line 4 344,000
Corporate Office Complex 1 2,975,000
Miscellaneous Operating Locations 72 6,913,000
--------- -----------
Total Locations 325 44,148,000
========= ===========
</TABLE>
Owned and leased retail stores include approximately 20 million square feet
of selling space and 14 million square feet devoted to storage, office and
related uses. Miscellaneous operating locations include warehouses, office
buildings and distribution centers, but exclude vacant land parcels and
properties held for disposition. See Note 11 to the Consolidated Financial
Statements for information with respect to leased properties.
The nationwide scope of Wards' operations helps minimize the impact of
changes in the economies of specific regions on the overall performance of
its retail stores and allows Wards to merchandise to a variety of
demographic profiles.
10
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
The regional distribution of Ward's retail stores, as of January 2, 1999,
excluding the retail stores announced to be closed in early 1999, is
indicated in the following table:
State Total
------------ -----
Arizona 9
Arkansas 1
California 49
Colorado 8
Florida 12
Georgia 2
Illinois 17
Indiana 4
Iowa 3
Kansas 5
Kentucky 1
Louisiana 5
Maryland 15
Michigan 12
Minnesota 2
Missouri 7
Nebraska 1
Nevada 3
New Mexico 3
New York 3
North Carolina 3
Ohio 4
Oklahoma 5
Oregon 7
Pennsylvania 11
South Carolina 2
Tennessee 1
Texas 37
Virginia 12
Washington 3
West Virginia 4
Wisconsin 1
-----
Total 252
=====
11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
At the close of business on July 7, 1997, Montgomery Ward Holding Corp. 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 and its
direct and indirect subsidiaries, Marinco, and Montgomery Ward Foundation.
The filing of the petitions and the rejection of certain contracts created
certain claims related to the filing. Among these cases is "Reliance
Insurance Company v. Forum Insurance Company." This case alleges that Forum
Insurance Company, an indirectly wholly-owned subsidiary of Signature, is
liable under an indemnification agreement of which Wards is a signatory for
the surety bonds issued to secure certain of Wards' obligations. The matter
is now pending before the Bankruptcy Court. The potential liability related
to the outcome of this claim cannot be estimated at this time.
The Company and its subsidiaries are engaged in various litigation,
including purported class actions, and have a number of unresolved claims.
While the amounts claimed are substantial and the ultimate liability with
respect to such litigation and claims cannot be determined at this time,
management is of the opinion that such liability, to the extent not
provided for through insurance or otherwise, is not likely to have a
material impact on the financial condition or the results of operations of
the Company.
In 1979, a suit entitled "United States v. Midwest Solvent Recovery, Inc.,
et.al." (Civil Action Number H-79-556) was initiated by the United States
Department of Justice on behalf of the Environmental Protection Agency in
the U.S. District Court for the Northern District of Indiana, and an
Amended Complaint was filed in January 1984. This suit was against Standard
T Chemical Company, Inc., a Delaware corporation and wholly-owned
subsidiary of Wards ("Standard T"), which ceased operations in 1994 and is
currently an inactive entity and is a debtor in the bankruptcy proceedings
described above, and others involving two waste disposal sites and seeks
reimbursement for the cost of surface clean-up, investigation studies
concerning possible contamination of the soil and ground water and remedial
action. In January 1990, the United States filed a second Amended Complaint
seeking inter alia, treble damages and monetary sanctions. Standard T
signed a consent decree, whereby it was obligated to provide a financial
assurance. The financial assurance in the amount of $2.77 million has been
drawn in order to remediate the site. The Company currently anticipates
that its obligation will not exceed that amount.
In 1985, the New York Environmental Protection Agency brought an action for
remediation of a site in Staten Island, New York against the owner of the
property. The owner asserted that Standard T, among others, generated
wastes that were disposed of by a prior owner of the site. Standard T is in
the process of completing the clean up of this site and has purchased the
site from the owner for $1.45 million. The proposed remedy has a present
value cost of $2.9 million.
In February 1986, Standard T, along with approximately 330 other companies,
was notified by the United States Environmental Protection Agency that the
agency was mandating a remediation of the contamination of the American
Chemical Services, Inc. ("A.C.S.") site located in Griffith, Indiana, under
authority vested in it by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980. Standard T and a Wards paint
factory were each identified as a Potentially Responsible Party ("PRP"),
under the terms of the Act, because of their alleged status as generators
of hazardous waste ultimately disposed of at the A.C.S. site. The Company
will pay its proportionate share of the costs of the studies, and may
ultimately pay a share of the costs of abating the contamination of the
A.C.S. site. One estimate by the EPA of future costs of abating
contamination at the A.C.S. site is $69 million, of which $24 million has
been paid by deminimus settling parties. The proposed settlement of the
proof of claim in the bankruptcy proceedings is $2.9 million.
12
<PAGE>
ITEM 3. LEGAL PROCEEDINGS (CONTINUED)
Standard T and Wards are also involved at various stages with several other
sites where Standard T and Wards have been notified or sued as a PRP. The
potential liability related to these sites cannot be estimated at this
time.
On April 29, 1997, MW Holding, Wards and Lechmere were served with a
complaint, purporting to represent a nationwide class, filed by certain
bankrupt credit card holders of Wards and Lechmere credit cards. The
complaint alleged that MW Holding, Wards and Lechmere, benefited from the
actions taken by Hurley, Lechmere's previous credit card provider, and MWCC
and Monogram (both of which are affiliates of GE Capital), Wards' and
Lechmere's current credit card providers, in that the recoveries received
from the bankrupt credit card holders, allegedly were in violation of the
bankruptcy laws dealing with reaffirmations, and ultimately reduced Wards'
and Lechmere's loss sharing obligations. Hurley, MWCC and Monogram took all
actions related to bankruptcy reaffirmations. A final settlement has been
executed by Monogram and MWCC with the plaintiffs, which releases MW
Holding, Wards and Lechmere of any liability. The plaintiffs have withdrawn
their proofs of claim.
In 1997, a suit entitled "Trent v. Montgomery Ward," was initiated by Karen
Trent and four other plaintiffs alleging, on behalf of themselves and a
class of other commissioned sales employees, fraud and breach of contract
in the calculation of their sales commissions. This class action currently
is being heard in the Federal District Court for the District of Wyoming.
The suit claims that from 1992 to the present, Wards devised a commission
sales plan that was designed to underpay commissions promised to employees
and that Wards in fact paid employees less than the commissions they were
supposed to have earned. Plaintiffs seek certification of the class and
actual and punitive damages. Wards has denied the allegations and intends
to aggressively defend this matter. The case currently is in the early
stage of class discovery, and damage exposure cannot be determined at this
time. A limited lifting of the bankruptcy automatic stay has been granted
so that the class certification issue can be resolved. The court has
determined that it does not have jurisdiction of the case and has remanded
the case to the Wyoming State court. The plaintiffs have filed a motion for
reconsideration. The plaintiffs have now filed a class claim in the
Bankruptcy Court and it is expected that their claim will be resolved in
the Bankruptcy Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names and ages of the executive officers of the
Company as of March 26, 1999, and the positions each has held during the
past five years:
Roger V. Goddu, 48, has been a director of the Company and Chairman and
Chief Executive Officer of Wards since January 6, 1997. Prior thereto, he
was with Toys "R" Us, where from 1996 until 1997, he was President-U.S.
Merchandising, and from 1989 to 1995, he was Executive Vice
President/General Merchandise Manager. Prior to 1989, Mr. Goddu was a
Senior Vice President and General Merchandise Manager of Target, a division
of Dayton Hudson Corporation.
Thomas J. Austin, 51, has been Executive Vice President - Men's and
Children's Apparel and Shoes of Wards since May 19, 1997. Prior thereto,
Mr. Austin was Senior Vice President - Divisional Merchandise Manager of
Kohl's Corporation, where he spent 15 years in various merchandising
positions of increasing responsibility.
13
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Louis J. Caporale, 45, has been Executive Vice President - Women's Apparel
and Fine Jewelry of Wards since May 27, 1997. Prior to joining Wards, Mr.
Caporale was Senior Vice President - Divisional Merchandise Manager of
Kohl's Corporation. From 1993 through 1997, he was Vice President -
Divisional Merchandise Manager of Kohl's. Prior to joining Kohl's, Mr.
Caporale held various merchandising positions with Federated Department
Stores for 16 years.
Don Civgin, 37, has been Vice President and Treasurer of the Company and
Senior Vice President - Finance of Wards since May 8, 1997. Prior thereto,
he was Vice President - Treasurer of Alliant Foodservice, Inc. from 1995 to
1997. From 1986 through 1995, Mr. Civgin held various financial management
positions with Itel Corporation.
Robert C. Claxton, 44, has been Senior Vice President - Advertising and
Marketing of Wards since March 23, 1998. Prior thereto, he was Vice
President of Advertising of Wards from June 1997 to March 1998. Prior
thereto, he held positions at Wards as Vice President of Home Image from
February 1996 to June 1997, Regional Managing Director from November 1995
to February 1996, and Field Director of Electric Avenue & More from
September 1995 to November 1995. Prior to joining Wards, he was Divisional
Vice President of Store Operations at Silo, Inc. since 1989.
Alan E. DiGangi, 52, has been Executive Vice President - Appliances,
Electronics and Automotive of Wards since November 1996. Prior thereto, he
was Executive Vice President Marketing of Wards from March 1996 through
November 1996. Mr. DiGangi was Executive Vice President, Electric Ave.,
Rooms & More/Soft Home of Wards from January 1996 through March 1996. Prior
thereto, he was Senior Vice President, Electric Ave. & More from April 1995
to January 1996. From 1993 though 1995, Mr. DiGangi was Vice President of
Wards, with responsibilities in Store Management, Field Operations,
Marketing and Sales Promotion.
Kevin Freeman, 48, has been Executive Vice President - Store Operations of
Wards since May 1, 1997. Prior thereto, he was Executive Vice President of
Store Operations for Caldor from 1994 until 1997. Mr. Freeman was Executive
Vice President - Store Operations with Roses Stores from 1991 to 1994.
Prior thereto, Mr. Freeman held various positions with Target, a division
of Dayton Hudson Corporation, from 1978 to 1991, leaving as Senior Vice
President of Store Operations.
Thomas G. Grimes, 61, has been Executive Vice President - Home of Wards
since November 7, 1997. Mr. Grimes joined the Company on February 24, 1997
as Chief Executive Officer of Lechmere, Inc. and President - Hardlines.
Prior thereto, he was Managing Director of Trimingham Bros. Ltd. from
January 1996 through February 1997. Prior to joining Trimingham Bros. Ltd.,
Mr. Grimes was Chairman and Chief Executive Officer of the John Breuner
Company, a division of Batus Inc., from 1986.
Spencer H. Heine, 56, has been an Executive Vice President, Secretary and
General Counsel of the Company since September 30, 1991 and was a director
from May 15, 1992 through January 6, 1997. Mr. Heine has been Executive
Vice President, Secretary and General Counsel of Wards and President -
Montgomery Ward Properties since April 12, 1994. Prior thereto, Mr. Heine
served as Executive Vice President - Legal of Wards from September 30, 1991
through April 11, 1994. Mr. Heine was Chairman and Chief Executive Officer
of Signature from March 8, 1993 through April 11, 1994.
Robert A. Kasenter, 52, has been an Executive Vice President of the Company
since February 21, 1992. Mr. Kasenter has served as Executive Vice
President, Human Resources of Wards since January 27, 1992 and was Senior
Vice President- Human Resources and Customer Satisfaction from June 23,
1988 to January 26, 1992. Mr. Kasenter announced his resignation from the
Company in March 1999 and will be leaving in May 1999.
14
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Thomas J. Paup, 50, has been an Executive Vice President and Chief
Financial Officer of Wards since September 22, 1997. Prior to joining
Wards, Mr. Paup was Senior Vice President, Finance and Distribution of Lord
& Taylor, a division of The May Department Stores Company from 1990 to
1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no established public trading market for the Common Stock of the
Company. All shares are subject to restrictions on transfers contained in
the Stockholders' Agreement dated as of June 17, 1988, as amended
("Stockholders' Agreement"), or the Terms and Conditions ("Terms and
Conditions") imposed under the Montgomery Ward & Co., Incorporated Stock
Ownership Plan ("Stock Ownership Plan"). Management believes the stock has
little or no value due to the bankruptcy filing.
Transfers of shares of Class A Common Stock are restricted for a period of
three years from certain applicable dates under the Stockholders' Agreement
and the Terms and Conditions. Transfers of Class A shares purchased other
than pursuant to the Stock Ownership Plan are restricted for a period of
three years from the holder's first acquisition of any such shares, while
transfers of shares received under the Stock Ownership Plan are restricted
for a period of three years after the award of such shares, exercise of
purchase rights for such shares or grant of options with respect to such
shares, as applicable. After the applicable three-year periods, limited
transfers of such shares which have become vested in accordance with the
Stockholders' Agreement or the Terms and Conditions, as applicable, are
permitted, subject to certain rights of first refusal. All of the Class B
shares and virtually all of the outstanding Class A shares are eligible for
transfer.
The redemption provisions of the Company's outstanding preferred stock have
been stayed by the Chapter 11 proceedings. No further dividends will be
declared or paid on the preferred stock prior to the approval of a plan of
reorganization. Future payments of dividends, if any, are dependent upon
the approval of a plan of reorganization.
As of March 26, 1999, there were 91 holders of record of Class A Common
Stock, Series 1, 192 such holders of Class A, Common Stock, Series 2, and
one such holder of Class B Common Stock. No shares of Class A Common Stock,
Series 3, were outstanding as of that date. On June 21, 1998, the Voting
Trust Agreement dated as of June 21, 1988, 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.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following summary of certain financial information for each of the five
fiscal years in the period ended January 2, 1999 has been derived from the
Consolidated Financial Statements of MW Holding. Signature's results of
operations have been classified as discontinued operations and prior
periods have been restated. See Note 3 to the Consolidated Financial
Statements on page 34 for a summary of financial data of discontinued
operations. Such information for each fiscal year should be read in
conjunction with the Consolidated Financial Statements and notes thereto
and the report of independent public accountants beginning on page 22.
<TABLE>
<CAPTION>
As of and for the
---------------------------------------------------------------------------------------------
52-Week 53-Week
Period Period
Ended Ended 52-Week Period Ended
------------- -------------- -----------------------------------------------------
(Dollars in millions, except Jan. 2, Jan. 3, Dec. 28, Dec. 30, Dec. 31,
Per share amounts) 1999 1998 1996 1995 1994
------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 3,634 $ 4,534 $ 5,879 $ 6,531 $ 6,564
Income (Loss) from Continuing
Operations before Reorganization
Costs and Income Taxes (418) (1,003) (446) (109) 89
Reorganization Costs 218 553 - - -
Net Income (Loss) before
Discontinued Operations (942) (1,170) (282) (63) 61
Net Income (Loss) Applicable
to Common Shareholders (971) (1,160) (249) (13) 135
Net Income (Loss) per Class A
Common Share before
Discontinued Operations (25.46) (32.17) (7.48) (1.69) 1.37
Total Assets 3,492 4,080 4,187 4,442 4,132
Long-term Debt 46 108 77 389 220
Obligations Under Capital
Leases (a) - - 90 102 122
Total Shareholders' Equity
(Deficit) (1,688) (716) 433 700 707
Redeemable Preferred Stock 177 177 175 175 75
Cash Dividends per Common
Share - - - - .50
</TABLE>
(a) Excludes $64 and $77 million of Obligations under capital leases included
in Liabilities subject to compromise as of January 2, 1999 and January 3, 1998,
respectively.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of results of operations for the
Company compares 1998 to 1997, as well as 1997 to 1996. Wards is on a 52-
or 53-week fiscal year basis, with 1998 being a 52-week year, 1997 a 53-
week year, and 1996 a 52-week year. All dollar amounts are in millions and
all income and expense items and gains and losses are shown before income
taxes, unless specifically stated otherwise.
The Company's retail business is seasonal, with approximately one-third of
sales occurring in the fourth quarter.
Results of Operations: 1998 Compared with 1997
Net sales were $3,634, compared with $4,534 in 1997, a decrease of $900, or
20%. Sales on a comparable store basis decreased approximately 2% after
adjusting for the closing of stores, the exit of certain product lines and
the noncomparable impact of sales that occurred in the 53rd week of 1997.
The decrease in net sales is attributable to the closing of nine retail
stores in the third quarter of 1998 and 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. These closed stores reported net sales
of $686 in 1997. The sales decrease was also caused by the Company's
decision to exit certain product offerings which reported sales of $74 in
1997 and the noncomparable impact of sales that occurred in the 53rd week
of 1997. Wards' management also believes that the decline in promotional
offers to Wards' credit cardholders during 1998 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.
Gross margin (net sales less cost of goods sold) dollars were $685, an
increase of $105, or 18%, from 1997. This increase was due to an increase
in the gross margin rate on sales of $246 and decreased occupancy and other
margin-related expenses of $104 primarily related to the closed stores,
offset by the gross margin impact of decreased sales of $245. The
improvement of 6 percentage points in the gross margin rate in 1998, as
compared to 1997, was due the effects of the increase in the margin rates
in nearly every category of merchandise and the impact of closing Lechmere
and Electric Avenue & More stores, which historically reported lower gross
margin rates, as well as the negative impact of the aggressive markdown
strategy employed in the first six months of 1997 to liquidate inventories.
Operating, selling, general and administrative expenses decreased $428, or
29%, from the prior year. The decrease was primarily due to decreased
payroll costs primarily related to the closed stores of $215, decreased
advertising and other promotional costs of $103, decreased bad debt expense
of $48, write-downs of investments and other unrealizable assets in the
prior year of $42, increased pension income of $17, and a decrease in all
other costs of $35, offset by decreased product service income of $32.
Net interest expense decreased $52, or 48%, 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
1998, excluding pre-petition debt, decreased by approximately $700 as
compared to 1997.
Reorganization costs were $218 in 1998 as compared to $553 in 1997. These
costs are related to the Company's exit of its non-core strategies, certain
dispositions of assets and various other expenses. See Note 5 to the
Consolidated Financial Statements for the components of these costs.
Income tax expense of $306 was recorded for 1998 as compared to a benefit
of $386 for 1997. See Note 9 to the Consolidated Financial Statements for a
discussion of management's determination of the valuation allowance
provided during 1998.
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Results of Operations: 1998 Compared with 1997 (continued)
On February 1, 1999, Wards announced that GE Capital, a major shareholder
and creditor, will acquire Signature, Wards' direct marketing response
operations segment. Signature's results of operations have been classified
as discontinued operations. The loss from discontinued operations was $29
million in 1998 as compared to income of $18 million in 1997. The current
year's results of discontinued operations included the write-off of $33
million of capitalized fulfillment costs and $31 million associated with
the estimated loss on Signature's sale of its dining operations. In
addition, in 1998 no tax benefit was recorded and in 1997 tax expense of
$11 million was recorded.
Results of Operations: 1997 Compared with 1996
Due to Wards' inability to reach an out-of-court settlement with its
lenders, petitions for reorganization under Chapter 11 of the Bankruptcy
Code were filed at the close of business on July 7, 1997. The Company's
performance reflected difficult competitive conditions and financial
pressures, as well as the negative impact of the aggressive markdowns and
promotional advertising to liquidate inventory in the first half of 1997.
Net sales were $4,534, compared with $5,879 in 1996, a decrease of $1,345
or 23%. After adjusting for the noncomparable impact of sales that occurred
in the 53rd week, sales on a comparable store basis, which reflect only the
stores in operation for all of 1997 and 1996, decreased 16%. $534 of the
sales decrease reflects the closings of 101 retail stores and liquidation
and outlet centers, including the exit of the Lechmere and Electric Avenue
& More formats. 1997 sales results also reflect the Company's decision to
exit certain product offerings, including personal computers. 1996 third
and fourth quarter sales for the affected product lines were $84.
Additionally, the Company's management believes that merchandise shipment
interruptions as a result of the bankruptcy filing and the decline in
promotional offers to Wards' credit cardholders in the second half of 1997
(4 in 1997 versus 19 in 1996), contributed to the sales decline.
Gross margin (net sales less cost of goods sold) dollars were $580, a
decrease of $431, or 43%, from 1996. This decrease was due to the gross
margin impact of the decreased sales of $298 and a decrease in the margin
rate on sales of $167, offset by decreased occupancy costs of $34,
primarily related to closed stores. The liquidation of slow moving and
discontinued inventory, as well as the Chapter 11 filing, negatively
impacted margin rates. As certain of the Company's vendors halted shipments
for portions of the third quarter, a higher mix of third quarter sales
represented sales of lower margin clearance merchandise. Gross margins
showed substantial improvement in the fourth quarter of 1997. Despite a
$579 decrease in 1997 fourth quarter sales, gross margin dollars increased
by $4 and fourth quarter 1997 margin rates improved by 5 percentage points
over fourth quarter 1996 rates.
Operating, selling, general and administrative expenses increased $137, or
10%, from the prior year. The increase was due to increased bad debt
expense of $29; write-downs of investments and other unrealizable assets of
$57 and decreased product service income of $66, offset by all other
decreased expenses of $15.
Net interest expense decreased $11, or 9%, from the prior year. The net
decrease reflects a $30 increase in interest expense for the first and
second quarters of 1997 offset by a $41 decrease in interest expense for
the third and fourth quarters of 1997. The first half increase reflects
increased borrowings (including borrowings under vendor financing programs)
and an increase in the weighted-average borrowing rate. The Company has
stopped accruing interest on its short-term debt in connection with the
Chapter 11 filing. Second-half 1997 borrowings under the DIP Facility were
substantially below second-half 1996 borrowing levels.
Reorganization costs of $553 were related to the Company's exit of its non-
core strategies, certain dispositions of assets and various other expenses.
See Note 5 to the Consolidated Financial Statements for the components of
these costs.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Results of Operations: 1997 Compared with 1996 (continued)
The income tax benefit was $386 as compared to a benefit of $164 for 1996.
See Note 9 to the Consolidated Financial Statements for a discussion of
management's determination of the benefit recorded and the related
valuation allowance provided during 1997.
The income from discontinued operations in 1997 was $18 million as compared
to $45 million in 1996. The decrease in income from discontinued operations
was due to an increase in amortization and other direct marketing related
costs of $150 million offset by an increase in direct response marketing
revenues of $111 million. Income tax expense was $11 million and $26
million in 1997 and 1996, respectively.
Discussion of Financial Condition
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.
On February 1, 1999, the Company announced its intention to emerge from
Chapter 11 bankruptcy protection in mid-1999. The Company will file its
plan of reorganization and disclosure statement with the Bankruptcy Court
shortly. The plan of reorganization will set forth the means for satisfying
claims and interests in the Company and its debtor subsidiaries, including
the Liabilities subject to compromise. Under the reorganization plan, when
filed, secured and non-tax priority claimholders will generally receive
cash equal to the amount of their allowed claim. Claims held by unsecured
creditors and certain allowed vendor claims held by GE Capital will be
satisfied by cash distributions for a portion of the allowed claims. GE
Capital will receive a significant equity interest in the Company in
exchange for its remaining claims. The Company intends to fund its
distributions under the plan of reorganization principally through funds
placed in escrow by GE Capital and through the termination of its over-
funded defined benefit pension plan. The Company expects to repay GE for
the funds placed in escrow by GE with the proceeds from the sale of
Signature. The consummation of a plan of reorganization for the Company and
its debtor subsidiaries will require the requisite vote of impaired
creditors and stockholders and confirmation by the Bankruptcy Court, which
is expected to be completed by the Summer of 1999.
Net cash used in the Company's operating activities for continuing
operations totaled $167 for 1998 compared to $292 for 1997, a decrease of
$125. The lower cash usage is summarized as follows:
<TABLE>
<S> <C>
Cash impact of smaller operating loss $ 517
Decrease in cash received from facility closings (108)
Higher payments of liabilities subject to compromise (32)
Lower cash provided by accounts payable (213)
All other cash from operations (37)
------
$ 125
======
</TABLE>
Cash received from facility closings, which represents proceeds from the
disposition of inventory and properties, net of costs associated with the
going out-of-business sales, declined to $47 million in 1998 from $155 in
1997. The 1997 net receipts included the proceeds from the exit of its non-
core specialty retail businesses and a portion of the proceeds from the
closing of the 53 Wards stores. The 1998 net receipts included the
remaining proceeds from the 1997 store closing program and the closing of
an additional nine Wards stores in 1998.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Discussion of Financial Condition (continued)
Higher payments of liabilities subject to compromise represents an increase in
the settlement amount of reclamation claims, the offset of restricted cash
against interest claims, and payments of advertising and real estate and
personal property tax claims. The lower cash provided by accounts payable was
due to the effects of the bankruptcy filing in the third quarter of 1997.
Net cash used for investing activities of continuing operations totaled $93
for 1998, compared to $35 million for 1997. Capital expenditures were $93 for
1998 compared to $47 for 1997. The Company has capitalized $12 on the
remodeling of three stores in 1998. These stores, unveiled in September 1998,
will serve as the prototype for the remodeling of future stores. These three
stores reflected sales increases over the prior year in excess of 30
percentage points above the combined performance of the entire chain from
September 1998 through February 1999. The Company plans to spend $180 over the
next three years related to the remodeling of approximately 120 stores.
Net cash provided by financing activities of continuing operations totaled
$225 for 1998, compared to $438 for 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
$254 in 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 $304 and letters of credit
outstanding were $108 at January 2, 1999. The Company had $363 of borrowing
availability under the DIP Facility at January 2, 1999.
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.
On November 9, 1998, Wards obtained a Third Amendment to the DIP Facility
("Third Amendment Agreement") which was approved by the Bankruptcy Court on
February 1, 1999. The Third Amendment Agreement amended certain provisions of
the DIP Facility , including an increase in the interest rate margin and a
reduction in the level of earnings required, as defined in the DIP Agreement.
Prior to the bankruptcy filing, Wards entered into a long term credit
agreement, as amended, ("Long Term Credit Agreement") and a short term credit
agreement, as amended, ("Short Term Credit Agreement") both dated as of
September 15, 1994; note purchase agreements, as amended, dated March 1, 1993
and July 11, 1995 ("Note Purchase Agreements"); and a credit agreement, as
amended, ("Seasonal Credit Agreement") dated October 4, 1996. The Company is
currently in default of the terms of these agreements and no future amounts
may be drawn thereunder. The Seasonal Credit Agreement was terminated as a
result of the Chapter 11 filings. There were no borrowings outstanding under
this agreement.
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Discussion of Financial Condition (continued)
On September 15, 1998, the Company received approval from the Bankruptcy Court
to permit Lechmere to lend Signature the funds to repay its borrowings of $102
under a Credit Agreement between Signature and various lenders, plus interest
and other fees associated with the extension and refinancing of such
agreement. On September 30, 1998, Signature's loan under the Credit Agreement
was repaid from the $105 of funds advanced by Lechmere to Signature. The
Lechmere loan to Signature, which accrues interest at either the prime rate
plus 1.75% or the LIBO rate plus 2.75%, is secured by a pledge of stock of
certain Signature subsidiaries and is guaranteed by Wards. Such guarantee is
subordinate to the DIP Facility. The loan shall become immediately due upon
the earliest of (i) upon demand; (ii) the effective date of a plan of
reorganization for the debtor subsidiary; (iii) the conversion of the
bankruptcy case from a Chapter 11 case to a Chapter 7 case under the
Bankruptcy Code; (iv) the sale of all or substantially all of Signature's
assets, the merger or consolidation of Signature with or into another entity,
or the sale of more than 50% of an interest in Signature to another entity; or
(v) December 31, 1999.
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.
The Company began addressing Year 2000 date conversion issues in the fall of
1996 and has developed a plan to assess and remediate both information
technology ("IT") and non-IT systems. The Company's plan consists of two
phases. The assessment phase includes the inventory of all systems (IT and
non-IT) subject to the Year 2000 issue and developing a plan for addressing
the problem as related to each system. The remediation phase includes the
implementation of the identified changes required and testing of these changes
before implementation.
For IT systems, the Company has completed its assessment phase and the
remediation phase is 90% complete. The remainder of the remediation phase is
expected to be completed in the first half of 1999. For non-IT systems, the
Company anticipates the assessment phase to be completed in early 1999 and the
remediation phase to be completed by September 30, 1999. The Company is also
in the process of assessing the Year 2000 readiness of its suppliers and
service providers and is participating in a National Retail Federation survey
of such providers.
In 1998, the Company had expensed $22 related to Year 2000 readiness. Prior to
1998, the Company expensed $12. The Company estimates an additional $3 will be
expensed as incurred to become Year 2000 ready. In addition, the Year 2000
issue has accelerated the timing of an estimated $26 of capital expenditures
of which $17 has been capitalized as of January 2, 1999. No significant
capital projects have been delayed as a result of addressing the Year 2000
issue. Based on the Company's plan, the remaining costs to be expended to
become Year 2000 ready are not expected to materially impact future cash
flows.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Discussion of Financial Condition (continued)
The Company believes that its program will result in Year 2000 readiness.
However, due to the complexity of the issue, there can be no assurances given
that the Company's plan will be fully effective. The Company could experience
interruptions of business at some of its operations, including those caused
by, but not limited to, the inability of utility companies to provide
telecommunications and electrical services, the failure of financial
institutions to process transactions, and the inability of vendors to deliver
products on a timely basis. The Company is in the process of developing
contingency plans which are anticipated to be completed by September 30, 1999,
with respect to the Company's facilities and merchandise supply and
distribution networks.
As discussed in Note 2 to the Consolidated Financial Statements, the
accompanying consolidated 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.
Capital expenditures during 1998 of $93 were primarily related to systems
development, remodeling of three stores, merchandise fixture and presentation
programs, and retail facility improvements.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Total capital expenditures $ 93 $ 47 $ 79
Capital appropriations authorized during the year 89 57 90
Cancellations of prior year's appropriations (3) (66) (34)
Unexpended capital appropriations at year-end 50 57 113
</TABLE>
Wards is not contractually committed to spend all of the capital
appropriations unexpended at January 2, 1999, but generally expects to do so.
The DIP Agreement restricts the amount of capital expenditures Wards may make
during the term of the Agreement.
ITEM 8. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
--------
<S> <C>
Report of Independent Public Accountants 23
For the 52-Week Period Ended January 2, 1999, the 53-Week Period
Ended January 3, 1998 and the 52-Week Period Ended December 28, 1996
Consolidated Statements of Income 24
Consolidated Statements of Shareholders' Equity (Deficit) 26
Consolidated Statements of Cash Flows 28
Consolidated Balance Sheets at January 2, 1999 and January 3, 1998
Notes to Consolidated Financial Statements 25
</TABLE>
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Shareholders
of Montgomery Ward Holding Corp.:
We have audited the accompanying consolidated balance sheets of MONTGOMERY WARD
HOLDING CORP. (a Delaware Corporation) AND SUBSIDIARIES (of which Montgomery
Ward Holding Corp. and certain of its U.S. subsidiaries filed petitions for
reorganization on July 7, 1997 under Chapter 11 of the United States Bankruptcy
Code), as of January 2, 1999 and January 3, 1998, and the related consolidated
statements of income, shareholders' equity (deficit) and cash flows for the
fiscal years ended January 2, 1999, January 3, 1998 and December 28, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Montgomery Ward
Holding Corp. and Subsidiaries as of January 2, 1999 and January 3, 1998 and the
results of their operations and their cash flows for the fiscal years ended
January 2, 1999, January 3, 1998 and December 28, 1996, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2, the
Company expects to file a plan of reorganization with the Bankruptcy Court
shortly. The Company anticipates emerging from bankruptcy in July 1999. On July
7, 1997, the Company filed a voluntary petition seeking to reorganize under
Chapter 11 of the United States Bankruptcy Code. The Chapter 11 filing was the
result of violation of certain debt covenants, recurring operating losses,
deterioration of vendor support, and cash flow deficiencies. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Although the Company is currently operating as a Debtor-In-Possession
under the jurisdiction of the Bankruptcy Court, the continuation of the business
as a going concern is contingent upon, among other things, the approval and
confirmation by the creditors and Bankruptcy Court of the aforementioned plan of
reorganization, the success of future operations, and the ability to recover the
carrying amount of assets and/or the amount and classification of liabilities.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
Arthur Andersen LLP
Chicago, Illinois
February 11, 1999
23
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
--------------- --------------- ---------------
Jan. 2, Jan. 3, Dec. 28,
(In millions, except per share amounts) 1999 1998 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales, including leased and licensed department sales $ 3,634 $ 4,534 $5,879
Costs and Expenses
Cost of goods sold, including net occupancy and
buying expense 2,949 3,954 4,868
Operating, selling, general and administrative
expenses ( Notes 11 and 17) 1,047 1,475 1,338
Interest expense, net (Note 15) 56 108 119
--------------- --------------- ---------------
Total Costs and Expenses 4,052 5,537 6,325
--------------- --------------- ---------------
Loss from Continuing Operations before Reorganization
Costs and Income Taxes (418) (1,003) (446)
Reorganization Costs (Note 5) 218 553 -
--------------- --------------- ---------------
Loss before Income Taxes and Discontinued Operations (636) (1,556) (446)
Income Tax Expense (Benefit) (Note 9) 306 (386) (164)
--------------- --------------- ---------------
Loss before Discontinued Operations (942) (1,170) (282)
Income (Loss) from Discontinued Operations,
net of Income Taxes (Note 3) (29) 18 45
--------------- --------------- ---------------
Net Loss (971) (1,152) 237
Preferred Stock Dividend Requirements (Note 12) - (8) (12)
--------------- --------------- ---------------
Net Loss Applicable to Common Shareholders $ (971) $(1,160) $ (249)
=============== =============== ===============
Net Income (Loss) per Common Share (Note 13)
Class A
Before Discontinued Operations $(25.46) $(32.17) $(7.48)
Discontinued Operations (.79) .50 1.15
--------------- --------------- ---------------
$(26.25) $(31.67) $(6.33)
=============== =============== ===============
Class B
Before Discontinued Operations $(18.99) $(23.54) $(6.17)
Discontinued Operations (.59) .37 .65
--------------- --------------- ---------------
$(19.58) $(23.17) $(5.22)
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
(In millions) 1999 1998
------------------ -------------------
<S> <C> <C>
Assets
Cash and cash equivalents (Note 1) $ 58 $ 164
Investments of insurance operations 3 3
------------- -----------
Total Cash and Investments 61 167
Trade and other accounts receivable 187 153
Accounts and notes receivable from affiliates (Notes 6 and 10) 123 17
------------- -----------
Total Receivables 310 170
Merchandise inventories 953 1,120
Prepaid pension cost (Note 7) 402 366
Properties, plants and equipment, net of accumulated
depreciation and amortization (Note 8) 963 1,052
Net assets of discontinued operations (Note 3) 666 732
Other assets (Note 8) 137 174
Deferred income taxes (Note 9) - 299
------------- -----------
Total Assets $ 3,492 $ 4,080
============= ===========
Liabilities
Short-term debt (Note 10) $ 328 $ 14
Trade accounts payable 444 442
Accrued liabilities and other obligations (Note 6) 738 561
Long-term debt (Note 10) 46 108
Liabilities subject to compromise (Notes 4, 6, and 11) 3,447 3,494
------------- -----------
Total Liabilities 5,003 4,619
Commitments and Contingent Liabilities (Notes 10 and 16 )
Redeemable Preferred Stock (Note 12) 177 177
Shareholders' Deficit
Common stock (Note 13) 1 1
Capital in excess of par value 65 64
Accumulated deficit (1,622) (651)
Accumulated other comprehensive income 7 9
Less: Treasury stock, at cost (139) (139)
------------- -----------
Total Shareholders' Deficit (1,688) (716)
------------- -----------
Total Liabilities and Shareholders' Deficit $ 3,492 $ 4,080
============= ===========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Class A Class B
Common Common Capital
Stock Stock In Accum. Treasury Total
$.01 $.01 Excess Other Stock Share-
Par Par Common of Par Retained Comp. At Holders'
Value Value Stock Value Earnings Income Cost Equity
------------ ---------- -------- -------- ----------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
Dec. 30, 1995 19,210 25,000 $1 $45 $ 758 $10 $(114) $ 700
Net loss - - - - (237) - - (237)
Unrealized losses
on securities, net
of reclassification
adjustment - - - - - (1) - (1)
-----------
Comprehensive
loss (238)
Cash dividends
declared and paid - - - - (9) - - (9)
Cash dividends
declared - - - - (3) - - (3)
Compensation
expense on
stock option
exercises and
other share
exchanges - - - 5 - - - 5
Shares repur-
chased as
treasury stock (1,242) - - - - - (25) (25)
Shares issued
upon exercise
of options 352 - - 3 - - - 3
Shares issued
upon exercise
of conversion
rights 2 - - - - - - -
------- ------- ------ ----- ------- ------ ------- -------
Balance,
Dec. 28, 1996 18,322 25,000 $1 $53 $ 509 $ 9 $(139) $ 433
======= ======= ====== ===== ======= ====== ======= =======
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
Class A Class B Capital
Common Common in Total
Stock Stock Excess Accum. Treasury Share-
$.01 $.01 of Retained Other Stock Holders'
Par Par Common Par Earnings Comp. at Equity
Value Value Stock Value (Deficit) Income Cost (Deficit)
---------- --------- -------- -------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Balance
Dec. 28, 1996 18,322 25,000 $1 $53 $ 509 $9 $(139) $ 433
Net loss - - - - (1,152) - - (1,152)
Unrealized losses
on securities, net
of reclassification
adjustment - - - - - - - -
--------
Comprehensive
loss (1,152)
Cash dividends
declared and paid - - - - (3) - - (3)
Cash dividends
declared - - - - (5) - - (5)
Grants of restricted
stock and stock
Options by
Majority
Shareholder
(Note 17) - - - 11 - - - 11
--------- -------- ------- -------- -------- -------- --------- ----------
Balance,
Jan. 3, 1998 18,322 25,000 $ 1 $ 64 $(651) $ 9 $ (139) $ (716)
--------- -------- ------- -------- -------- -------- --------- ----------
Net loss - - - - (971) - - (971)
Unrealized losses
on securities, net
of reclassification
Adjustment - - - - - (2) - (2)
----------
Comprehensive (973)
loss
Grants of restricted
stock and stock
Options by
Majority
Shareholder
(Note 17) - - - 1 - - - 1
--------- -------- ------- -------- -------- -------- --------- ----------
Balance,
Jan. 2, 1999 18,322 25,000 $ 1 $ 65 $ (1,622) $ 7 $ (139) $ (1,688)
========= ======== ======= ======== ======== ======== ========= ==========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
----------------- --------------- --------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
----------------- --------------- --------------
<S> <C> <C> <C>
Cash flows used for operating activities:
Net loss $(971) $(1,152) $(237)
Adjustments to reconcile net loss to net cash used for
operating activities:
(Income) loss from discontinued operations 29 (18) (45)
Provision for disposition of assets of Lechmere, Inc. - 280 -
Provision for closing of Wards and Electric Avenue
& More stores 125 204 -
Provision for other reorganization costs 36 38 -
Net receipts of cash relating to disposition of assets of
Lechmere, Inc. and closing of Wards and Electric
Avenue & More stores 47 155 -
Depreciation and goodwill amortization 95 119 128
Deferred income taxes 299 (375) (110)
Changes in operating assets and liabilities:
Trade and other accounts receivable 7 (28) (18)
Accounts and notes receivable from affiliates (1) (9) (11)
Merchandise inventories 163 191 225
Prepaid pension cost (36) (19) (13)
Other assets 44 33 48
Trade accounts payable (4) 209 (219)
Liabilities subject to compromise (44) (12) -
Federal income taxes payable, net - (4) (2)
Accrued liabilities and other obligations 44 96 (38)
--------------- ------------- ------------
Net cash used for continuing operations (167) (292) (292)
Net cash provided by (used for) discontinued operations 4 66 (22)
--------------- ------------- ------------
Net cash used for operating activities $ (163) $ (226) $ (314)
--------------- ------------- ------------
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
MONTGOMERY WARD HOLDING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
--------------- --------------- --------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Cash flows used in investing activities:
Purchase of short-term investments $ - $ - $ (2)
Capital expenditures (93) (47) (79)
Disposition of properties, plants and equipment, net - 12 19
Other investments - - (9)
--------------- --------------- --------------
Net cash used in investing activities of
continuing operations (93) (35) (71)
Net cash provided by (used in) investing activities of
discontinued operations 27 (58) (95)
--------------- --------------- --------------
Net cash used in investing activities (66) (93) (166)
--------------- --------------- --------------
Cash flows provided by financing activities:
Proceeds from issuance of short-term debt, net - 409 486
Borrowings under Post-Petition Loan and Guaranty
Agreement 937 321 -
Payments under Post-Petition Loan and Guaranty
Agreement (683) (271) -
Restricted cash applied as payments under Long Term
Credit Agreement (14) - -
Payments of long-term debt (2) (5) (56)
Payments of obligations under capital leases (13) (13) (12)
Cash dividends paid - (3) (9)
Proceeds from issuance of common stock - - 3
Purchase of treasury stock, at cost - - (20)
--------------- -------------- -------------
Net cash provided by financing activities of
continuing operations 225 438 392
Net cash provided by (used for) financing activities
of discontinued operations (102) - 102
Net cash provided by financing activities 123 438 494
--------------- --------------- --------------
Increase (decrease) in cash and cash equivalents (106) 119 14
Cash and cash equivalents at beginning of period 164 45 31
--------------- ------------- --------------
Cash and cash equivalents at end of period $ 58 $ 164 $ 45
=============== =============== ==============
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES
Business Segments
Montgomery Ward Holding Corp. ("the Company" or "MW Holding") and its
wholly owned subsidiary, Montgomery Ward & Co., Incorporated ("Wards"), are
engaged in retail merchandising. As of January 2, 1999, retail
merchandising operations are conducted through Wards. The assets of Wards'
wholly-owned subsidiary, Lechmere, Inc. ("Lechmere") were disposed of in
fiscal 1997 (see Note 4) and Lechmere's retail merchandising operations
closed. On February 1, 1999 Wards announced its intention to sell its
wholly-owned subsidiary, Signature Financial/Marketing, Inc. ("Signature")
which operates in the direct response marketing segment. See Note 3 for
information regarding the discontinued direct response marketing
operations.
Principles of Consolidation; Use of Estimates
The consolidated financial statements include the Company and all
subsidiaries. Investments in 20 percent to 50 percent owned affiliates,
where significant influence exists, are accounted for using the equity
method. All significant intercompany accounts and transactions are
eliminated in consolidation. Certain prior period amounts have been
reclassified to be comparable with the current period presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Fiscal Year
The Company operates on a 52- or 53- week fiscal year basis. The Company's
fiscal year ends on the Saturday closest to December 31. The fiscal years
ended January 2, 1999 and December 28, 1996 included 52 weeks. The fiscal
year ended January 3, 1998 included 53 weeks.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, time deposits and highly
liquid debt instruments with an original maturity of three months or less.
The carrying amount reported in the financial statements for cash and cash
equivalents approximates the fair value of these assets.
Cash and cash equivalents includes $8 million and $110 million at January
2, 1999 and January 3, 1998, respectively, of restricted cash generated
from the disposition of the assets of Lechmere. The proceeds may be used to
pay Lechmere's post-petition obligations, or may be used for other purposes
only pursuant to order of the Bankruptcy Court. In September 1998, Lechmere
loaned $105 million of its proceeds from the disposition of its assets to
Signature. In addition, the Company has approximately $5 million and $29
million at January 2, 1999 and January 3, 1998, respectively, of cash held
in segregated accounts by various banks who were lenders to the Company
under the Long Term and Short Term Credit Agreements. This cash is being
held subject to potential offset, pursuant to the order of the Bankruptcy
Court.
In June 1998, $24 million of pre-petition debt and interest under the Long
Term Credit Agreement and Short Term Credit Agreement was offset against
this cash.
30
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES (CONTINUED)
Cash and Cash Equivalents (continued)
Following is a summary of cash payments for interest and income taxes and
non-cash financing and investing activities:
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
---------------- ----------------- ----------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
---------------- ----------------- ----------------
<S> <C> <C> <C>
Cash paid (refunded) for:
Income taxes $ 3 $ 1 $ (22)
Interest 38 74 111
Non-cash financing activities:
Notes issued for purchase of treasury stock - - 5
Non-cash investing activities:
Grants of restricted stock and stock options
by majority shareholder 1 11 -
Increase in liquidation value of preferred
stock - 2 -
Changes in unrealized gain on marketable
securities (2) - (1)
</TABLE>
Investments of Insurance Operations
The Company accounts for investments under Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
In Debt and Equity Securities". Under SFAS No. 115, all debt and equity
securities are classified by management as "available-for-sale" and are
stated at fair market value with all changes in unrealized gains or losses,
net of applicable income taxes, included in Shareholders' Equity (Deficit).
Merchandise Inventories
Merchandise inventories consist primarily of merchandise held for resale
and are valued at the lower of the cost or market using the retail, first-
in, first-out ("FIFO") method.
Properties, Plants and Equipment
Depreciation is computed on a straight-line basis over the estimated useful
life of the asset, with annual rates ranging between 2% and 3% for
buildings and between 12% and 25% for fixtures and equipment. Leasehold
improvements and assets under capital leases are amortized on a straight-
line basis over no longer than the primary term of the lease. Depreciation
expense includes amortization of assets under capital leases.
31
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES (CONTINUED)
Properties, Plants and Equipment (continued)
Interest relating to construction in progress is capitalized and amortized
over the useful life of the property. In 1996, pre-opening costs, which
were not capital in nature, were expensed upon store openings. No pre-
opening costs were incurred in 1997 or 1998. Statement of Position ("SOP")
98-5 "Reporting of Costs of Start-up Activities" requires costs of start-up
activities to be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. The Company will expense all costs
as incurred relating to future store openings. Normal maintenance and
repairs are expensed as incurred. Major repairs that materially extend the
lives of properties are capitalized. SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," provides
guidance on accounting for the costs of computer software developed or
obtained for internal use and requires certain costs incurred to be
expensed or capitalized depending on the stage of its development and
nature. This SOP is effective for fiscal years beginning after December 15,
1998. The Company's current accounting policy complies with this Statement.
Results of operations and financial position of the Company will be
unaffected by this new standard.
Impairment of Long-lived Assets
In the event facts and circumstances indicate the cost of any long-lived
assets may be impaired, an evaluation of recoverability would be performed.
If an evaluation is required, the estimated future undiscounted cash flows
associated with the assets would be compared to the carrying amount of the
assets to determine if a write-down to market value or discounted cash flow
value is required.
Interest Rate Exchange and Cap Agreements
Amounts paid or received pursuant to interest rate exchange and cap
agreements are deferred and amortized as interest expense or income over
the remaining life of the applicable agreement.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences by applying enacted statutory tax rates to differences between
the financial statement carrying amounts and tax bases of existing assets
and liabilities. In addition, the amount of any future tax benefits is
reduced by a valuation allowance to the extent such benefits are not
expected to be realized on a more likely than not basis.
Advertising Costs
The Company expenses production costs of print, radio and television
advertisements on the date the advertising first takes place. Advertising
expenses included in operating, selling, general and administrative
expenses were $229 million, $334 million and $373 million for the periods
ended January 2, 1999, January 3, 1998 and December 28, 1996, respectively.
32
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. MAJOR ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), Reporting Comprehensive Income. This statement
establishes rules for 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 (deficit). The
components of the unrealized gains (losses) on securities are as follows:
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
-------------- ------------- -------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Unrealized holding gains arising during
the period $ 6 $ 3 $ 2
Less: reclassification adjustment for gains
included in net income (8) (4) (2)
---------- ---------- -----------
$ (2) $ (1) $ -
========== ========== ===========
</TABLE>
The unrealized holding gains and the reclassification adjustment for gains
included in net loss for the period ended January 2, 1999 are net of income
taxes of $3 million and $5 million, respectively. The income taxes
associated with the unrealized holding gains and reclassification
adjustment for gains included in net income for the periods ended January
3, 1998 and December 28, 1996 are not significant.
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 and its direct and indirect subsidiaries; Marinco Insurance
U.S.A., Inc. ("Marinco"); and Montgomery Ward Foundation.
After a long period of negotiation, Wards was unable to reach an out-of-
court settlement with its lenders. Accordingly, bankruptcy petitions were
filed in order to obtain an opportunity to reorganize and begin
implementing the Company's strategies while working to restructure its
indebtedness. Pursuant to the Post-Petition Loan and Guaranty Agreement
dated July 8, 1997, among Wards and Lechmere, as borrowers; MW Holding and
other debtor subsidiaries of MW Holding, as guarantors; General Electric
Capital Corporation ("GE Capital"), as agent and lender; and various
lenders, as amended (the "DIP Facility"), the lenders have agreed to
provide up to $1 billion in post-petition financing to Wards.
33
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. REORGANIZATION (CONTINUED)
On February 1, 1999, the Company announced its intention to emerge from
Chapter 11 bankruptcy protection in mid-1999. The Company will file its
plan of reorganization and disclosure statement with the Bankruptcy Court
shortly. The plan of reorganization will set forth the means for satisfying
claims and interests in the Company and its debtor subsidiaries, including
the Liabilities subject to compromise. Under the reorganization plan, when
filed, secured and non-tax priority claimholders will generally receive
cash equal to the amount of their allowed claim. Claims held by unsecured
creditors and certain allowed vendor claims held by GE Capital will be
satisfied by cash distributions for a portion of the allowed claims. GE
Capital will receive a significant equity interest in the Company in
exchange for its remaining claims. The Company intends to fund its
distributions under the plan of reorganization principally through funds
placed in escrow by GE Capital and through the termination of its over-
funded defined benefit pension plan. The Company expects to repay GE for
the funds placed in escrow by GE with the proceeds from the sale of
Signature. The consummation of a plan of reorganization for the Company and
its debtor subsidiaries will require the requisite vote of impaired
creditors and stockholders and confirmation by the Bankruptcy Court, which
is expected to be completed by the Summer of 1999.
The accompanying consolidated 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 significant 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. DISCONTINUED OPERATIONS
On February 1, 1999, Wards announced that GE Capital, a major shareholder
and creditor, will acquire Signature, Wards' direct marketing response
operations segment. Signature's results of operations have been classified
as discontinued operations and prior periods have been restated. The net
loss for the period ended January 2, 1999 includes the cumulative effect of
$33 million associated with a change in the method of accounting for the
printing and mailing of membership material costs. Historically, these
costs were capitalized and amortized ratably over the membership period as
revenue is recognized. Effective in fiscal year 1998, these costs were
expensed upon the mailing of membership materials. The net loss for the
period ended January 2, 1999 also includes a $31 million charge associated
with the estimated loss on the sale of its dining operations. In March
1999, Signature signed a definitive agreement for the sale of its dining
business to Transmedia Network Inc. Summarized financial data of
discontinued operations are as follows:
34
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. DISCONTINUED OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
-------------- ------------- -------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 831 $ 852 $ 741
Income (loss) from operations before
income taxes (29) 29 71
Income tax expense - (11) (26)
Net income (loss) (29) 18 45
</TABLE>
<TABLE>
<CAPTION>
January 2, January 3,
(In millions) 1999 1998
-------------- ---------------
<S> <C> <C>
Net assets of discontinued operations
Cash and investments $ 440 $ 408
Direct response and insurance acquisition costs 466 559
Other assets 293 302
Short-term debt (105) (102)
Insurance policy claim reserves (234) (236)
Accrued liabilities (194) (199)
------------ -------------
Net assets of discontinued operations $ 666 $ 732
============ =============
</TABLE>
The short-term debt balance at January 2, 1999 represents a loan from
Lechmere (see Note 10).
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.
35
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LIABILITIES SUBJECT TO COMPROMISE (CONTINUED)
<TABLE>
<CAPTION>
January 2, January 3,
(In millions) 1999 1998
-------------- --------------
<S> <C> <C>
Accounts payable $1,380 $1,376
Long Term Credit Agreement 603 603
Short Term Credit Agreement 442 456
Note Purchase Agreements 276 276
Other long-term debt 4 9
Obligations under capital leases 64 77
Lease and other contract rejection claims 118 104
Other liabilities 560 593
--------- ----------
$3,447 $3,494
========= ==========
</TABLE>
The Company has $56 million of liabilities due Marinco which have been
eliminated in consolidation but are subject to compromise. In addition,
obligations under capital leases include amounts due Signature of $22 million
and $26 million at January 2, 1999 and January 3, 1998, respectively.
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.
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.
Contractual interest expense not recorded on certain pre-petition debt totaled
$122 million for the period ended January 2, 1999 and $61 million for the
period from July 8, 1997 through January 2, 1999.
Prior to the bankruptcy filing, the Company's debt consisted primarily of
borrowings under the Long Term Credit Agreement, the Short Term Credit
Agreement and Note Purchase Agreements. The Company was in default of the
terms of each applicable loan agreement. Each of these agreements had a
maturity date of August 29, 1997 and were to bear interest at varying rates.
The Company was also in default of the terms of the Seasonal Credit Agreement,
which was terminated as a result of the Chapter 11 filing. There were no
borrowings outstanding under this agreement. The caption "Accounts payable,"
included in Liabilities subject to compromise, includes facilities Wards had
available under vendor financing programs which totaled $725 million. At June
28, 1997, these facilities were principally drawn. These facilities are no
longer available due to the Chapter 11 filing.
The Company had entered into interest rate exchange and cap agreements with
various banks to offset the market risk associated with an increase in
interest rates under both the Long Term and Short Term Credit Agreements. The
aggregate notional principal amounts under the interest rate exchange
agreements was $175 million. The interest rate exchange agreements were
terminated upon the Company's bankruptcy filing. Pursuant to the early
termination, the Company incurred a pre-petition liability of $3 million which
has been included in Liabilities subject to compromise. The cap agreements,
which all expired during fiscal 1997, were not terminated early.
36
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LIABILITIES SUBJECT TO COMPROMISE (CONTINUED)
As part of the Chapter 11 reorganization process, the Company has attempted
to notify all known or potential creditors of the Chapter 11 filing for the
purpose of identifying all pre-petition claims against the Company.
Generally, creditors whose claims arose prior to the Petition Date had
until March 2, 1998 ("Bar Date") to file claims or be barred from asserting
claims in the future. Claims arising from rejection of executory contracts
and leases by the Company and claims related to certain other items were
permitted to be filed by other dates set by the Bankruptcy Court.
Differences between amounts shown by the debtors and claims filed by
creditors are being investigated and will either be amicably resolved or
adjudicated. The ultimate amount of and settlement terms for such
liabilities are subject to the plan of the reorganization when confirmed,
and accordingly are not presently determinable.
5. REORGANIZATION COSTS
Reorganization costs recorded in fiscal 1998 and 1997 consisted of the
following (in millions):
<TABLE>
<CAPTION>
52-Week 53-Week
Period Ended Period Ended
-------------- --------------
Jan. 3, Jan. 2,
1999 1998
-------------- --------------
<S> <C> <C>
Store closings $ 125 $ 484
Interim Account Agreement Fees (Note 6) 30 3
Professional fees 17 10
Distribution center closings 15 -
Other 39 58
Interest income (8) (2)
-------------- --------------
$ 218 $ 553
============== ==============
</TABLE>
In 1997, Wards announced its exit of its non-core specialty retail
businesses- Lechmere, Home Image by Lechmere and Electric Avenue & More and
the closing of 53 underperforming retail stores and four outlet and
liquidation centers. In 1998, Wards announced the closing of nine stores.
1998 store closing charges include 9 stores closed during 1998 and 39 store
closings that will be completed in 1999. Sales of automotive products and
services were discontinued in 17 operating retail stores in January 1999.
The charges associated with these restructuring efforts included 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.
Distribution center closings include 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, severance and other expenses.
37
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. ACCOUNTS AND NOTES RECEIVABLE FROM AFFILIATES
Wards entered into a Bank Credit Card Program Agreement ("Card Agreement")
effective April 1, 1996 with Monogram Credit Card Bank of Georgia
("Monogram"), and an Account-Related Agreement ("Account Related
Agreement") effective April 1, 1996 with Montgomery Ward Credit Corporation
("Montgomery Ward Credit") (collectively referred to as the "Agreements")
pursuant to which Monogram and Montgomery Ward Credit (collectively
referred to as the "Montgomery Ward Credit Companies" or "MWCC"), both of
which are affiliates of GE Capital provide services to Wards, and MWCC
makes payments to Wards as to their receivables generated by sales to
customers of Wards, its affiliates and licensees who utilize the Wards
private label credit card.
Under the Agreements, Monogram has the exclusive right to operate the
Wards' private label credit card system and the obligation to pay to Wards
the face amount of Monogram's receivables generated by the Wards private
label credit card system, up to $7 billion outstanding at any time. Sales
of receivables to Montgomery Ward Credit under the prior arrangements, and
payments with respect to receivables under the current Agreements, were
$2.1 billion, $2.6 billion and $3.6 billion for the periods ended January
2, 1999, January 3, 1998 and December 28, 1996, respectively. At January 2,
1999 and January 3, 1998, there were $3.3 billion and $4.2 billion,
respectively, of Wards credit card receivables owned by Montgomery Ward
Credit Companies. Amounts receivable from Monogram in connection with such
receivables are included in Accounts and notes receivable from affiliates.
Under the Card Agreement, Wards is required to pay Monogram the excess
interest costs on a monthly basis if a blended interest rate applicable to
funding costs with respect to the receivables exceeds 10% per annum. This
blended interest rate has been less than 10% since 1988.
Should Montgomery Ward Credit Companies, or their guarantor GE Capital,
fail to perform their obligations under the Agreements, Wards would suffer
an accounting loss up to the amount of Wards' share of finance charges and
late fees (as described below), net of applicable reserves carried by
Montgomery Ward Credit. Wards estimates that any accounting loss would be
immaterial at January 2, 1999. Montgomery Ward Credit Companies'
obligations under the Agreements are not collateralized.
Wards generally bears a portion of the risk of credit losses due to non-
payment by cardholders up to a maximum of 2.6% of average outstanding
receivables, subject to offsets relating to Wards' share of certain
incremental increases in finance charges and late fees payable by
cardholders. Wards is also responsible for losses on certain higher risk
starter card accounts to the extent the loss percentage as to those
accounts exceeds the loss percentage experience of the rest of the
portfolio.
Wards' net unpaid liability for credit losses for 1991 through 1998 are to
be payable to Montgomery Ward Credit pursuant to a note ("Continuation
Note") due in early 2003, provided that the outstanding balance of such
note cannot exceed $300 million. A remaining note in the amount of $15
million, consisting of losses incurred after July 7, 1997 for the remaining
portion of 1997, was executed which provides for monthly principal payments
in the amount of 5% of the scheduled monthly principal payments for the
Continuation Note. Starter card losses are payable currently. Interest on
Wards' unpaid liability for credit losses is to be payable at the monthly
GE commercial paper rate. Interest on notes outstanding as of July 7, 1997,
has been stayed by the Chapter 11 proceeding.
38
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. ACCOUNTS AND NOTES RECEIVABLE FROM AFFILIATES (CONTINUED)
In exchange for Wards' agreement to allow MWCC to increase finance charge
rates and late fees in selected states, Wards receives a share of
incremental finance charges and late fees resulting from such increases.
Such amount is available for offset against Wards' unpaid liability for its
share of credit losses, and to the extent not currently paid or offset
earns interest at the same rate as amounts owned by Wards to Montgomery
Ward Credit. In the event that, due to the increase in finance charge rates
and late fees, refunds are required to be made, Wards and MWCC have agreed
in certain cases to share the financial risk.
In connection with the foregoing arrangements, Wards owes $72 million for
1998 credit losses offset by incremental finance charges and late fee
assessments. Wards has previously executed notes for certain of its unpaid
share of credit losses through 1997, offset by incremental finance charges
and late fee assessments due to Wards for a net obligation of $300 million.
At January 2, 1999 and January 3, 1998, $288 million of the net obligation
is included in Liabilities subject to compromise and the remainder of the
net obligation of $84 million and $40 million at January 2, 1999 and
January 3, 1998, respectively, is included in Accrued liabilities and other
obligations. As the $300 million threshold has been reached, it is expected
that future payments may be required depending upon the level of credit
card losses.
The Agreements are scheduled to expire on December 31, 2011, provided the
terms shall continue thereafter from year to year unless either party gives
ten years prior notice of its election to terminate. Except upon the
occurrence of certain events of default, the Agreements may generally not
be terminated by either party prior to December 31, 2011.
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 whether
the Interim Amount Agreement is terminated or not, except in the
termination circumstance where the Company would be liquidated or when
certain defaults occur, 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 authorizing Wards to discontinue all of
its retail operations or converts the case to Chapter 7, (e) upon certain
defaults by the Company or Wards or default by Monogram or Montgomery Ward
Credit, or (f) December 31, 1999.
39
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RETIREMENT PLANS
Retirement plans cover a majority of full-time associates of Wards and its
subsidiaries. Retirement benefits are provided through a defined benefit
pension plan and a defined contribution plan. In addition, certain
associates who retire after participation in the retirement plan for ten
years and who were members of the health care plan for the year prior to
retirement are eligible for certain post-retirement health care benefits,
the cost of which is shared with the retirees. Certain associates who
retired before January 1, 1996 are eligible for post-retirement life
insurance benefits. The post-retirement healthcare benefits cease at age 65
for associates who retire on or after January 1, 1996 and who do not meet
certain age and service requirements. In 1992, the Company established a
limit on its future annual contributions on behalf of retirees at a maximum
of 125% of the projected 1992 company contributions. The Company continues
to evaluate ways in which it can better manage retiree benefits and control
costs. Any changes in the plan or revisions to assumptions that affect the
amount of expected future benefits may have a significant effect on the
amount of the reported obligation and annual expense.
<TABLE>
<CAPTION>
PENSION POST-RETIREMENT
BENEFITS BENEFITS
------------------------------- --------------------------------
1998 1997 1998 1997
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 691 $ 677 $ 109 $ 119
Service cost 11 11 1 1
Interest cost 45 48 6 8
Benefit payments (70) (66) (8) (8)
Actuarial (gains)/losses (8) 42 (12) (10)
Plan amendments - (21) (2) (1)
------------- ------------- -------------- -------------
Benefits obligation at end of year $ 669 $ 691 $ 94 $ 109
------------- ------------- -------------- -------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning $ 967 $ 946
of year
Actual return on plan assets 234 87
Benefits paid (70) (66)
------------- -------------
Fair value of plan assets at end of year $1,131 $ 967
============= =============
Funded status $ 462 $ 277 $ (94) $(109)
Unrecognized net actuarial (gain)/loss (49) 103 (25) (14)
Unrecognized prior service cost (11) (14) (15) (15)
------------- ------------- -------------- -------------
Prepaid (accrued) benefit cost $ 402 $ 366 $(134) $(138)
============= ============= ============== =============
WEIGHTED-AVERAGE ASSUMPTIONS AS OF YEAR
END
Discount rate for obligation 6.75% 7.00% 6.75% 7.00%
Expected return on plan assets 9.50% 9.50% - -
Rate of compensation increase 3.00% 3.00% - -
</TABLE>
40
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RETIREMENT PLANS (CONTINUED)
Components of net periodic benefit cost are as follows:
<TABLE>
<CAPTION>
PENSION POST-RETIREMENT
BENEFITS BENEFITS
------------------------------- -----------------------------------
1998 1997 1998 1997
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT
(INCOME) EXPENSE
Service cost $ 11 $ 11 $ 1 $ 1
Interest cost 45 48 6 8
Expected return on assets (90) (80) (2) (1)
Amortization of prior service cost - (1) (1) (1)
Amortization of actuarial loss/(gain) (2) 3 - -
------------- ------------- --------------- ---------------
Net periodic benefit (income) expense $ (36) $ (19) $ 4 $ 7
============= ============= =============== ===============
</TABLE>
The Company provides a 401(k) defined contribution plan to eligible
employees. Company matching contributions amounted to $2 million, $4
million and $6 million for the periods ended January 2, 1999, January 3,
1998 and December 28, 1996, respectively.
The assumed health care cost trend rate and the impact of a 1% change in
the medical trend rate on the accumulated post-retirement benefit
obligation, service cost and interest cost are not applicable due to caps
established on current cost levels.
A motion was approved by the Bankruptcy Court on February 19, 1999, which
would allow the Company to spin-off and then terminate a portion of its
over-funded defined benefit pension plan in order to partially fund its
distributions under its plan of reorganization. Annuities will be purchased
to fund the benefits of active, terminated and retired associates. A
portion of the excess benefits will be contributed to a replacement plan
for active associates. Subject to government approval, the remaining assets
will revert to the Company, after payment of applicable taxes. In
connection with the termination of the plan, the Company estimates it will
incur a loss in excess of $100 million in 1999.
8. PROPERTIES, PLANTS AND EQUIPMENT
The details of the properties, plants and equipment accounts at cost are
shown below:
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
(In millions) 1999 1998
-------------------- -------------------
<S> <C> <C>
Land $ 154 $ 162
Buildings 712 768
Leasehold improvements 243 275
Fixtures and equipment 450 462
Deferred software costs 70 39
Assets under capital leases 123 143
Less accumulated depreciation and amortization (789) (797)
-------------------- -------------------
Properties, plants and equipment, net $ 963 $1,052
==================== ===================
</TABLE>
41
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. PROPERTIES, PLANTS AND EQUIPMENT (CONTINUED)
Depreciation expense for properties, plants and equipment was $94 million,
$117 million and $124 million for the periods ended January 2, 1999,
January 3, 1998 and December 28, 1996, respectively. Assets held for
disposition, representing primarily closed retail and warehouse facilities,
of $82 million and $76 million at January 2, 1999 and January 3, 1998,
respectively, are included in Other assets. Losses of $42 million and $16
million for the periods ended January 2, 1999 and January 3, 1998,
respectively, which are included in Reorganization Costs, were recognized
in connection with the write-down of these properties to their net
realizable values.
9. INCOME TAXES
As of January 2, 1999, the Company has a tax credit of $831 million
attributable to net operating loss ("NOL") carryforwards available, which
expire beginning in 2007; targeted jobs tax credit ("TJTC") carryforwards
of $7 million, which expire beginning in 2009; alternative minimum tax
("AMT") credits of $3 million available to offset future federal income tax
liabilities; and capital loss carryforward credits of $3 million expiring
in 2002.
At year-end 1997, management evaluated the realizability of the tax
carryforwards and established a valuation reserve based upon its tax
planning strategy of selling certain appreciated, non-operating assets,
prior to emerging from Chapter 11, to avoid the carryforwards expiring
without being used. During the third quarter of 1998, management determined
that the tax benefits will more likely be realized through emergence from
bankruptcy and the related expected restructuring of liabilities. As a
result of the foregoing, the Company increased its valuation allowance by
$299 million at January 2, 1999, since the consolidated financial
statements do not give effect to adjustments that might result from a plan
of reorganization. It is anticipated that the implementation of a plan of
reorganization would significantly reduce or eliminate the amount of tax
credits available.
The approximate tax effects of temporary differences and carryforwards that
give rise to the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
(In millions) 1999 1998
------------------------ -------------------
<S> <C> <C>
Accrued liabilities $ 262 $ 114
Postretirement benefits 47 48
Insurance reserves 54 57
Other deferred tax assets 7 13
------------------------ -------------------
Total deferred tax assets 370 232
Prepaid pension contribution (146) (131)
Net deferred liabilities of discontinued operations (148) (185)
Properties, plants and equipment (148) (117)
Other deferred tax liabilities (19) (39)
------------------------ -------------------
Total deferred tax liabilities (461) (472)
NOL, TJTC, AMT and capital loss credit carryforwards 831 744
Valuation allowance (740) (205)
------------------------ -------------------
Net deferred tax asset $ - $ 299
======================== ===================
</TABLE>
42
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES (CONTINUED)
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
-------------------- ------------------ ----------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
-------------------- ------------------ ----------------
<S> <C> <C> <C>
Federal
Current $ 2 $ 2 $ 2
Deferred 299 (372) (160)
State, local and foreign 5 (16) (6)
-------------------- ------------------ ----------------
Income tax expense (benefit) before
discontinued operations 306 (386) (164)
Income tax expense related to discontinued
operations - 11 26
-------------------- ------------------ ----------------
Total income tax expense (benefit) $ 306 $ (375) $ (138)
==================== ================== ================
</TABLE>
A reconciliation of the statutory to effective federal income tax rate is
as follows:
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
--------------- ---------------- -----------------
Jan. 2, Jan. 3, Dec. 28,
1999 1998 1996
--------------- ---------------- -----------------
<S> <C> <C> <C>
Federal income tax rate (35)% (35)% (35)%
State taxes, net of reduction of federal tax
and NOL benefit 1 (1) (1)
Tax credits - - (2)
Permanent differences 1 - 1
Change in valuation allowance 81 11 -
--------------- ---------------- -----------------
Effective income tax rate 48% (25)% (37)%
=============== ================ =================
</TABLE>
43
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SHORT-TERM AND LONG-TERM DEBT
The long-term debt of Wards and its subsidiaries is as follows:
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
(In millions) 1999 1998
---------------------- ---------------------
<S> <C> <C>
Wards
Post-Petition Loan and Guaranty Agreement $ - $ 50
Wards' Real Estate Subsidiaries
11.50% Secured Note, due serially to September 1, 2001 11 11
7.50% Secured Note, due serially to November 30, 2002 5 5
9.45% Secured Notes, due serially to November 30, 2003 14 14
7.75% Secured Notes, due serially to August 31, 2004 15 16
7.875% Secured Notes, due serially to December 15, 2005 7 7
9.00% Secured Notes, due serially to January 1, 2006 11 11
Other 7 8
---------------------- ---------------------
Total long-term debt 70 122
Less: current portion 24 14
---------------------- ---------------------
$ 46 $ 108
====================== =====================
</TABLE>
Maturities of long-term debt for the five years succeeding January 2, 1999
are as follows: 1999--$24 million, 2000--$11 million, 2001--$10 million,
2002--$9 million, 2003--$8 million, and thereafter --$8 million.
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the carrying value of
long-term debt approximates fair value.
Wards entered into the Post-Petition Loan and Guaranty Agreement ("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 billion. Wards had borrowed $304 million
under the DIP facility at January 2, 1999 which has been classified as
short-term debt due to the facility expiring on July 7, 1999. Total letters
of credit outstanding were $108 million at January 2, 1999. The Company had
$363 million of borrowing availability under the DIP Facility at January 2,
1999.
Under the DIP Facility, Wards may select among several interest rate
options, all of which are based on market rates plus a margin, as amended.
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. 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 also 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.
44
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SHORT-TERM AND LONG-TERM DEBT (CONTINUED)
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.
Effective November 9, 1998, Wards obtained a Third Amendment to the DIP
Facility ("Third Amendment Agreement") which was approved by the Bankruptcy
Court on February 1, 1999. The Third Amendment Agreement amended certain
provisions of the DIP Facility , including an increase in the interest rate
margin and a reduction in the level of earnings required, as defined in the
DIP Agreement.
On September 15, 1998, the Company received approval from the Bankruptcy
Court to permit Lechmere to lend Signature the funds to repay its
borrowings of $102 under a Credit Agreement between Signature and various
lenders, plus interest and other fees associated with the extension and
refinancing of such agreement. On September 30, 1998, Signature's loan
under the Credit Agreement was repaid from the $105 of funds advanced by
Lechmere to Signature. The Lechmere loan to Signature, which accrues
interest at either the prime rate plus 1.75% or the LIBO rate plus 2.75%,
is secured by a pledge of stock of certain Signature subsidiaries and is
guaranteed by Wards. Such guarantee is subordinate to the DIP Facility. The
loan shall become immediately due upon the earliest of (i) upon demand;
(ii) the effective date of a plan of reorganization for the debtor
subsidiary; (iii) the conversion of the bankruptcy case from a Chapter 11
case to a Chapter 7 case under the Bankruptcy Code; (iv) the sale of all or
substantially all of Signature's assets, the merger or consolidation of
Signature with or into another entity, or the sale of more than 50% of an
interest in Signature to another entity; or (v) December 31, 1999.
The Secured Notes of the real estate subsidiaries are secured by mortgage
liens and/or assignments of rental agreements whereby the real estate
subsidiaries have assigned to trustees certain monies payable under leases
with Wards. As the Secured Notes of the real estate subsidiaries are
adequately collateralized by the respective properties, these obligations
are not considered subject to compromise.
11. LEASES
The Company leases real and personal property principally through
noncancelable capital and operating leases, which generally provide for the
payment of minimum rentals and, in certain instances, executory costs and
additional rentals based upon a percentage of sales. The terms of the real
estate leases typically contain renewal +options for additional periods.
45
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. LEASES (CONTINUED)
At January 2, 1999, the minimum lease payments under all noncancelable
operating leases with an initial term of more than one year, not including
$16 million of future sublease rentals, and under capital leases are as
follows:
<TABLE>
<CAPTION>
Capital Operating
(In millions) Leases Leases
----------------------- -----------------------
<S> <C> <C>
1999 $ 17 $ 70
2000 15 61
2001 14 51
2002 14 45
2003 12 41
Thereafter 18 286
======================= -----------------------
Total Minimum Lease Payments $ 90 $ 554
=======================
Less: Executory costs, principally real
estate taxes to be paid by the lessor (2)
Less: Imputed interest (24)
-----------------------
Present value of net minimum capital
lease payments including portion due
within one year of $6 $ 64
=======================
</TABLE>
The obligations under capital leases have been included in Liabilities
subject to compromise at January 2, 1999 and January 3, 1998.
Net rent expense charged to earnings was $91 million, $128 million and $124
million for the periods ended January 2, 1999, January 3, 1998 and December
28, 1996, respectively, after deducting rentals from subleases of $7
million, $9 million and $10 million for the periods ended January 2, 1999,
January 3, 1998 and December 28, 1996, respectively. Rent expense includes
contingent lease rentals for capital and operating leases of $4 million, $7
million, and $10 million for the periods ended January 2, 1999, January 3,
1998 and December 28, 1996, respectively. These contingent lease rentals
are generally based on sales revenues.
Some rental agreements contain escalation provisions that may require
higher future rent payments. Rent expense incurred under rental agreements
which contain escalation clauses is recognized on a straight-line basis
over the life of the lease.
46
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. REDEEMABLE PREFERRED STOCK
On December 29, 1995, Wards issued 1,750 shares of senior preferred stock
("MW Senior Preferred Stock"), par value of $1.00 per share, to GE Capital
in exchange for $175 million in cash. Subsequent to year end 1995, Wards
used a portion of the proceeds to finance the purchase of the Amoco Motor
Club by its wholly-owned subsidiary, Signature. The subscription agreement
for the MW Senior Preferred Stock contained an exchange option which gave
GE Capital the option to exchange the MW Senior Preferred Stock for senior
preferred stock of the Company with substantially the same terms. On
January 31, 1996, GE Capital exercised this exchange option. On March 29,
1996, the Company issued 1,750 shares of senior preferred stock ("Senior
Preferred Stock") to GE Capital in exchange for the 1,750 shares of MW
Senior Preferred Stock held by GE Capital. Dividends on the Senior
Preferred Stock are payable quarterly at an annual rate of $7,010 per
share. The Company is required to redeem the Senior Preferred Stock on June
30, 2002, with the option of redeeming all or any portion prior to June 30,
2002.
On March 4, 1997, GE Capital, Wards and Lechmere amended the Program
Agreement under which GE Capital provided funds to Wards and Lechmere to
pay manufacturers and distributors of goods purchased by Wards and
Lechmere. In exchange for a $150 million increase in the maximum amount of
funds GE Capital agreed to provide, MW Holding agreed to issue shares of a
new series of preferred stock having a liquidation value of $21 million. On
April 1, 1997, GE Capital further increased its funding under the Program
Agreement by $100 million and the Board of Directors of MW Holding agreed
to issue additional shares of the new series of preferred stock.
At its Annual Meeting held on May 29, 1997, the stockholders of MW Holding
approved an amendment to its Certificate of Incorporation authorizing the
issuance of up to 25,000 shares of preferred stock. The amendment allows
future issuances of preferred stock by action of the Board of Directors
without the need for further action by the stockholders. The Board of
Directors designated 1,000 shares of the newly authorized preferred stock
to be Series C Preferred Stock and MW Holding issued 352 shares of the
Series C Preferred Stock to GE Capital in full payment of the obligations
described above.
All of the Series C Preferred Stock is required to be redeemed on September
30, 2002 at a redemption price of $100,000 per share (the "Liquidation
Value") plus unpaid accrued dividends. Dividends are payable quarterly at a
rate per annum equal to 15%, with the first payment based on the number of
days from and including March 4, 1997. If for any reason the full dividend
on any payment date is not paid in cash on such date, the unpaid amount
thereof will automatically, without further action, be deemed added to the
Liquidation Value. MW Holding did not pay the dividend due June 30, 1997 of
$2 million and such amount has been added to the liquidation value of the
Series C Preferred Stock.
MW Holding also did not pay dividends due on June 30, 1997 on its Senior
Preferred Stock. The redemption provisions of the Series C and Senior
Preferred Stock have been stayed by the Chapter 11 proceedings. No further
dividends will be declared or paid on the Series C or Senior Preferred
Stock prior to the approval of a plan of reorganization.
47
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMON STOCK
As of January 2, 1999, the Company has the following authorized classes of
common stock:
Class A Common Stock, Series 1; $.01 par value; 25,000,000 shares
authorized; 18,222,706 shares issued and outstanding, net of 6,777,294
shares held in treasury.
Class A Common Stock, Series 2; $.01 par value; 5,412,000 shares
authorized; 99,446 shares issued and outstanding, net of 2,118,185
shares held in treasury.
Class A Common Stock, Series 3; $.01 par value; 12,400,000 shares
authorized; no shares issued or outstanding.
Class B Common Stock; $.01 par value; 25,000,000 shares authorized,
issued and outstanding; all owned by GE Capital.
The Company has repurchased 5,982,897 shares held by certain former
officers of the Company, Wards and Signature and their permitted
transferees by making cash payments and issuing installment notes in the
aggregate of approximately $54 million. As of January 2, 1999, the
outstanding balance of these notes was $7 million. These installment notes
bear interest at varying rates, are payable over multi-year periods
(generally three to five years) and are secured by shares of common stock.
These notes are classified as Liabilities subject to compromise. The
Company does not have the capacity under its borrowing agreements to
satisfy the payments for these notes. A noteholder may foreclose on the
pledge of shares repurchased if note payments are not made within one year
of becoming due; provided, however that the foreclosure remedy has been
stayed by the Chapter 11 filing. The escrow accounts holding the shares of
common stock have been closed and the stock is now being held by the
noteholders.
Each share of Class B Common Stock entitles the holder thereof to one vote.
All shares of Class A Common Stock entitle the holders to a total of
25,000,000 votes, or one vote per share if the total number of Class A
shares issued and outstanding is less than 25,000,000.
In 1997, the Company adopted Statement of Financial Accounting Standards
Number 128, "Earnings per Share" ("FAS 128"). FAS 128 requires the
presentation of "basic" earnings per share (income applicable to common
shareholders divided by the weighted-average number of common shares
outstanding during the period) and "diluted" earnings per share (which
gives effect to all dilutive potential common shares that were outstanding
during the period). All prior-period earnings per share data have been
restated to conform to FAS 128. Basic and diluted earnings per share are
the same for the periods ended January 2, 1999, January 3, 1998
48
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMON STOCK (CONTINUED)
and December 28, 1996, as all common stock equivalents are antidilutive,
due to the net loss incurred during these periods.
<TABLE>
<CAPTION>
For the 52-Week For the 53-Week For the 52-Week
(In millions, Period Ended Period Ended Period Ended
except share January 2, 1999 January 3, 1998 December 28, 1996
-------------------------------- ---------------------------- ---------------------------
and per share
amounts) Class A Class B Class A Class B Class A Class B
---------------- ------------- ---------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Net loss applicable to
common shareholders $ 481 $ 490 $ 580 $ 580 $ 118 $ 131
Weighted average number
of common shares
outstanding 18,322,173 25,000,000 18,322,247 25,000,000 18,710,601 25,000,000
Net loss per
common share,
Before discontinued
operations $ (25.46) $ (18.99) $ (32.17) $ (23.54) $ (7.48) $ (6.17)
Discontinued operations (.79) (.59) .50 .37 1.15 .95
---------------- ------------ ------------ ------------ ------------ -----------
$ (26.25) $ (19.58) $ (31.67) $ (23.17) $ (6.33) $ (5.22)
================ ============ ============ ============ ============ ===========
</TABLE>
14. STOCK OWNERSHIP PLAN
The Montgomery Ward & Co., Incorporated Stock Ownership Plan was adopted
effective July 19, 1988. A total of 1,000,000 Class A Common Stock, Series
1, 5,412,000 shares of Class A Common Stock, Series 2, and 12,400,000
shares of Class A Common Stock, Series 3, have been reserved for issuance
under the plan. Key associates of Wards and its subsidiaries are eligible
to participate and may receive awards, purchase rights and options. Awards
are grants of shares for no consideration. The Stock Ownership Plan expired
on July 19, 1998 and, therefore, no additional stock options may be granted
thereunder.
During 1991, the Board of Directors approved the Directors Plan. The
Directors Plan was established to, among other things, allow outside
directors to receive all or any portion of the fees for their services as
directors of the Company and Wards via conversion rights in Series 1 or
Series 2 shares. In 1998, no shares were issued from treasury stock as
payment for directors fees. In 1997 and 1996, 706 and 2,421 Series 1 shares
were issued from treasury stock as payment for directors fees,
respectively.
49
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. STOCK OWNERSHIP PLAN (CONTINUED)
Following is a summary of activity under the plans:
<TABLE>
<CAPTION>
January 2, January 3, December 28,
1999 1998 1996
-------------------------------- ------------------------------- ---------------------------
Wtd. Wtd. Wtd.
Shares Avg. Shares Avg. Shares Avg.
(000) Ex. Price (000) Ex. Price (000) Ex. Price
------------- ------------- ------------ ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beg. of year 6,761 $11.64 4,338 $17.87 5,165 $17.61
Granted - - 4,721 7.32 340 23.95
Exercised - - - - (352) 9.52
Forfeited (315) 18.51 (970) 18.61 (458) 21.14
Canceled (204) 10.05 (1,328) 11.54 (357) 23.86
------------- ------------- ------------ ------------- -------------- --------
Outstanding,
end of year 6,242 $11.67 6,761 $11.64 4,338 $17.8
============= ============= ============ ============= ============== ========
Exercisable,
end of year 4,253 $13.71 3,688 $15.23 3,981 $16.3
============= ============= ============ ============= ============== ========
</TABLE>
4.9 million of the 6.2 million options outstanding at January 2, 1999 have
exercise prices between $2.91 and $18.75, with a weighted-average exercise
price of $8.60 and a weighted-average remaining contractual life of 6.9
years. 2.9 million of these options are exercisable. The remaining 1.3
million options have exercise prices between $22.50 and $26.50, with a
weighted-average exercise price of $23.27 and a weighted-average remaining
contractual life of 4.9 years. All of these options are exercisable.
In 1996, the Company adopted the disclosure only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," requiring pro-forma net
loss and net loss per common share be determined as though stock-based
compensation expense had been recognized using an option pricing model.
However, due to the Company's bankruptcy filing and the significant losses
incurred in fiscal 1998 and 1997, the Company does not believe the pro-
forma net loss and net loss per common share would be materially different
from the reported amounts.
50
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. INTEREST EXPENSE, NET OF INVESTMENT INCOME
Net interest expense is as follows:
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
------------------- ---------------------------------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
------------------- ----------------- -----------------
<S> <C> <C> <C>
Interest on short-term borrowings $ 22 $ 54 $ 53
Interest on long-term debt and obligations under
capital leases 25 18 36
Miscellaneous interest, net 10 36 32
Investment income (1) - (2)
------------------- ----------------- -----------------
Total interest expense, net of investment income $ 56 $ 108 $ 119
=================== ================= =================
</TABLE>
16. LITIGATION AND OTHER PROCEEDINGS
MW Holding, Wards and its subsidiaries are engaged in various litigation
and have a number of unresolved claims. While the amounts claimed are
substantial and the ultimate liability with respect to such litigation and
claims cannot be determined at this time, management is of the opinion that
such liability, to the extent not provided for through insurance or
otherwise, is not likely to have a material impact on the financial
condition and the results of operations of the Company.
17. RELATED PARTY TRANSACTIONS
Bernard F. Brennan
In conjunction with a Relationship Agreement entered into between Mr.
Brennan and the Company in December 1996, the Company provided a loan to
Mr. Brennan of $12.5 million. Class A common stock of the Company owned by
Mr. Brennan and his permitted transferees is pledged as collateral for this
loan. The loan does not bear interest. In addition, Mr. Brennan is to be
paid $1.5 million annually (for a five-year period) for consulting services
he provides to the Company. The Company ceased payment for such consulting
services upon the bankruptcy filing.
GE Capital Corporation
Certain key executives in 1997 and 1998 were granted restricted stock and
stock options of General Electric Company ("GE"). Roger Goddu, Chairman and
Chief Executive Officer, was granted 120,000 shares of GE restricted stock
which had a fair market value of $6.1 million at the date of grant. The
shares vest equally over a five-year period on each December 31, beginning
on December 31, 1997, subject to continuing employment.
51
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. RELATED PARTY TRANSACTIONS (CONTINUED)
Mr. Goddu and six other key executives were granted GE stock options with a
fair market value of $5.6 million at the grant date. The shares vest over
periods ranging from four to six years, subject to continuing employment.
The exercise price equaled in each case the fair market value of the common
stock at the grant date.
As a result of the above transactions, the Company recorded the grants of
GE restricted stock and stock options of $11.7 million as a capital
contribution and established an asset, unearned compensation expense. Total
expense recorded related to the amortization of the unearned compensation
was $3.0 million for the fiscal years ended January 2, 1999 and January 3,
1998, respectively.
The Company engages in various other transactions with GE Capital as
described in Notes 2, 6, 12 and 13.
ValueVision International, Inc.
On December 30, 1997, the Bankruptcy Court approved a restructuring of the
operating agreement between Wards and ValueVision. ValueVision agreed to
cede exclusive use of the Wards' name for catalog and mail order catalog
"syndicates" back to Wards in exchange for Wards' return to ValueVision of
warrants covering the purchase of approximately 3.8 million shares of
ValueVision common stock. In addition, ValueVision agreed to repurchase
1.28 million shares of its stock owned by Wards, at a price of $3.80 per
share. Under the new operating agreement, Wards' commitment to support
ValueVision's television spot advertising purchases will be $2 million
annually, for a period of three years. The transaction was consummated on
January 15, 1998. In connection with this transaction, Wards recorded a
loss on the sale of its investment in ValueVision of approximately $25
million, which is included in Reorganization Costs.
Merchant Partners
In July 1994, Wards became a limited partner in Merchant Partners. Wards
made capital contributions to the partnership of $17 million in 1996, $4
million in 1995 and $1 million in 1994. In December 1995, Merchant Partners
made a partnership distribution of $22 million to Wards, resulting in a
gain of $16 million. On December 31, 1996, Wards entered into an agreement
under which Wards assigned, transferred and set over unto, the general
partner of Merchant Partners Wards' entire right, title and interest in and
to its limited partnership interest. The general partner assumed the
performance of all of the covenants and obligations associated with the
interest under the Limited Partnership Agreement. The agreement eliminated
Wards' future obligations with respect to its interest in Merchant
Partners. Wards recognized a charge to earnings of $7.8 million and $10.0
million for the periods ended January 3, 1998 and December 28, 1996,
respectively, which is included in Operating, selling, general and
administrative expense.
52
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT COMPANY FINANCIAL INFORMATION
Following are the MW Holding balance sheets as of January 2, 1999 and
January 3, 1998 and the statements of income and cash flows for the 52-week
period ended January 2, 1999, the 53-week period ended January 3, 1998 and
the 52-week period ended December 28, 1996.
BALANCE SHEETS
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
(In millions) 1999 1998
------------------- -----------------
<S> <C> <C>
Assets
Deferred income taxes $ - $ 2
Investment in Wards (1,596) (623)
Redeemable preferred stock of Wards 175 175
Other assets 6 9
------------------------ ----------------
Total Assets $ (1,415) $ (437)
======================== ================
Liabilities
Accounts payable to Wards $ 85 $ 91
Liabilities subject to compromise 11 11
------------------------ ----------------
Total Liabilities 96 102
Redeemable Preferred Stock 177 177
Shareholders' Deficit
Common stock 1 1
Capital in excess of par value 65 64
Accumulated deficit (1,622) (651)
Accumulated other comprehensive income 7 9
Less: Treasury stock, at cost (139) (139)
------------------------ ----------------
Total Shareholders' Deficit (1,511) (716)
------------------------ ----------------
Total Liabilities and Shareholders' Deficit $ (1,415) $ (437)
======================== ================
</TABLE>
53
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
--------------------- ------------------- ----------------
<S> <C> <C> <C>
Miscellaneous expenses $ - $ (1) $ (2)
--------------------- ------------------- ----------------
Total costs and expenses - (1) (2)
--------------------- ------------------- ----------------
Net loss before earnings of Wards - (1) (2)
Equity in net loss of Wards (971) (1,151) (235)
--------------------- ------------------- ----------------
Net loss (971) (1,152) (237)
Preferred stock dividend requirements - (8) (12)
--------------------- ------------------- ----------------
Net loss available for common shareholders $ (971) $ (1,160) $ (249)
===================== =================== ================
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
52-Week 53-Week 52-Week
Period Period Period
Ended Ended Ended
--------------------- -------------------- ---------------
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
--------------------- -------------------- --------------
<S> <C> <C> <C>
Net loss $ (971) $ (1,152) $ (237)
Adjustments to reconcile net loss to net cash
Provided by operations:
Change in undistributed earnings of subsidiary 971 1,157 235
Compensation expense on stock option grants/
repurchases - - 5
Change in operating assets and liabilities:
Accounts payable to Wards - (2) 36
Accrued liabilities and liabilities subject to
compromise - - (13)
--------------------- -------------------- --------------
Net cash provided by operating activities $ - $ 3 $ 26
--------------------- -------------------- --------------
</TABLE>
54
<PAGE>
MONTGOMERY WARD HOLDING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Jan. 2, Jan. 3, Dec. 28,
(In millions) 1999 1998 1996
----------------- ----------------- ------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of common stock $ - $ - $ 3
Proceeds from issuance of preferred stock - - 175
Purchase of Wards preferred stock - - (175)
Cash dividends paid - (3) (9)
Purchase of treasury stock, at cost - - (20)
----------------- ----------------- ------------------
Net cash used for financing activities - (3) (26)
----------------- ----------------- ------------------
Cash at end of period $ - $ - $ -
================= ================= ==================
Non-cash investing activities:
Grants of restricted stock and stock options
by majority shareholder $ 1 $ 11 $ -
Increase in liquidation value of preferred
stock - 2 -
Change in unrealized gain on marketable
securities (2) - (1)
Non-cash financing activities:
Notes issued for purchase of treasury stock $ - $ - $ 5
</TABLE>
55
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
56
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors
The following persons currently serve as directors of the Company: Roger V.
Goddu, Bernard F. Brennan, Tommy T. Cato, Silas S. Cathcart, James A. Parke,
Denis J. Nayden, Dennis D. Dammerman and Edward D. Stewart.
Under that certain Stockholders' Agreement dated as of June 17, 1988, as
amended to date (the "Stockholders' Agreement"), the By-laws of the Company
shall provide (and the By-laws of the Company do so provide), and the parties
to the Stockholders' Agreement agree to vote, for the election of a Board of
Directors consisting of ten members, three to be designated by Mr. Brennan
(which three shall include Mr. Brennan), five to be designated by GE Capital
and two to be designated by the Chief Executive Officer of Wards (which two
shall include such Chief Executive Officer). Of the nominees listed below, Mr.
Brennan has designated himself and Mr. Cato, GE Capital has designated Messrs.
Cathcart, Parke, Nayden, Dammerman and Stewart, and Mr. Goddu, who is the
Chief Executive Officer of Wards, has designated himself as a director of the
Company. A directorship to be designated by Mr. Brennan and a directorship to
be desginated by Mr. Goddu are each vacant.
Pursuant to the Stockholders' Agreement, if GE Capital and its affiliates
cease to own more than 50% of the number of shares of Common Stock purchased
by them in June 1988, the number of directors which Mr. Brennan is permitted
to designate will be increased by one, and the number of directors which GE
Capital may designate shall be reduced by one. If GE Capital and its
affiliates cease to own 20% or more of such shares of Common Stock, except as
described below, GE Capital shall have no right to designate any directors,
and the number of directors shall be reduced to nine, seven to be elected by
the holders of Class A Common Stock, voting as a class, and two to be elected
by the holders of Class B Common Stock, voting as a class, provided that, so
long as the Account Purchase Agreement between Wards and Montgomery Ward
Credit relating to the purchase by Montgomery Ward Credit of customer
receivables of Wards remains in effect, and GE Capital or any of its
affiliates owns any Common Stock, GE Capital will have the right to elect one
of the two directors to be elected by the holders of Class B Common Stock.
Also pursuant to the Stockholders' Agreement, if Mr. Brennan and his permitted
transferees cease to own more than 50% of the number of shares of Common Stock
held by them on December 1, 1996, the number of directors which GE Capital is
permitted to designate will be increased by two and the number of directors
which Mr. Brennan may designate shall be reduced by two. If Mr. Brennan and
his permitted transferees cease to own 20% or more of such shares of Common
Stock, Mr. Brennan shall no longer have the right to designate any directors
and the directors that Mr. Brennan would have been entitled to designate
(after taking into account the application of the preceding sentence) shall be
designated by the Chief Executive Officer of Wards.
The holder of the Senior Preferred Stock (currently GE Capital) has the right
to elect one director to be an additional member of the Board of Directors (a)
during the period following a default in the payment of accrued dividends on
the Senior Preferred Stock for four consecutive quarters until such accrued
dividends shall have been paid in full and (b) during the period following any
failure to make a mandatory redemption of Senior Preferred Stock until such
failure shall have been cured.
Information with respect to ages of the directors is as of March 26, 1999 and
information as to their ownership of shares of the Company as of that date is
provided under Item 12 below.
57
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Board of Directors (continued)
Roger V. Goddu, 48, has been a director of the Company and Chairman and Chief
Executive Officer of Wards since January 6, 1997. Prior thereto, he was with
Toys "R" Us, where from 1996 until 1997, he was President-U.S. Merchandising,
and from 1989 to 1995, he was Executive Vice President/General Merchandise
Manager. Prior to 1989, Mr. Goddu was a Senior Vice President and General
Merchandise Manager of Target, a division of Dayton Hudson Corporation.
Bernard F. Brennan, age 60, has been a director of the Company since February
9, 1988, has been Chairman of the Company since June 17, 1988, and was Chief
Executive Officer of the Company from February 9, 1988 through December 10,
1996. Mr. Brennan served as Chief Executive Officer of Wards from May 13, 1985
through December 10, 1996. Mr. Brennan has been a director of Itel Corporation
since 1988.
Tommy T. Cato, age 57, has been a director of the Company since August 20,
1997. Mr. Cato served as Executive Vice President of the Company from May 15,
1992, until February 4, 1994. Mr. Cato was Executive Vice President -Logistics
and Product Service of Montgomery Ward from November 8, 1990 through February
3, 1994.
Silas S. Cathcart, age 72, has been a director of the Company since June 25,
1988. Mr. Cathcart is retired Chairman of Illinois Tool Works, Inc. and
Kidder, Peabody Group, Inc. He is a director of Allegiance Corporation and
General Electric Company.
Dennis D. Dammerman, age 53, has been a director of the Company since January
26, 1999. Mr. Dammerman was named Vice Chairman of the Board and Executive
Officer of General Electric Company and Chairman and Chief Executive Officer
of GE Capital Services, Inc. in 1998. Prior thereto, he was Senior Vice
President, Finance since 1984.
Denis J. Nayden, age 44, has been a director of the Company since June 25,
1988. Mr. Nayden has been President and Chief Operating Officer of GE Capital
since January 1, 1995. Mr. Nayden served as President and Chief Operating
Officer of Kidder, Peabody Group, Inc. from June 1994 through December 1994.
Prior thereto, Mr. Nayden was an Executive Vice President of GE Capital from
February 1989 to June 1994. Mr. Nayden is a director of General Electric
Capital Services, Inc. and GE Capital.
James A. Parke, age 53, has been a director of the Company since March 31,
1997 and previously was a director from April 27, 1990 through December 17,
1996. He has been Senior Vice President - Finance of General Electric
Financial Services since November 1989. Mr. Parke is a director of GE Capital,
FGIC Corporation, Polaris Holding Co., and Financial Guaranty Insurance Co.
Edward D. Stewart, age 56, has been a director of the Company since December
10, 1996. Mr. Stewart has been an Executive Vice President of GE Capital since
January 1, 1992. Mr. Stewart serves on the board of directors of GE Capital.
Executive Officers
Information with respect to the executive officers of the Company is included
in Part I of this Form 10-K.
58
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
Section 16(a) Reporting
Section 16(a) of the Securities Exchange Act of 1934, and the rules
promulgated thereunder, requires the Company's executive officers, directors
and holders of 10% or more of the Common Stock to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. On June
21, 1998, the Voting Trust Agreement dated as of June 21, 1988 expired
pursuant to its terms. All holders of voting trust certificates received
shares of Class A Common Stock in respect of such voting trust certificates on
that date. None of those directors and executive officers who received shares
of such common stock timely reported such transaction under Section 16(a).
During 1998, Mr. Robert Claxton became an executive officer of the Company and
Mr. Dammerman became a director of the Company. Neither Mr. Claxton nor Mr.
Dammerman filed a Form 3 in connection with such appointment.
ITEM 11. EXECUTIVE COMPENSATION
The Company (Montgomery Ward Holding Corp.) had no employees and paid no
compensation in 1998. The following information details compensation accrued
by Wards and its subsidiaries to executive officers of the Company.
59
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Summary Compensation Table
The following table sets forth summary compensation information for (i) Mr.
Goddu, who was the only person to serve as Chief Executive Officer during
the Company's 1998 fiscal year, and (ii) the four most highly compensated
other executive officers who were serving as executive officers at the end
of the Company's 1998 fiscal year. Due to the bankruptcy filing, management
believes that the securities underlying options have little or no value.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------------------------------------- ---------------------------------------
Other Securities All
Annual Underlying LTIP Other
Name and Salary Bonus Compensation Options Payout Compensation
Principal Position Year ($) ($) ($) /1/ (#) ($) ($) /2/
-------------------- ------- ---------- --------- -------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Roger V. Goddu 1998 1,000,000 350,000 5,984 2,596,219 - 120,112
Chairman and Chief 1997 985,215 350,000 10,296 2,596,219 - 2,849,330
Executive Officer /3/
Thomas J. Paup 1998 400,000 150,000 1,708 - - 10,461
Executive Vice 1997 110,000 150,000 40 - - 87,999
President and
Chief Financial
Officer /3/
Kevin Freeman 1998 450,000 75,000 3,224 200,000 - 259
Executive Vice 1997 306,250 150,000 20 200,000 - 62,079
President -Store
Operations /3/
Spencer H. Heine 1998 400,000 125,000 1,244 225,000 - 2,490
Executive Vice 1997 400,000 125,000 2,934 225,000 - 403,075
President, Secretary 1996 400,000 - 4,869 - - 352,952
and General Counsel
Thomas G. Grimes 1998 450,000 50,000 19,880 500,000 - 863
Executive Vice 1997 417,262 200,000 6,181 500,000 - 84,396
President - Home /3/
</TABLE>
/1/ No named executive officer received perquisites exceeding $50,000 or
10% of salary and bonus.
/2/ Represents company matching contributions to the Savings and Profit
Sharing Plan and company payments of premiums on group term life
insurance policies. In 1998 and 1997, Mr. Goddu was paid $115,200 and
$93,600, respectively, representing an amount equivalent to dividends on
non-vested GE restricted stock shares. Relocation costs for Mr. Goddu
were $4,653 and $533,782 in 1998 and 1997, respectively. In 1997, Mr.
Goddu was paid $2,221,948 as compensation for benefits accrued with Mr.
Goddu's prior employer which were lost by Mr. Goddu in connection with
the termination of his employment with such former employer. Relocation
costs for Mr. Paup were $10,461 and $37,854 in 1998 and 1997,
respectively. Mr. Paup received a hiring bonus of $50,000 in 1997. Mr.
Freeman was paid $12,079 and $50,000 in 1997 for relocation costs and a
hiring bonus, respectively. For 1997, amounts paid to Mr. Heine include
$400,000 in exchange for his waiver of the diminution of his position
upon removal from the Board of Directors in January 1997. For 1996,
amounts paid to Mr. Heine include $200,000 under a retention plan and
$150,000 under a security plan due to the triggering of a change of
control event. Mr. Grimes was paid $34,396 and $50,000 in 1997 for
relocation costs and a hiring bonus, respectively.
/3/ Messrs. Goddu and Grimes joined Wards in January 1997. Mr. Messrs.
Paup and Freeman joined Wards in September 1997 and May 1997,
respectively.
60
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Option Grants and Exercises
The following table sets forth the value of unexercised options held by
Messrs. Goddu, Freeman, Heine and Grimes as of January 2, 1999. No stock
options or stock appreciation rights were granted to or exercised by any of
the Named Executive Officers in 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at FY-End (#) In-the-Money Options at FY-End /1/
--------------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------------------------- -------------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Roger V. Goddu 1,298,110 1,298,109 $ - $ -
Kevin Freeman 80,000 120,000 - -
Spencer H. Heine 75,000 150,000 - -
Thomas G. Grimes 200,000 300,000 - -
</TABLE>
1 The stock was deemed to have value below the exercise price as the Company
has filed for reorganization under Chapter 11 of the Bankruptcy Code.
Long-Term Incentive Plan Awards
Prior to the bankruptcy filing, senior executives of Wards, generally Senior
Vice Presidents and above, were eligible to participate in the Executive Long-
Term Incentive Plan. The Executive Long-Term Incentive Plan generally
consisted of three-year cycles that could be initiated annually. If specific
objectives for the pre-tax earnings and return on equity for the Company and
its subsidiaries established by the Incentive Compensation Committee were
achieved for any designated cycle, cash was awarded based upon a target
Executive Long-Term Incentive Plan payout, which was a percentage (determined
by the Incentive Compensation Committee) of the base salary of each
participant, but in no event would the target Executive Long-Term Incentive
Plan payout for any participant exceed $2,000,000 for any cycle. The plan has
not been operational subsequent to the bankruptcy filing and no future
benefits for outstanding cycles will be paid.
Executive Emergence Bonus Plan
Certain senior executives of Wards participate in the Montgomery Ward Special
Emergence Bonus Plan ("Emergence Bonus Plan"). The Emergence Bonus Plan
(subject to amendment or modification in the plan of reorganization) provides
for a lump sum bonus payment within 30 days of court approval of a plan of
reorganization. To be eligible for the full bonus, the executive must be
actively employed on the date of the court approval of the plan of
reorganization or the executive must have separated from employment after a
Change of Control (as defined in the Severance Plan described below) but
within six months of approval of the plan of reorganization. If the plan of
reorganization is approved as of April 1, 1999, the bonus amount for Messrs.
Goddu, Paup, Freeman, Heine and Grimes would be $1,250,000, $500,000,
$562,500, $500,000 and $625,000, respectively. If the plan of reorganization
is approved after April 1, 1999, but prior to or as of October 1, 1999, the
bonus amount for Messrs. Goddu, Paup, Freeman, Heine and Grimes would be
$1,000,000, $400,000, $450,000, $400,000 and $500,000, respectively. If the
plan of reorganization is approved after October 1, 1999, the bonus amount for
Messrs. Goddu, Paup, Freeman, Heine and Grimes would be $500,000, $200,000,
$225,000, $200,000 and $250,000, respectively.
61
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Pension Plan
In 1998, executive officers of Wards, in addition to many other associates,
participated in a pension plan (the "Pension Plan"), which provides benefits
defined by formulae based primarily on a participant's compensation, offset,
with respect to periods prior to July 1, 1997, as provided by benefits
provided by the participant's accounts in the Savings Plan ("Savings Plan"),
in which executive officers of Wards, in addition to many other associates,
participate. From 1989 through 1993, no more than $200,000, as adjusted
annually under Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended (the "Code"), of any participant's compensation was considered for any
purpose, including for purposes of the formulae, under the Pension Plan.
Beginning in 1994, no more than $150,000, as adjusted, ($160,000 in 1998) of
any participant's compensation is considered for any purpose, including for
purposes of the formulae, under the Pension Plan. The monthly pension benefit
to which current associates are entitled under the Pension Plan at the normal
retirement age of 65 is generally based on different benefit formulae that are
applicable to different years of service. The formula for service on and
after July 1, 1997 is a credit of $.70 to $1.35 (depending on age) for each $1
contributed as a basic contribution (3% of compensation) to the Savings Plan.
Such Pension Plan accounts will be credited with interest at a rate based on
the 30-year rate earned by government securities. The formula for service
after 1988 and before July 1, 1997 applies to credited service, as defined in
the Pension Plan, earned during such period while making contributions to the
Savings Plan and is based on "career earnings".
A participant's annual benefit under such 1988 - 1997 formula is 1.5% of the
participant's eligible pay for each year of credited service after 1988 and
before July 1, 1997.
A participant's benefit determined under the Pension Plan based on the
formulae through June 30, 1997 is reduced by an amount equivalent to an
annuity which could be purchased with the participant's Basic Contribution and
Transferred Contribution accounts in the Savings Plan as of June 30, 1997.
The Pension Plan formulae benefit is determined by adding the benefit under
the formula in effect commencing July 1, 1997 to the participant's accrued
benefit under the Pension Plan as of June 30, 1997, as determined under the
formulae in effect prior to July 1, 1997.
The following table sets forth the estimated annual benefits (calculated on a
straight life annuity basis) upon retirement at age 65 (for executives who
have not retired or resigned) under the Pension Plan, which is the only
defined benefit plan under which associates of Wards can currently accrue
benefits, to the Named Executive Officers (calculated on the basis of
estimated years of service at retirement age; levels of compensation paid in
calendar year 1998 assuming 6% annual increases for executives who have not
retired or resigned and the Named Executive Officers make basic contributions
(3% of compensation) to the Savings Plan; but with regard to Code limitations
on compensation and benefits and without regard to any reduction for benefits
under the Savings Plan):
Estimated
Annual
Pension at
Name of Participant Retirement
---------------------------------------- -----------------
Roger V. Goddu $25,883
Thomas J. Paup 22,518
Kevin Freeman 25,892
Spencer H. Heine 71,526
Thomas G. Grimes 4,628
62
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Certain Arrangements
In the course of recruiting new executives, promoting existing associates to
executive positions, increasing the responsibilities of existing executives
and retaining executives, Wards frequently enters into employment agreements
which set forth the general terms of the compensation arrangements for such
executive. Such agreements have, in the past, typically set forth, among
other things, a recipient's base salary, the target annual bonus under the
Senior Executive Performance Management Program ("PMP"), the maximum
percentage of the target bonus under the PMP that can be earned, bonus
guarantees, if any, relocation payments and the number of stock options, if
any, that are expected to be initially granted to the executive in his or her
new position. Of the executive officers named in the Summary Compensation
Table, Messrs. Paup, Freeman, Heine and Grimes have agreements of this type,
each of which were entered into in connection with the commencement of the
executive's employment with Wards (other than the agreement with Mr. Heine,
which was entered into connection with his retention as an executive officer
of Wards).
The agreements with Messrs. Paup, Freeman, Heine and Grimes provide for,
respectively, (i) annual base salary of $400,000, $450,000, $400,000 and
$450,000; and (ii) PMP target bonuses of $150,000, $150,000, $125,000 and
$200,000 in each case guaranteed at 100% for 1997 (the target bonuses for
Messrs. Paup and Freeman were also guaranteed at 100% and 50%, respectively,
for 1998) and in each case with opportunities to earn up to 150% of such
target bonuses. The agreements with Messrs. Freeman, Heine and Grimes also
provide for the grant of options to purchase common stock of the Company. Due
to the bankruptcy filing, management believes that the options and the
securities underlying the options are of little or no value.
The agreements with Messrs. Paup, Freeman and Grimes provided for hiring
bonuses of $50,000 each, which were paid in 1997. The Company agreed to
reimburse Messrs. Paup, Freeman and Grimes for certain relocation costs in
connection with their moves. In the case of a separation of employment
initiated by the Company for a reason other than "Cause," the agreements
provide that Messrs. Paup, Freeman, Heine and Grimes will receive their base
salaries through September 22, 2000 in the case of Mr. Paup, and through
October 1, 2000 in the case of Messrs. Freeman, Heine and Grimes (however, not
less than twenty-four months). In addition, if the agreements of Messrs.
Paup, Freeman, Heine and Grimes are not renewed at the end of the respective
agreement, a lump sum payment equal to twenty-four months base salary will be
owed. In the event of a change of control, in which a sale of substantially
all of the business occurs, and for a period of three years after such date,
if Messrs. Paup, Freeman, Heine and Grimes are separated from the Company for
a reason other than "Cause", the lump sum severance payment will be three
years base salary plus three times their target bonus amount.
In September 1997, GE granted options to Mr. Paup to purchase 20,000 shares of
GE common stock with an exercise price of $66.25, which options vest 50% on
September 12, 2000 and 50% on September 12, 2002. In June 1997, GE granted
options to Mr. Freeman to purchase 40,000 shares, of GE common stock with an
exercise price of $65.3125, which options vest 50% on September 27, 1999 and
50% on September 27, 2001. In February 1997, GE granted options to Mr. Grimes
to purchase 40,000 shares, of GE common stock, with an exercise price of
$52.50, which options vest 50% on September 7, 1999 and 50% on September 7,
2001.
GE Capital has agreed to pay Messrs. Paup, Freeman and Grimes their base
salary for the first three years of their 1997 employment agreements described
above and the guaranteed bonus under such agreements if Wards fails to pay
such amounts for any reason other than the executives' termination of
employment either voluntarily by the executives or for cause by Wards.
63
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Certain Arrangements (continued)
Mr. Goddu joined the Company as Chief Executive Officer and as Chairman and
Chief Executive Officer of Wards effective January 6, 1997. In connection
with his employment with Wards, Mr. Goddu, the Company and Wards entered into
an employment agreement dated as of December 20, 1996 (the "Goddu Agreement").
The Goddu Agreement expires on December 31, 2001. During the term of the Goddu
Agreement (unless his employment is earlier terminated), Mr. Goddu is to serve
as Chairman of the Board and Chief Executive Officer of Wards and as Chief
Executive Officer of the Company. Pursuant to the Goddu Agreement, Mr. Goddu
is to receive a base salary of $1,000,000 per annum, increasing at a rate of
$50,000 per year or such larger increase as the Board of Directors may
determine. Mr. Goddu waived his annual increase for 1998 and has elected not
to accept contractual annual increases until the Company successfully emerges
from Chapter 11.
In addition, the Goddu Agreement provides that Mr. Goddu is eligible to
receive an annual cash bonus of up to 50% of his base salary, based on
performance targets to be established from time to time by the Board of
Directors or a committee thereof. For each of 1997, 1998 and 1999, Mr.
Goddu's bonus is guaranteed to be at least $350,000 without regard to such
targets. The bonus may be increased by up to an additional 50% of base salary
based on the achievement of exceptional performance against the targets. The
Goddu Agreement also provides that Mr. Goddu will be provided with a
supplemental pension benefit on the same terms as his arrangement with his
prior employer with an actuarial present value at age 60 of $3.9 million. The
Company also agreed to pay Mr. Goddu $2,221,948 as compensation for benefits
accrued with Mr. Goddu's prior employer which were lost by Mr. Goddu in
connection with the termination of his employment with such former employer.
Mr. Goddu's agreement also provides for the grant of options to purchase
common stock of the Company. Due to the bankruptcy filing, management
believes that the options and the securities underlying the options are of
little or no value.
The Goddu Agreement also provides that Wards would provide Mr. Goddu a loan in
the principal amount of $2,000,000, payable in five years, and bearing
interest at LIBOR plus 25 basis points payable in arrears on each January 8
during the loan term. The Company provided such loan to Mr. Goddu on January
8, 1997, and Mr. Goddu executed a Promissory Note (the "Goddu Note") with
respect thereto on that date. As of March 6, 1999, the outstanding balance of
the loan including interest accrued thereon was $2,017,118.
The Goddu Agreement provides that in the event his employment is terminated
due to his death or disability, he (or his estate, as applicable) would be
entitled to unpaid base salary through the month in which his death or
disability occurs, an amount equal to 50% of his base salary in effect on the
date of his death or disability (in lieu of any bonus), and a restatement of
the Goddu Note to provide a maturity date of the third anniversary of Mr.
Goddu's death or disability. In the event his employment is terminated by
Wards for cause (as defined in the Goddu Agreement), he would be entitled to
unpaid base salary through the month in which the termination of his
employment occurs, and amounts outstanding under the Goddu Note will become
immediately due and payable 90 days after such termination.
In the event that his employment is terminated without cause or through a
constructive termination, as provided in the Goddu Agreement, he would be
entitled to a prorated bonus through the date of termination of employment,
continuation of his then-current base salary for a period of 24 months and, in
lieu of further bonus, an amount equal to $700,000 (which salary continuation
and amount may be paid in a lump sum) and cancellation of Mr. Goddu's
obligations under the Goddu Note.
64
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Certain Arrangements (continued)
In the event his employment is terminated by the expiration of the Goddu
Agreement, Mr. Goddu would be entitled to continuation of his then-current
base salary for a period of 24 months and, in lieu of further bonus, an amount
equal to $700,000 (which salary continuation and amount may be paid in a lump
sum).
The Goddu Agreement is not guaranteed by GE Capital if Wards fails to pay such
amounts.
Also in connection with Mr. Goddu's employment with Wards, Mr. Goddu and GE
Capital entered into a letter agreement dated as of December 20, 1996 (the
"Goddu Letter Agreement"). The Goddu Letter Agreement provides that on or
before January 6, 1997, General Electric Company ("GE"), the indirect parent
of GE Capital, would grant to Mr. Goddu 60,000 shares of common stock of GE,
with restrictions lapsing on 12,000 of such shares on each December 31,
beginning on December 31, 1997, and would grant to Mr. Goddu options to
purchase 60,000 shares of common stock of GE with an exercise price equal to
the NYSE closing price of such shares on the date of grant (which was $102.25
per share), which options will vest in cumulative annual installments of
20,000 underlying shares on January 6, 1999, January 6, 2001 and January 6,
2003. Such shares and options were granted to Mr. Goddu on December 20, 1996.
The Goddu Letter Agreement also provides that on an annual basis beginning in
1997, GE will grant to Mr. Goddu, at such time as similar grants are made to
its employees, options to purchase up to 25,000 shares of common stock of GE,
up to an aggregate of 125,000 such shares, with exercise prices equal to the
NYSE closing price of such shares on the applicable date of grant, and which
options will vest 50% three years from the date of grant and 50% five years
from the date of grant. In accordance with the terms of his letter agreement,
options were granted to Mr. Goddu on September 12,1997 and September 11, 1998.
Such options will vest 50% three years from the date of issuance and 50% five
years from the date of issuance. On April 28, 1997, after the date of the
Goddu Letter Agreement, the shares of GE Common Stock split 2-for-1.
The Wards Executive Committee Severance Plan ("Severance Plan") provides that
if the employment of certain senior executives is terminated other than for
Cause (as defined in the Severance Plan), the executive will receive a lump
sum payment equal to the greater of the executive's base salary for the
remainder of the executive's employment agreement or the executive's base
salary for 24 months. In addition, the executive will receive executive
outplacement services and continue to participate in executive benefit plans.
If such termination occurs within three years of a Change of Control (as
defined in the Severance Plan), the lump sum payment is increased to three
years base salary plus three times the executives' target bonus. Amounts
otherwise payable under the Severance Plan are reduced dollar for dollar for
any additional amounts representing base salary or bonus payable under the
executive's employment contract or other severance plan.
Director Compensation Arrangements
The Directors Plan (the "Directors Fee Plan") permits directors (as designated
by the Directors Fee Plan Committee, as defined below) to receive Series 1 and
Series 2 Shares. The plan provides for the establishment of a committee (the
"Directors Fee Plan Committee") to (i) administer the Directors Fee Plan, (ii)
estimate director fees payable to directors for the fiscal year and (iii)
permit directors to elect to receive Class A Shares with a value determined by
the Directors Fee Plan Committee not to exceed the estimated fees.
65
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Director Compensation Arrangements (continued)
Under the Directors Fee Plan, participating directors are automatically
granted rights ("Conversion Rights") after the end of each fiscal quarter of
the Company in a number determined by dividing the director fees for the
fiscal quarter by the fair market value per share of the Company's Common
Stock. The number of Class A Shares acquired pursuant to accelerated
Conversion Rights (as described below) reduces the number of automatically
granted Conversion Rights. The acquisition of Class A Shares by directors
pursuant to Conversion Rights does not require any direct payment by a
director, but the director fees which otherwise would be payable to the
director are reduced by such fair market value of the Class A Shares acquired.
If directors acquire Class A Shares pursuant to Conversion Rights, the Company
will pay the directors an amount sufficient to pay all applicable federal and
state taxes payable by the directors with respect to the Class A Shares
acquired pursuant to Conversion Rights and the amount attributable to this
payment. The Directors Fee Plan Committee decides based on the past service
of the director whether there should be an acceleration of the grant of
Conversion Rights based on an estimate of director fees for the fiscal year.
If the grant of Conversion Rights is accelerated by the Directors Fee Plan
Committee, the Directors Fee Plan Committee determines the number of Class A
Shares to which the Conversion Rights relate, the value of the Class A Shares,
the duration of the Conversion Rights and the limitations on the Class A
Shares acquired pursuant to the Conversion Rights. It is currently
anticipated that any Class A Shares acquired pursuant to accelerated
Conversion Rights would be forfeited to the extent a director does not earn
the anticipated director fees for the fiscal year.
Directors of the Company or Wards other than members of the Directors Fee Plan
Committee are eligible to participate in the Directors Fee Plan if designated
by the Directors Fee Plan Committee. The Directors Fee Plan Committee is
comprised of not fewer than two directors who are appointed by the Board of
Directors and who serve at the pleasure of the Board of Directors. The
current members of the Directors Fee Plan Committee are Messrs. Brennan and
Stewart. Of the seven eligible directors, the Directors Fee Plan Committee
has designated only Mr. Cathcart as a participant in the Directors Fee Plan.
Pursuant to an irrevocable election made in 1992, Mr. Cathcart elected to
receive all of the fees earned for service as a director of the Company and of
Wards in Series 1 Shares. Through the date of the bankruptcy filing, Mr.
Cathcart had acquired 8,987 Series 1 Shares and Mr. Myron Lieberman, a former
director, had acquired 10,235 Series 1 Shares, pursuant to Conversion Rights
under the Directors Fee Plan. No shares have been distributed under the
Directors Fee Plan since the bankruptcy filing.
The Board of Directors may amend or terminate the Directors Fee Plan, except
that no such action by the Board of Directors may change the terms and
conditions of any Conversion Rights previously granted in a manner adverse to
the holder of the Conversion Right without the consent of such holder. The
Directors Fee Plan Committee has the right to make adjustments with respect to
Conversion Rights if Wards or the Company dissolves or is liquidated or upon
the occurrence of a public offering of shares of the Company.
66
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Director Compensation Arrangements (continued)
In connection with the termination of the employment of Bernard F. Brennan as
Chief Executive Officer of the Company and as Chairman and Chief Executive
Officer of Wards, Mr. Brennan, the Company, Montgomery Ward and GE Capital
entered into a Relationship Agreement dated as of December 10, 1996 (the
"Relationship Agreement"). The Relationship Agreement provided the terms of
Mr. Brennan's separation from the Company and Wards, including with respect to
his continued participation as Chairman of the Company and a director of each
of the Company and Wards. Pursuant to the Relationship Agreement, the Company
loaned to Mr. Brennan $12.5 million in cash, without interest, for which the
Company's sole recourse is the shares of Common Stock owned by Mr. Brennan and
his permitted transferees. In the Relationship Agreement, Mr. Brennan agreed
that within five business days after he or any permitted transferee sells any
such shares or receives any proceeds with respect to any such shares (other
than as a result of certain charity loans), such proceeds would be applied
toward any outstanding balance of such loan, provided that if proceeds are
received pursuant to the "put" provisions of the Stockholders' Agreement, only
75% of such proceeds need be so applied. The Relationship Agreement also
provides that amounts outstanding under the loan, if not paid sooner, shall be
due and payable on the last to occur of the deaths of Mr. Brennan, his wife
and his children.
The Relationship Agreement provides that Mr. Brennan is engaged as a
consultant to the Company and Wards for the lesser of five years or until the
date on which he and his permitted transferees no longer own any shares of
Common Stock. The Company and Wards agreed to make annual cash consulting
payments totaling $1.5 million to Mr. Brennan in installments not less
frequently than semi-monthly throughout the consulting period. Wards ceased
payment of the consulting fees as of the Bankruptcy date. Also in connection
with his resignation, Mr. Brennan, the Company and GE Capital entered into an
Amendment Agreement dated as of December 10, 1996 with respect to certain
amendments to the Stockholders' Agreement and the Company's By-laws (the
"Amendment Agreement"). Pursuant to the Amendment Agreement, Mr. Brennan's
right to require the Company to purchase his shares of Common Stock will
become effective on January 1, 1999. The Amendment Agreement also amended the
Stockholders' Agreement to provide the director designation rights described
herein and the supermajority requirements described herein. See Item 10.
Finally, the Amendment Agreement provides Mr. Brennan and his affiliates with
certain rights to participate in transfers of shares of Common Stock by GE
Capital, provides for Mr. Brennan's and his affiliates' participation in
certain sales of the stock or assets of the Company, and provides GE Capital,
Mr. Brennan and their respective affiliates with a right of first refusal on
new securities issued by the Company.
Compensation Committee Interlocks And Insider Participation
Mr. Brennan, Chairman of the Company and a former executive officer of the
Company, serves as a member of the Compensation Committee of Wards' Board of
Directors. Robert A. Kasenter, Executive Vice President of the Company and
Executive Vice President, Human Resources of Wards, serves as Secretary of the
Compensation Committee of Wards' Board of Directors, although Mr. Kasenter is
not a director of the Company or of Wards.
67
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership, as of March 26, 1999,
of Class A Shares (i) by each person who is a director of the Company (none of
whom except the individuals identified beneficially owns any shares of the
Company's equity securities), (ii) by each of the Named Executive Officers
(none of whom except the individuals identified beneficially owns any shares
of the Company's equity securities), (iii) by each person who is known to be a
holder of more than 5% of Class A Shares and (iv) by all directors and
executive officers of the Company as a group.
Individual or Group Shares %
---------------------------- -------------------- --------------
Bernard F. Brennan (a) 13,025,750 71.1%
Edwin G. Pohlmann (b) 2,892,500 15.8%
Tommy T. Cato 227,875 1.2%
Silas S. Cathcart 18,987 0.1%
Roger V. Goddu (c) 1,298,110 6.6%
Kevin Freeman (d) 140,000 0.8%
Spencer H. Heine (e) 401,250 2.2%
Thomas G. Grimes (f) 350,000 1.9%
Tamara Brennan (g) 2,200,000 12.0%
All directors and executive
officers as a group (19
persons) (h) 15,736,772 77.6%
(a) Represents 13,025,750 Class A Shares (71.1% of the Class A Shares and
30.1% of the Company's common stock ("Common Stock") outstanding as of
March 26, 1999) owned of record by Mr. Brennan and with respect to which
Mr. Brennan has sole investment and voting power. Does not include
2,200,000 Class A Shares (12.0% of the Class A Shares and 5.1% of the
Common Stock outstanding as of March 26, 1999) which are owned by Edwin G.
Pohlmann, as trustee of a trust (the "Family Trust") for the benefit of
members of Mr. Brennan's family with respect to which Mr. Brennan has no
voting or investment power, but with respect to which Tamara Brennan, Mr.
Brennan's wife, may acquire shared voting and dispositive power. See Note
(g) below. Mr. Brennan disclaims beneficial ownership of such 2,200,000
Class A Shares. Mr. Brennan's business address is 5000 Sawgrass Village
Circle, Suite Five, Ponte Vedra, FL 32082.
(b) Does not include 200,000 Class A Shares held by trusts for the benefit of
members of Mr. Pohlmann's family, with respect to which Mr. Pohlmann has
no voting or investment power. Includes 2,200,000 Class A Shares with
respect to which Mr. Pohlmann has sole voting and investment power as
trustee of the Family Trust. Mr. Pohlmann's business address is 9300 Sante
Fe Springs Road, Sante Fe Springs, CA 90670.
(c) Includes 1,298,110 Class A Shares which may be acquired by Mr. Goddu
pursuant to options exercisable on March 26, 1999. Does not include
1,298,110 Class B Shares which may be acquired by Mr. Goddu from GE
Capital pursuant to options exercisable on December 31, 1998 and December
31, 1997, as described herein. See Item 11 above. Mr. Goddu's business
address is Montgomery Ward Plaza, Chicago, IL 60671.
(d) Represents 140,000 Class A Shares which may be acquired by Mr. Freeman
pursuant to options currently exercisable.
(e) Includes 150,000 Class A Shares which may be acquired by Mr. Heine
pursuant to exercisable options.
68
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
(f) Includes 350,000 Class A Shares which may be acquired by Mr. Grimes
pursuant to exercisable options.
(g) Represents Class A Shares with respect to which Mrs. Brennan, if she were
to elect to become an advisor to the trustee of the Family Trust, may
acquire shared power to vote or direct the vote of, and shared power to
dispose or direct the disposition of, such shares. See Notes (a) and (b)
above.
(h) Represents all Class A Shares with respect to which executive officers and
directors have investment power, which is in each case sole investment
power. Includes 2,170,410 Class A Shares which may be acquired by
executive officers or directors at purchase prices ranging from $2.91 to
$24.50 per share pursuant to options exercisable on March 26, 1999 or on
April 1, 1999 (date within 60 days after March 26, 1999).
GE Capital owns 100% of the 25,000,000 Class B Shares currently outstanding.
Such shares represented 57.7% of the outstanding Common Stock as of March 26,
1999. GE Capital has granted to Mr. Goddu an option, 50% of which is
exercisable as of March 26, 1999, to purchase from GE Capital that number of
shares of Common Stock which equals 5% of the issued and outstanding shares of
Common Stock of the Company on a fully-diluted basis. For purposes of this
calculation, the number of shares of Common Stock underlying such options is
to be adjusted upwards from time to time until the last day of the Company's
1998 fiscal year to give effect to the grant of stock options after December
20, 1996 to management employees of Wards covering up to 10% of the
outstanding shares of Common Stock on a fully-diluted basis. As of March 26,
1999, pursuant to the foregoing, such option is exercisable with respect to
1,298,110 Class B Shares (4.9% of the outstanding Class B Shares and 2.9% of
the outstanding Common Stock). GE Capital's address is 260 Long Ridge Road,
Stamford, Connecticut 06927.
GE Capital owns 100% of the 1,750 shares of Senior Preferred Stock of the
Company, having a liquidation value of $100,000 per share (the "Senior
Preferred Stock") outstanding as of the date hereof, and 100.0% of the 352
shares of Series C Preferred Stock of the Company, having a liquidation value
of $100,000 per share (the "Series C Preferred Stock") outstanding as of the
date hereof.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Wards entered into a Bank Credit Card Program Agreement ("Card Agreement")
effective April 1, 1996 with Monogram Credit Card Bank of Georgia
("Monogram"), and an Account-Related Agreement ("Account Related Agreement")
effective April 1, 1996 with Montgomery Ward Credit Corporation ("Montgomery
Ward Credit") (collectively referred to as the "Agreements") pursuant to which
Monogram and Montgomery Ward Credit (collectively referred to as the
"Montgomery Ward Credit Companies"), both of which are affiliates of GE
Capital, make payments to Wards as to their receivables generated by sales to
customers of Wards, its affiliates and licensees who utilize the Wards'
private label credit card, and provide services to Wards, all of which are
guaranteed by GE Capital. Set forth below is a description of various
transactions entered into in connection with the Agreements. Unless otherwise
specified, information given is for aggregate transactions under both the Card
Agreement and the Account Related Agreement. As of January 2, 1999, there
were $3.3 billion of Wards' private label credit card receivables owned by the
Montgomery Ward Credit Companies. During the 1998, 1997 and 1996 fiscal
years, the Credit Companies paid to Wards, pursuant to the Agreements and
predecessor agreements, approximately $2.1 billion, $2.6 billion and $3.6
billion, respectively, in respect of such receivables. As of February 27,
1999, the Credit Companies have paid approximately $209 million to Wards in
respect of such receivables during the current fiscal year. Wards generally
bears the risk of credit losses due to non-payment by cardholders to the
extent of (i) the amount of credit losses that are between 3.9% and 5.0% of
average outstanding receivables, plus (ii) 50% of credit losses that are
between 5.0% and 8.0% of average outstanding receivables, subject to offsets
described below relating to Wards' share of certain incremental increases in
finance charges and late fees payable by cardholders.
69
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
Wards' net unpaid liability for credit losses for 1991 through 1998 are to
be payable to Montgomery Ward Credit pursuant to a note ("Continuation
Note") due in early 2003, provided that the outstanding balance of such
note cannot exceed $300 million. A remaining note in the amount of $15
million, consisting of losses incurred after July 7, 1997 for the remaining
portion of 1997, was executed which provides for monthly principal payments
in the amount of 5% of the scheduled monthly principal payments for the
Continuation Note. Starter card losses are payable currently. Interest on
Wards' unpaid liability for credit losses is to be payable at the monthly
GE commercial paper rate. Interest on notes outstanding as of July 7, 1997,
has been stayed by the Chapter 11 proceeding.
In connection with the foregoing arrangements, Wards owes $72 million for
1998 credit losses offset by incremental finance charges and late fee
assessments. Wards has previously executed notes for certain of its unpaid
share of credit losses through 1997, offset by incremental finance charges
and late fee assessments due to Wards for a net obligation of $300 million.
At January 2, 1999 and January 3, 1998, $288 million of the net obligation
is included in Liabilities subject to compromise and the remainder of the
net obligation of $84 million and $40 million at January 2, 1999 and
January 3, 1998, respectively, is included in Accrued liabilities and other
obligations. As the $300 million threshold has been reached, it is expected
that future payments may be required depending upon the level of credit
card losses.
In exchange for Wards' agreement to allow the Montgomery Ward Credit
Companies to increase finance charge rates and late fees in selected
states, Wards receives a share of incremental finance charges and late fees
resulting from such increases. Such amount is available for offset against
Wards' unpaid liability for its share of credit losses. To the extent not
currently paid or offset, such amounts earn interest at the same rate as
amounts owned by Wards to Montgomery Ward Credit. The Montgomery Ward
Credit Companies also provide administrative services in connection with
Signature products.
Lechmere, Inc., a wholly-owned subsidiary of Wards ("Lechmere"), entered
into an Interim Consumer Credit Card Program Agreement (the "Lechmere
Agreement") effective as of March 13, 1996 with Monogram pursuant to which
Monogram (among other things) made payments to Lechmere in respect of
Monogram's receivables generated by sales to customers of Lechmere who
utilized the Lechmere private label credit card issued by Monogram pursuant
to the Lechmere Agreement. Such payments were equal to the face amount of
such receivables. The Lechmere Agreement, as executed, was scheduled to
expire on the earlier of August 31, 1996 or the execution by the parties
thereto of a long-term agreement. The long-term agreement never was
executed and the Lechmere Agreement was extended by numerous letter
agreements between the parties. Pursuant to an order of the Bankruptcy
Court overseeing Lechmere's bankruptcy (which, like the bankruptcy filing,
was filed on July 7, 1997), Lechmere and Monogram continued to perform
under the Lechmere Agreement as though such Agreement had been assumed by
Lechmere. On or around August 1, 1997 (before any assumption or rejection
of the Lechmere Agreement), Lechmere announced that its assets would be
sold and liquidated. Shortly thereafter, Monogram, Lechmere and Wards
entered into a stipulation and order for adequate protection defining the
parties' respective rights during the wind-down of the Lechmere credit card
program and the liquidation of receivables that arose in connection
therewith. Pursuant to that stipulation and order, purchases made using
Lechmere cards ceased on or around August 8, 1997. Lechmere, to date, has
neither assumed or rejected the Lechmere Agreement.
Wards and Lechmere also entered into an agreement on April 3, 1996 for the
sale of certain commercial customer receivables to Montgomery Ward Credit.
During 1998, Montgomery Ward Credit paid $2.5 million to Wards and Lechmere
pursuant to this agreement and, as of February 27, 1999, Montgomery Ward
Credit has paid $379,000 to Wards in respect of such receivables during the
current fiscal year.
70
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
Wards and Lechmere have entered into a Program Agreement dated October 12,
1989, as amended on March 6, 1997, with GE Capital, under which GE Capital
pays certain manufacturers and distributors a discounted invoice price of
products acquired by Wards and Lechmere and whereby Wards and Lechmere
reimburse GE Capital for such payments according to an agreed-upon
schedule. The aggregate amount of outstanding payments and other amounts
payable under the Program Agreement is not to exceed $650 million at any
one time. At June 28, 1997, this facility was principally drawn. This
facility is no longer available due to the bankruptcy.
Wards entered into the Post-Petition Loan and Guaranty Agreement ("DIP
Facility"), as amended, with GE Capital as agent and lender; and various
other lenders, on July 8, 1997, 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 billion. Total letters of credit
outstanding were $108 million at January 2, 1999. The Company had $363
million of borrowing availability under the DIP Facility at January 2,
1999. 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. GE
Capital's portion of the commitment under the DIP Facility is $300 million.
On February 1, 1999, Wards announced its intention to sell Signature to GE
Capital. The sale is expected to close in the second half of 1999 after the
receipt of all required insurance regulatory approvals.
GE, the indirect parent of GE Capital, is, in the ordinary course of its
business, a major supplier of consumer goods to Wards for sale at Wards'
stores in the ordinary course of its business.
As more fully described above, Mr. Goddu is indebted to the Company under
the Goddu Note in the initial principal amount of $2,000,000 and Mr.
Brennan is indebted to the Company in connection with the loan provided him
pursuant to the Relationship Agreement in the initial principal amount of
$12,500,000. See Item 11 above.
71
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
<TABLE>
<CAPTION>
Page
---------------
<S> <C>
Report of Independent Public Accountants 23
For the 52-Week Period Ended January 2, 1999,
the 53-Week Period Ended January 3, 1998 and the 52-Week Period
Ended December 28, 1996
Consolidated Statements of Income 24
Consolidated Statements of Shareholders' Equity (Deficit) 26
Consolidated Statements of Cash Flows 28
Consolidated Balance Sheets at January 2, 1999 and January 3, 1998 25
Notes to Consolidated Financial Statements 30
</TABLE>
2. Financial Statement Schedules
Schedules have been omitted because they are not applicable, not required,
not material, or the required information is given in the financial
statements or notes thereto or combined with the information presented in
other schedules or exhibits.
72
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits
3.1 Third Restated Certificate of Incorporation of the Company,
filed June 28, 1994, incorporated by reference to Exhibit
3.2 (ii) of the Company's Registration Statement on Form S-
1 (Registration No. 33-33252).
3.1 (i) Certificate of Amendment to Certificate of Incorporation of
Montgomery Ward Holding Corp. dated October 25, 1994,
incorporated by reference to Exhibit 3.2 (iv) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.
3.1 (ii) Certificate of Amendment to Certificate of Incorporation of
Montgomery Ward Holding Corp. dated March 29, 1996,
incorporated by reference to Exhibit 3.1 (ii) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.
3.1 (iii) Certificate of Amendment to Certificate of Incorporation of
Montgomery Ward Holding Corp. dated May 29, 1997,
incorporated by reference to Exhibit 3.1 (iii) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter quarterly period ended June 28, 1997.
3.1 (iv) Certificated of Stock Designation of Montgomery Ward
Holding Corp. dated May 29, 1997, incorporated by reference
to Exhibit 3.1 (iv) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended June 28,
1997.
3.3 Amended and Restated By-laws of the Company, dated as of
December 29, 1994, incorporated by reference to Exhibit 3.3
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995.
3.3 (i) Amendment to By-laws of Montgomery Ward Holding Corp.,
dated as of December 10, 1996, incorporated by reference to
Exhibit 3.3 (i) of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996.
9. (i) Voting Trust Agreement dated as of October 21, 1994,
incorporated by reference to Exhibit 9. (i) of the
Company's quarterly report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.
10. (i) (A) (1) Stockholders' Agreement dated as of June 17, 1988, as
amended and restated as of December 29, 1994, incorporated
by reference to Exhibit 4. (e) to the Company's
Registration Statement on Form S-8 (Registration No. 33-
57075).
10. (i) (A) (2) Amendment Agreement dated as of December 10, 1996,
incorporated by reference to Exhibit 1 of the Company's
Current Report on Form 8-K for an event occurring January
6, 1997.
10. (i) (A) (3) Montgomery Ward & Co., Incorporated Stock Ownership Plan
Terms and Conditions, as amended and restated, as of
December 29, 1994, incorporated by reference to Exhibit 4.
(f) of the Company's Registration Statement on Form S-1
(Registration No. 33-57075).
73
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (i) (A) (4) Amendment No. 17 to Stockholders' Agreement, dated as of
March 31, 1997, incorporated by reference to Exhibit 10.
(i) (A) (3) of the Company's Quarterly Report on Form 10-Q
for the fiscal quarterly period ended March 19, 1997.
10. (i) (B) Stock Purchase Agreement dated March 6, 1988 between Mobil
Corporation, Marcor Inc. and BFB Acquisition Corp.
incorporated by reference to Exhibit 10. (i) (B) of the
Company's Registration Statement on Form S-1 (Registration
No. 33-23403).
10. (i) (C) Subscription Agreement dated as of December 29, 1995
between General Electric Capital Corporation, Montgomery
Ward & Co., Montgomery Ward Holding Corp., and Bernard F.
Brennan, incorporated by reference to Exhibit 10. (i) (C)
of the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1995.
10. (i) (F) Note Purchase Agreements dated March 1, 1993 between
Montgomery Ward & Co., Incorporated and various lenders,
incorporated by reference to Exhibit 10. (i) (F) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993.
10. (i) (F) (1) Amendment dated June 30, 1995 to Note Purchase Agreements
dated March 1, 1993 between Montgomery Ward & Co.,
Incorporated and various lenders, incorporated by reference
to Exhibit 10. (i) (F) (1) of the Company's quarterly
report on Form 10-Q for the fiscal quarterly period ended
July 1, 1995.
10. (i) (F) (2) Limited waiver and First Amendment to Note Purchase
Agreements dated as of March 29, 1997 among Montgomery Ward
& Co., Incorporated and various lenders, incorporated by
reference to Exhibit 10. (i) (F) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended March 29, 1997.
10. (i) (G) U.S. $1,000,000,000 Post-Petition Loan and Guaranty
Agreement dated as of July 8, 1997, among Montgomery Ward &
Co., Incorporated and Lechmere, Inc. as borrowers and
various guarantors and General Electric Capital Corporation
as agent and lender and various lenders, incorporated by
reference to Exhibit 10. (i) (G) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
June 28, 1997.
10. (i) (G) (1) Waiver and First Amendment to Post-Petition Loan and
Guaranty Agreement dated as of July 30, 1997, incorporated
by reference to Exhibit and 10. (i) (G) (1) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended June 28, 1997.
10. (i) (G) (2) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & Co., as borrower; Montgomery Ward Holding
Corp. and other debtor subsidiaries of Montgomery Ward
Holding Corp., as guarantors; General Electric Capital
Corporation, as agent and lender; and various lenders dated
as of August 12, 1997, incorporated by reference to Exhibit
10. (i) (G) (2) of the Company's Quarterly Report on Form
10-Q for the fiscal quarterly period ended September 27,
1997.
74
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (i) (G) (3) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & Co., as borrower; Montgomery Ward Holding
Corp. and other debtor subsidiaries of Montgomery Ward
Holding Corp., as guarantors; General Electric Capital
Corporation, as agent and lender; and various lenders dated
as of September 24, 1997, incorporated by reference to
Exhibit 10. (i) (G) (3) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period ended
September 27, 1997.
10. (i) (G) (4) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & Co., as borrower; Montgomery Ward Holding
Corp. and other debtor subsidiaries of Montgomery Ward
Holding Corp., as guarantors; General Electric Capital
Corporation, as agent and lender; and various lenders dated
as of November 7, 1997, incorporated by reference to
Exhibit 10. (i) (G) (4) of the Company's Annual Report on
Form 10-K for the fiscal year ended January 3, 1998.
10. (i) (G) (5) Waiver and Second Amendment to Post-Petition Loan and
Guaranty Agreement among Montgomery Ward & Co.,
Incorporated, as borrower; Montgomery Ward Holding Corp.
and other debtor subsidiaries of Montgomery Ward Holding
Corp., as guarantors; General Electric Capital Corporation,
as agent and lender; and various lenders dated as of
February 20, 1998, incorporated by reference to Exhibit 10.
(i) (G) (5) of the Company's quarterly report on Form 10-Q
for the fiscal quarterly period ended April 4, 1998.
10. (i) (G) (6) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & co., Incorporated, as borrower;
Montgomery Ward Holding Corp. and other debtor subsidiaries
of Montgomery Ward Holding Corp., as guarantors; General
Electric Capital Corporation, as agent and lender; and
various lenders as of June 26, 1998, incorporated by
reference to Exhibit 10. (i) (G) (6) of the Company's
quarterly report on Form 10-Q for the fiscal quarterly
period ended October 3, 1998.
10. (i) (G) (7) Waiver to Post-Petition Loan and Guaranty Agreement among
Montgomery Ward & Co., Incorporated, as borrower;
Montgomery Ward Holding Corp. and other debtor subsidiaries
of Montgomery Ward Holding Corp., as guarantors; General
Electric Capital Corporation, as agent and lender; and
various lenders dated as of September 2, 1998, incorporated
by reference to Exhibit 10. (i) (G) (7) of the Company's
quarterly report on Form 10-Q for the fiscal quarterly
period ended October 3, 1998.
10. (i) (G) (8) Amendment to Post-Petition Loan and Guaranty Agreement
among Montgomery Ward & Co., Incorporated, as borrower;
Montgomery Ward Holding Corp. and other debtor subsidiaries
of Montgomery Ward Holding Corp., as guarantors; General
Electric Capital Corporation, as agent and lender; and
various lenders dated as of November 9, 1998.
10. (i) (H) Long Term Credit Agreement dated as of September 15, 1994
among Montgomery Ward & Co., Incorporated, various banks,
The First National Bank of Chicago, as Documentary Agent,
The Bank of Nova Scotia, as Administrative Agent, The Bank
of New York, as Negotiated Loan Agent and Bank of America
National Trust and Savings Association, as Advisory Agent,
incorporated by reference to Exhibit 10. (i) (H) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.
75
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (i) (H) (1) Amended Schedule 1 to the Long Term Credit Agreement dated
as of September 15, 1994 among Montgomery Ward & Co.,
Incorporated, various banks, The First National Bank of
Chicago, as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent incorporated by reference to
Exhibit 10. (i) (H) (1) of the Company's Quarterly Report
on Form 10-Q, for the fiscal quarterly period ended
September 30, 1995.
10. (i) (H) (2) Amendment dated March 19, 1996 to the Long Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust
and Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (H) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended March 30, 1996.
10. (i) (H) (3) Amendment to Long Term Credit Agreement dated as of
September 15, 1994 among Montgomery Ward & Co.,
Incorporated, various banks, The First National Bank of
Chicago, as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent, which became effective
September 6, 1996, incorporated by reference to Exhibit 10.
(i) (H) (3) of the Company's Quarterly Report on Form 10-Q
for the fiscal quarterly period ended September 28, 1996.
10. (i) (H) (4) Amendment to Long Term Credit Agreement dated as of
December 23, 1996 among Montgomery Ward & Co.,
Incorporated, various banks, The First National Bank of
Chicago, as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, The Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent, incorporated by reference
to Exhibit 10. (i) (H) (5) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996.
10. (i) (H) (5) Waiver and Fourth Amendment to Long Term Credit Agreement
dated as of March 29, 1997 among Montgomery Ward & Co.,
Incorporated and various banks, incorporated by reference
to Exhibit 10. (i) (H) (5) of the Company's Annual Report
on Form 10-Q for the fiscal quarterly period ended March
29, 1997.
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 American National Trust and Savings
Association, as Advisory Agent, incorporated by reference
to Exhibit 10. (i) (H) (6) of the Company's quarterly
report on Form 10-Q for the fiscal quarterly period ended
July 4, 1998.
76
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
3. Exhibits (continued)
10. (i) (I) Short Term Credit Agreement dated as of September 15, 1994
among Montgomery Ward & Co., Incorporated, various banks,
The First National Bank of Chicago, as Documentary Agent,
The Bank of Nova Scotia, as Administrative Agent, The Bank
of New York, as Negotiated Loan Agent and Bank of America
National Trust and Savings Association, as Advisory Agent,
incorporated by reference to Exhibit 10. (i) (H) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 1, 1994.
10. (i) (I) (1) Amended Schedule 1 to the Short Term Credit Agreement dated
as of September 15, 1994 among Montgomery Ward & Co.,
Incorporated, various banks, The First National Bank of
Chicago, as Documentary Agent, The Bank of Nova Scotia, as
Administrative Agent, the Bank of New York, as Negotiated
Loan Agent and Bank of America National Trust and Savings
Association, as Advisory Agent, incorporated by reference
to Exhibit 10. (i) (I) (1) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
September 30, 1995.
10. (i) (I) (2) Amendment dated March 19, 1996 to the Short Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust
and Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (I) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended March 30, 1996.
10. (i) (I) (3) Amendment dated September 6, 1996 to the Short Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust
and Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (I) (3) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended September 28, 1996.
10. (i) (I) (4) Confirmation of New Bank executed by The Industrial Bank of
Japan, Limited, Chicago Branch and The Bank of Nova Scotia,
as Administrative Agent, pursuant to Section 2.6(c) of the
Short Term Credit Agreement dated as of September 15, 1994
among Montgomery Ward & Co., Incorporated, various banks,
The First National Bank of Chicago, as Documentary Agent,
The Bank of Nova Scotia, as Administrative Agent, The Bank
of New York, as Negotiated Loan Agent and Bank of America
National Trust and Savings Association, as Advisory Agent,
as amended and extended, and (b) a letter dated October 24,
1996 from The Bank of Nova Scotia, as Administrative Agent,
to the Banks and other Agents who are parties to said Short
Term Credit Agreement transmitting an attached revised
Schedule 1 to such Agreement, incorporated by reference to
Exhibit 10. (i) (I) (4) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period ended
September 28, 1996.
77
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (i) (I) (5) Amendment dated December 23, 1996 to the Short Term Credit
Agreement dated as of September 15, 1994 among Montgomery
Ward & Co., Incorporated, various banks, The First National
Bank of Chicago, as Documentary Agent, The Bank of Nova
Scotia, as Administrative Agent, The Bank of New York, as
Negotiated Loan Agent and Bank of America National Trust
and Savings Association, as Advisory Agent, incorporated by
reference to Exhibit 10. (i) (I)(5) of the Company's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996.
10. (i) (I) (6) Waiver and Fourth Amendment to Short Term Credit Agreement
dated as of March 29, 1997 among Montgomery Ward & Co.,
Incorporated and various banks, incorporated by reference
to Exhibit 10. (I) (I) (6) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
March 29, 1997.
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 American National Trust and Savings
Association, as Advisory Agent, incorporated by reference
to Exhibit 10. (i) (I) (7) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
July 4, 1998.
10. (i) (J) Note Purchase Agreement dated July 11, 1995 between
Montgomery Ward & Co., Incorporated and various lenders,
incorporated by reference to Exhibit 10. (i) (J) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended July 1, 1995.
10. (i) (J) (1) Limited waiver and First Amendment to Note Purchase
Agreements dated as of March 29, 1997 among Montgomery Ward
& Co., Incorporated and various lenders, incorporated by
reference to Exhibit 10. (i) (F) (2) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended March 29, 1997.
10. (i) (L) Credit Agreement dated as of September 27, 1996 as amended
and restated as of October 21, 1996, among Signature
Financial/Marketing, Inc., various lenders, The Bank of New
York, as Documentation Agent and The Bank of Nova Scotia,
as Administrative Agent, incorporated by reference to
Exhibit 10. (i) (L) of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996.
10. (i) (L) (1) Amendment to Credit Agreement dated as of December 23, 1996
among Signature Financial/Marketing, Inc., various lenders,
The Bank of New York, as Documentation Agent and The Bank
of Nova Scotia, as Administrative Agent, incorporated by
reference to Exhibit 10. (i) (L) (1) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.
10. (i) (L) (2) Waiver Letter dated as of March 27, 1997 addressed to
Signature Financial/Marketing, Inc. from the Bank of New
York and The Bank of Nova Scotia, incorporated by reference
to Exhibit 10. (i) (L) (2) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
March 29, 1997.
78
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (i) (L) (3) Correction Letter Agreement dated as of March 27, 1997
among Signature Financial/Marketing, Inc., The Bank of New
York and The Bank of Nova Scotia, incorporated by reference
to Exhibit 10. (i) (L) (3) of the Company's Quarterly
Report on Form 10-Q for the fiscal quarterly period ended
March 29, 1997.
10. (i) (L) (4) Waivers and Recision of Acceleration dated July 15, 1997,
among The Bank of New York, The Bank of Nova Scotia and
Signature Financial/Marketing, Inc., incorporated by
reference to Exhibit 10. (i) (L) (4) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended June 28, 1997.
10. (i) (L) (5) Waiver, Amendment and Extension Agreement dated as of
August 29, 1997, among Signature Financial Marketing, Inc.,
various lenders, The Bank of New York, as Documentation
Agent and The Bank of Nova Scotia, as Administrative Agent,
incorporated by reference to Exhibit 10. (i) (L) (5) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
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, incorporated by reference to Exhibit
10. (i) (L) (6) of the Company's Quarterly Report on Form
10-Q for the fiscal quarterly period ended July 4, 1998.
10. (i) (L) (7) Waiver, Amendment and Extension Agreement dated as of July
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, incorporated by reference to Exhibit 10. (i) (L) (7)
of the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended October 3, 1998.
10. (i) (M) Credit Agreement dated October 4, 1996 among Montgomery
Ward & Co., Incorporated, various lenders, The Bank of Nova
Scotia, as Administrative Agent, and The Bank of New York,
as Documentation Agent, incorporated by reference to
Exhibit 10. (i) (M) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended September
28, 1996.
10. (i) (M) (1) Amendment to Credit Agreement dated as of December 23, 1996
among Montgomery Ward & Co., Incorporated, various lenders,
The Bank of Nova Scotia, as Administrative Agent, and The
Bank of New York, as Documentation Agent, incorporated by
reference to Exhibit 10. (i) (M) (1) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.
10. (i) (M) (2) Second Amendment to Credit Agreement dated as of December
23, 1996 among Montgomery Ward & Co., Incorporated, various
lenders, The Bank of Nova Scotia, as Administrative Agent,
and The Bank of New York, as Documentation Agent,
incorporated by reference to Exhibit 10. (i) (M) (2) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 28, 1996.
79
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (i)(M)(3) Waiver and Third Amendment to Credit Agreement dated as
of March 29, 1997 among Montgomery Ward & CO.,
Incorporated and various lenders, incorporated by
reference to Exhibit 10. (i) (M) (3) of the Company's
Quarterly Report on Form 10-Q for the fiscal quarterly
period ended March 29, 1997.
10. (i)(N) Asset Purchase, License & Agency Agreement for the
Purchase of Certain Assets of Lechmere, Inc. and
Montgomery Ward & Co., Incorporated, by Schottenstein
Bernstein Capital Group LLC dated August 14, 1997,
incorporated by reference to Exhibit 10. (i) (N) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended September 27, 1997.
10. (i)(O) Agency Agreement between Schottenstein Bernstein Capital
Group LLC and Montgomery Ward & Co., Incorporated, as of
August 14, 1997, incorporated by reference to Exhibit 10.
(i) (O) of the Company's Quarterly Report on Form 10-Q
for the fiscal quarterly period ended September 27, 1997.
10. (i)(P) Agency Agreement dated as of October 31, 1997 between the
joint venture composed of Gordon Brothers Partners, Inc.,
Hilco Trading, Inc./Garcel, Inc. D/B/A Great American
Asset Management and Alco Capital Group, Inc., as agent
and Montgomery Ward & Co., Incorporated, incorporated by
reference to Exhibit 10. (i) (P) of the Company's Annual
Report on Form 10-K for the fiscal year ended January 3,
1998.
10. (i)(Q) Promissory Note among Lechmere, Inc. and Signature
Financial/Marketing, Inc. dated September 30, 1998,
incorporated by reference to Exhibit 10. (i) (Q) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended October 3, 1998.
10. (i)(R) Master Service Agreement for Information Technology
Services and Service Agreements No. 1 through 7 between
Montgomery Ward & Co., Incorporated and Axciom
Corporation dated November 6, 1998.
10. (ii)(A)* Interim Consumer Credit Card Program dated as of April 1,
1996, as amended, restated and renamed the Bank Credit
Card Program Agreement dated as of April 1, 1996 by and
between Monogram Credit Card Bank of Georgia and
Montgomery Ward & Co., Incorporated, incorporated by
reference to Exhibit 10. (ii) (A) of the Company's Annual
Report on Form 10-K for the fiscal year ended December
28, 1996.
10. (ii)(B)* Account Purchase Agreement dated as of June 24, 1988, as
amended, restated and renamed the Account-Related
Agreement and dated as of April 1, 1996 by and between
Montgomery Ward Credit Corporation and Montgomery Ward &
Co., Incorporated, incorporated by reference to Exhibit
10. (ii) (B) of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996.
10. (ii)(B)(1) Letter Agreement dated March 27, 1998 by and between
Montgomery Ward & Co., Incorporated and Monogram Credit
Card Bank of Georgia amending the Bank Program Agreement
dated as of April 1, 1996, incorporated by reference to
Exhibit 10. (ii) (B) (1) of the Company's quarterly
report on Form 10-Q for the fiscal quarterly period ended
April 4, 1998.
* Confidential treatment has been requested from the Secretary of the
Commission, with respect to portions of this document.
80
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (ii)(B)(2) Letter Agreement dated March 20, 1998 by and between
Montgomery Ward & Co., Incorporated and Montgomery Ward
Credit Corporation amending the Account-Related Agreement
dated as of April 1, 1996, incorporated by reference to
Exhibit 10. (ii) (B) (2) of the Company's quarterly
report on Form 10-Q for the fiscal quarterly period ended
April 4, 1998.
10. (ii)(B)(3) Interim Amendment Agreement Relating to Bank Program and
Account-Related Agreements dated as of April 1, 1998 by
and between Monogram Credit Card Bank of Georgia,
Montgomery Ward Credit Corporation and Montgomery Ward &
Co., Incorporated, incorporated by reference to Exhibit
10. (ii) (B) (3) of the Company's quarterly report on
Form 10-Q for the fiscal quarterly period ended April 4,
1998.
10. (ii)(C)(1) Letter Agreement dated as of April 1, 1996 between
Signature Financial/Marketing, Inc., Monogram Credit Card
Bank of Georgia, Montgomery Ward Credit Corporation, and
Montgomery Ward & Co., Incorporated, incorporated by
reference to Exhibit 10. (ii) (C) (1) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.
10. (ii)(C)(2) Letter Agreement dated as of April 1, 1996 between
Signature Financial/Marketing, Inc. and Montgomery Ward
Credit Corporation, incorporated by reference to Exhibit
10. (ii) (C) (2) of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996.
10. (ii)(C)(3) Letter Agreement dated September 17, 1996 between
Montgomery Ward & Co., Incorporated, Monogram Credit Card
Bank of Georgia and Montgomery Ward Credit Corporation,
incorporated by reference to Exhibit 10. (ii) (C) (3) of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.
10. (ii)(C)(4)* Letter Agreement dated as of August 2, 1995 between
Monogram Retailer Credit Services, Inc. and Montgomery
Ward & Co., Incorporated, incorporated by reference to
Exhibit 10. (ii) (C) (4) of the Company's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996.
10. (ii)(D)* Interim Consumer Credit Card Program Agreement dated as
of March 13, 1996 between Monogram Credit Card Bank of
Georgia and Lechmere, Inc., incorporated by reference to
Exhibit 10. (ii) (D) of the Company's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996.
10. (ii)(D)(1)* Letter Agreement dated January 23, 1996 between
Montgomery Ward & Co., Incorporated, Montgomery Ward
Credit and General Electric Capital Corporation,
incorporated by reference to Exhibit 10. (ii) (D) (1) of
the Company's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.
* Confidential treatment has been requested from the Secretary of the
Commission, with respect to portions of this document.
81
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (ii)(D)(2) Letter Agreement dated March 13, 1996 between Montgomery
Ward & Co., Incorporated, Lechmere, Inc., General
Electric Capital Corporation and Montgomery Ward Credit
Corporation, incorporated by reference to Exhibit 10.
(ii) (D) (2) of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996.
10. (ii)(E)* MWCC Program Agreement dated as of April 3, 1996 between
Montgomery Ward Credit Corporation, Montgomery Ward &
Co., Incorporated and Lechmere, Inc., incorporated by
reference to Exhibit 10. (ii) (E) of the Company's Annual
Report on Form 10-K for the fiscal year ended December
28, 1996.
10. (ii)(F) Letter Agreement dated July 7, 1997, among Montgomery
Ward & Co., Incorporated, Monogram Credit Card Bank of
Georgia, Montgomery Ward Credit Corporation and Lechmere,
Inc., incorporated by reference to Exhibit 10. (ii) (F)
of the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended June 28, 1997.
10. (iii)(A) Program Agreement dated October 12, 1989 between
Montgomery Ward & Co., Incorporated and General Electric
Capital Corporation, incorporated by reference to Exhibit
10. (iii) (A) of the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996.
10. (iii)(B) Amendment to Program Agreement dated March 4, 1997
between General Electric Corporation, Montgomery Ward &
Co., Incorporated and Lechmere, Inc., incorporated by
reference to Exhibit 10. (iii) (B) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.
10. (iii)(C) Waiver letter of General Electric Capital Corporation
dated March 27, 1997, incorporated by reference to
Exhibit 10. (iii) ( C) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period ended March
27, 1997.
10. (iii)(D) Letter Agreement dated June 25, 1997 among General
Electric Capital Corporation, Montgomery Ward Holding
Corp., Montgomery Ward & Co., Incorporated and Lechmere,
Inc., incorporated by reference to Exhibit 10. (iii) (D)
of the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended June 28, 1997.
10. (iv)(A) Montgomery Ward & Co., Incorporated Stock Ownership Plan,
amended and restated as of May 20, 1994, incorporated by
reference to Exhibit 10. (iv) (A) (ii) (A) of the
Company's Registration Statement on Form S-1 (No. 33-
33252).
10. (iv)(A)(1) Amendment No. 1 to the Amended and Restated Montgomery
Ward & Co. Stock Ownership Plan dated October 20, 1994,
incorporated by reference to Exhibit 10. (iv) (A) (iii)
of the Company's Quarterly Report on Form 10-Q for the
fiscal quarterly period ended October 1, 1994.
* Confidential treatment has been requested from the Secretary of the
Commission, with respect to portions of this document.
82
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (iv)(A)(2) Amendment No. 2 to the Amended and Restated Montgomery
Ward & Co., Incorporated Stock Ownership Plan, dated as
of May 29, 1997, incorporated by reference to Exhibit 10.
(iv) (A) (2) of the Company's Quarterly Report on Form
10-Q for the fiscal quarterly period ended June 28, 1997.
10. (iv)(B) Montgomery Ward & Co., Incorporated Long-Term Incentive
Plan, incorporated by reference to Exhibit 10. (iv) (B)
of the Company's Registration Statement on Form S-1
(Registration No. 33-23403).
10. (iv)(B)(i) Montgomery Ward & Co., Incorporated Executive Long-Term
Incentive Plan, incorporated by reference to Exhibit 10.
(iv) (B) (1) of the Company's Registration Statement on
Form S-1 (No. 33-33252).
10. (iv)(C) Montgomery Ward & Co., Incorporated Performance
Management Program, incorporated by reference to Exhibit
10. (iv) (C) of the Company's Registration Statement on
Form S-1 (Registration No. 33-23403).
10. (iv)(C)(i) Montgomery Ward & Co., Incorporated Senior Executive
Performance Management Program, incorporated by reference
to Exhibit 10. (iv) (C) (i) of the Company's Registration
Statement on Form S-1 (No. 33-33252).
10. (iv)(D)(6) Montgomery Ward & Co., Incorporated Retirement Security
Plan (as amended and restated effective as of January 1,
1998).
10. (iv)(D)(7) First Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective November
25, 1998.
10. (iv)(D)(8) Second Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective January
2, 1999.
10. (iv)(D)(9) Third Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective January
1, 1999.
10. (iv)(D)(10) Fourth Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective January
29, 1999.
10. (iv)(D)(11) Fifth Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective March 6,
1999.
10. (iv)(E) Montgomery Ward & Co., Incorporated Supplemental
Retirement Plan, incorporated by reference to Exhibit 10.
(iv) (E) of the Company's Registration Statement on Form
S-1 (Registration No. 33-23403).
10. (iv)(F) Montgomery Ward Holding Corp. Directors Fee and Stock
Ownership Plan, incorporated by reference to Exhibit 10.
(iv) (F) of the Company's Registration Statement on Form
S-1 (Registration No. 33-41161).
83
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (iv)(G) Montgomery Ward Holding Corp. Senior Officer Severance
Plan, incorporated by reference to Exhibit 10. (iv) (G)
of the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993.
10. (iv)(G)(1) Montgomery Ward & Co., Incorporated Executive Committee
Severance Plan incorporated by reference to Exhibit 10.
(iv) (G) (1) of the Company's Annual Report on Form 10-K
for the fiscal year ended January 3, 1998.
10. (iv)(H)(3) Montgomery Ward & Co., Incorporated Savings Plan (as
amended and restated effective as of January 1, 1998).
10. (iv)(I) Montgomery Ward & Co., Incorporated Success Plan,
incorporated by reference to Exhibit 10. (iv) (I) of the
Company's Registration Statement on Form S-1 (No.33-
33252).
10. (iv)(J) Form of Montgomery Ward Special Retention Plan document
entered into with the following persons: Alan E. DiGangi,
Spencer H. Heine, Carol J. Harms, Robert A. Kasenter,
Frederick E. Meiser, Edwin G. Pohlmann, Robert J.
Stevenish and John Workman, incorporated by reference to
Exhibit 10. (iv) (J) of the Company's Quarterly Report on
Form 10-Q for the fiscal quarterly period ended March 30,
1996.
10. (iv)(L) Form of Montgomery Ward Change of Control Security Plan
document entered into with the following persons: Alan E.
DiGangi, Spencer H. Heine, Carol J. Harms, Robert A.
Kasenter, Frederick E. Meiser, Edwin G. Pohlmann, Robert
J. Stevenish and John Workman, incorporated by reference
to Exhibit 10. (iv) (L) of the Company's Quarterly Report
on Form 10-Q for the fiscal quarterly period ended March
30, 1996.
10. (v) Relationship Agreement effective December 10, 1996
between Bernard F. Brennan, Montgomery Ward Holding
Corp., Montgomery Ward & Co., Incorporated and General
Electric Capital Corporation, incorporated by reference
to Exhibit 10. (v) of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996.
10. (vi)(A) Employment Agreement effective December 20, 1996 between
Montgomery Ward & Co., Incorporated, Montgomery Ward
Holding Corp., and Roger V. Goddu, incorporated by
reference to Exhibit 10. (vi) of the Company's Annual
Report on Form 10-K for the fiscal year ended December
28, 1996.
10. (vi)(B) Letter Agreement dated December 20, 1996 between General
Electric Capital Corporation and Roger V. Goddu,
incorporated by reference to Exhibit 10. (vi) (B) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (vi)(C) Letter Agreement dated November 3, 1997 between
Montgomery Ward & Co., Incorporated and Roger V. Goddu,
regarding Court Approval of Executive Compensation Plan
for Executive Committee Members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan,
incorporated by reference to Exhibit 10. (vi) (C) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
84
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (vii)(A) Employment Agreement effective January 31, 1997 between
Montgomery Ward & Co., Incorporated, Montgomery Ward
Holding Corp., and Burnett Donoho, incorporated by
reference to Exhibit 10. (vii) (A) of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1996.
10. (vii)(B) General Release and Agreement Not to Sue dated January
23, 1998 between Montgomery Ward & Co., Incorporated and
Burnett Donoho, incorporated by reference to Exhibit 10.
(vii) (B) of the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998.
10. (viii) Line of Credit Agreement effective December 19, 1996
between Montgomery Ward & Co., Incorporated and The
Northern Trust Company, incorporated by reference to
Exhibit 10. (viii) of the Company's Annual Report on Form
10-K for the fiscal year ended December 28, 1996.
10. (ix)(A) Employment Agreement effective November 3, 1997, between
Montgomery Ward & Co., Incorporated and Alan E. DiGangi,
incorporated by reference to Exhibit 10. (ix) (A) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (ix)(B) Letter agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Alan E. DiGangi,
regarding court approval of Executive Compensation Plan
for Executive Committee members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan,
incorporated by reference to Exhibit 10. (ix) (B) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (x)(A) Employment Agreement effective February 3, 1997, between
Montgomery Ward & Co., Incorporated and Thomas Grimes,
incorporated by reference to Exhibit 10. (x) (A) of the
Company's Annual Report of Form 10-K for the fiscal year
ended December 28, 1996.
10. (x)(B) Letter Agreement dated February 18, 1997 between General
Electric Capital Corporation and Thomas Grimes,
incorporated by reference to Exhibit 10. (x) (B) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (x)(C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Thomas Grimes,
regarding court approval of Executive Compensation Plan
for Executive Committee members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan,
incorporated by reference to Exhibit 10. (x) (C) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (x)(D) Supplemental Employment Agreement effective November 6,
1997, between Montgomery Ward & Co., Incorporated and
Thomas Grimes.
10. (xi)(A) Employment Agreement effective April 15, 1997, between
Montgomery Ward & Co., Incorporated and Thomas J. Austin,
incorporated by reference to Exhibit 10. (xi) (A) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
85
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (xi)(B) Letter Agreement dated April 30, 1997 between General
Electric Capital Corporation and Thomas J. Austin,
incorporated by reference to Exhibit 10. (xi) (B) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (xi)(C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Thomas J. Austin,
regarding court approval of Executive Compensation Plan
for Executive Committee members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan,
incorporated by reference to Exhibit 10. (xi) (C) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (xii)(A) Employment Agreement effective April 15, 1997, between
Montgomery Ward & Co., Incorporated and Louis J.
Caporale, incorporated by reference to Exhibit 10. (xii)
(A) of the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998.
10. (xii)(B) Letter Agreement dated April 30, 1997 between General
Electric Capital Corporation and Louis. J. Caporale,
incorporated by reference to Exhibit 10. (xii) (B) of the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998.
10. (xii)(C) Letter agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Louis J.
Caporale, regarding court approval of Executive
Compensation Plan for Executive Committee members and
Montgomery Ward & Co., Incorporated Special Emergence
Bonus Plan, incorporated by reference to Exhibit 10.
(xii) (C) of the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1998.
10. (xiv)(A) Employment Agreement effective April 13, 1997 between
Montgomery Ward & Co., Incorporated and Spencer H. Heine,
incorporated by reference to Exhibit 10. (xiv) of the
Company's Quarterly Report on Form 10-Q for the fiscal
quarterly period ended March 29, 1997, incorporated by
reference to Exhibit 10. (xiv) (A) of the Company's
Annual Report on Form 10-K for the fiscal year ended
January 3, 1998.
10. (xiv)(B) Amendment to Employment Agreement effective November 3,
1997, between Montgomery Ward & Co., Incorporated and
Spencer H. Heine.
10. (xiv)(C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Spencer H. Heine,
regarding court approval of Executive Compensation Plan
for Executive Committee members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan.
10. (xv) Employment Agreement dated March 6, 1998 between
Montgomery Ward & Co., Incorporated and Worthington W.
Linen, incorporated by reference to Exhibit 10. (xv) of
the Company's Annual Report on Form 10-K for the fiscal
year ended January 3, 1998.
10. (xvi)(A) Employment Agreement dated September 2, 1997 between
Montgomery Ward & Co., Incorporated and Thomas J. Paup.
10. (xvi)(B) Letter Agreement dated September 4, 1997 between General
Electric Capital Corporation and Thomas J. Paup.
86
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
3. Exhibits (continued)
10. (xvi)(C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Thomas J. Paup,
regarding court approval of Executive Compensation Plan
for Executive Committee members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan.
10. (xvii)(A) Employment Agreement effective March 19, 1997 between
Montgomery Ward & Co., Incorporated and Kevin Freeman.
10. (xvii)(B) Letter Agreement dated April 30, 1997 between General
Electric Capital Corporation and Kevin Freeman.
10. (xvii)(C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Kevin Freeman,
regarding court approval of Executive Compensation Plan
for Executive Committee members and Montgomery Ward &
Co., Incorporated Special Emergence Bonus Plan.
10. (xvii)(D) Supplemental Employment Agreement effective November 6,
1997, between Montgomery Ward & Co., Incorporated and
Kevin Freeman.
11. Not applicable.
12. Not applicable.
13. Not applicable.
16. Not applicable.
18. Not applicable.
19. Not applicable.
21. Subsidiaries of the Registrant, incorporated by reference to Exhibit
21 of the Company's Registration Statement on Form S-1 (Registration
No. 33-33252).
22. Not applicable.
23. Consent of independent public accountants.
24. Power of attorney.
27. Financial data schedule.
28. Not applicable.
(b) Reports on Form 8-K.
None.
87
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant, Montgomery Ward Holding Corp., has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
REGISTRANT MONTGOMERY WARD HOLDING CORP.
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Thomas J. Paup, Executive Vice President, Chief Financial
Officer
DATE April 2, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Roger V. Goddu*, Director and Chief Executive Officer
DATE April 2, 1999
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Thomas J. Paup, Executive Vice President, Chief Financial
Officer
DATE April 2, 1999
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Bernard F. Brennan*, Director
DATE April 2, 1999
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Silas S. Cathcart*, Director
DATE April 2, 1999
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Tommy T. Cato*, Director
DATE April 2, 1999
BY /s/ Thomas J. Paup
----------------------------------------------------------
NAME AND TITLE Dennis D. Dammerman*, Director
DATE April 2, 1999
* By power of attorney.
88
<PAGE>
SIGNATURES (CONTINUED)
BY /s/ Thomas J. Paup
--------------------------------------------------------
NAME AND TITLE Denis J. Nayden*, Director
DATE April 2, 1999
BY /s/ Thomas J. Paup
--------------------------------------------------------
NAME AND TITLE James A. Parke*, Director
DATE April 2, 1999
BY /s/ Thomas J. Paup
--------------------------------------------------------
NAME AND TITLE Edward D. Stewart*, Director
DATE April 2, 1999
* By power of attorney.
89
<PAGE>
EXHIBIT INDEX
--------------------------------------------------
10. (i) (G) (8) Amendment to Post-Petition Loan and Guaranty
Agreement among Montgomery Ward & Co.,
Incorporated, as borrower; Montgomery Ward Holding
Corp. and other debtor subsidiaries of Montgomery
Ward Holding Corp., as guarantors; General Electric
Capital Corporation, as agent and lender; and
various lenders dated as of November 9, 1998.
10. (i) (R) Master Service Agreement for Information Technology
Services and Service Agreements No. 1 through 7
between Montgomery Ward & Co., Incorporated and
Axciom Corporation dated November 6, 1998.
10. (iv) (D) (6) Montgomery Ward & Co., Incorporated Retirement
Security Plan (as amended and restated effective as
of January 1, 1998).
10. (iv) (D) (7) First Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective
November 25, 1998.
10. (iv) (D) (8) Second Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective
January 2, 1999.
10. (iv) (D) (9) Third Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective
January 1, 1999.
10. (iv) (D) (10) Fourth Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective
January 29, 1999.
10. (iv) (D) (11) Fifth Amendment to the Montgomery Ward & Co.,
Incorporated Retirement Security Plan effective
March 6, 1999.
10. (iv) (H) (3) Montgomery Ward & Co., Incorporated Savings Plan
(as amended and restated effective as of January 1,
1998).
10. (x) (D) Supplemental Employment Agreement effective
November 6, 1997, between Montgomery Ward & Co.,
Incorporated and Thomas Grimes.
10. (xiv) (B) Amendment to Employment Agreement effective
November 3, 1997, between Montgomery Ward & Co.,
Incorporated and Spencer H. Heine.
10. (xiv) (C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Spencer H.
Heine, regarding court approval of Executive
Compensation Plan for Executive Committee members
and Montgomery Ward & Co., Incorporated Special
Emergence Bonus Plan.
10. (xvi) (A) Employment Agreement dated September 2, 1997
between Montgomery Ward & Co., Incorporated and
Thomas J. Paup.
10. (xvi) (B) Letter Agreement dated September 4, 1997 between
General Electric Capital Corporation and Thomas J.
Paup.
<PAGE>
10. (xvi) (C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Thomas J.
Paup, regarding court approval of Executive
Compensation Plan for Executive Committee members
and Montgomery Ward & Co., Incorporated Special
Emergence Bonus Plan.
10. (xvii) (A) Employment Agreement effective March 19, 1997
between Montgomery Ward & Co., Incorporated and
Kevin Freeman
10. (xvii) (B) Letter Agreement dated April 30, 1997 between
General Electric Capital Corporation and Kevin
Freeman.
10. (xvii) (C) Letter Agreement dated November 3, 1997, between
Montgomery Ward & Co., Incorporated and Kevin
Freeman, regarding court approval of Executive
Compensation Plan for Executive Committee members
and Montgomery Ward & Co., Incorporated Special
Emergence Bonus Plan.
10. (xvii) (D) Supplemental Employment Agreement effective
November 6, 1997, between Montgomery Ward & Co.,
Incorporated and Kevin Freeman.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
27. Financial Data Schedule.
<PAGE>
10.(i)(G)(8)
THIRD AMENDMENT TO
POST-PETITION LOAN AND GUARANTY AGREEMENT
THIRD AMENDMENT TO POST-PETITION LOAN AND GUARANTY AGREEMENT, dated as
of November 9, 1998 (this "Amendment"), among MONTGOMERY WARD & CO.,
---------
INCORPORATED, an Illinois corporation and a debtor and debtor in possession
("Borrower Representative"), MONTGOMERY WARD HOLDING CORP., a Delaware
- - -------------------------
corporation and a debtor and debtor in possession ("Parent" or "Guarantor"), as
------ ---------
Guarantor, the other Guarantors signatory hereto (together with Parent and the
Borrower Representative, the "Credit Parties"), GENERAL ELECTRIC CAPITAL
--------------
CORPORATION, a New York corporation (in its individual capacity, "GE Capital"),
----------
for itself, as Lender, and as Agent (the "Agent") for Lenders, and the other
-----
Lenders signatory hereto.
RECITALS
--------
WHEREAS, the Borrower Representative, the Guarantors, the Lenders and
the Agent are parties to that certain Post-Petition Loan and Guaranty Agreement,
dated as of July 8, 1997 (as amended by the Waiver and First Amendment to Post-
Petition Loan and Guaranty Agreement, dated as of July 30, 1997; by the Waiver
and Second Amendment to Post-Petition Loan and Guaranty Agreement, dated as of
February 20, 1998; and as further amended, supplemented or modified, the "Loan
----
Agreement"). The Borrower Representative and the Guarantors have requested that
- - ---------
the Lenders agree to amend certain provisions of the Loan Agreement. The
Borrower Representative, the Guarantors, the Lenders and the Agent have agreed,
upon the terms and conditions specified herein, to amend certain provisions of
the Loan Agreement, all as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the parties hereto agree
as follows:
SECTION 1. Defined Terms and Interpretation.
--------------------------------
(a) The capitalized terms used herein which are defined in the Loan
Agreement shall have the respective meanings assigned to them in the Loan
Agreement except as otherwise provided herein or unless the context otherwise
requires. In addition, as used in this Amendment, the following term shall have
the following meaning:
"Third Amendment Effective Date" shall have the meaning specified in
------------------------------
Section 4 hereof.
<PAGE>
(b) Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) No provision in this Amendment shall be interpreted or construed
against any Person because that Person or its legal representative drafted such
provision.
SECTION 2. Amendments to the Loan Agreement. The Loan Agreement is,
--------------------------------
effective as of the Third Amendment Effective Date, amended as follows:
(a) The second paragraph of Section 1.5(a) of the Loan Agreement is
hereby amended and restated to read as follows:
"The Applicable Revolver Index Margin, the Applicable Revolver
LIBOR Margin, the Applicable Standby L/C Margin and the Applicable
Trade L/C Margin will be 1.25%, 2.50%, 2.00% and 1.75% per annum,
respectively, as of the Closing Date."
(b) Section 5.11 of the Loan Agreement is hereby amended and restated
to read as follows:
"5.11 Appraisals of Eligible Real Property.
------------------------------------
(a) The Agent (or the Requisite Lenders acting through the Agent)
may require Borrowers, at any time, to retain a Qualified Appraiser
(as such term is defined in this Section 5.11) to conduct a Conforming
------------
Appraisal (as such term is defined in this Section 5.11) of the real
------------
property, buildings and improvements (whether held in fee or by
leasehold) that are stores, warehouses or other business facilities
operated by any Credit Party in the ordinary course of its business.
In addition, for purposes of establishing the Fair Market Value of any
Eligible Real Property, from time to time, Borrowers shall be entitled
to submit to Agent a Conforming Appraisal of such Eligible Real
Property. Borrowers shall be obligated to pay for the first
Conforming Appraisal of any parcel of real property, building or
improvement requested by Agent or the Requisite Lenders, as
applicable; provided, that so long as a Default or Event of Default
--------
has not occurred and is continuing, the Borrowers shall only be
obligated to pay for additional Conforming Appraisals requested by
Agent or the Requisite Lenders of such parcel of real property,
building or improvement once in any twelve (12)-month period.
Borrowers shall be obligated to pay for any Conforming Appraisals that
are not requested by either Agent or the Requisite Lenders.
(b) `Conforming Appraisal', as used in this Agreement, shall
--------------------
mean, as to any parcel of real property, buildings or improvements, an
2
<PAGE>
appraisal rendered by a Qualified Appraiser that establishes the cash
price that would be paid for such real property, buildings or
improvements in an arm's-length sale transaction between an informed
and willing purchaser (other than a purchaser currently in possession)
under no compulsion to purchase and an informed and willing seller
under no compulsion to sell. `Qualified Appraiser', as used in this
-------------------
Agreement, shall mean an independent third-party appraiser with at
least ten (10) years continuous experience in the appraisal of
property of the generally same kind and character as the property to
be appraised and the identity of whom is acceptable to (i) Agent, if a
Conforming Appraisal has been requested by Agent or if it has been
provided by Borrowers on their own initiative or (ii) the Requisite
Lenders, if they have requested a Conforming Appraisal, in each case,
in the exercise of its or their reasonable discretion, as the case may
be."
(c) The following proviso is hereby inserted at the end of the
definition of "Borrowing Base" in Annex A of the Loan Agreement:
--------------
"provided, however, that, from and after November 1, 1998, if any Credit
-------- -------
Party sells, transfers or otherwise disposes of any of its interest in any
Real Estate, then, at such time as the aggregate amount of the Net Sale
Proceeds from all such sales, transfers or other dispositions exceed
$25,000,000 (the "Cut-Off Date"), the amount in clause (b)(B) shall be
------------
reduced, on a dollar for dollar basis, by an amount that is equal to 75% of
all of the Net Sale Proceeds received by any Credit Party relating to or
arising out of any sale, disposition or other transfer by any Credit Party
of any Real Estate after the Cut-Off Date; provided, further, if any Real
-------- -------
Estate that is sold, disposed of or otherwise transferred after the Cut-Off
Date is also Eligible Real Property that is listed on Schedule X attached
----------
hereto, then, to the extent the aggregate Net Sale Proceeds received by any
of the Credit Parties after the Cut-Off Date in respect of all of the
sales, transfers or other dispositions of Eligible Real Property after the
Cut-Off Date are less than the aggregate Fair Market Value of such sold,
transferred or otherwise disposed of Eligible Real Property, then the
amount in clause (b)(B) hereof shall be reduced by 100% of the aggregate
Net Sale Proceeds received by any Credit Party from the sale, transfer or
other disposition of all such Eligible Real Property.
(d) The definition of "Fair Market Value" in Annex A of the Loan
-----------------
Agreement is hereby amended and restated to read as follows:
"'Fair Market Value' shall mean (for the purpose of calculating
-----------------
the Borrowing Base, as of the Closing Date and continuing, for each
parcel of Eligible Real Property until an updated appraisal of such
parcel has been rendered to Agent that conforms to the requirements of
Section 5.11) an amount equal to the excess of (a) the amount ascribed
------------
to such parcel of Eligible Real Property under the column titled
`Borrowing Base Value' on Schedule X attached hereto over (b) the
--------------------- ----------
amount ascribed to such parcel of Eligible Real Property under the
column titled `8/1/98 Existing Mortgage'
------------------------
3
<PAGE>
on Schedule X attached hereto less any reductions to such Indebtedness
----------
since August 1, 1998. Upon the delivery to Agent of an updated
Conforming Appraisal on any parcel of Eligible Real Property pursuant
to Section 5.11, the Fair Market Value of such parcel of Eligible Real
------------
Property shall be the amount ascribed to such parcel of Eligible Real
Property in such Conforming Appraisal."
(e) The following definition is added, in the proper alphabetical
order, to Annex A of the Loan Agreement:
"'Net Sale Proceeds' shall mean, with respect to any sale,
-----------------
transfer or other disposition of any Real Estate, the aggregate
proceeds received by any Credit Party relating to or arising out of
any sale, transfer or other disposition of Real Estate minus any
-----
reasonable and customary fees, title expenses, Taxes or Indebtedness
(if in the case of any Eligible Real Property, such Indebtedness is
secured by a Permitted Encumbrance), in each case, that are required
to be paid by a Credit Party in connection with such sale, transfer or
other disposition minus any escrowed amounts, holdbacks or other funds
-----
given by a Credit Party as security or collateral for its performance
or other obligations to the purchaser of such Real Estate; provided,
--------
however, that at such time as any such escrowed amounts, holdbacks or
-------
other funds are returned or refunded to any Credit Party, the amount
of such returned or refunded escrowed amounts, holdbacks or other
funds shall be deemed to be added to the Net Sale Proceeds relating to
such Real Estate."
(f) Subsection (b) of Annex G of the Loan Agreement is hereby
amended and restated to read as follows:
"Minimum EBITDA. At the end of each Fiscal Quarter set forth
--------------
below, EBITDA, for the respective periods set forth below, shall be an
amount not less than the following:
(i) $(235,000,000) for the twelve Fiscal Months ending the fourth
Fiscal Quarter of 1998;
(ii) $(225,000,000) for the twelve Fiscal Months ending the first
Fiscal Quarter of 1999; and
(iii) $(200,000,000) for the twelve Fiscal Months ending the second
Fiscal Quarter of 1999."
SECTION 3. Representations and Warranties True; No Default or Event
--------------------------------------------------------
of Default. The Credit Parties represent and warrant to the Agent and the
- - ----------
Lenders that on the date of and after giving effect to the execution and
delivery of this Amendment (i) the representations and warranties set forth in
the Loan Agreement are true and correct in all material respects on the date
hereof as though made on and as of such date (unless any
4
<PAGE>
such representation or warranty expressly relates to an earlier date) and (ii)
neither any Default nor any Event of Default has occurred and is continuing as
of the date hereof.
SECTION 4. Conditions of Effectiveness. As used in this Amendment,
---------------------------
"Third Amendment Effective Date" shall mean the date when, and only when: (i)
- - -------------------------------
Agent has received executed counterparts of this Amendment from the requisite
number of Lenders that comprise the Requisite Lenders; (ii) the Bankruptcy Court
has entered a final order that is not subject to appeal, in form and substance
satisfactory to the Agent, in its sole and absolute discretion, authorizing the
payment of a fee to Agent from the Borrowers, for the account of the Lenders who
execute this Amendment, in an amount equal to .20% of the Lenders' Revolving
Loan Commitments (the "Fee") and (iii) Agent has received the Fee.
---
SECTION 5. Reference to this Amendment and Effect on Loan Documents.
--------------------------------------------------------
(a) From and after the Third Amendment Effective Date, each reference
in the Loan Agreement (including in any Exhibit thereto) to "this Agreement",
"hereunder", "herein" or words of like import shall mean and be a reference to
the Loan Agreement, as affected and amended hereby.
(b) From and after the Third Amendment Effective Date, each reference
in the Loan Documents (i) to "the Loan Agreement" shall mean and be reference to
the Loan Agreement, as affected and amended hereby and (ii) to the terms whose
definitions are amended pursuant to this Amendment shall mean and be a reference
to such term as affected and amended hereby.
(c) The Loan Agreement, the Notes and the other Loan Documents, as
affected and amended hereby, shall remain in full force and effect and the Loan
Documents are hereby ratified and confirmed in all respects.
SECTION 6. Governing Law; Binding Effect. In all respects, including
-----------------------------
all matters of construction, validity and performance, this Amendment shall be
governed by, and construed and enforced in accordance with, the internal laws of
the State of New York (without regard to conflict of law provisions) and any
applicable laws of the United States of America, and shall be binding upon the
parties hereto and their respective successors and permitted assigns.
SECTION 7. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 8. Consent of Guarantors. By their execution and delivery of
---------------------
this Amendment, each Guarantor hereby consents to all of the terms and
provisions of this Amendment and ratifies and confirms that each of the other
Loan Documents to which it is a party remains in full force and effect and
enforceable in accordance with their respective terms.
5
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
BORROWER:
MONTGOMERY WARD & CO., INCORPORATED
By: s/ Thomas J. Paup
-----------------
Name: Thomas J. Paup
Title: Executive Vice President
GUARANTORS:
LECHMERE, INC.
By: s/ Thomas G. Grimes
-------------------
Name: Thomas G. Grimes
Title: President
AMERICAN DELIVERY SERVICE COMPANY
By: s/ Philip D. Delk
-----------------
Name: Philip D. Delk
Title: Vice President
CONTINENTAL TRANSPORTATION, INC.
By: s/ Philip D. Delk
-----------------
Name: Philip D. Delk
Title: Vice President and Assistant Secretary
S-1
<PAGE>
JRI DISTRIBUTING, INC.
STANDARD T CHEMICAL COMPANY, INC.
WFL REALTY, INC.
By: s/ Philip D. Delk
---------------------------------------
Name: Philip D. Delk
Title: Vice President and Secretary
M-W PRESTRESS, INC.
MW DIRECT GENERAL, INC.
MW DIRECT LIMITED, INC.
By: s/ Philip D. Delk
---------------------------------------
Name: Philip D. Delk
Title: Vice President and Secretary
MONTGOMERY WARD
INTERNATIONAL, INC.
MPI, INC.
By: s/ Philip D. Delk
---------------------------------------
Name: Philip D. Delk
Title: Assistant Secretary
S-2
<PAGE>
BARRETWARD PROPERTIES CO., INC.
BRANDYWINE DC, INC.
BRANDYWINE PROPERTIES, INC.
BRETTWARD PROPERTIES CO., INC.
FIRST MONT CORPORATION
FOURTH WYCOMBE PROPERTIES, INC.
GABEWARD PROPERTIES CORPORATION
GARDEN GROVE DEVELOPMENT CORPORATION HUGA REALTY INC.
JOSHWARD PROPERTIES CORPORATION
LECHMERE DEVELOPMENT CORPORATION
M-W FAIRFAX PROPERTIES, INC.
M-W PROPERTIES CORPORATION
M-W RESTAURANTS REALTY CORPORATION
MARCOR HOUSING SYSTEMS, INC.
MARYWARD PROPERTIES CORPORATION
MF NEVADA INVESTMENTS, INC.
MICHAELWARD PROPERTIES CO., INC.
MONTGOMERY WARD DEVELOPMENT
CORPORATION
MONTGOMERY WARD LAND CORPORATION
MONTGOMERY WARD PROPERTIES
CORPORATION
MONTGOMERY WARD REALTY CORPORATION
MW LAND CORPORATION
NATIONAL HOMEFINDING SERVICE, INC.
998 MONROE CORPORATION
PAULWARD PROPERTIES CO., INC.
ROBERTWARD PROPERTIES CORPORATION
SACWARD PROPERTIES, INC.
SECOND MONT CORPORATION
7TH & CARROLL CORPORATION
SEVENTH MONT CORPORATION
618 CORPORATION
619 CORPORATION
THE 535 CORPORATION
THIRD WYCOMBE PROPERTIES, INC.
2825 DEVELOPMENT CORPORATION
2825 REALTY CORPORATION
UNIVERSITY AVENUE MARKETPLACE, INC.
WFL DEVELOPMENT CORPORATION
WYCOMBE PROPERTIES, INC.
By: s/ G. Tad Morgan
---------------------------------------
Name: G. Tad Morgan
Title: Vice President and Secretary
S-3
<PAGE>
GOODE FURNITURE COMPANIES, INC.
MONTGOMERY WARD SECURITIES, INC.
R M P DEVELOPMENT CORPORATION
By: s/ G. Tad Morgan
---------------------------------------
Name: G. Tad Morgan
Title: Secretary
MONTGOMERY WARD HOLDING CORP.
By: s/ G. Tad Morgan
---------------------------------------
Name: G. Tad Morgan
Title: Assistant Secretary
JEFFERSON STORES, INC.
By: s/ G. Tad Morgan
---------------------------------------
Name: G. Tad Morgan
Title: Vice President and Treasurer
S-4
<PAGE>
AGENT AND AS LENDER
GENERAL ELECTRIC CAPITAL CORPORATION
By: s/ Paul M. Feehan
----------------------------------
Its Authorized Signatory
LENDERS:
THE CHASE MANHATTAN BANK
By: s/ William P. Rindfuss
----------------------------------
Title: Vice President
BANK OF SCOTLAND
By: s/ Annie Chin Tat
----------------------------------
Title: Senior Vice President
BANKAMERICA BUSINESS CREDIT, INC.
By: s/ Thomas G. Sullivan
----------------------------------
Title: Vice President
BANKBOSTON RETAIL FINANCE INC.
(f/k/a GBFC, INC.)
By: s/ Mary E. Abott
----------------------------------
Title: Assistant Vice President
S-5
<PAGE>
PARIBAS
By: s/ John J. McCormick
----------------------------------
Title: Vice President
By: s/ David Canavan
-----------------------------------
Title: Director
CREDIT AGRICOLE INDOSUEZ
By: s/ David Bouhl
----------------------------------
Title: F.V.P.
By: s/ Dean Balice
----------------------------------
Title: Senior Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.
By: s/ Nicole Cangelos
-----------------------------------
Title: Assistant Secretary
CITICORP USA, INC.
By: s/ Claudia Slacik
----------------------------------
Title: Vice President
FLEET CAPITAL CORPORATION
By: s/ Thomas E. Joyce
----------------------------------
Title: Senior Vice President
FLEET NATIONAL BANK
By: s/ Kevin Chamberlain
----------------------------------
Title: Vice President
S-6
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: s/ Ed Forst
----------------------------------
Title: Authorized Signatory
GREEN TREE FINANCIAL SERVICING
CORPORATION
By: s/ Gary Wetherholt
----------------------------------
Title: Vice President
HELLER FINANCIAL, INC.
By: s/ Albert J. Forzano
----------------------------------
Title: Vice President
IBJ SCHRODER BUSINESS CREDIT CORP.
By : s/ Alfred J. Scoyni
----------------------------------
Title: Vice President
JACKSON NATIONAL LIFE INSURANCE
COMPANY
By: PPM FINANCE, INC.
Its Attorney-in-fact
By: s/ Jeffrey J. Powdika
----------------------------------
Title: Vice President
LEHMAN COMMERCIAL PAPER, INC.
By: s/ Michele Swanson
----------------------------------
Title: Authorized Signatory
S-7
<PAGE>
NATIONAL CITY COMMERCIAL FINANCE, INC.
By:___________________________________
Title:
STAR BANK, N.A.
By: s/ Mike Ehlert
-----------------------------------
Title: Vice President
S-8
<PAGE>
10.(i)(R)
MASTER SERVICE AGREEMENT
FOR INFORMATION TECHNOLOGY SERVICES
BETWEEN
MONTGOMERY WARD & CO., INCORPORATED
AND
ACXIOM CORPORATION
NOVEMBER 6, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BACKGROUND AND OBJECTIVES...................................................................................... 1
ARTICLE 1...................................................................................................... 2
DEFINITIONS................................................................................................. 2
Section 1.1 Certain Definitions.......................................................................... 2
Section 1.2 Other Definitions............................................................................ 7
ARTICLE 2...................................................................................................... 7
MASTER AGREEMENT............................................................................................ 7
Section 2.1 Master Agreement............................................................................. 7
Section 2.2 Master Schedules............................................................................. 7
Section 2.3 Interpretation and Precedence................................................................ 7
Section 2.4 No Implied Agreement......................................................................... 8
ARTICLE 3...................................................................................................... 8
TERM........................................................................................................ 8
Section 3.1 Term......................................................................................... 8
Section 3.2 Renewal Term................................................................................. 8
ARTICLE 4...................................................................................................... 9
SERVICES.................................................................................................... 9
Section 4.1 General; Service Agreements.................................................................. 9
Section 4.2 Migration Services........................................................................... 9
Section 4.3 Specialized Services or Products............................................................. 11
Section 4.4 Third Party Services......................................................................... 11
Section 4.5 Resources.................................................................................... 12
Section 4.6 Cooperation.................................................................................. 12
Section 4.7 Affiliates................................................................................... 12
Section 4.8 Changes in Law and Regulations............................................................... 13
Section 4.9 Licenses and Permits......................................................................... 13
Section 4.10 Dedicated/Partitioned Environment.......................................................... 13
Section 4.11 Services non-exclusive..................................................................... 14
Section 4.12 Correction of Errors....................................................................... 14
ARTICLE 5...................................................................................................... 15
SERVICE LEVELS.............................................................................................. 15
Section 5.1 Service Level Agreements..................................................................... 15
Section 5.2 Review of Service Levels..................................................................... 15
Section 5.3 Measurement and Monitoring Tools............................................................. 15
Section 5.4 Failure to Meet Service Levels............................................................... 15
Section 5.5 Performance Standards........................................................................ 16
Section 5.6 Baseline Wards Satisfaction Survey........................................................... 17
Section 5.7 Value Initiatives and Periodic IT Review..................................................... 17
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ARTICLE 6.................................................................................................. 18
TRANSFERS OF EQUIPMENT, FACILITIES AND THIRD PARTY CONTRACTS............................................ 18
Section 6.1 Assumption of Equipment Leases........................................................... 18
Section 6.2 Use of Wards Facilities.................................................................. 18
Section 6.3 Third Party Contracts.................................................................... 19
ARTICLE 7.................................................................................................. 20
PERSONNEL............................................................................................... 20
Section 7.1 Offers and Terms of Employment........................................................... 20
Section 7.2 Key Supplier Positions................................................................... 20
Section 7.3 Supplier Employees Assigned to Wards Account............................................. 21
Section 7.4 Employment Offers........................................................................ 21
ARTICLE 8.................................................................................................. 21
INTELLECTUAL PROPERTY RIGHTS AND OBLIGATIONS............................................................ 21
Section 8.1 Wards Software........................................................................... 21
Section 8.2 Supplier Software........................................................................ 22
Section 8.3 Third Party Software..................................................................... 22
Section 8.4 Work Product............................................................................. 23
Section 8.5 Use of Concepts, Know-how and Methods.................................................... 23
Section 8.6 Non-Infringement......................................................................... 23
Section 8.7 Viruses.................................................................................. 24
Section 8.8 Disabling Code........................................................................... 24
ARTICLE 9.................................................................................................. 24
CONFIDENTIALITY......................................................................................... 24
Section 9.1 Definitions.............................................................................. 24
Section 9.2 Rights, Restrictions and Obligations of the Receiving Party.............................. 25
Section 9.3 Rights and Remedies of the Disclosing Party.............................................. 27
Section 9.4 Nondisclosure Agreements................................................................. 28
Section 9.5 Ownership of Wards Data.................................................................. 28
Section 9.6 Return of Data........................................................................... 28
Section 9.7 Security................................................................................. 28
Section 9.8 Destroyed or Lost Data................................................................... 29
ARTICLE 10................................................................................................. 29
MANAGEMENT AND SUBCONTRACTING........................................................................... 29
Section 10.1 Project Executives..................................................................... 29
Section 10.2 Joint Operating Committee and Executive Committee...................................... 30
Section 10.3 Wards Office Space at Supplier Facilities.............................................. 30
Section 10.4 Meetings............................................................................... 30
Section 10.5 Reports................................................................................ 30
Section 10.6 Procedures Manual...................................................................... 30
Section 10.7 Technical Change Control............................................................... 31
Section 10.8 Contract Change Control................................................................ 32
Section 10.9 System Change Benchmarking............................................................. 33
Section 10.10 Subcontracting......................................................................... 33
ARTICLE 11................................................................................................. 34
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AUDITS................................................................................................. 34
Section 11.1 Audit Rights.......................................................................... 34
Section 11.2 Payments.............................................................................. 35
Section 11.3 Supplier Audits....................................................................... 35
Section 11.4 Survival.............................................................................. 35
ARTICLE 12................................................................................................ 36
INSURANCE; RISK OF LOSS................................................................................ 36
Section 12.1 Required Insurance Coverages.......................................................... 36
Section 12.2 General Insurance Requirements........................................................ 37
Section 12.3 Risk of Loss.......................................................................... 37
ARTICLE 13................................................................................................ 37
CHARGES................................................................................................ 37
Section 13.1 Charges............................................................................... 37
Section 13.2 Pass-Through Expenses................................................................. 38
Section 13.3 Taxes................................................................................. 38
Section 13.4 Charges Pursuant to Change Control Procedures......................................... 40
Section 13.5 Recordkeeping......................................................................... 40
Section 13.6 Most Favored Customer................................................................. 40
ARTICLE 14................................................................................................ 40
INVOICING AND PAYMENT.................................................................................. 40
Section 14.1 Invoices.............................................................................. 41
Section 14.2 Payment............................................................................... 42
Section 14.3 Proration............................................................................. 42
Section 14.4 Refunds............................................................................... 42
Section 14.5 Setoff and Withholding................................................................ 43
ARTICLE 15................................................................................................ 43
CERTAIN REPRESENTATIONS AND WARRANTIES................................................................. 43
Section 15.1 Mutual Representations and Warranties................................................. 43
Section 15.2 Supplier Representations and Warranties............................................... 43
Section 15.3 RFP and Due Diligence Assistance...................................................... 44
ARTICLE 16................................................................................................ 45
INDEMNIFICATION........................................................................................ 45
Section 16.1 Indemnification by Supplier........................................................... 45
Section 16.2 Indemnification by Wards.............................................................. 45
Section 16.3 Mutual Indemnification................................................................ 46
Section 16.4 Intellectual Property Indemnification................................................. 46
Section 16.5 Indemnification Procedures............................................................ 47
Section 16.6 Subrogation........................................................................... 48
ARTICLE 17................................................................................................ 48
LIMITATIONS ON LIABILITY............................................................................... 48
Section 17.1 General Intent........................................................................ 48
Section 17.2 Limit on Types of Damages Recoverable................................................. 48
Section 17.3 Limit on Amount of Direct Damages Recoverable......................................... 49
Section 17.4 Force Majeure......................................................................... 50
Section 17.5 Actions of Other Party................................................................ 51
ARTICLE 18................................................................................................ 51
TERMINATION............................................................................................ 51
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Section 18.1 Termination for Cause................................................................ 51
Section 18.2 Termination for Convenience.......................................................... 53
Section 18.3 Termination for Insolvency........................................................... 54
Section 18.4 Termination Upon Force Majeure Event................................................. 54
Section 18.5 Extension of Expiration or Termination Effective Date................................ 54
Section 18.6 Effect of Termination................................................................ 54
Section 18.7 Termination/Expiration Assistance.................................................... 55
Section 18.8 Purchase of Equipment................................................................ 55
Section 18.9 Supplier Software License............................................................ 55
Section 18.10 Third Party Contracts................................................................ 56
Section 18.11 Offers to Supplier Employees......................................................... 56
ARTICLE 19............................................................................................... 57
DISPUTE RESOLUTION.................................................................................... 57
Section 19.1 General.............................................................................. 57
Section 19.2 Informal Dispute Resolution.......................................................... 57
Section 19.3 Arbitration.......................................................................... 57
Section 19.4 Continued Performance................................................................ 58
Section 19.5 Applicable Law....................................................................... 58
Section 19.6 Jurisdiction and Venue............................................................... 58
Section 19.7 Equitable Remedies................................................................... 59
ARTICLE 20............................................................................................... 59
MISCELLANEOUS......................................................................................... 59
Section 20.1 Interpretation....................................................................... 59
Section 20.2 Binding Nature and Assignment........................................................ 60
Section 20.3 Expenses............................................................................. 60
Section 20.4 Amendment and Waiver................................................................. 60
Section 20.5 Further Assurances; Consents and Approvals........................................... 60
Section 20.6 Publicity............................................................................ 61
Section 20.7 Severability......................................................................... 61
Section 20.8 Entire Agreement..................................................................... 61
Section 20.9 Notices.............................................................................. 61
Section 20.10 Survival............................................................................. 62
Section 20.11 Independent Contractors.............................................................. 62
Section 20.12 Third Party Beneficiaries............................................................ 62
Section 20.13 Counterparts......................................................................... 62
Section 20.14 Bankruptcy Court Approval............................................................ 63
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SCHEDULES
Schedule A........Form of Service Agreement
Schedule B........Form of Service Level Agreement
Schedule C........Corporate Service Level Credits and Termination
Events
Schedule D........Account Management and Governance Overview
Schedule E........Supplier Rates
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MASTER AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES
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THIS MASTER AGREEMENT FOR INFORMATION TECHNOLOGY SERVICES (the "Master
Agreement") is made and entered into this 6th day of November, 1998 (the
"Effective Date"), between Montgomery Ward & Co., Incorporated, an Illinois
corporation ("Wards"), and Acxiom Corporation, a Delaware corporation
("Supplier").
BACKGROUND AND OBJECTIVES
This Master Agreement is entered into in connection with Wards'
decision to contract with Supplier for Supplier's provision of information
technology services related to Wards' business operations. This Master Agreement
sets forth the general terms and conditions governing the contractual
relationship between Wards and Supplier. It is the intent of Wards and Supplier
that they will, upon entering into this Master Agreement, enter into one or more
Service Agreements pursuant to this Master Agreement and may, from time to time
in the future, enter into one or more Value Initiative Agreements or additional
Service Agreements setting forth the specific terms and conditions applicable to
specific Value Initiatives or Services to be contracted for by Wards and
Supplier.
Supplier is an established provider of a broad range of information
technology services. By entering into this Master Agreement and each Service
Agreement, Supplier represents that it has, and will have, the skills,
qualifications, expertise and experience necessary to perform and manage the
services described in each such Service Agreement in an efficient,
cost-effective manner with a high degree of quality and responsiveness and has
performed and continues to perform similar services for other customers in such
manner.
Wards' objectives in entering into this Master Agreement include
obtaining (i) high quality information technology services and systems in the
areas described in this Master Agreement and related Service Agreements provided
in a cost-effective manner; (ii) a flexible relationship with Supplier under
which Supplier will be highly responsive to the requests of Wards and to changes
in technology and methods for providing information technology services,
including accommodation of significant changes in volumes of operations, new
generations of technology and improved methods of monitoring, measuring and
achieving increased levels of service; (iii) continuous improvement in services
and reduction of Wards' associated costs in each area of Services performed by
Supplier; and (iv) consistent and effective management of the relationship
between Supplier and Wards. Supplier will thoroughly review and analyze Wards'
needs and requirements for each information technology area described in each
Service Agreement. Supplier fully understands Wards' objectives in entering into
this Master Agreement and, with respect to the Services, each Service Agreement.
Based on such review and understanding, Supplier represents and
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warrants to Wards that Supplier currently has and will maintain the capability
to achieve those objectives.
On the basis of and in reliance upon the inducements described above,
and in any proposal provided by Supplier relating to a Service Agreement, and
the representations and warranties made by Supplier therein, in this Master
Agreement, and in any Service Agreement (including Supplier's representation and
warranty that the statements in the above paragraphs are true and correct in all
respects and will continue to be true and correct at any time a Service
Agreement is entered into), Wards desires to engage Supplier to perform the
services described in each Service Agreement entered into pursuant to this
Master Agreement.
The foregoing provisions set forth the background and inducements under
which Wards is entering into this Master Agreement and are intended to be a
general introduction to this Master Agreement. They are not intended to expand
the scope of the parties' express obligations under this Master Agreement or to
alter the plain meaning of the terms and conditions of this Master Agreement.
However, to the extent the terms and conditions of this Master Agreement do not
address a particular circumstance or are otherwise unclear or ambiguous, such
terms and conditions are to be interpreted and construed consistent with the
foregoing provisions.
ARTICLE 1
DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS
In this Master Agreement, the following terms shall have the indicated
meanings:
"AFFILIATE" means, with respect to any specified person or entity, any
other person or entity that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by, or is under common Control with,
the specified person or entity; provided, however, that General Electric Company
and its Affiliates, other than Wards and Wards Affiliates and Montgomery Ward
Holding Corporation, shall not be deemed to be Affiliates of Wards.
"BANKRUPTCY CASE" has the meaning given in Section 20.14.
"BUSINESS DAY" means any day during which Wards is generally conducting
business.
"CHANGE CONTROL DOCUMENT" has the meaning given in Section 10.8(c).
"CHANGE CONTROL PROCEDURES" has the meaning given in Section 10.8(a).
"CHARGES" has the meaning given in Section 13.1.
"COMMERCIALLY REASONABLE EFFORTS" means, with respect to any objective,
a level of effort to achieve such objective equal to or exceeding the higher of
(i) the level of effort to
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achieve the same or similar objectives used by Wards or any third party
providing such services for Wards immediately before the applicable Service
Agreement Effective Date, or (ii) the level of effort to achieve the same or
similar objectives used by other sophisticated outsourcing companies providing
services similar to the Services, and in any event a prompt and diligent effort,
made in a professional and workmanlike manner, using qualified individuals.
"CONFIDENTIAL INFORMATION" has the meaning given in Section 9.1.
"CONFIDENTIAL MATERIALS" has the meaning given in Section 9.1.
"CONTRACT YEAR" with respect to a Service Agreement, means each annual
period beginning on the Service Agreement Effective Date unless defined
otherwise within a Service Agreement.
"CONTROL" and its derivatives means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
"CORPORATE SERVICE LEVEL CREDITS" has the meaning given in Section
5.4(a).
"CRITICAL MIGRATION MILESTONES" has the meaning given in Section
4.2(a).
"DISCLOSING PARTY" has the meaning given in Section 9.1(a).
"EFFECTIVE DATE" means the date of this Master Agreement.
"EQUIPMENT" means the computer, communications and other equipment
owned or leased by Supplier and used by Supplier to provide the Services.
Equipment includes, without limitation, all associated accessories and
peripheral devices used in the provision of Services.
"EXECUTIVE COMMITTEE" has the meaning given in Section 10.2(b).
"FORCE MAJEURE EVENTS" has the meaning given in Section 17.4(a).
"KEY SUPPLIER POSITIONS" has the meaning given in Section 7.3(a).
"LOSSES" means all losses, liabilities, damages and claims, and all
related costs and expenses (including any and all reasonable legal fees and
reasonable costs of investigation, litigation, settlement, judgment, appeal,
interest and penalties) incurred by an indemnified party hereunder in connection
with an indemnified claim.
"MASTER AGREEMENT" means this Master Agreement For Information
Technology Services, all Master Schedules, and, when the meaning so requires,
all Service Agreements.
"MASTER SCHEDULE(S)" has the meaning given in Section 2.2.
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"MATERIAL SUBCONTRACT" has the meaning given in Section 10.9(a).
"MIGRATION COMPLETION DATE" means the date a migration is completed in
accordance with a Migration Plan.
"MIGRATION MILESTONES" has the meaning given in Section 4.2(a).
"MIGRATION PLAN" has the meaning given in Section 4.2(b).
"MIGRATION SERVICES" has the meaning given in Section 4.2(b).
"NOTICE OF ASSUMPTION OF DEFENSE" has the meaning given in Section
16.5.
"OPERATING COMMITTEE" has the meaning given in Section 10.2(a).
"PARTIES" means Wards and Supplier, and "PARTY" means either one of
them.
"PASS-THROUGH EXPENSES" means the actual invoiced amounts (excluding
any Supplier profit, administrative fee or overhead charges) charged to Supplier
by third parties that Wards has agreed to pay directly or for which Wards has
agreed to reimburse Supplier.
"PERFORMANCE STANDARDS" has the meaning given in Section 5.5.
"PRELIMINARY MIGRATION PLAN" is a preliminary plan for migration of
Services to be included as part of a Service Agreement, as described in Section
4.2(a).
"PROCEDURES MANUAL" has the meaning given in Section 10.6(a).
"PROJECT EXECUTIVE" has the meaning given in Section 10.1.
"RECEIVING PARTY" has the meaning given in Section 9.1(a).
"REPORTS" means, collectively, single or periodic reports relating to
the Services that are provided by Supplier to Wards under any Service Agreement,
as defined in Section 10.5.
"RULES" has the meaning given in Section 19.3.
"SCHEDULES" means any schedule, exhibit, agreement or other document
either (i) attached to this Master Agreement, (ii) attached to Service
Agreements; or (iii) executed by the Parties at any time hereafter, if such
document states that it is a schedule to this Master Agreement or any Service
Agreement.
"SERVICE AGREEMENT" has the meaning given in Section 2.1.
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"SERVICE AGREEMENT COMMENCEMENT DATE" is the date Supplier shall begin
providing Services under a Service Agreement as defined in each Service
Agreement.
"SERVICE AGREEMENT EFFECTIVE DATE" is the date indicated as such in a
Service Agreement, and with respect to Service Agreements No. 1 through No. 7,
means the date of this Master Agreement.
"SERVICE AGREEMENT TERM" means the term of the applicable Service
Agreement, as defined in each Service Agreement.
"SERVICE LEVEL" has the meaning given in Section 5.1.
"SERVICE LEVEL AGREEMENT" has the meaning given in Section 5.1.
"SERVICE CREDITS" means, collectively, Service Level Credits and
Corporate Service Level Credits.
"SERVICE LEVEL CREDITS" has the meaning given in Section 5.4(a).
"SERVICES" has the meaning given in Section 4.1.
"SOFTWARE" means any computer software that relates to Services
provided under a Service Agreement, and includes any Wards Software, Supplier
Software and Third Party Software.
"SPECIAL CHARGES" means Charges provided for in Service Agreements No.
1 and No. 3 (or as designated in other Service Agreements by the Parties
subsequent to the Effective Date) that are based on amortized costs incurred by
Supplier for equipment, software and other one-time costs.
"SUPPLIER ENVIRONMENT" has the meaning given in Section 15.2(f).
"SUPPLIER FACILITIES" means the facilities owned or leased by Supplier
and from which the Supplier will provide any Services as specifically identified
in a Services Agreement.
"SUPPLIER PERSONNEL" means employees of Supplier and its subcontractors
assigned to performing Services.
"SUPPLIER SOFTWARE" means any Software owned by Supplier and used in
conjunction with any of the Services.
"TERM" has the meaning given in Sections 3.1 and 3.2. When used herein
in the context of a Service Agreement, "Term" refers to the applicable Service
Agreement Term.
"TERMINATION/EXPIRATION ASSISTANCE" has the meaning given in Section
18.7(a).
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"THIRD PARTY CONSENTS" has the meaning given in Sections 6.3(c).
"THIRD PARTY CONTRACTS" means any contract that is a Third Party
Software License or Third Party Service Contract.
"THIRD PARTY SERVICE CONTRACTS" means, collectively, (i) the agreements
between Wards and a third party pursuant to which the third party is providing
to Wards immediately before a Service Agreement Effective Date any services
included within the Services, and (ii) the agreements between Supplier and a
third party pursuant to which the third party is providing to Wards or Supplier
at any time during the applicable Service Agreement Term any services included
within the Services.
"THIRD PARTY SOFTWARE" means any Software that is owned by a person
other than Supplier or Wards and used to provide the Services.
"THIRD PARTY SOFTWARE LICENSE" means a license agreement that
authorizes Wards or Supplier to use Third Party Software.
"TRANSFERRED EMPLOYEE" has the meaning given in Section 7.1(b).
"TRANSFERRED EQUIPMENT" has the meaning given in Section 6.1.
"UNIDENTIFIED THIRD PARTY CONTRACT" has the meaning given in Section
6.3(d).
"VALUE INITIATIVE AGREEMENT" has the meaning given in Section 5.8.
"VIRUS" shall mean files, programs or program code designed to affix
themselves to, bury themselves within or send instructions to, other files,
programs or program code in order to cause malfunctions, errors or destruction
or corruption of data when affixed or at a later time.
"WARDS" means Montgomery Ward & Co., Incorporated and each of its
Affiliates, subsidiaries, divisions, partnerships and joint ventures.
"WARDS DATA" means all information entered in Software or Equipment by
or on behalf of Wards and information derived from such information, including
all file layouts and records associated therewith.
"WARDS EQUIPMENT" has the meaning given in Section 6.2.
"WARDS FACILITIES" has the meaning given in Section 6.2.
"WARDS SOFTWARE" means any Software owned or developed by Wards and
used in conjunction with any of the Services, including any exits to Third Party
Software.
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"YEAR 2000 COMPLIANT" means that the Supplier Software and Supplier
Environment, as the case may be, will (i) operate and produce data on and after
January 1, 2000 (including taking into effect that such year is a leap year),
accurately and without delay, interruption or error, and (ii) accept, calculate,
process, maintain, write and output, accurately and without delay, interruption
or error, all times or dates, or both, whether before, on or after January 1,
2000 (including taking into effect that such year is a leap year), and any time
periods determined or to be determined based on any such times or dates, or
both.
SECTION 1.2 OTHER DEFINITIONS
Other terms used in this Master Agreement, the Master Schedules and the
Service Agreements are defined where they first appear and have the respective
meanings there indicated.
ARTICLE 2
MASTER AGREEMENT
SECTION 2.1 MASTER AGREEMENT
(a) This Master Agreement is a Master Agreement that contains general
contractual terms for Services to be provided to Wards by Supplier. Services
will be provided by Supplier pursuant to Service Agreements entered into by
Wards and Supplier. Separate Service Agreements may be entered into for discrete
Services. Each Service Agreement shall describe the Services covered by the
Service Agreement, the provisions for payment, the term for performance,
applicable Service Levels, and other provisions that are specific to the Service
Agreement. A form of Service Agreement is attached hereto as Master Schedule A.
-----------------
(b) Except as otherwise expressly set forth in this Master Agreement,
the obligations of the Parties under this Master Agreement during the Term shall
be suspended during any period in which no Service Agreement is in effect.
(c) This Master Agreement and the Service Agreements are effective as
of the Effective Date; however, except to the extent expressly provided in
Service Agreement No. 1 (Transition Management and Migration Services), neither
Party shall be required or permitted to begin performance of any obligations
under this Master Agreement or the Service Agreements until the same have been
approved by the Court in the Bankruptcy Case.
SECTION 2.2 MASTER SCHEDULES
Attached to this Master Agreement are schedules (the "Master
Schedules") that contain specific provisions that apply to the Services
generally or provide a form to be used in preparation of Service Agreements. The
Master Schedules shall apply to all Service Agreements unless the Parties
expressly agree otherwise.
SECTION 2.3 INTERPRETATION AND PRECEDENCE
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This Master Agreement, the Master Schedules, the Service Agreements,
and the Service Level Agreements and other Schedules that may be added to the
Service Agreements are to be interpreted so that all of the provisions are given
as full effect as possible. In the event of a conflict between this Master
Agreement or a Master Schedule and any Service Agreement, the order of
precedence shall be first, the Service Agreement, second, any exhibit or
Schedule to the Service Agreement; third, this Master Agreement; and fourth, any
Master Schedule. All of the terms of this Master Agreement shall apply to each
Service Agreement except to the extent negated or contradicted by the express
terms of a Service Agreement or any Schedule to a Service Agreement.
SECTION 2.4 NO IMPLIED AGREEMENT
Except as expressly required in a Service Agreement, nothing in this
Master Agreement requires Wards to purchase products or services from Supplier.
Wards may request information, proposals, or competitive bids from third parties
on the same or different terms than as provided in this Master Agreement.
ARTICLE 3
TERM
SECTION 3.1 TERM
The term of this Master Agreement (the "Term") shall begin as of the
Effective Date and shall continue for a period of ten (10) years thereafter or,
if later, the expiration of the Service Agreement Term for any Service Agreement
in effect as of the date of expiration of such ten-year period, unless earlier
terminated or renewed in accordance with the provisions of this Master
Agreement.
Each Service Agreement shall set forth the applicable Service Agreement
Term.
SECTION 3.2 RENEWAL TERM
Wards shall have the option to renew each Service Agreement for a three
(3) year term by delivering written notice of such renewal to Supplier at least
ninety (90) days before expiration of the final applicable Contract Year under
each Service Agreement. All of the terms of this Master Agreement and the
applicable Service Agreement shall continue to apply without change during any
renewal period. "Service Agreement Term" shall refer to both the original term
of the applicable Service Agreement and any renewal thereof.
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ARTICLE 4
SERVICES
SECTION 4.1 GENERAL; SERVICE AGREEMENTS
During the Term of this Master Agreement, regardless of whether one or
more Service Agreements are in effect, Supplier shall cooperate with Wards in
providing proposals for information technology services reasonably requested by
Wards from time to time. Throughout each Service Agreement Term, Supplier shall
provide the services described in the Service Agreements, as such Service
Agreements may be amended and supplemented from time to time by written
amendments thereto or pursuant to the Change Control Procedures (collectively,
the "Services"). Supplier shall provide the Services in accordance with all of
the terms of this Master Agreement, the Master Schedules, and the applicable
Service Agreement.
The specific Services to be supplied by Supplier to Wards, the
compensation to be paid and other related matters shall be expressed in each
Service Agreement prepared from time to time by Supplier in response to a
request by Wards for such Services. Each Service Agreement shall incorporate by
reference, and shall be subject to, the terms and conditions of this Master
Agreement. No Services shall be provided by Supplier unless and until the
appropriate Service Agreement has been duly signed and delivered by an
authorized officer of Wards. Each Service Agreement shall generally be in the
form, and shall contain the information and terms, described in Master Schedule
A attached hereto.
As of the Effective Date of this Master Agreement, Wards and Supplier
are entering into the following Service Agreements:
Agreement Services
--------- --------
Service Agreement No. 1 Migration and Transition Services
Service Agreement No. 2 Data Center Services
Service Agreement No. 3 Midrange Processing Services
Service Agreement No. 4 Network Services
Service Agreement No. 5 Desktop/LAN Services
Service Agreement No. 6 Satellite Services
Service Agreement No. 7 Tandem Services
Wards shall not resell Supplier's Service to third parties, except in
support of Wards' and its Affiliates' businesses.
SECTION 4.2 MIGRATION SERVICES
If any migration of Services is to occur under a Service Agreement,
Supplier shall be responsible for preparing a Preliminary Migration Plan and a
Migration Plan, both subject to Wards' approval in order to assure an orderly
transition of the Services (and, if necessary, the Equipment and Software).
After any Migration Completion Date, Supplier shall obtain Wards' written
consent prior to any subsequent migration of the Services. Any such
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subsequent migration of Services shall be conducted by Supplier at its sole
expense pursuant to a Migration Plan prepared by Supplier and approved by Wards.
(a) Supplier shall prepare and submit to Wards as part of a Service
Agreement a Preliminary Migration Plan that generally describes the Migration
Services to be provided, and that specifies the milestones for completion of the
applicable Migration Services (the "Migration Milestones") including certain
critical Migration milestones ("Critical Migration Milestones") and the dates
and time schedule for the applicable migration. Supplier acknowledges that, if
requested by Wards in advance, a Migration Plan must recognize as a Migration
Milestone any date identified by Wards that relates to the closing or sale of
any Wards Facilities.
(b) Within thirty (30) days following a Service Agreement Effective
Date, Supplier shall submit for Wards' approval a final plan (the "Migration
Plan") for the migration of the Services. The Migration Plan shall state in
detail the specific steps for the timing and migration methodology that will be
used by Supplier. The Migration Plan must be approved by Wards prior to
implementation of any part of such Plan. As part of the Services, Supplier shall
perform all functions and services, including the functions and services
described in the Migration Plan necessary to accomplish the migration to the
Supplier as identified in the Migration Plan (the "Migration Services").
Supplier shall perform the Migration Services without causing a disruption to
Wards' business.
(c) As part of the Services and as directed by Wards, Supplier shall
support and assist in the closing of any Wards Facilities if required in
connection with a migration and to the extent related to Services or computer or
network equipment related to the Services. In connection with such closures and
as part of the Services, Supplier shall, upon Wards' request, identify and
solicit, upon terms and prices as favorable to Wards as Supplier would obtain
for its own account, purchasers of Wards' data processing assets at the
applicable Wards Facilities. Any sale of assets shall be approved in advance by
Wards and may in certain cases be subject to bankruptcy court approval.
(d) Each Migration Plan shall include a migration acceptance test for
each Service that is migrated that will ensure a complete and satisfactory
migration of Services.
(e) As part of the Migration Services, and if requested by Wards,
Supplier shall provide (i) parallel operation/testing environments and (ii) a
training environment for the Supplier Environment using test data prepared by
Supplier. Subject to Wards approval and where testing with data representative
of the production environment is necessary, Supplier may use a copy of such
Wards production data; provided, however, that such test data shall not contain
actual client names or addresses to the extent that the same is prohibited by
statutory or regulatory requirements.
(f) Supplier acknowledges that in the event any Critical Migration
Milestone is not achieved in the manner specified in a Migration Plan, Wards
will suffer damages the amount of which are difficult to specify at this time.
Accordingly, subject to Section 17.5 of this Master Agreement, in addition to
any obligations under this Section 4.2, Supplier shall pay to
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Wards, upon Wards' election, the following amounts as liquidated damages and not
as a penalty if Supplier fails by more than the number of days specified in this
Section 4.2(f) to achieve a Critical Migration Milestone:
(i) In the event a Critical Migration Milestone is
not met within ten (10) days of the Critical Migration Milestone date set forth
in the applicable Service Agreement or Migration Plan, Wards may elect, and upon
such election Supplier shall pay to Wards the liquidated damages specified in
the applicable Service Agreement or Migration Plan for each Critical Migration
Milestone that is not achieved.
(ii) If the damages resulting from the failure to
meet a Critical Migration Milestone exceed the amount of liquidated damages
specified in the applicable Service Agreement or Migration Plan, Wards may
terminate the applicable Service Agreement, upon notice to Supplier within
thirty (30) days after such failure.
(g) A breach of any Preliminary Migration Plan or Migration Plan shall
constitute a breach of the applicable Service Agreement. Unless otherwise
expressly provided in a Service Agreement, Preliminary Migration Plan or
Migration Plan, all of Supplier's obligations contained in this Master Agreement
and the applicable Service Agreement shall continue to apply during the
applicable migration of Services.
SECTION 4.3 SPECIALIZED SERVICES OR PRODUCTS
From time to time Wards may request that Supplier use Commercially
Reasonable Efforts to obtain products or specialized services reasonably related
to the Services that may be available from a third party supplier and that
Supplier make such products or specialized services available to Wards at prices
more favorable than would otherwise be available to Wards directly. Supplier
shall notify Wards from time to time of relationships Supplier may have with
such third party suppliers that may be of benefit to Wards in this respect.
Supplier will not add an administrative fee or other markup to such products or
services unless the charges to be paid by Wards through Supplier are less than
the charges Wards would pay directly.
SECTION 4.4 THIRD PARTY SERVICES
Notwithstanding any request made to Supplier or the submission of any
proposal by Supplier pursuant to Section 4.1 (General; Service Agreements) or
5.7 (Value Initiative Agreements), Wards shall have the right to contract with a
third party to perform any services which are in addition to, or outside the
scope of, the Services. If Wards contracts with a third party to perform any
such service, Supplier shall cooperate with Wards and such third party to the
extent reasonably required by Wards, including provision of (i) written
requirements, standards, and procedures for Wards systems operations maintained
by Supplier so that the enhancements or developments of such third party may be
operated by Supplier, (ii) assistance and support services to such third party
at the rates specified in Master Schedule E to this Master Agreement or the
-----------------
applicable Service Agreement, and (iii) access to the technical environment
managed or operated by Supplier or any Services as necessary for such third
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parties to perform their work. Wards shall require such third parties to comply
with Supplier's reasonable requirements regarding confidentiality, operations,
standards, and security. Supplier shall be obligated to support and maintain
such service provider's work product at Wards' request, provided the service
provider complies with any written requirements, standards, and policies for
system operations provided to Wards by Supplier. The cost of any Supplier
facilities necessary to accommodate such work product shall be borne by the
third party service provider, except that Supplier shall bear such costs for
facilities directly related to the Services.
Nothing herein shall be construed to relieve Supplier of its obligation
to maintain or cause to be maintained any Third Party Software that is embedded
in or operates with any operating systems software in the Supplier Environment.
Wards may request that Supplier provide modifications to Third Party Software
used in the Supplier Environment and that any such modifications be maintained
by a third party service provider.
SECTION 4.5 RESOURCES
Except as otherwise expressly provided in a Service Agreement and in
Section 6.2, Supplier shall provide, at its expense, all of the facilities,
personnel, Equipment, Software, services and other resources necessary to
provide the Services. Except as contemplated by Service Agreement No. 1,
Supplier shall not implement any action or decision regarding such resources
that would have an adverse effect on the Services (including, without
limitation, changes in Equipment, Software and systems configurations), Service
Levels, the amounts payable to Supplier under any Service Agreement or other
Wards costs and expenses without Wards' prior written consent, which consent may
be withheld in Wards' sole discretion. No consent on behalf of Wards shall be
binding on Wards unless granted in writing by Wards' Project Executive (or
authorized designee) or an officer of Wards.
SECTION 4.6 COOPERATION
As part of the Services, and generally to the extent the Transferred
Employees provided such cooperation and assistance prior to the applicable
Service Agreement Commencement Date, Supplier agrees to use Commercially
Reasonable Efforts to comply with Wards requests for cooperation and assistance
for Wards and its third party service providers in connection with special
projects that are not within the scope of the Services. In particular, Supplier
agrees to provide assistance and cooperation relating to Wards' efforts to
assess, implement and test Year 2000 conversion and readiness projects to the
extent within the scope of efforts provided by the Transferred Employees prior
to the applicable Service Agreement Commencement Date.
SECTION 4.7 AFFILIATES
Throughout the Term, Supplier shall provide the Services to Wards and
to those present and future Affiliates of Wards as Wards may designate from time
to time, all in accordance with the terms and conditions of this Master
Agreement and the designated Service Agreement(s). Wards and Supplier shall each
have all of the same rights and obligations with
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respect to Services provided to Wards Affiliates as they do with respect to
Services provided to Wards; provided, however, that each Party reserves the
right to separately negotiate the terms on which Services would be provided to
an Affiliate of Wards not using the Services as of any Service Agreement
Effective Date if Wards requests that Supplier incur new financial obligations
for Wards or Affiliate personnel, assets or liabilities (e.g., equipment,
software transfer or upgrade fees, license or lease obligations) in connection
with providing such Services.
If at any time during the Term of any Service Agreement Wards sells or
otherwise transfers ownership of an Affiliate to a third party, Supplier shall
continue to provide the Services to such Affiliate if requested by Wards, and
for the time period requested by Wards on the terms and conditions set forth in
this Master Agreement and the applicable Service Agreement. Supplier shall
cooperate with Wards, such Affiliate and any new service provider to ensure an
uninterrupted transition to the new service provider.
SECTION 4.8 CHANGES IN LAW AND REGULATIONS
As part of the Services, Supplier shall identify the impact, if any, of
changes in applicable legislative enactments and regulations on the Services.
Supplier shall notify Wards of such changes and shall work with Wards to
identify the impact of such changes on how Wards uses the Services. Wards shall
notify Supplier of such changes in applicable legislative enactments and
regulations that Wards becomes aware of in the ordinary course of its business.
Supplier shall promptly make any resulting modifications to the Services as
reasonably necessary as a result of such changes through the Change Control
Procedures. Supplier shall be responsible for, and shall pay for, the cost of
any such changes relating to Supplier's business. Wards shall be responsible for
the cost of any such changes relating to Wards' business to the extent such
changes require computer resources in excess of the personnel or computer
resources otherwise provided by Supplier as part of the Services. Supplier shall
be responsible for any fines and penalties imposed on Wards or Supplier arising
from any noncompliance by Supplier, its subcontractors or agents with the laws
and regulations in respect of the Services. Wards shall be responsible for any
fines and penalties imposed on Wards or Supplier relating to Supplier's
provision of the Services which arise from Wards' failure to comply with laws
and regulations to the extent advised of the necessity of such compliance by
Supplier pursuant to this Section 4.8.
SECTION 4.9 LICENSES AND PERMITS
As part of the Services, except as otherwise expressly set forth herein
or in an applicable Service Agreement, Supplier shall be responsible for
obtaining all applicable licenses, authorizations, and permits required in
connection with the performance of Services and to otherwise carry out its
obligations under each Service Agreement and shall have financial responsibility
for, and shall pay, all fees and taxes associated with such licenses,
authorizations, and permits.
SECTION 4.10 DEDICATED/PARTITIONED ENVIRONMENT
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During any time Services are performed at the Wards Facilities,
Supplier shall provide the Services using hardware, software and related
resources dedicated solely to supporting Wards. Unless otherwise expressly
provided in a Service Agreement, all Services provided from the Supplier's
Facilities shall be provided using partitioned or dedicated Equipment. Supplier
shall not provide any Services from a shared partition or shared processing
environment unless specifically approved in writing by Wards.
SECTION 4.11 SERVICES NON-EXCLUSIVE
(a) Except as shall be expressly set forth in a Service Agreement,
Wards may obtain the Services during the Term from Supplier or, at Wards' option
exercised from time to time during the Term, Wards may obtain any or all of the
Services from a third party or provide them internally. Wards shall have no
obligation to obtain from Supplier any services that are not included within the
definition of Services. Any Services that are limited to specific locations
under a Service Agreement apply only to such locations.
(b) If Wards elects to obtain any categories of Services from a third
party, or elects to provide any categories of Services internally in accordance
with Section 4.11(a), Wards shall so notify Supplier at least forty-five (45)
days in advance of the date such third party or Wards will begin to provide such
Services. Supplier shall cooperate with Wards and Wards' contractors to allow
the proper performance of any services (whether or not included within the
definition of Services) being provided internally by Wards or by such third
party contractors. Such cooperation shall include, without limitation, provision
of (i) written requirements, standards and procedures for Wards systems
operations maintained by Supplier so that the enhancements or developments of
such third party may be operated by Supplier, (ii) assistance and support
services to such third party at commercially reasonable rates, and (iii) access
to the technology environment used by Supplier to provide the Services (subject
to reasonable confidentiality and security restrictions) or any Services as
necessary for such third parties to perform their work.
SECTION 4.12 CORRECTION OF ERRORS
Supplier shall promptly correct any errors or inaccuracies in Wards
Data or Reports. Such corrections shall be provided at no charge to Wards unless
the error or inaccuracy was caused by Wards. Corrections and reruns shall be
reported in daily, weekly and monthly reports defined by Wards and produced by
Supplier.
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ARTICLE 5
SERVICE LEVELS
SECTION 5.1 SERVICE LEVEL AGREEMENTS
Concurrently with entering into each Service Agreement, Wards and
Supplier will enter into an agreement (a "Service Level Agreement") that
specifically relates to such Service Agreement and contains quantitative levels
of performance ("Service Levels") for certain specified Services. Each Service
Level Agreement will be in a form similar to the form attached hereto as Master
------
Schedule B. With respect to each Service which has an associated Service Level,
- - ----------
Supplier shall provide such Service throughout the Term in a manner that meets
or exceeds the associated Service Level.
SECTION 5.2 REVIEW OF SERVICE LEVELS
Within six (6) months after the initiation of Services under a Service
Agreement and every six months thereafter, the parties shall jointly review the
Service Levels and adjust them to reflect any improved performance capabilities
associated with advances in the technology and methods used to perform the
Services. The Parties acknowledge that they expect the Service Levels identified
in the Service Level Agreements to generally improve continuously throughout the
Term. Throughout the Term, Supplier shall identify and notify Wards of
Commercially Reasonable methods of improving the Service Levels.
SECTION 5.3 MEASUREMENT AND MONITORING TOOLS
As part of the Services throughout the Term, and at no additional cost
to Wards, Supplier shall implement any measurement and monitoring tools and
procedures necessary to measure its performance of the Services and compare such
performance to that required by the Service Level Agreements. Upon Wards'
request, Supplier shall provide Wards or its auditors with any information and
access to the measurement and monitoring tools necessary to verify compliance by
Supplier with the Service Level Agreements.
SECTION 5.4 FAILURE TO MEET SERVICE LEVELS
(a) Supplier acknowledges that its failure to meet one or more Service
Levels may have a material adverse effect on the business and operations of
Wards and that the actual amount of damage sustained by Wards because of such
failure would be impracticable or extremely difficult to determine. Accordingly,
if Supplier fails to meet a Service Level for reasons other than those specified
in Section 5.4(c) below, Wards shall have the option, but not the obligation, to
recover the applicable amount specified in each Service Level Agreement
("Service Level Credits") as liquidated damages. If Supplier fails to meet
Service Levels under certain circumstances described in Master Schedule C, Wards
-----------------
shall have the option, but not the obligation, to recover the applicable amounts
specified in Master Schedule C (the "Corporate Service Level Credits"). Supplier
-----------------
acknowledges that the Service Credits are reasonable under the circumstances
existing as of the date of this Master Agreement and any
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Service Agreement Effective Date. Supplier shall remit Service Credits to Wards
within thirty (30) days after the end of the month in which such failure
occurred, or, at Wards' option, Supplier shall deduct the Service Credits from
the next succeeding invoice or other amounts due to Supplier. Regardless of
whether Wards exercises its option to recover Service Credits with respect to
any failure, Wards shall also have any remedies available to Wards under this
Master Agreement or any Service Agreement, at law or in equity, including the
right, depending on the circumstances, to terminate this Master Agreement or any
Service Agreement for cause.
(b) Each time Supplier fails to meet a Service Level, Supplier shall:
(i) promptly investigate the root cause(s) of the failure and deliver to Wards a
written report identifying such root cause(s) in the form requested by Wards or
as specified in a Service Agreement; (ii) use all Commercially Reasonable
Efforts to correct the problem and to begin meeting such Service Level as soon
as practicable; and (iii) at Wards' request, advise Wards of the status of such
corrective efforts. All Service Levels and applicable Service Credits remain in
effect notwithstanding Supplier's use of Commercially Reasonable Efforts to
correct any performance problem.
(c) If any failure to meet a Service Level is directly and solely
attributable to (i) a Force Majeure Event, (ii) a breach by Wards of this Master
Agreement or a Service Agreement, (iii) Wards Software, or (iv) as otherwise
provided in a Service Level Agreement, Wards shall not be entitled to a Service
Credit.
SECTION 5.5 PERFORMANCE STANDARDS
(a) With respect to any Service or obligation which does not have an
associated Service Level, Supplier shall perform such Service or obligation with
a level of accuracy, quality, completeness, timeliness, responsiveness and cost
efficiency that meets or exceeds the higher of (i) the level of performance by
Wards or any third party providing such services for Wards immediately before
the applicable Service Agreement Effective Date, or (ii) the standards of other
sophisticated outsourcing companies providing services similar to the Services,
and in any event using prompt and diligent efforts in a professional and
workmanlike manner and using qualified individuals ("Performance Standards").
Each time Supplier fails to meet any Performance Standards, Supplier shall: (i)
promptly investigate the root cause(s); (ii) use all Commercially Reasonable
Efforts to correct the problem and to begin performing such obligation in the
required manner as soon as practicable, but in any event within thirty (30) days
of such failure; and (iii) at Wards' request, advise Wards of the status of such
corrective efforts. All Performance Standards remain in effect notwithstanding
Supplier's use of Commercially Reasonable Efforts to correct any performance
problem.
(b) Regardless of whether there exists an associated Service Level,
Supplier shall (i) perform all Services and obligations promptly, diligently and
in a workmanlike and professional manner, using qualified individuals, and (ii)
use all Commercially Reasonable Efforts to perform the Services and obligations
in the manner which reduces charges payable by Wards hereunder to the minimum
amount reasonably practicable while still meeting required levels of quality and
performance.
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SECTION 5.6 BASELINE WARDS SATISFACTION SURVEY
Upon the request of Wards and as part of the Services, Supplier (or if
Wards elects, a third party mutually agreed upon by Wards and Supplier) shall,
if requested by Wards, conduct a baseline Wards satisfaction survey as approved
by Wards for affected end-users of the Services as designated by Wards. This
survey shall be of the content and scope reasonably determined by Wards,
administered in accordance with the procedures agreed upon by Wards and
Supplier. If a third party is selected, Wards and Supplier shall share the third
party costs equally.
SECTION 5.7 VALUE INITIATIVES AND PERIODIC IT REVIEW
During the Term of this Master Agreement it is the intention of
Supplier and Wards to cooperate in good faith to identify opportunities for
Supplier to propose Supplier Services to Wards for the purpose of creating
technology-enabled business value for the benefit of Wards ("Value
Initiatives"). Periodically, but at least annually, Supplier and Wards
executives shall meet for a review of Wards' information technology requirements
as well as reporting and recommendations of Supplier as to the quality of
Services performance by Supplier and continuous improvement in such performance.
Wards may periodically cause an independent, nationally recognized organization
to conduct an information technology review of Wards' operations to assist Wards
and Supplier in their assessment and review, including a review of available
benchmarking and best practices information. Such organization shall be
reasonably acceptable to Supplier, it being acknowledged by the Parties that a
competitor of Supplier in the provision of information technology outsourcing
services shall not be the selected organization. The cost of such review will be
shared equally by Wards and Supplier, provided that Supplier's share of such
cost shall not exceed $50,000 per year.
If Wards agrees with Supplier to contract for implementation of a
Value Initiative, Supplier and Wards will negotiate in good faith to determine
the pecuniary value of Supplier's contribution to achievement of the applicable
business objectives, the method of measuring and tracking such value and the
period over which it will be measured and tracked, and the basis for
compensating Supplier for the applicable Supplier Services. The principles on
which these negotiations will be based will include, among others, the degree to
which the applicable Supplier Services contribute to achievement of the business
objectives and the value of the at-risk investment of resources Supplier is
willing to make to achieve such business objectives. Generally, it is the intent
of Supplier and Wards that Supplier' compensation for such Supplier Services
will be contingent upon successful achievement of the business objectives and
will be equivalent to Supplier's proportionate value contribution over a
specific period (generally up to one (1) year). The terms and conditions agreed
to by Supplier and Wards with respect to each Value Initiative will be set forth
by the Parties in an agreement (a "Value Initiative Agreement").
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ARTICLE 6
TRANSFERS OF EQUIPMENT, FACILITIES AND THIRD PARTY CONTRACTS
SECTION 6.1 ASSUMPTION OF EQUIPMENT LEASES
If specified in a Service Agreement, Wards shall assign, and Supplier
shall assume, Wards' obligations under the applicable leases for certain
equipment that is used to provide the Services as described in the Services
Agreement or Wards may sell equipment owned by it to Supplier (the "Transferred
Equipment"). Unless Wards obtains an order from the Bankruptcy Court authorizing
the assumption and assignment of such leases to Supplier, Supplier. with Wards'
assistance, shall seek to obtain consents to such assignments and releases of
Wards' liability under such leases as promptly as practicable. The Service
Agreement shall state the other terms and conditions applicable to the
Transferred Equipment. Wards represents that all Transferred Equipment is
subject to valid regular maintenance agreements with vendors or time and
materials maintenance agreements with third parties. Otherwise, any assignment
of Wards' interests in the Transferred Equipment is made "AS IS, WHERE IS,"
WITHOUT WARRANTIES OF ANY KIND (EXCEPT AS EXPRESSLY STATED IN SUCH SERVICE
AGREEMENT), AND SPECIFICALLY WITHOUT ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
SECTION 6.2 USE OF WARDS FACILITIES AND EQUIPMENT
(a) During the Term of a Service Agreement, Wards shall make available
to Supplier furnished space in Wards' facilities as reasonably determined by
Wards to be suitable for Supplier to carry out administrative functions
associated with the Services (the "Wards Facilities") and certain Equipment
identified in each Service Agreement that will continue to be owned by Wards
(the "Wards Equipment").
(b) Supplier shall: (i) use the space in the Wards Facilities for the
sole purpose of providing the Services; (ii) comply with the leases and other
agreements applicable to the Wards Facilities; (iii) comply with all policies
and procedures governing access to and use of Wards Facilities; and (iv) return
such space to Wards in the same condition it was in on the Service Agreement
Effective Date, ordinary wear and tear excepted. Except to the extent included
in the Services and charges described in the applicable Service Agreement (e.g.,
supplies and consumables used in providing the Services), Wards shall provide
the Wards Facilities and access to normal office resources (e.g., fax, telephone
and copier support) at no charge to Supplier; provided, however, that Supplier
shall be responsible for costs associated with any Wards Facilities leased by
Wards (for Service Agreements No. 1 through No. 7 not to exceed $1,500 per month
for approximately 18 to 20 employees). Supplier shall remain responsible for any
required personal computers and peripherals, long distance charges and all other
expenses incurred by Supplier's on-site account management team.
(c) Supplier shall: (i) use the Wards Equipment for the sole purpose of
providing the Services; (ii) comply with any directions from Wards concerning
the location of the Wards Equipment; (iii) provide, or arrange for third parties
to provide, maintenance of the Wards Equipment; and (iv) return such equipment
to Wards, upon termination of the applicable
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Service Agreement, in the same condition it was in on the Service Agreement
Effective Date, ordinary wear and tear excepted.
SECTION 6.3 THIRD PARTY CONTRACTS
(a) Each Service Agreement shall provide for the treatment of all
Third Party Contracts, as follows: (i) all or certain of the Third Party
Contracts may be assigned by Wards to Supplier, (ii) all or certain of the Third
Party Contracts may be retained by Wards and, as necessary, any required Third
Party Consents shall be obtained by Wards, Supplier or both, as specified in the
Service Agreement, and (iii) the respective financial, operational and other
obligations of the Parties with respect to the Third Party Contracts shall be
set forth in the Service Agreement.
Regardless of whether a Third Party Consent is obtained with respect to
any Third Party Service Contract assigned or to be assigned to Supplier, on and
after each Service Agreement Effective Date Supplier shall fulfill all of the
payment and other obligations formerly imposed on Wards under such Third Party
Contracts. If any such Third Party Consent cannot be obtained, Supplier shall
identify and adopt, at its expense, subject to Wards' prior approval, such
alternative approaches as are necessary to provide the Services without such
Third Party Consent; provided that if the third party has refused to grant its
consent primarily based on Wards' involvement, Wards will share 50% of any
incremental cost attributable to the selected alternative.
(b) Subject to obtaining any required Third Party Consents, as of the
applicable Service Agreement Effective Date Wards shall grant to Supplier, for
the sole purpose of providing the Services, the same rights of access to, and
use of, the Third Party Contracts used by Wards immediately before the
applicable Service Agreement Effective Date.
(c) On or before the applicable Service Agreement Commencement Date, in
the event the Service Agreement requires Supplier to assume any Third Party
Contract, and unless Wards obtains an order from the Bankruptcy Court
authorizing the assumption and assignment of such Third Party Contracts to
Supplier, Supplier, with Wards' assistance, shall seek to obtain from each third
party to a Third Party Contract existing on the applicable Service Agreement
Effective Date any required consents by such third party to (i) the assignment
to and assumption by Supplier of Third Party Contracts, and (ii) to the extent
agreed to by the third party, a complete release of Wards with respect to all
obligations arising under such Third Party Contracts on and after the applicable
Service Agreement Effective Date (collectively, the "Third Party Consents").
Supplier shall pay all transfer, upgrade and other fees necessary to obtain any
Third Party Consents with respect to Third Party Contracts, and Wards' liability
for any such payments is only to Supplier as expressly set forth in the
applicable Service Agreement. Unless otherwise specified in a Service Agreement,
the Parties shall attempt to include in any assigned Third Party Contract the
right of Wards to re-acquire the rights under the Third Party Contract upon any
termination or expiration of a Service Agreement.
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(d) With respect to any Third Party Contract which both (i) is not
identified in a Service Agreement and (ii) was not made known to Supplier during
the due diligence and negotiations preceding the execution of a Service
Agreement (an "Unidentified Third Party Contract"), the following shall apply:
(A) the Unidentified Third Party Contract shall be added to the appropriate
Service Agreement as soon as it has been identified; (B) Supplier shall obtain
any required Third Party Consents with respect to any Unidentified Third Party
Contract that is a Third Party Service Contract as soon as possible after it has
been identified; and (C) Wards shall pay all transfers, upgrade and other fees
necessary to obtain such Third Party Consent with respect to the Unidentified
Third Party Contracts. During the Term, Wards shall either retain financial
responsibility for license, maintenance or other financial obligations with
respect to such Unidentified Third Party Contracts or Supplier shall charge such
amounts to Wards on a Pass-Through Expense basis.
ARTICLE 7
PERSONNEL
SECTION 7.1 OFFERS AND TERMS OF EMPLOYMENT
(a) Each Service Agreement will specify the Wards employees to whom
Supplier shall offer employment, if any. With respect to Service Agreements No.
1 through No. 7, such employees are listed in Service Agreement No. 1.
(b) Supplier shall give each such employee who accepts such offer (a
"Transferred Employee") full credit under all Supplier seniority-based benefits
plans (including, without limitation, vacation, 401(k) and employee stock
purchase plans) for years of service at Wards or elsewhere to the same extent
that Wards had given credit for that employee's years of service. Any pre-
existing condition limitations and waiting periods under Supplier benefit plans
shall be waived for all Transferred Employees to the extent permitted or
required by applicable law. Supplier shall grant each Transferred Employee the
same rights and opportunities for advancement as comparable employees currently
employed by Supplier.
SECTION 7.2 KEY SUPPLIER POSITIONS
(a) A Service Agreement may designate certain Supplier personnel
positions (the "Key Supplier Positions") which are critical to providing the
Services throughout the Term. Wards may change or update the Key Supplier
Positions from time to time during the Term, provided that, unless otherwise
agreed by the parties, the number of Key Supplier Positions shall not exceed the
number listed in the applicable Service Agreement. Supplier shall cause the
personnel filling the Key Supplier Positions to devote substantially full time
and effort to the provision of the Services.
(b) The individuals who will fill the Key Supplier Positions on the
Service Agreement Commencement Date shall be listed in the applicable Service
Agreement. From the date an individual first fills a Key Supplier Position until
completion of the period set forth next to such Key Supplier Position in such
Service Agreement, Supplier shall notify Wards reasonably in advance of any
decision by Supplier to (i) terminate the employment of any
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individual originally or subsequently filling such Key Supplier Position except
for cause, (ii) transfer such individual from such Key Supplier Position, or
(iii) transfer of an individual from a Key Supplier Position to the account of a
competitor of Wards. In any such case, Supplier shall reasonably consider any
concerns expressed by Wards with respect to such proposed action.
(c) Before assigning an individual to fill a Key Supplier Position,
Supplier shall notify Wards of the proposed assignment, shall introduce the
individual to appropriate Wards representatives as designated by Wards' Project
Executive and Relationship Executive, and shall provide Wards with a resume and
such other information as Wards may reasonably request. If Wards objects in good
faith to the proposed assignment within fifteen (15) days after being notified
thereof, Supplier shall discuss such objections with Wards and attempt to
resolve them on a mutually agreeable basis. If Wards continues to object to the
proposed assignment, Supplier shall not assign the individual to that position
and shall propose another individual to fill the Key Supplier Position.
SECTION 7.3 SUPPLIER EMPLOYEES ASSIGNED TO WARDS ACCOUNT
Under any Service Agreement, Wards shall have the right to notify
Supplier if Wards determines that the continued assignment to the Wards account
of any Supplier employee is not in the best interests of Wards. Upon receipt of
such notice, Supplier shall have a reasonable time period, not to exceed five
(5) days, to investigate the matters stated therein, discuss its findings with
Wards and attempt to resolve such matters in a manner acceptable to Wards.
SECTION 7.4 EMPLOYMENT OFFERS
Except as set forth in Section 18.11 (Offers to Supplier Employees) or
except with Supplier's prior approval, during the Term Wards shall not solicit
the employment of any Supplier employees. During the Term and while Supplier is
providing any Termination/Expiration Assistance, Supplier, and any Subcontractor
providing Services under Section 10.10, shall not extend offers of employment
to, or directly or indirectly solicit the employment of, any Wards employees
without Wards' prior approval.
ARTICLE 8
INTELLECTUAL PROPERTY RIGHTS AND OBLIGATIONS
SECTION 8.1 WARDS SOFTWARE
Each Service Agreement shall identify the Wards Software, if any, that
Supplier is authorized to use to perform the Services and specify the rights of
Supplier to use the Wards Software.
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SECTION 8.2 SUPPLIER SOFTWARE
Each Service Agreement will identify any Supplier Software that will be
used to provide the Services. Supplier shall install, operate and maintain at
its expense any Supplier Software needed to provide the Services. Without Wards'
written consent, Supplier shall not use in performing the Services any Supplier
Software that is not commercially available to Wards. As of the applicable
Service Agreement Effective Date, Supplier grants to Wards and its contractors
and subcontractors, to the extent necessary or desirable for Wards or such
contractors and subcontractors to perform any Services permitted by this Master
Agreement or any Service Agreement, a worldwide, royalty free, nonexclusive
license during the Term to use Supplier Software for the sole benefit of Wards.
Except for the foregoing license, Supplier retains all right, title and interest
in and to the Supplier Software.
SECTION 8.3 THIRD PARTY SOFTWARE
Each Service Agreement shall identify any Third Party Software, and,
unless otherwise stated in such Service Agreement, Supplier shall, to the extent
necessary or appropriate to provide the Services: (i) maintain licenses for
Third Party Software Licenses used by Wards on the Service Agreement Effective
Date; (ii) upgrade, enhance, and implement new versions of Third Party Software
used by Wards on the Service Agreement Effective Date; (iii) obtain licensed
authorization for use and disclosure of Third Party Software by and to
Supplier's employees or agents; (iv) install fixes, modifications, releases or
versions of Third Party Software which are identified by the licensor of Third
Party Software as required to make the Third Party Software Year 2000 Compliant;
and (v) if directed by Wards, replace or add to Third Party Software used by
Wards on the Service Agreement Effective Date. Supplier shall not use in
performing the Services any Third Party Software unless such Third Party
Software was commercially available to Wards when selected. If required by any
vendor of Third Party Software, Wards will enter into three-way confidentiality
agreements with Supplier and such vendors upon terms and conditions reasonably
acceptable to Wards.
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SECTION 8.4 WORK PRODUCT
Supplier shall be the sole and exclusive owner of all work product
owned by it as of each applicable Service Agreement Effective Date. Wards shall
be the sole and exclusive owner of any reports, manuals (including any
Procedures Manual) and other work product prepared by Supplier pursuant to a
Service Agreement and of any enhancements to and modifications of Wards Software
implemented pursuant to a Service Agreement. In addition, as between Wards and
Supplier, Wards shall be the sole and exclusive owner of any enhancements to and
modifications of Third Party Software implemented pursuant to a Service
Agreement. All work product described in the preceding two (2) sentences shall
be considered works for hire owned by Wards. If any such work product is not
considered a work made for hire under applicable law, Supplier hereby
irrevocably assigns to Wards, without further consideration, all of Supplier's
right, title and interest in and to such work product. Supplier shall execute
any documents and take any other actions reasonably requested by Wards to
accomplish the purposes of this Section. If for any reason Wards fails to obtain
ownership of the work product and such ownership is vested in Supplier or its
employees or agents, Supplier grants to Wards, or will obtain the right to grant
to Wards, a perpetual, exclusive, royalty-free and world-wide license to use the
work product for any purpose, and to assign and sublicense its license rights.
The Parties' rights, if any, in software developed outside the scope of the
Services shall be determined pursuant to the Contract Change Control Procedures.
Notwithstanding the foregoing, prior to proceeding with development of
any work product or enhancements, Supplier may propose to Wards that Supplier
will fund such development without charge to Wards. If Wards agrees to proceed
on that basis, Supplier shall retain ownership of the work product or
enhancements and shall grant Wards a royalty-free, transferable, perpetual and
non-exclusive license to such work product or enhancements.
SECTION 8.5 USE OF CONCEPTS, KNOW-HOW AND METHODS
Nothing in this Master Agreement or any Service Agreement shall
restrict a Party from the use of any ideas, concepts, know-how, methods or
techniques relating to information technology services that such Party,
individually or jointly, develops or discloses under this Master Agreement or
any Service Agreement or obtains from third parties, except to the extent that
such use infringes the other Party's patent rights, copyrights or other
intellectual property rights or involves a disclosure or use of the other
Party's Confidential Information.
SECTION 8.6 NON-INFRINGEMENT
Supplier shall perform its obligations under this Master Agreement and
all Service Agreements in a manner that does not infringe, or constitute an
infringement or misappropriation of, any patent, copyright, trademark, trade
secret or other proprietary rights of any third party. Supplier represents that,
to its knowledge, the Supplier Software and Third Party Software and the
Services performed by Supplier do not, and will not, infringe any patent,
copyright, trade secret or any other intellectual property interest owned or
controlled by any other person.
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SECTION 8.7 VIRUSES
Supplier shall use all Commercially Reasonable Efforts to ensure that
no Viruses are coded or introduced into the systems used to provide the
Services. If a Virus is introduced into the systems used to provide the
Services, Supplier shall eliminate the Virus and mitigate any losses of
operational efficiency or data caused by the Virus.
SECTION 8.8 DISABLING CODE
Supplier shall not insert into any Software any code that would have
the effect of disabling any Software, Equipment or Services. With respect to any
disabling code that may be part of the Software, Supplier shall not invoke such
disabling code at any time (whether during or after the Term) for any reason. If
at any time the licensor of any Third Party Software shall invoke or threaten to
invoke any disabling code in Third Party Software licensed to Supplier which
could adversely affect the Services, Supplier shall use its Best Efforts to
preclude such action on the part of such licensor.
ARTICLE 9
CONFIDENTIALITY
SECTION 9.1 DEFINITIONS
(a) "Disclosing Party" means the Party furnishing Confidential
Information and "Receiving Party" means the Party receiving the Confidential
Information disclosed by the Disclosing Party.
(b) "Confidential Information" means information designated as
confidential or which ought to be considered as confidential from its nature or
from the circumstances surrounding its disclosure. Confidential Information
includes, without limiting the generality of the foregoing, Supplier Software,
Wards Data, Wards Software, the terms of this Master Agreement, and information:
(i) relating to the Disclosing Party's software or hardware
products or services, or to its research and development projects or plans;
(ii) relating to the Disclosing Party's business, policies,
strategies, operations, finances, plans or opportunities, including the identity
of, or particulars about, the Disclosing Party's clients or suppliers; and
(iii) marked or otherwise identified as confidential, restricted,
secret or proprietary, including, without limiting the generality of the
foregoing, information acquired by inspection or oral disclosure provided such
information was identified as confidential at the time of disclosure or
inspection and is confirmed in writing with ten (10) Business Days after the
disclosure or inspection.
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Notwithstanding the foregoing, Confidential Information does not include
information that the Receiving Party can establish:
(A) has become generally available to the public or commonly
known in either Party's business other than as a result of a breach by the
Receiving Party of any obligation to the Disclosing Party;
(B) was known to the Receiving Party prior to disclosure to
the Receiving Party by the Disclosing Party by reason other than having been
previously disclosed in confidence to the Receiving Party;
(C) was disclosed to the Receiving Party on a non-
confidential basis by a third party who did not owe an obligation of confidence
to the Disclosing Party with respect to the disclosed information;
(D) was independently developed by the Receiving Party
without any recourse to any part of the Confidential Information; or
(E) in the case of Wards, any information related to the
Services which Wards determines in good faith to be necessary or appropriate in
connection with any requests by Wards for information or proposals from other
service providers, including, without limitation, information of an operational,
technical or financial nature related to Wards which Wards desires to make
available to such service providers (excluding, however, Supplier's pricing for
the Services).
(c) "Confidential Materials" means the part of any tangible media
upon or within which any part of the Confidential Information is recorded or
reproduced in any form, excluding any storage device which forms a part of
computer hardware.
SECTION 9.2 RIGHTS, RESTRICTIONS AND OBLIGATIONS OF THE RECEIVING PARTY
(a) During the Term, the Receiving Party may:
(i) disclose Confidential Information received from the
Disclosing Party only to its subcontractors, agents, representatives, advisors,
employees, officers and directors and Affiliates who have a need to know such
information exclusively for the purpose of executing its obligations or
exercising its rights under this Master Agreement or any Service Agreement;
provided that the Disclosing Party may, on a case by case basis, require that
the Receiving Party obtain its written consent prior to disclosure of certain
categories of Confidential Information to such parties;
(ii) reproduce the Confidential Information received from the
Disclosing Party only as required to execute its obligations or exercise its
rights under this Master Agreement or any Service Agreement;
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(iii) disclose Confidential Information as required by law,
provided the Receiving Party gives the Disclosing Party prompt notice prior to
such disclosure to allow the Disclosing Party to make a reasonable effort to
obtain a protective order or otherwise protect the confidentiality of such
information; and
(iv) disclose Confidential Information which pertains to the
terms of this Master Agreement, any Service Agreement or Wards' information
technology operations which may be necessary in order for potential bidders to
respond to any future Wards request for proposal for all or part of the
Services.
(b) Except as otherwise specifically provided in this Master
Agreement or any Service Agreement, the Receiving Party shall not during the
Term and after expiration or earlier termination hereof:
(i) disclose, in whole or in part, any Confidential
Information received directly or indirectly from the Disclosing Party; or
(ii) sell, rent, lease, transfer, encumber, pledge, reproduce,
publish, transmit, translate, modify, reverse engineer, compile, disassemble or
otherwise use the Confidential Information in whole or in part.
(c) The Receiving Party shall exercise the same care in preventing
unauthorized disclosure or use of the Confidential Information that it takes to
protect its own information of a similar nature, but in no event less than
reasonable care. Reasonable care includes, without limiting the generality of
the foregoing:
(i) informing its subcontractors, agents, representatives,
advisors, directors, officers, employees and Affiliates and, where applicable,
their directors, officers and employees, of the confidential nature of the
Confidential Information and the terms of this Master Agreement, directing them
to comply with these terms, and obtaining their written acknowledgment that they
have been so informed and directed, and their written undertaking to abide by
these terms; and
(ii) notifying the Disclosing Party immediately upon discovery
of any loss, unauthorized disclosure or use of Confidential Information, or any
other breach of this Article by the Receiving Party, and assisting the
Disclosing Party in every reasonable way to help the Disclosing Party regain
possession of the Confidential Information and to prevent further unauthorized
disclosure or use.
(d) The Receiving Party acknowledges that:
(i) the Disclosing Party possesses and will continue to
possess Confidential Information that has been created, discovered or developed
by or on behalf of the Disclosing Party, or otherwise provided to the Disclosing
Party by third parties, which information has commercial value and is not in the
public domain;
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(ii) unauthorized use or disclosure of Confidential Information
is likely to cause injury not readily measurable in monetary damages, and
therefore irreparable;
(iii) in the event of an unauthorized use or disclosure of
Confidential Information, the Disclosing Party shall be entitled, without
waiving any other rights or remedies, to such injunctive or equitable relief as
may be deemed proper by a court of competent jurisdiction;
(iv) subject to the rights expressly granted to the Receiving
Party in this Master Agreement or in any Service Agreement, the Disclosing Party
and its licensors retain all right, title and interest in and to the
Confidential Information, including without limiting the generality of the
foregoing, title to all Confidential Materials regardless of whether provided by
or on behalf of the Disclosing Party or created by the Receiving party; and
(v) any disclosure by the subcontractors, agents,
representatives, advisors, directors, officers and employees and Affiliates of
the Receiving Party and, where applicable, their directors, officers and
employees shall be deemed to be disclosure by the Receiving Party and the
Receiving Party shall be liable for any such disclosure as if the Receiving
Party had disclosed the Confidential Information.
SECTION 9.3 RIGHTS AND REMEDIES OF THE DISCLOSING PARTY
(a) Immediately upon the Disclosing Party's request, and at the
expiration or earlier termination of this Master Agreement or any applicable
Service Agreement, the Receiving Party shall:
(i) return all Confidential Materials, including, without
limitation, all originals, copies, reproductions and summaries of Confidential
Information; and
(ii) destroy all copies of Confidential Information in its
possession, power or control, which are present on magnetic media, optical disk,
volatile memory or other storage device, in a manner that assures the
Confidential Information is rendered unrecoverable.
Upon completion of those tasks an officer of the Receiving Party shall provide
written confirmation to the Disclosing Party that the requirements of this
Section have been complied with.
(b) The Disclosing Party may visit the Receiving Party's premises,
upon reasonable prior notice and during normal business hours, to review the
Receiving Party's compliance with the terms of this Section.
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SECTION 9.4 NONDISCLOSURE AGREEMENTS
Supplier shall, at Wards' request made from time to time during the
Term, cause Supplier Personnel designated by Wards to sign nondisclosure
agreements reasonably proposed by Wards.
SECTION 9.5 OWNERSHIP OF WARDS DATA
All Wards Data shall remain the property of Wards. The Wards Data
shall not be (i) used by Supplier other than in connection with providing the
Services, (ii) disclosed, sold, assigned, leased or otherwise provided to third
parties by Supplier, or (iii) commercially exploited by or on behalf of
Supplier, its employees or agents.
SECTION 9.6 RETURN OF DATA
At no cost to Wards, Supplier shall upon (i) request by Wards at any
time, and (ii) the cessation of all Termination/Expiration Assistance, promptly
return to Wards, in the format and on the media in use as of the date of
request, all or any requested portion of the Wards Data. Archival tapes
containing any Wards Data shall be used by Supplier solely for back-up purposes.
SECTION 9.7 SECURITY
(a) Supplier will comply with the written security procedures that
are in effect during the Term of this Master Agreement and any Service Agreement
for the security of Wards' facilities and Wards Data, as such procedures are
created or modified by Wards from time to time. The applicable policy or
policies may be included in each applicable Service Agreement.
(b) (i) Since Supplier personnel may, by nature of the Services,
have the ability to defeat systems security provisions on devices specified in
each applicable Service Agreement containing both attorney-client privileged
material or attorney work product, but such personnel have no need to actually
access such data in order to perform Services, Supplier covenants that, in
addition to the other provisions of this Article 9, Supplier shall inform Wards
whenever access is sought by Supplier, its employees, agents, or contractors to
the data files on such devices. Supplier shall not, and Supplier's employees and
contractors shall not, access such Wards Data, and Supplier waives any claim
that, as to Supplier, Wards, by any act contemplated or permitted under this
Master Agreement or any Service Agreement, has waived any privileges to which it
is otherwise entitled by virtue of the access required for performing the
Services.
(ii) Since Supplier personnel may, by nature of the Services,
have the ability to defeat systems security provisions on devices specified in
each applicable Service Agreement containing Wards' financial data that, if
utilized or disclosed could lead to violations of the applicable securities
laws, Supplier covenants that, in addition to the other provisions of this
Article 9, (1) neither Supplier nor its employees or contractors shall access or
disclose any Wards financial data, and (2) Supplier employees and contractors
who have the ability to obtain access to the data files on such devices
containing Wards Data which includes such financial data will not
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trade in any Wards security for the period of time from the close of any fiscal
quarter or Wards fiscal year until at least one day after the release by Wards
of its quarterly or annual financial reports to the public (or such other period
which Wards imposes upon the Wards employees who have permitted access to such
Wards Data).
(c) Supplier shall indemnify Wards and hold Wards harmless from any
loss resulting from a breach by Supplier, or its employees, agents, or
contractors under this Section 9.7.
SECTION 9.8 DESTROYED OR LOST DATA
Supplier will not delete or destroy any Wards Data or media on which
Wards Data resides without prior authorization from Wards. Wards hereby
authorizes Supplier to delete or destroy Wards Data in accordance with any Wards
document retention program, including Wards' approved tape management retention
rules. Supplier will maintain and provide to Wards one or more Reports that
identify the Wards Data or media that have been destroyed. In the event any
Wards Data is lost or destroyed due to any act or omission of Supplier,
including any breach of the security procedures described in this Article 9 and
any Service Agreement, Supplier shall be responsible for the prompt regeneration
or replacement of such Wards Data. Supplier shall prioritize this effort so that
the loss of Wards Data will not have an adverse effect upon Wards' business or
the Services. Wards agrees to cooperate with Supplier to provide any available
information, files or raw data needed for the regeneration of the Wards Data. If
Supplier fails to regenerate the lost or destroyed Wards Data within the time
reasonably set by Wards, then Wards may obtain data reconstruction services from
a third party, and Supplier shall cooperate with such third party as requested
by Wards. In addition to any other damages incurred by Wards, Supplier will be
responsible for the actual costs incurred by Wards for the reconstruction of
Wards Data by a third party. In the event it is determined that Wards Data has
been lost or destroyed as a result of the willful conduct of Supplier or its
employees, contractors or agents, Wards may terminate the applicable Service
Agreement or this Master Agreement for cause pursuant to Section 18.1.
ARTICLE 10
MANAGEMENT AND SUBCONTRACTING
SECTION 10.1 PROJECT EXECUTIVES
On or before the Effective Date, and from time to time thereafter
during the Term, Wards and (subject to Section 7.3 (Key Supplier Positions))
Supplier shall each designate an individual as its relationship executive (the
"Relationship Executive"). A Party's Relationship Executive shall be authorized
to act as the primary contact for such Party with respect to all matters
relating to this Agreement. In addition, each Party shall designate individuals
who will be directly responsible for its performance under each Service
Agreement (each a "Project Executive"). Supplier shall ensure that Supplier's
Relationship Executive and Project Executive has the authority necessary to
allow such Project Executive to make prompt decisions with respect to this
Agreement.
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SECTION 10.2 JOINT OPERATING COMMITTEE AND EXECUTIVE COMMITTEE
(a) Within thirty (30) days after the Effective Date, the Parties
shall form a joint committee (the "Joint Operating Committee"). The Joint
Operating Committee shall take the actions and assume oversight of those matters
described in the Account Management and Governance Overview attached hereto as
Schedule D.
(b) Within thirty (30) days after the Effective Date, the Parties
shall form a joint committee (the "Executive Committee") as described in the
Account Management and Governance Overview attached hereto as Schedule D. The
Joint Operating Committee shall report to the Executive Committee and the
Executive Committee shall take the actions and assume oversight of these matters
described in Schedule D.
SECTION 10.3 WARDS OFFICE SPACE AT SUPPLIER FACILITIES
Supplier shall provide to Wards without charge furnished office space
at any Supplier Facilities used to provide Services for the occasional use of
the Wards Relationship Executive, Project Executive or their designees when
visiting such Supplier Facilities. The Wards Relationship Executive, Project
Executive, or their designees shall comply with all policies and procedures
governing access to and use of such Supplier Facilities and shall leave such
space in the same condition it was in immediately before they used the space,
ordinary wear and tear excepted.
SECTION 10.4 MEETINGS
Throughout the Term, the Parties shall hold those meetings and review
the items described in Schedule D and in any Service Agreement.
SECTION 10.5 REPORTS
Supplier shall prepare and deliver to Wards the reports described in
each Service Agreement ("Reports") by the respective deadlines specified in each
Service Agreement. At no charge to Wards, Supplier shall modify the Reports or
provide additional Reports as reasonably requested by Wards from time to time.
SECTION 10.6 PROCEDURES MANUAL
(a) Within ninety (90) days after the commencement of Services under
any Service Agreement, Supplier shall deliver to Wards for review and comment a
draft of a manual (the "Procedures Manual") describing in detail how Supplier
shall perform the Services, the Equipment and Software used to provide the
Services, and the documentation (such as, for example, operations manuals, user
guides, forms of Service Level reports, call lists, escalation procedures,
emergency procedures, and requests for approvals or information) which provides
further information regarding the Services. The Procedures Manual shall describe
the activities Supplier proposes to undertake in order to provide the Services,
including, where appropriate, those direction, supervision, monitoring, quality
assurance, staffing, reporting,
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planning and overseeing activities normally undertaken at facilities that
provide services of the type Supplier shall provide under this Agreement, and
further including acceptance testing and quality assurance procedures approved
by Wards. The Procedures Manual shall be based on the Wards procedures manual in
use immediately before the commencement of Services under such Service Agreement
Supplier shall incorporate any reasonable comments and suggestions made by Wards
and shall deliver a revised Procedures Manual within fifteen (15) days after
receipt of Wards' comments. The final Procedures Manual shall be subject to
Wards' approval.
(b) Supplier shall update the Procedures Manual throughout the Term
to reflect changes in the Services and the procedures and resources used to
provide the Services. Updates to the Procedures Manual shall also be provided to
Wards for review, comment and approval. Supplier shall update and deliver to
Wards for approval portions of the Procedures Manual relating to any material
operational change in the Services within fifteen (15) days of such change.
(c) Supplier shall perform the Services in accordance with the
then-current version of the Procedures Manual. The Procedures Manual shall be
for operational purposes only, and shall not constitute a contractual document.
Accordingly, in the event of a conflict between the provisions of this Agreement
and a Procedures Manual, the provisions of this Agreement shall control, and
Wards' acceptance of the Procedures Manual shall not be deemed a waiver of any
rights of Wards.
SECTION 10.7 TECHNICAL CHANGE CONTROL
Supplier shall implement any changes in the technical environment and
systems used to provide the Services in accordance the Service Agreement and any
applicable Procedures Manual. Until such Procedures Manual is finalized,
Supplier shall follow Wards' existing procedures or instructions for the
implementation of technical changes. Notwithstanding anything to the contrary in
the Service Agreement, the Procedures Manual, or Wards' existing procedures:
(a) Supplier shall not make any change that adversely affects the
functions or performance of, or decreases the operational efficiency of, the
Services, including without limitation the implementation of technological
changes, without first obtaining Wards' approval, which may be withheld in its
sole discretion. Notwithstanding the foregoing, Supplier may make temporary
changes required by an emergency but shall, if reasonably practicable, contact
appropriate Wards personnel to obtain prior approval. Supplier shall promptly
document and report such emergency changes to Wards.
(b) Supplier shall move programs from development and test
environments to production environments in a controlled and documented manner,
and shall not permit any changes to be introduced into such programs during such
move without first obtaining Wards' approval.
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SECTION 10.8 CONTRACT CHANGE CONTROL
(a) From time to time during the Term Wards or Supplier may propose
changes in or additions to the Services or other aspects of this Agreement or a
Service Agreement. Subject to clause (e) below, all such changes shall be
implemented pursuant to the procedures set forth in this Section (the "Change
Control Procedures").
(b) Any change to this Master Agreement must be approved by the
Relationship Executive of each Party and memorialized in a written amendment
that specifically identifies this Master Agreement, the section of this
Agreement that is the subject of the amendment, and the new provision.
(c) If Wards desires to propose a change in or addition to the
Services under a Service Agreement, it shall deliver a written notice to the
Supplier Project Executive describing the proposal. Supplier shall respond to
such proposal as promptly as reasonably possible by preparing at Supplier's
expense and delivering to the Wards Project Executive a written document
("Change Control Document"), indicating: (i) the effect of the proposal, if any,
on the amounts payable by Wards hereunder (which effect shall be determined in
the manner set forth in Section 13.4 (Charges Pursuant to Change Control
Procedures) and the manner in which such effect was calculated; (ii) the effect
of the proposal, if any, on Service Levels with a full explanation acceptable to
Wards; (iii) the anticipated time schedule for implementing the proposal; and
(iv) any other information requested in the proposal or reasonably necessary for
Wards to make an informed decision regarding the proposal. If Supplier desires
to propose a change in or addition to the Services or other aspects of this
Agreement, it may do so by preparing at its expense and delivering a Change
Control Document to the Wards Project Executive. A Change Control Document, once
submitted to Wards, shall constitute an offer by Supplier to implement the
proposal described therein on the terms set forth therein, and shall be
irrevocable for a minimum of thirty (30) days.
(d) No change in or addition to the Services or any other aspect of
this Agreement shall become effective without the written approval of the Wards
Project Executive (or, if necessary, a Wards officer with the appropriate level
of signature authority). If Wards elects to accept the offer set forth in the
Change Control Document, as evidenced by the written approval of the Wards
Project Executive, any changes in or additions to the Services described in the
Change Control Document shall thereafter be deemed "Services," any other changes
described in the Change Control Document shall be deemed to have amended this
Agreement, and the Parties shall agree on any further modifications to the
Agreement required to reflect the Change Control Document.
(e) Routine changes made in the ordinary course of Supplier's
provision of the Services that are performed within the then-existing resources
used to provide the Services and that do not affect Service Levels (such as
changes to operating procedures, schedules and Equipment configurations) shall
be made at no additional cost to Wards and shall be made and documented in
accordance with the Procedures Manual.
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SECTION 10.9 SYSTEM CHANGE BENCHMARKING
Each time, if any, that Supplier initiates a material change in the
operating environment in which Supplier is operating Software (a "System
Change"), Supplier shall perform a comparison, at a reasonable and mutually
agreed level of detail, between the amount of resources required by the Software
to perform a representative sample of the data processing then being performed
for Wards immediately prior to the System Change and immediately after the
System Change. Wards shall not be required to pay for increased resource usage
due to a System Change. If, following a System Change, Supplier contends that
increased resource usage has resulted from increased Wards usage and not from
the System Change, Wards shall only pay for increased usage as to the extent
Supplier is able to demonstrate to Wards that increased usage is not due to the
System Change and is due to Wards usage. Any such demonstration shall utilize
the same representative sample as used in the comparison above.
The parties acknowledge that upgrades to existing operating systems
Software operated by Supplier shall not be deemed a System Change provided
Supplier uses all Commercially Reasonable Efforts to minimize any increased
processing utilization; however, for example, new or replacement operating
systems Software implementation would be deemed a System Change unless such
implementation is directed by Wards.
SECTION 10.10 SUBCONTRACTING
(a) Supplier shall not delegate or subcontract any of its material
obligations under this Master Agreement or any Service Agreement without Wards'
prior written consent, which may be withheld in Wards' sole discretion.
Notwithstanding the preceding sentence, but subject to clause (c) below,
Supplier may use, in the ordinary course of business, third party service
providers or products pursuant to subcontracts which, when combined with any
related subcontracts, involve the payment of no more than $100,000 in any twelve
month period. A subcontract involving the payment of more than $100,000 in any
twelve-month period shall be a Material Subcontract. Notwithstanding any other
provision in this Section 10.10, all subcontractors shall be required to execute
documents binding the subcontractor to confidentiality and non-disclosure
agreements that are at least as protective as this Agreement with respect to
confidentiality of Wards Confidential Information under Article 9.
(b) If Supplier desires to enter into a Material Subcontract, it
shall submit to Wards in writing a proposal specifying (i) the specific tasks
Supplier proposes to subcontract, (ii) the reason for having a subcontractor
perform such tasks instead of Supplier, (iii) the identity and qualifications of
the proposed subcontractor and (iv) any other information reasonably requested
by Wards or relevant to Wards' approval of the subcontractor. If Wards approves
of the use of such subcontractor, Supplier shall include in such subcontract
provisions (A) naming Wards as an intended third-party beneficiary, (B)
substantially similar to Article 11 (Audits), Section 5.5 (Performance
Standards) and Article 9 (Confidentiality), and (C) any other provisions
necessary for Supplier to fulfill its obligations under this Master Agreement or
any Service Agreement (including without limitation, clause (c) below), and
provide Wards with a copy of each Material Subcontract. Such subcontract
provisions shall also include the option
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of Wards to assume each Material Subcontract in the event Wards terminates this
Master Agreement or a Service Agreement. In addition, Supplier shall not
disclose any Wards Confidential Information to such subcontractor until such
subcontractor has agreed in writing to assume the obligations described in
Article 9 (Confidentiality).
(c) Wards may revoke approval of a subcontractor previously approved,
or object to Supplier's use of a subcontractor for which Wards' approval was not
required pursuant to the clause (a) above, if a subcontractor is acquired or
otherwise becomes affiliated with a competitor of Wards, the subcontractor's
performance has been materially deficient, good faith doubt exists concerning
the subcontractor's ability to render future performance, or there have been
material misrepresentations by or concerning the subcontractor. Upon such
revocation or objection, Supplier shall remove such subcontractor from
performing the Services.
(d) Supplier shall remain liable for obligations performed by
subcontractors to the same extent as if a Supplier employee had performed such
obligations, and for purposes of this Master Agreement such work shall be deemed
work performed by Supplier. If a subcontractor breaches a Material Subcontract,
or is alleged to have breached a Material Subcontract, Supplier shall notify
Wards and provide Wards with such information relating to the alleged breach as
Wards may reasonably request.
(e) At no time shall Supplier retain individual independent
contractors for provision of the Services in excess of twenty-five percent (25%)
of the number of personnel involved in providing the Services under each
Services Agreement, without the prior approval of Wards.
ARTICLE 11
AUDITS
SECTION 11.1 AUDIT RIGHTS
Supplier shall maintain records and supporting documentation of all
financial and non-financial transactions under this Master Agreement and all
Service Agreements sufficient to permit a complete audit thereof in accordance
with this Section 11.1. Supplier shall, at no additional cost to Wards, provide
to Wards, Wards' internal and external auditors, inspectors, regulators and such
other representatives as Wards may designate from time to time access at
reasonable times and after reasonable notice (unless circumstances reasonably
preclude such notice) to (i) the parts of any facility at which Supplier is
providing the Services, (ii) Supplier Personnel providing the Services, and
(iii) all data and records relating to the Services, for the purpose of
performing audits and inspections of Wards and its business, to verify the
integrity of Wards Data, to examine the systems that process, store, support and
transmit that data, and to examine Supplier's charges and performance of the
Services under this Master Agreement and any Service Agreement. The foregoing
audit rights shall include, without limitation, and when applicable, audits (A)
of practices and procedures, (B) of systems, (C) of general controls and
security practices and procedures, (D) of disaster recovery and backup
procedures, (E) of costs (to the extent Services may be being provided by
Supplier on a Pass-Through Expense basis) and procurement practices of Supplier
in performing the Services (e.g., pursuant to Section 13.2 hereof), (F) of
Charges under any Service Agreement, (G)
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necessary to enable Wards to meet applicable regulatory requirements, and (H)
for any other reasonable purpose as determined by Wards. Supplier shall provide
full cooperation to such auditors, inspectors, regulators and representatives,
including the installation and operation of audit software.
Notwithstanding the foregoing, if Wards has reason to suspect any
malfeasance or dishonest acts on the part of Supplier, or other significant or
non-routine problems, Wards shall be entitled to undertake such audit of
Supplier as Wards reasonably deems appropriate without the foregoing notice or
other restrictions. If in any audit Wards determines that material operational
problems or financial issues exist, Supplier shall reimburse Wards for any costs
directly incurred in such audit and Wards may conduct a follow-up audit when
reasonably deemed appropriate by Wards. Supplier shall respond promptly to any
conclusions and recommendations reported as part of an audit and the applicable
Operating Committee will establish and monitor Supplier's schedule for
implementation of such recommendations.
SECTION 11.2 PAYMENTS
If an audit reveals that Supplier has overcharged Wards for Services
during the audited period in an amount equal to or in excess of three percent
(3%) of the payments made to Supplier during the last twelve-month period,
Supplier shall reimburse Wards for the cost of the audit in addition to the
amount of any overcharges that are due Wards. If the audit reveals that Supplier
has overcharged Wards in an amount equal to or in excess of ten percent (10%) of
the payments made to Supplier during the last twelve-month period, Supplier
shall pay an additional amount equal to one hundred percent (100%) of the
overcharged amount. The calculation of overcharges shall be calculated based
upon each Service Agreement, and not on a cumulative basis. Supplier shall pay
such amount to Wards within thirty (30) days following Wards' written request.
SECTION 11.3 SUPPLIER AUDITS
Supplier shall make available promptly to Wards, at no additional
charge, the results of any internal or external review or audit conducted by
Supplier, its Affiliates, or their respective contractors, agents or
representatives, relating to Supplier's operating practices and procedures to
the extent relevant to the Services.
SECTION 11.4 SURVIVAL
This Article shall survive the expiration or earlier termination of
the Term and shall continue to the fifth (5th) anniversary of the last day
Supplier provides any Termination/Expiration Assistance.
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ARTICLE 12
INSURANCE; RISK OF LOSS
SECTION 12.1 REQUIRED INSURANCE COVERAGES
Throughout the Term Supplier shall maintain in force, at minimum, the
insurance coverages described below. All subcontractors must comply with
required insurance requirements as set forth in Section 12.1. Any exceptions
must be approved by Wards. Additional insurance coverage(s) may be required
under a Service Agreement.
(a) Commercial General Liability Insurance, including
Products/Complete Operations and Advertising Injury coverage, with a minimum
combined single limit of $3 million per occurrence and minimum general aggregate
limit of $5 million;
(b) Umbrella Liability Insurance, including Products/Complete
Operations and Advertising Injury coverage, with a minimum limit of $50 million
per occurrence and minimum aggregate amount of $50 million;
(c) Worker's Compensation Insurance or any alternative plan or
coverage as permitted or required by applicable law and employers liability
insurance with a minimum occurrence limit of $500,000;
(d) Comprehensive Computer Processor/Computer Consultant Professional
Liability Insurance covering the liability for financial loss due to error,
omission or negligence of Supplier as described in this Master Agreement and any
Service Agreement with a minimum amount of $50 million;
(e) Automotive Liability Insurance covering use of all owned, non-
owned and hired automobiles with a minimum combined single limit of $3 million
per occurrence for bodily injury and property damage liability;
(f) "All Risk" Property Insurance in an amount equal to the
replacement value of the Equipment;
(g) Employee Dishonesty and Computer Fraud Insurance for loss arising
out of or in connection with fraudulent or dishonest acts committed by the
employees of Supplier, acting alone or in collusion with others, in a minimum
amount of $10 million per loss; and
(h) Employment Practices Liability Insurance covering all of
Supplier's employment practices and covering Wards for Vicarious Liability as
the result of Supplier's actions on behalf of Wards in an amount of at least $10
million per occurrence.
Supplier shall maintain in full force and effect, during each Service
Agreement Term and for a period of one (1) year thereafter, the Comprehensive
Computer Processor/Computer Consultant Professional Liability Insurance in
satisfaction of its obligation pursuant to Section 12.1(d). If for any reason
such policy insurer cancels or fails to renew such policy, Supplier
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shall immediately purchase a replacement policy containing substantially the
same terms as such policy and including a Prior Acts Coverage Endorsement
effective from the Master Agreement Effective Date.
SECTION 12.2 GENERAL INSURANCE REQUIREMENTS
All insurance policies Supplier is required to carry pursuant to this
Article shall: (i) be primary as to Supplier's negligence and non-contributing
with respect to any other insurance or self-insurance Wards may maintain; (ii)
name Wards, its Affiliates, subsidiaries and their respective officers,
directors and employees as additional insureds, as such parties' interests may
appear with respect to this Master Agreement (except as to the insurance
described in Section 12.1(c), (d), (g) and (h)); (iii) be provided by reputable
and financially responsible insurance carriers with a Best's minimum rating of
"A-" (or any future equivalent) and minimum Best's financial performance rating
of "6" (or any other future equivalent); (iv) require the insurer to notify
Wards in writing at least forty-five (45) days in advance of cancellation or
modification; and (v) include a waiver of all rights of subrogation against
Wards and its Affiliates. Supplier shall cause its insurers to issue to Wards on
or before the Effective Date and each policy renewal date certificates of
insurance evidencing that the coverages and policy endorsements required by this
Article are in effect.
SECTION 12.3 RISK OF LOSS
As of the Effective Date, each Party shall be responsible for risk of
loss of, and damage to, any Equipment, Software or other materials in its
possession or under its control.
ARTICLE 13
CHARGES
SECTION 13.1 CHARGES
Subject to the other provisions of this Master Agreement, Wards shall
pay to Supplier the amounts set forth in each Service Agreement as payment in
full for the Services under such Service Agreement performed by Supplier during
the Term (the "Charges"). Except as otherwise expressly set forth in this Master
Agreement, Wards shall not be obligated to pay any amounts to Supplier for its
performance of the Services and its other obligations under this Master
Agreement other than the amounts set forth in the Service Agreements. Without
limiting the foregoing, Wards shall not be required to reimburse Supplier for
any expenses Supplier incurs in performing the Services and such obligations,
including, without limitation, travel and lodging, document reproduction and
shipping. If a Service Agreement Term is renewed pursuant to the applicable
terms of such Service Agreement, the Charges set forth in such Service Agreement
for the last applicable Contract Year shall continue to apply during the renewal
period(s).
Wards may from time to time advise Supplier that Wards desires to
acquire equipment or software related to Services and Supplier shall acquire
such equipment or software on
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Wards' behalf. In such event the monthly processing charges provided for in the
applicable Service Agreement shall be increased by the net present value of the
total cost of such equipment or software, including taxes, installation,
certification and shipping, amortized at 8% interest per annum over the
remaining term of the applicable Service Agreement (or such shorter period as
the parties may agree). Upon any Termination For Convenience by Wards pursuant
to Section 18.2 of this Master Agreement or Termination for Cause by Supplier
pursuant to Section 18.1(e) of this Master Agreement, Wards' shall pay Supplier
the remaining unamortized amount related to such purchase reduced by the
remaining lease or license obligations for the equipment or software assumed by
Wards and title to the subject equipment or the license to the software shall be
transferred to Wards. This provision does not relieve Supplier of its
obligations to acquire, at Supplier's expense, equipment or software necessary
to provide the Services contemplated by a Service Agreement.
SECTION 13.2 PASS-THROUGH EXPENSES
(a) Any categories of Pass-Through Expenses shall be described in the
applicable Service Agreement. Supplier shall review for accuracy each third
party invoice for any Pass-Through Expenses and shall pay when due to such third
party all valid amounts set forth on such invoice. Supplier shall include the
amount of such payment on its next invoice to Wards and shall include with such
invoice a copy of the third party invoice. Supplier shall not charge Wards any
mark-up or administrative fee with respect to such Pass-Through Expenses unless
expressly agreed to in a Service Agreement. Pass-Through Expenses must be
approved in advance by Wards' Project Executive.
(b) Supplier shall use all Commercially Reasonable Efforts to minimize
the amount of Pass-Through Expenses. With respect to materials or services paid
for on a Pass-Through Expenses basis, Wards shall have the right to: (i) obtain
such materials or services directly from a third party; (ii) designate the third
party source for such materials or services; (iii) designate the particular
materials or services Supplier shall obtain; (iv) require Supplier to identify
and consider multiple sources for such materials or services; (v) review and
approve the Pass-Through Expense for such materials or services before Supplier
enters into a subcontract for such materials or services; and (vi) if mutually
agreed by the Parties with respect to any commitments made after a Service
Agreement Effective Date for Pass-Through Expenses reject or require
discontinuance of any third party providing pass-through materials or services
pertaining to the Services.
SECTION 13.3 TAXES
(a) Each Party shall pay any real property taxes or personal property
taxes on property it either owns or leases from a third party or any other
taxes, fees or costs related to equipment or the lease of equipment, including
any property taxes attributable to Wards Facilities used by Supplier to provide
the Services, which shall be paid by Wards. Taxes payable on any Transferred
Equipment shall be prorated as of the Service Agreement Effective Date of the
applicable Service Agreement based on the number of days in the applicable tax
period, with Wards paying the taxes allocable to the period before the Service
Agreement Effective Date and Supplier paying the taxes allocable to the period
on and after the Service
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Agreement Effective Date. If Supplier owes money to Wards pursuant to such
proration, Supplier shall pay such amount to Wards by corporate check on the
Service Agreement Effective Date. If Wards owes money to Supplier pursuant to
such proration, Wards shall pay such amount to Supplier by corporate check on or
before the date Supplier must pay the next installment of the applicable tax. If
Wards purchases any Equipment from Supplier on the expiration or earlier
termination of a Service Agreement pursuant to Section 18.8 (Purchase of
Equipment), personal property taxes on such Equipment shall be prorated and paid
in a similar manner, with Supplier paying the taxes allocable to the period
before the date Wards purchases the Equipment and Wards paying the taxes
allocable to the period on and after such date.
A Service Agreement may provide, with respect to certain equipment
leases, that applicable taxes will be paid on a regularly scheduled basis.
(b) Supplier shall pay any sales, use, excise, value-added, services,
consumption, and other taxes and duties imposed on any goods and services
acquired, used or consumed by Supplier in connection with the Services
(including any taxes applicable to the acquisition of the Transferred Equipment,
but excluding any taxes applicable to Pass-Through Expenses). Wards shall pay
any sales, use, excise, value-added, services, consumption and other taxes and
duties imposed on its acquisition of Equipment from Supplier on the expiration
or earlier termination of a Service Agreement pursuant to Section 18.8 (Purchase
of Equipment).
(c) Wards shall pay when due any sales, use, excise, value-added,
services, consumption, or other tax imposed by any taxing jurisdiction as of the
Service Agreement Effective Date on the provision of the Services or any
component thereof, as the rate of such tax may change from time to time during
the applicable Service Agreement Term. At Wards' option, unless not legally
permissible, Wards shall either pay such taxes directly to the appropriate
taxing authority or Wards shall pay such taxes to Supplier as invoiced and
Supplier shall remit such payments to the appropriate taxing authority. Supplier
shall be responsible for properly calculating and invoicing applicable taxes on
the Services (other than City of Chicago taxes, if applicable, for which Wards
shall be responsible for calculating).
If any taxing jurisdiction imposes after the Service Agreement
Effective Date a new sales, use, excise, value-added, services, consumption, or
other tax on the provision of the Services or any component thereof, the Parties
shall cooperate in attempting to reduce the amount of such tax to the maximum
extent feasible. Wards shall be liable for any such new tax which is imposed on
the Charges for the provision of the Services, or any component thereof, as well
as such new tax on Pass-Through Expenses. Supplier shall be liable for any such
new tax which is imposed on any Charges (other than Pass-Through Expenses)
incurred in order to provide the Services. If any taxes applicable to the
Services are imposed on Wards during a Service Agreement Term as a result of
Supplier's migration of Services to a location other than the initial location
of Supplier's Facility under the applicable Service Agreement, Supplier shall
have full responsibility for payment of all such taxes to the extent the net
taxes owed increases over the amount of taxes then being paid by Wards.
(d) The Parties shall cooperate with each other to enable the Parties
to determine accurately their respective tax liabilities and to reduce such
liabilities to the extent permitted by
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law. Supplier invoices to Wards shall separately state the amount of any taxes
Supplier is collecting from Wards. Each Party shall provide to the other any
resale certificates, exemption certificates, information regarding out-of-state
or out-of-country sales or use of Equipment and services, and such other similar
information as the other Party may reasonably request.
SECTION 13.4 CHARGES PURSUANT TO CHANGE CONTROL PROCEDURES
(a) If either Wards or Supplier proposes a change in or addition to the
Services pursuant to the Change Control Procedures, the charge for such change
or addition shall be determined in the manner set forth in this Section.
(b) To the extent the proposed change or addition can be accommodated
within the existing level of resources then being used by Supplier to provide
the Services and without degradation to existing Service Levels (unless
otherwise agreed by Wards in writing), the Charges payable by Wards under the
applicable Service Agreement shall not be increased. To the extent the proposed
change or addition will lower Supplier's cost to provide the Services
thereafter, the applicable charges payable by Wards shall be equitably adjusted
to reflect such projected cost savings.
(c) To the extent the proposed change or addition will require the
addition or subtraction of resources for which a pricing metric exists under
this Master Agreement, the resulting change to the Charges payable by Wards
hereunder shall be calculated in accordance with that pricing metric.
SECTION 13.5 RECORDKEEPING
Supplier shall maintain complete and accurate records of, and
supporting documentation for, the amounts billed to and payments made by Wards
under this Master Agreement and all Service Agreements, as specified in the
monthly invoice, of such amounts and payments. Such records shall include data
and documentation of third party charges invoiced to and paid by Supplier.
Supplier shall retain such records throughout the Term (including any records
received by Supplier maintained by Wards or Wards' previous Supplier prior to
the applicable Service Agreement Effective Date). Supplier shall provide Wards,
at Wards' request, with paper and electronic copies of documents and information
reasonably necessary to verify Supplier's compliance with this Master Agreement.
Wards and its authorized agents and representatives shall have access to such
records for audit purposes during normal business hours during the Term and
thereafter for the period during which Supplier is required to maintain such
records. Upon termination or expiration of this Master Agreement, Wards and
Supplier shall mutually agree as to any records or documentation of which
Supplier may retain one archived copy.
SECTION 13.6 MOST FAVORED CUSTOMER
Charges payable from time to time by Wards under each Service Agreement
shall not exceed those then paid by other Supplier customers under contracts
signed before or after the
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Effective Date of the applicable Service Agreement to whom Supplier provides
services similar in type and scope to the Services described in such Service
Agreement. The comparison of charges payable by Wards and such other Supplier
customers shall take into account non-standard costs such as purchases of assets
by Supplier at above fair market value, the term of such other customer
agreements, and the extent of any customer guarantees of revenues to Supplier
under such agreements. If the prices charged to another Supplier customer are,
considering the foregoing, lower than the charges to Wards under any Service
Agreement, then the charges to Wards shall be equitably adjusted to provide
Wards the benefit of such lower charges for such Service Agreement, retroactive
to the first date on which such lower charges to the other Supplier customer
first became effective. Within thirty (30) days after the beginning of each
Contract Year, a Supplier officer with executive responsibility for systems
outsourcing and operations services shall certify in writing to Wards that
Supplier's charges to Wards comply with this Section, and shall provide to
Wards' auditors the information reasonably necessary for Wards to verify such
compliance. The auditors shall inform Wards and Supplier whether Supplier's
charges comply with this Section, but shall keep in strict confidence all
information necessary to provide such verification.
ARTICLE 14
INVOICING AND PAYMENT
SECTION 14.1 INVOICES
Supplier shall issue to Wards, on a monthly basis in arrears, one (1)
consolidated invoice for all amounts due under each Service Agreement with
respect to Services rendered in the previous month. Each invoice shall
separately state Charges for each category of Service, Pass-Through Expenses and
taxes payable, and shall otherwise be in such detail as Wards may require for
its internal accounting needs (including, without limitation, any chargeback
requirements), as specified by Wards from time to time. Each Service Agreement
invoice shall include any calculations used to establish the Charges. Invoices
shall be in the form and provide such detail as specified in the sample invoice
form as required by the applicable Service Agreement. Supplier shall deliver
each invoice (one paper copy and one electronic version) to the appropriate
Wards Project Executive. If out-of-scope Services are provided under a Service
Agreement, Supplier will invoice the applicable charges in a separate invoice.
If data required for invoicing is for any reason destroyed, corrupted
or otherwise not available, the Charges to be invoiced for that month shall be
calculated by using the lowest actual reported volumes or levels of Services for
the corresponding period during such month. For example, if such data is not
available for a period of hours on a Thursday, then the volumes during the same
period on each other Thursday during the month shall be compared and the actual
volumes for the lowest volume period shall be used for the unavailable data.
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SECTION 14.2 PAYMENT
(a) Subject to Section 14.5 (Setoff and Withholding), each invoice
delivered pursuant to Section 14.1 shall be due and payable within forty-five
(45) days after the date such invoice is received by the applicable Wards
Project Executive. Any amount due under or any Service Agreement for which a
payment date is not otherwise specified shall be due and payable within
forty-five (45) days after receipt of the invoice for such amount.
(b) To the extent Wards is entitled to a credit pursuant to this Master
Agreement or any Service Agreement, Supplier shall provide Wards with such
credit on the first invoice delivered after such credit is earned. If the amount
of any credit on an invoice exceeds the amount owing to Supplier reflected on
such invoice, Supplier shall pay the balance of the credit to Wards within
forty-five (45) days after the invoice date. If no further amounts are payable
to Supplier under this Master Agreement, Supplier shall pay the amount of the
credit to Wards within forty-five (45) days after the credit is earned.
SECTION 14.3 PRORATION
All periodic charges under this Master Agreement (excluding charges
based upon actual usage or consumption of Services) shall be computed on a
calendar month basis and shall be prorated for any partial month.
SECTION 14.4 REFUNDS
If either Party should receive a refund, credit or other rebate for
goods or services paid for by the other Party, the recipient of such refund,
credit or rebate shall promptly notify the other Party and shall pay such
amount, with interest at the prime rate of Citibank of New York, to the other
Party (or, if applicable, provide a credit on the next delivered invoice) within
thirty (30) days after receipt thereof. Interest shall be calculated from the
date thirty (30) days after such refund, credit or rebate was received.
SECTION 14.5 SETOFF AND WITHHOLDING
(a) Notwithstanding any other provision of this Master Agreement, a
Party who is owed any amount by the other Party may, at its option, set off that
amount as a credit against any amounts it otherwise owes to the other Party.
(b) If Wards disputes in good faith any portion of an invoice, Wards
shall pay the undisputed dollar amount of such invoice when due and may, at its
option, withhold the disputed portion pending resolution of the dispute by
mutual agreement or pursuant to Article 19 (Dispute Resolution). If Wards
withholds any payment pursuant to this Section 14.5(b), Wards shall notify
Supplier of the basis for such withholding in accordance with Section 20.9
(Notices). Upon resolution of the dispute, Wards shall pay to Supplier such
portion, if any, of the disputed amount determined to be owing to Supplier.
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ARTICLE 15
CERTAIN REPRESENTATIONS AND WARRANTIES
SECTION 15.1 MUTUAL REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants that, as of the Effective Date and
each Service Agreement Effective Date:
(a) It is a corporation duly incorporated, validly existing and is in
good standing under the laws of the state in which it is incorporated, and is
good standing in each other jurisdiction where the failure to be in good
standing would have a material adverse effect on its business or its ability to
perform its obligations under this Master Agreement or any Service Agreement.
(b) It has all necessary corporate power and authority to own, lease
and operate its assets and to carry on its business as presently conducted and
as it will be conducted pursuant to this Master Agreement and any Service
Agreement.
(c) It has all necessary corporate power and authority to enter into
this Master Agreement and each Service Agreement and to perform its obligations
thereunder, and the execution and delivery of this Master Agreement and each
Service Agreement and the consummation of this transactions contemplated thereby
have been duly authorized by all necessary corporate actions on its part.
(d) This Master Agreement and each Service Agreement constitutes a
legal, valid and binding obligation of such Party, enforceable against it in
connection with its terms.
SECTION 15.2 SUPPLIER REPRESENTATIONS AND WARRANTIES
As of the Effective Date and continuing throughout the Term and each
Service Agreement Term, Supplier represents and warrants to Wards that:
(a) It has not violated and it will not violate any applicable laws or
regulation or any Wards policies regarding the offering of unlawful inducement
in connection with this Master Agreement or any Service Agreement.
(b) Except as previously disclosed to Wards and Wards' outside legal
counsel, it has and shall have the right and authority to use the Supplier
Software and Third Party Software to provide Services during each Service
Agreement Term and to grant to Wards the licenses to the Supplier Software
described in each Service Agreement.
(c) It is not a party to, and is not bound or affected by or subject
to, any instrument, agreement, charter or by-law provision, law, rule,
regulation, judgment or order which would be contravened or breached as a result
of the execution of this Master Agreement, consummation of the transactions
contemplated by this Master Agreement, or execution of any Service Agreement.
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(d) Except as previously disclosed to Wards and Wards' outside legal
counsel, it is not the subject of any pending or threatened litigation
(including claims subject to arbitration) with any vendor of software, equipment
or other resources or arising from an outsourcing relationship similar to the
relationship contemplated by this Master Agreement or any Service Agreement and
will notify Wards immediately in the event Supplier becomes the subject of any
such litigation.
(e) Supplier shall perform the Services in a professional and
workmanlike manner.
(f) All Supplier Software is and shall remain Year 2000 Compliant and,
no later than June 30, 1999, the computing environment provided or serviced by
Supplier (including all hardware, peripherals, Supplier Software and Third Party
Software but not including any Wards' Software) (the "Supplier Environment")
shall be and shall remain throughout the Term Year 2000 Compliant. Upon Wards'
request prior to June 30, 1999 Supplier shall provide to Wards such internal and
external information and analyses as are available to fully advise Wards of the
status and compliance efforts of Supplier with respect to Supplier's Year 2000
compliance program. Beginning July 1, 1999 and, as requested by Wards, an
executive officer of Supplier shall certify that the foregoing warranty
continues to be true and correct. In no event shall Wards incur additional costs
or increased Charges as a result of Supplier's Year 2000 Compliance efforts with
respect to the Supplier Environment. For example, provided that Wards has
satisfactorily performed Year 2000 testing of its application software prior to
the Migration Completion Date under Service Agreement No. 1, if Supplier
upgrades operating system software and as a result of such upgrade any Wards' or
Third Party application software requires modification, Supplier shall be
responsible for the cost of such modification.
SECTION 15.3 RFP AND DUE DILIGENCE ASSISTANCE
If at any time during the Term Wards elects to issue a request for
proposals to one or more services providers for the provision of all or any part
of the Services, Supplier shall cooperate with Wards by (i) providing to Wards
and such third party providers reasonable access to personnel and information
relevant to such request for proposals, and (ii) participating in a reasonable
due diligence process for the benefit of Wards and such third party providers in
connection with the request for proposals. Supplier's obligations pursuant to
this Section 15.3 are subject to (i) the agreement of Wards and such third party
providers to reasonable security and confidentiality restrictions, generally in
accordance with Article 9 (Confidentiality) of this Master Agreement, and (ii)
the condition that such activities shall not disrupt or adversely affect
Supplier's normal business.
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ARTICLE 16
INDEMNIFICATION
SECTION 16.1 INDEMNIFICATION BY SUPPLIER
Supplier shall indemnify, defend and hold harmless Wards, its
Affiliates, and Wards' private label credit card provider, if any, and their
respective officers, directors, employees, agents, successors and assigns, from
and against all Losses arising from, in connection with or relating to, third
party allegations of any of the following:
(a) Supplier's failure to perform any obligations required to be
performed by it under any of the Third Party Contracts or Transferred Equipment
leases on or after the applicable Service Agreement Commencement Date;
(b) acts or omissions of Supplier Personnel located in any Wards
Facility;
(c) any claims arising out of or related to occurrences Supplier is
required to insure against pursuant to Article 12 (Insurance; Risk of Loss);
(d) Supplier's breach of its obligations with respect to Wards'
Confidential Information;
(e) any claims relating in any way to selection of the Transferred
Employees or Supplier's offers of employment, and any claims by or on behalf of
Transferred Employees that arise from or relate in any way to their employment
with Supplier or to the termination of their employment with Supplier, including
any claims by Transferred Employees against Wards based on a theory of joint
employer liability or similar theory;
(f) any claims of Supplier's subcontractors; and
(g) any theft or other misappropriation of Wards' property or funds by
Supplier or any of Supplier's employees.
SECTION 16.2 INDEMNIFICATION BY WARDS
Wards shall indemnify, defend and hold harmless Supplier, its
Affiliates and their respective officers, directors, employees, agents,
successors and assigns, from and against all Losses arising from, in connection
with or relating to, third party allegations of any of the following:
(a) Wards' failure to perform any obligations required to be performed
by it under any of the Third Party Contracts or Transferred Equipment leases
before the Service Agreement Commencement Date;
(b) Wards' breach of its obligations with respect to Supplier's
Confidential Information; and
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(c) any claims by or on behalf of Transferred Employees that arise from
or relate in any way to their employment with Wards prior to the date such
Transferred Employees are hired by Supplier, including any termination of such
employment by Wards; provided, however, that during any period in which Supplier
is managing Wards' employees pursuant to a Service Agreement, the foregoing
indemnification is contingent on Supplier having given Wards prompt notice at
the time Supplier knew or reasonably should have known of any acts or omissions
of Wards' employees that could be the basis for any claim against Wards or
Supplier.
SECTION 16.3 MUTUAL INDEMNIFICATION
Each Party shall indemnify, defend and hold harmless the other Party,
the other Party's Affiliates, and Wards' private label credit card provider, if
any, and their respective officers, directors, employees, agents, successors and
assigns, from and against all Losses arising from: (i) death of or injury to any
agent, employee, invitee, visitor or other person to the extent caused by the
conduct of the indemnitor, its Affiliates, or their respective agents, employees
or contractors; (ii) damage to, or loss or destruction or, any real or tangible
personal property to the extent caused by conduct of the indemnitor, its
Affiliates, or their respective agents, employees or contractors; (iii) any
violation of law by the indemnitor, whether before, on or after the Effective
Date; or (iv) any breach of a Party's representations and warranties pursuant to
this Master Agreement.
SECTION 16.4 INTELLECTUAL PROPERTY INDEMNIFICATION
Wards and Supplier each agree to defend the other against any action to
the extent that such action is based on a claim that the Wards Software, in the
case of Wards, and the Supplier Software or the Services in the case of
Supplier, or the Confidential Information provided by the indemnitor, or any
party thereof, (a) infringes a copyright perfected under applicable law, (b)
infringes a patent granted under applicable law or (c) constitutes an unlawful
disclosure, use or misappropriation of another party's trade secret. The
indemnitor will bear the expense of such defense and pay any damages and
attorneys' fees that are attributable to such claim finally awarded by a court
of competent jurisdiction. If any Software or Confidential Information becomes
the subject of a claim under this Section, or in the indemnitor's opinion is
likely to become the subject of such a claim, then the indemnitor may, at its
option, (a) modify the Software or Confidential Information to make it
noninfringing or cure any claimed misuse of another's trade secret, provided
such modification does not adversely affect the functionality of the Software,
or (b) procure for the indemnitee the right to continue using the Software or
Confidential Information pursuant to the applicable Service Agreement, or (c)
replace the Software with substantially equivalent Software that is
noninfringing or that is free of claimed misuse of another's trade secret. Any
costs associated with implementing any of the above alternatives shall be borne
by the indemnitor.
With respect to any Software provided or developed by a Party pursuant
to a Service Agreement, such Party shall have no liability to the other Party
under such Service Agreement (a) to the extent that any claim of infringement is
based upon the use of the Software in
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connection or in combination with equipment, devices or Software not supplied by
that Party or used in a manner for which the Software was not designed, (b) for
infringements that arise solely as a result of the implementation by that Party
of functionality requirements presented by the other Party where there is no
non-infringing alternative to such implementation, and the other Party has been
so advised by that Party prior to implementation, and (c) for maintenance,
modifications, updates, enhancements and improvements to the Software made by
any party other than that Party.
SECTION 16.5 INDEMNIFICATION PROCEDURES
(a) Promptly after receipt by an indemnitee of any written claim or
notice of any action giving rise to a claim for indemnification by the
indemnitee, the indemnitee shall so notify the indemnitor and shall provide
copies of such claim or any documents relating to the action. No failure to so
notify an indemnitor shall relieve the indemnitor of its obligations under this
Master Agreement except to the extent that the failure or delay is prejudicial.
Within thirty (30) days following receipt of such written notice, but in any
event no later than ten (10) days before the deadline for any responsive
pleading, the indemnitor shall notify the indemnitee in writing (a "Notice of
Assumption of Defense") if the indemnitor elects to assume control of the
defense and settlement of such claim or action.
(b) If the indemnitor delivers a Notice of Assumption of Defense with
respect to a claim within the required period, the indemnitor shall have sole
control over the defense and settlement of such claim; provided, however, that
(i) the indemnitee shall be entitled to participate in the defense of such claim
and to employ counsel at its own expense to assist in the handling of such claim
and (ii) the indemnitor shall obtain the prior written approval of the
indemnitee before entering into any settlement of such claim or ceasing to
defend against such claim. After the indemnitor has delivered a timely Notice of
Assumption of Defense relating to any claim, the indemnitor shall not be liable
to the indemnitee for any legal expenses incurred by such indemnitee in
connection with the defense of such claim; provided, that the indemnitor shall
pay for separate counsel for the indemnitee to the extent that conflicts or
potential conflicts of interest between the Parties so require. In addition, the
indemnitor shall not be required to indemnify the indemnitee for any amount paid
by such indemnitee in the settlement of any claim for which the indemnitor has
delivered a timely Notice of Assumption of Defense if such amount was agreed to
without prior written consent of the indemnitor, which shall not be unreasonably
withheld or delayed in the case of monetary claims. An indemnitor may withhold
consent to settlement of claims of infringement affecting its proprietary rights
in its sole discretion.
(c) If the indemnitor does not deliver a Notice of Assumption of
Defense relating to a claim within the required notice period, the indemnitee
shall have the right to defend the claim in such a manner as it may deem
appropriate, at the cost and expense of the indemnitor. The indemnitor shall
promptly reimburse the indemnitee for all such costs and expenses upon written
request therefor.
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SECTION 16.6 SUBROGATION
In the event an indemnitor indemnifies an indemnitee pursuant to this
Article, the indemnitor shall, upon payment in full of such indemnity, be
subrogated to all of the rights of the indemnitee with respect to the claim to
which such indemnity relates.
ARTICLE 17
LIMITATIONS ON LIABILITY
SECTION 17.1 GENERAL INTENT
Subject only to the limitations set forth in this Article, a Party who
breaches any of its obligations under this Master Agreement or any Service
Agreement shall be liable to the other for any damages actually incurred by the
other as a result of such breach.
SECTION 17.2 LIMIT ON TYPES OF DAMAGES RECOVERABLE
(a) EXCEPT AS SET FORTH IN CLAUSE (B) BELOW, NEITHER PARTY SHALL BE
LIABLE FOR INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES, REGARDLESS OF
THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR OTHERWISE, AND EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(b) The exclusion set forth in clause (a) shall not apply to (i) Losses
otherwise recoverable by an indemnitee pursuant to Article 16 (Indemnification)
(except that such exclusion shall apply to Losses recoverable pursuant to
Section 16.3(iv)), (ii) breach by a Party of its obligations for intentional
acts with respect to Confidential Information, (iii) damages caused by a Party's
intentional or willful acts or willful misconduct, or (iv) any intentional
breach of this Master Agreement or any Service Agreement.
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SECTION 17.3 LIMIT ON AMOUNT OF DIRECT DAMAGES RECOVERABLE
(a) Supplier's aggregate liability for any breach or series of related
breaches of this Master Agreement or any Service Agreement shall not exceed an
amount equal to the total Charges payable to Supplier under all Service
Agreements (excluding any Pass-Through Expenses and Special Charges) for the
twelve (12) complete calendar months immediately preceding the month in which
the event giving rise to the liability occurred (or, if the event giving rise to
the liability occurs during the first twelve (12) months after the Effective
Date, the total Charges (excluding any Pass-Through Expenses and Special
Charges) estimated to be payable to Supplier pursuant to all Service Agreements
for such first twelve (12) months). This limitation shall not apply to losses or
damages attributable to (i) claims by an indemnitee pursuant to Article 16
(Indemnification) (except that such limitation shall apply to Losses recoverable
pursuant to Section 16.3(iv)), (ii) breach by Supplier of its obligations for
intentional acts with respect to Confidential Information, (iii) claims arising
out of Supplier's intentional or willful acts or willful misconduct, or (iv) any
intentional breach of this Master Agreement or any Service Agreement.
Notwithstanding the foregoing, if any claim against Supplier for breach of this
Master Agreement or any Service Agreement is a claim covered by any insurance
policy maintained by Supplier in accordance with Article 12, any recovery of
proceeds under such policy shall be paid to Wards to the extent Wards' damages
exceed the foregoing limitation of liability. Supplier shall vigorously pursue
any applicable policy claim as requested by Wards.
(b) Wards' liability for any breach of this Master Agreement or any
Service Agreement shall not exceed an amount equal to the total Charges payable
to Supplier under all Service Agreements (excluding any Pass-Through Expenses
and Special Charges) for the twelve (12) complete calendar months immediately
preceding the month in which the event giving rise to the liability occurred
(or, if the event giving rise to the liability occurs during the first twelve
(12) months after the Effective Date, the total Charges (excluding any
Pass-Through Expenses and Special Charges) estimated to be payable to Supplier
pursuant to all Service Agreements for such first twelve (12) months). This
limitation shall not apply to losses or damages attributable to (i) claims by an
indemnitee pursuant to Article 16 (Indemnification) (except that such limitation
shall apply to Losses recoverable pursuant to Section 16.3(iv)), (ii) breach by
Wards of its obligations for intentional acts with respect to Confidential
Information, (iii) claims arising out of Wards' intentional or willful acts or
willful misconduct, or (iv) claims for breach of Wards' payment obligations
under any Service Agreement.
(c) The following shall be considered direct damages and neither party
shall assert that they are consequential damages to the extent they result from
a Party's failure to fulfill its obligations in accordance with any Service
Agreement:
(i) costs of recreating or reloading any of Wards' lost or
damaged information;
(ii) costs of implementing a workaround in respect of a failure to
provide the Services;
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(iii) costs of replacing lost or damaged Equipment and Software
or other materials;
(iv) costs and expenses incurred to correct errors in software
maintenance and enhancements provided as part of the Services;
(v) costs and expenses incurred to procure the Services from an
alternate source; and
(vi) straight time, overtime, or related expenses incurred by
Wards, including overhead allocations of Wards for Wards' employees, wages and
salaries of additional employees, travel expenses, overtime expenses,
telecommunication charges, and similar charges, due to the failure of Supplier
to provide the Services or incurred in connection with (i) through (v) above.
(d) Each Party shall have a duty to mitigate damages for which the
other Party is liable.
SECTION 17.4 FORCE MAJEURE
(a) Subject to clause (d) below, neither Party shall be liable for
any failure or delay in the performance of its obligations under this Master
Agreement or any Service Agreement, if any, to the extent such failure or delay
both:
(i) is caused, directly or indirectly, without fault by such
Party, by: fire, flood, earthquake, elements of nature or acts of God; labor
disruptions or strikes; acts of war, terrorism, riots, civil disorders,
rebellions or revolutions; quarantines, embargoes and other similar governmental
action; or any other similar cause beyond the reasonable control of such party;
and
(ii) could not have been prevented by reasonable precautions and
cannot reasonably be circumvented by the non-performing Party through the use of
alternate sources, work-around plans or other means (including, in the case of
Supplier, compliance with Supplier's obligations with respect to the provision
of any disaster recovery services as set forth in any Service Agreement).
Events meeting both of the criteria set forth in clauses (i) and (ii) above are
referred to collectively as "Force Majeure Events." The Parties expressly
acknowledge that, except as otherwise expressly provided in a Service Agreement,
Force Majeure Events do not include third party non-performance or the failure
of an individual component or group of components (including but not limited to,
hardware and software) used in delivery of the Services. The Parties further
agree that Force Majeure Events do not include those events, circumstances or
constraints that prevent a contracted product or service from qualifying as Year
2000 Compliant.
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(b) Subject to clause (d) below, upon the occurrence of a Force
Majeure Event, the non-performing Party shall be excused from any further
performance or observance of the affected obligation(s) for as long as such
circumstances prevail and such Party continues to attempt to recommence
performance or observance whenever and to whatever extent possible without
delay. Any Party so delayed in its performance will immediately notify the other
by telephone or by the most timely means otherwise available (to be confirmed in
writing within two (2) Business Days of the inception of such delay) and
describe in reasonable detail the circumstances causing such delay.
(c) If a Force Majeure Event causes a material failure or delay in
the performance of any Services for more than two (2) consecutive days, Wards
may, at its option, and in addition to any rights Wards may have pursuant to
Section 18.4 (Termination Upon Force Majeure Event), procure such Services from
an alternate source until Supplier is again able to provided such Services, and
Supplier shall be liable for all payments made and costs incurred by Wards
required to obtain the Services from such alternate source during such period.
Wards shall continue to pay Supplier the charges established hereunder during
such period, but Supplier shall not be entitled to any additional payments as a
result of the Force Majeure Event.
(d) Notwithstanding any other provision of this Section, a Force
Majeure Event shall not relieve Supplier of its obligation to implement
successfully all of the Services relating to disaster recovery services that are
included in any Service Agreement within the time period described in such
Service Agreement.
SECTION 17.5 ACTIONS OF OTHER PARTY
Neither Party shall be liable for any failure or delay in the
performance of its obligations under this Master Agreement or any Service
Agreement if and to the extent such failure or delay is caused by the actions or
omissions of the other Party or breaches of this Master Agreement or a Service
Agreement by the other Party provided that the Party which is unable to perform
has provided the other Party with reasonable notice of such non-performance and
has used Commercially Reasonable Efforts to perform notwithstanding the actions,
omissions or breaches of the other Party.
ARTICLE 18
TERMINATION
SECTION 18.1 TERMINATION FOR CAUSE
(a) Wards shall have the option, but not the obligation, to terminate
any Service Agreement, or one or more categories of Services under a Service
Agreement, for cause:
(i) for a material breach of such Service Agreement by Supplier that
is not cured by Supplier within thirty (30) days of the date on which Wards
provides written notice of such breach, in accordance with Section 20.9;
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(ii) for a material breach of such Service Agreement by Supplier that
is not reasonably subject to cure within thirty (30) days after its occurrence.;
(iii) for any Service Level Termination Event defined in any Service
Level Agreement or any Corporate Service Level Termination Event defined in
Master Schedule C;
(iv) immediately upon failure by Supplier to provide any Services
pertaining to disaster recovery services under any Service Agreement;
(v) upon Supplier's failure to satisfactorily complete a migration
under a Service Agreement by the scheduled Migration Completion Date;
(vi) upon termination of this Master Agreement for any reason; or
(vii) upon any change in control of Supplier or any sale of
substantially all the assets of Supplier.
(b) Wards shall have the option, but not the obligation, to
terminate this Master Agreement for cause:
(i) for a material breach of the terms of this Master Agreement by
Supplier that is not cured by Supplier within thirty (30) days of the date on
which Wards provides written notice of such breach, in accordance with Section
20.9;
(ii) for a material breach of this Master Agreement by Supplier that
is not reasonably subject to cure within thirty (30) days after its occurrence;
(iii) for any Corporate Service Level Termination Event defined in
Master Schedule C;
(iv) at any time if Wards has terminated one or more Service
Agreement for cause; or
(v) upon any change in control of Supplier or any sale of
substantially all the assets of Supplier.
(c) Wards shall have the option, but not the obligation, to
terminate this Master Agreement without cause at any time if no Services are
being provided by Supplier under a Service Agreement.
(d) Wards shall exercise its termination option by delivering to
Supplier written notice of such termination identifying the scope of the
termination and the termination date.
(e) Supplier shall have the option, but not the obligation, to
terminate a Service Agreement only if Wards fails to pay when due undisputed
amounts (including, without limitation, amounts determined pursuant to Article
19 (Dispute Resolution) to be owing to
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Supplier) Wards owes to Supplier under such Service Agreement and Wards fails to
cure such failure within ten (10) days after receipt from Supplier of written
notice specifically stating that Supplier is exercising its rights under this
Section 18.1(d). Supplier hereby waives any rights it may have under this Master
Agreement or any Service Agreement, at law or in equity, to terminate this
Master Agreement or any Service Agreement for any reason other than that set
forth in the immediately preceding sentence. Supplier shall exercise its
termination option by delivering to Wards written notice of such termination
identifying the termination date, which shall be at least thirty (30) days from
the date such termination notice is delivered to Wards.
SECTION 18.2 TERMINATION FOR CONVENIENCE
(a) Wards shall have the option, but not the obligation, to terminate
for convenience this Master Agreement or, from time to time, one or more Service
Agreements or one or more categories of Services under a Service Agreement.
Wards shall exercise its termination option by delivering to Supplier written
notice of such termination identifying the scope of the termination and the
termination date (which shall be at least ninety (90) days after the date of
such notice). In connection with any such termination, (i) Wards shall have no
liability to Supplier for amounts in excess of the normal charges through the
date of termination except for payment of the termination fee, if any, described
in the applicable Service Agreement, and (ii) Supplier shall use Commercially
Reasonable Efforts to reduce any costs associated with any such termination. Any
termination fee included within a Service Agreement shall be equivalent to
agreed unamortized investments made by Supplier in connection with a Service
Agreement and shall not include any reimbursements for lost profits.
(b) If a purported termination for cause by Wards under Section 18.1
(Termination for Cause) is determined pursuant to Article 19 (Dispute
Resolution) not to be a proper termination for cause, such termination shall be
deemed a termination for convenience subject to this Section.
(c) Either Party may terminate this Master Agreement and all Service
Agreements for convenience upon written notice to the other Party upon
occurrence of either (i) Wards' decision not to file a motion for approval of
this Master Agreement and the Service Agreements on or before November 30, 1998,
or (ii) any such motion filed by Wards is not approved by the court in the
Bankruptcy Case on or before December 31, 1998. In the event of any termination
pursuant to this Section 18.2(c) Wards shall not be required to make any
payments to Supplier except as provided in Service Agreement No. 1 and as
provided in that certain letter agreement between the Parties dated October 28,
1998.
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SECTION 18.3 TERMINATION FOR INSOLVENCY
Wards shall have the option, but not the obligation, to terminate this
Master Agreement in its entirety (including all Service Agreements) without
payment of any termination fees if Supplier (i) becomes insolvent or is unable
to meet its debts as they mature, (ii) files a voluntary petition in bankruptcy
or seeks reorganization or to effect a plan or other arrangement with creditors,
(iii) files an answer or other pleading admitting, or fails to deny or contest,
the material allegations of an involuntary petition filed against it pursuant to
any applicable statute relating to bankruptcy, arrangement or reorganization,
(iv) shall be adjudicated a bankrupt or shall make an assignment for the benefit
of its creditors generally, (v) shall apply for, consent to or acquiesce in the
appointment of any receiver or trustee for all or a substantial part of its
property, or (vi) any such receiver or trustee shall be appointed and shall not
be discharged within thirty (30) days after the date of such appointment.
SECTION 18.4 TERMINATION UPON FORCE MAJEURE EVENT
Wards shall have the option, but not the obligation, to terminate this
Master Agreement or, from time to time, one or more affected Service Agreements
or categories of Services, if Supplier fails to perform any Services in any
material respect because of the occurrence of a Force Majeure Event and:
(a) subject to clause (b) below, Supplier does not cure such failure
within five (5) days after the occurrence of the Force Majeure Event; or
(b) such failure is not reasonably subject to cure within five (5)
days after such occurrence.
Wards shall exercise its termination option by delivering to Supplier written
notice of such termination identifying the termination date.
SECTION 18.5 EXTENSION OF EXPIRATION OR TERMINATION EFFECTIVE DATE
Wards may, at its option, upon thirty (30) days advance notice, extend
any expiration date or the termination date it has specified pursuant to this
Article one or more times, provided that the total of all such extensions shall
not exceed one (1) year and each extension shall be for a minimum of ninety (90)
days. In such event, the Services shall be provided pursuant to and on the terms
and conditions set forth in this Master Agreement and each applicable Service
Agreement.
SECTION 18.6 EFFECT OF TERMINATION
Termination of this Master Agreement or any Service Agreement or
categories of Services for any reason under this Article shall not affect (i)
any liabilities or obligations of either Party arising before such termination
or out of the events causing such termination, or (ii) any damages or other
remedies to which a Party may be entitled under this Master
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Agreement or any Service Agreement, at law or in equity, arising from any
breaches of such liabilities or obligations.
SECTION 18.7 TERMINATION/EXPIRATION ASSISTANCE
(a) Upon Wards delivery to Supplier of any written notice of breach
or termination of this Master Agreement or any Service Agreement, Supplier shall
provide to Wards or Wards' designee the assistance reasonably requested by Wards
to enable the Services to continue without interruption and to facilitate the
orderly transfer of the Services to Wards or its designee, including, without
limitation, the assistance described in the applicable Service Agreement(s)
("Termination/Expiration Assistance"). Wards may also request that Supplier
begin providing Termination/Expiration Assistance at any time within the six-
month period prior to expiration of any Service Agreement Term.
(b) At Wards' request, Supplier shall provide Termination/Expiration
Assistance of an incidental nature to Wards for up to eighteen (18) months after
the expiration date of a Service Agreement or, if applicable, the effective date
of termination. The Termination/Expiration Assistance described in each Service
Agreement shall be provided to Wards at no additional cost (except as may set
forth in each Service Agreement) and except for reasonable travel and out-of-
pocket expenses approved by Wards in connection with any expiration or
termination of this Master Agreement or any Service Agreement.
(c) Supplier acknowledges that, if it were to breach, or threaten to
breach, its obligation to provide Wards with Termination/Expiration Assistance,
Wards would be irreparably harmed. In such circumstances, Wards shall be
entitled to proceed directly to a court of competent jurisdiction and obtain
such injunctive, declaratory or other injunctive relief as may be reasonably
necessary to prevent such breach, without the requirement of posting any bond.
SECTION 18.8 PURCHASE OF EQUIPMENT
Upon expiration or termination of any Service Agreement, Wards shall
have the option, but not the obligation, to purchase any Equipment owned by
Supplier and used by Supplier primarily to provide the Services provided under
such Service Agreement. The purchase price for any Equipment purchased by Wards
shall be its net book value. Wards shall pay the purchase price to Supplier
concurrently with Supplier's delivery to Wards of the Equipment and a bill of
sale acceptable to Wards. In addition, Wards shall have the option, but not the
obligation, to assume any lease of Equipment leased by Supplier and used by
Supplier primarily to provide the Services.
SECTION 18.9 SUPPLIER SOFTWARE LICENSE
Upon expiration or earlier termination of any Service Agreement,
Supplier shall grant to Wards a worldwide, royalty-free, nonexclusive license to
Wards or its designee to use, copy, maintain, modify, enhance and create
derivative works of Supplier Software used to provide the applicable Services at
the end of the Services Agreement, and Supplier shall offer
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to maintain such Supplier Software on terms at least as favorable as those
offered to other Supplier customers. The scope of any such license grant will be
for the sole purpose of supporting Wards' technology requirements covered by the
Service Agreement that has been terminated and any such Supplier Software or
derivative works thereof may be used only by Wards or by a third party on Wards'
behalf for such purpose. If for any reason any Supplier Software is not
available to Wards or such designee or cannot be licensed to Wards or such
designee at the expiration or earlier termination of the Term, Supplier shall
procure at its expense a license for substitute Software with substantially
equivalent functionality and shall pay for all reasonable conversion costs. All
references in this section to Wards shall include Wards' designee.
SECTION 18.10 THIRD PARTY CONTRACTS
Upon expiration or earlier termination of any Service Agreement,
Supplier shall, at Wards' request, and to the extent permitted by the applicable
Third Party Contract and any applicable Third Party Consent, assign to Wards or
its designee any Third Party Software Licenses and any Third Party Service
Contracts used to provide Services to Wards on a dedicated basis at the end of
the Term. Concurrently with such assignment, Wards shall deliver to Supplier a
corporate check payable to Supplier equal to the amount, if any, of pre-payments
made by Supplier pursuant to such Third Party Software Licenses and Third Party
Service Contracts attributable to the period after such assignment. All
references in this section to Wards shall include Wards' designee.
SECTION 18.11 OFFERS TO SUPPLIER EMPLOYEES
Beginning upon delivery by Wards to Supplier of a written notice of
breach or termination of this Master Agreement or a Service Agreement, or during
the six-month period prior to expiration of any Service Agreement Term, Wards
shall be entitled to seek to hire any Transferred Employee or any Supplier
Personnel who has spent a majority of his or her working hours in the preceding
twelve (12) months performing Services with respect to the applicable Service
Agreement or any individual who is involved in more than one set of Services but
has significant responsibilities under the applicable Service Agreement.
Supplier shall not interfere with Wards' efforts, shall not enforce any
restrictions imposed on such employees by agreement or policy which would
interfere with Wards' efforts, and shall provide Wards access to such employees
for the purposes of interviews, evaluations and recruitment. Any such employment
by Wards would not be effective until termination or expiration of this Master
Agreement or the applicable Service Agreement Supplier shall give.
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ARTICLE 19
DISPUTE RESOLUTION
SECTION 19.1 GENERAL
Any dispute or controversy between the parties with respect to the
interpretation or application of any provision of this Master Agreement or the
performance by Supplier or Wards of their respective obligations hereunder shall
be resolved as provided in this Article.
SECTION 19.2 INFORMAL DISPUTE RESOLUTION
The Parties may, by mutual agreement, attempt to resolve their dispute
informally in the following manner:
(a) Either Party may submit the dispute to the applicable Operating
Committee, which shall meet as often as the Parties reasonably deem necessary to
gather and analyze any information relevant to the resolution of the dispute.
The applicable Operating Committee shall negotiate in good faith in an effort to
resolve the dispute.
(b) If the applicable Operating Committee determines in good faith
that resolution through continued discussions by such Operating Committee does
not appear likely, the matter shall be referred to the Executive Committee to
negotiate a resolution of the dispute.
(c) During the course of negotiations, all reasonable requests made
by one Party to the other for non-privileged information, reasonably related to
the dispute, shall be honored in order that each of the Parties may be fully
advised of the other's position.
(d) The specific format for the discussions shall be determined at
the discretion of the applicable Operating Committee or the Executive Committee,
but may include the preparation of agreed upon statements of fact or written
statements of position.
(e) Proposals and information exchanged during the informal
proceedings described in this Article between the Parties shall be privileged,
confidential and without prejudice to a Party's legal position in any formal
proceedings. All such proposals and information, as well as any conduct during
such proceedings, shall be considered settlement discussions and proposals, and
shall be inadmissible in any subsequent proceedings.
(f) Notwithstanding this Section, either Party may commence formal
dispute resolution proceedings pursuant to Section 19.3 (Arbitration) without
first observing the procedures set forth in this Section.
SECTION 19.3 ARBITRATION
(a) Except as set forth in clause (b) below, any controversy or claim
arising out of or relating to this Master Agreement or any Service Agreement, or
any alleged breach hereof, including any controversy regarding the arbitrability
of any dispute, shall be settled at the
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request of either Party by binding arbitration in Chicago, Illinois before and
in accordance with the then existing Commercial Arbitration Rules of the
American Arbitration Association (the "Rules"). In any dispute in which the
amount in controversy is less than Two Hundred Fifty Thousand Dollars
($250,000), there shall be one (1) arbitrator agreed to by the Parties or, if
the Parties are unable to agree within thirty (30) days after demand for
arbitration is made, selected in accordance with the Rules. In all other cases
there shall be three (3) arbitrators, one (1) of whom shall be selected by Wards
within thirty (30) days after demand for arbitration is made, one (1) of whom
shall be selected by Supplier within thirty (30) days after demand for
arbitration is made, and one (1) of whom shall be selected by the two Party-
appointed arbitrators within thirty (30) days after their selection. If one or
more arbitrator(s) is not selected within the time period stated in the
preceding sentence, such arbitrator(s) shall be selected pursuant to Rule 13 of
the Rules. Any arbitrator(s) proposed by the American Arbitration Association
shall have at least ten (10) years of experience in complex, commercial
technology engagements in the area that is generally the same as the technology
issue that is the subject of the dispute. Each Party shall pay its own
attorneys' fees and one-half (1/2) of the other arbitration costs, subject to
final apportionment by the arbitrators. The arbitrators shall apply the law set
forth herein to govern this Master Agreement and any Service Agreement and shall
have the power to award any remedy available at law or in equity; provided,
however, that the arbitrators shall have no power to amend this Master Agreement
or any Service Agreement. Any award rendered pursuant to such arbitration shall
be final and binding on the Parties, and judgment on such award may be entered
in any court having jurisdiction thereof. A party may recover its attorneys'
fees incurred in any such enforcement action.
(b) Notwithstanding clause (a) above, either Party may request a
court of competent jurisdiction to grant provisional injunctive relief to such
Party until an arbitrator can render an award on the matter in question and such
award can be confirmed by a court having jurisdiction thereof.
SECTION 19.4 CONTINUED PERFORMANCE
Both parties shall continue performing their respective obligations and
responsibilities under this Master Agreement and any Service Agreement while any
dispute is being resolved in accordance with this Article, unless and until such
obligations are terminated or expire in accordance with the provisions of this
Master Agreement or the applicable Service Agreement.
SECTION 19.5 APPLICABLE LAW
All questions concerning the validity, interpretation and performance
of this Master Agreement and any Service Agreement shall be governed by and
decided in accordance with the laws of the State of Illinois, as such laws are
applied to contracts between Illinois residents that are entered into and
performed entirely with the State of Illinois.
SECTION 19.6 JURISDICTION AND VENUE
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The Parties hereby submit and consent to the exclusive jurisdiction of
any state or federal court located within Cook County of the State of Illinois
and irrevocably agree that all actions or proceedings relating to this Master
Agreement and any Service Agreement, other than any action or proceeding
required by this Article to be submitted to arbitration, shall be litigated in
such courts, and each of the Parties waives any objection which it may have
based on improper venue or forum non conveniens to the conduct of any such
action or proceeding in such court. Nothing in this Section shall affect the
obligation of the Parties with respect to the arbitration of disputes pursuant
to Section 19.3.
SECTION 19.7 EQUITABLE REMEDIES
The Parties agree that in the event of any breach or threatened breach
of any provision of this Master Agreement or any Service Agreement concerning
(i) Confidential Information, (ii) intellectual property rights or (iii) other
matters for which equitable rights may be granted, money damages would be an
inadequate remedy. Accordingly, such provisions may be enforced by the
preliminary or permanent, mandatory or prohibitory injunction or other order of
a court of competent jurisdiction.
ARTICLE 20
MISCELLANEOUS
SECTION 20.1 INTERPRETATION
(a) In this Master Agreement and in any Service Agreement, words
importing the singular number include the plural and vice versa and words
importing gender include all genders. The word "person" includes, subject to the
context in which it appears, an individual, partnership, association,
corporation, trustee, executor, administrator or legal representative.
(b) The division of this Master Agreement, any Master Schedules and
any Service Agreement into Articles, Sections, subsections and Schedules and the
insertion of any captions or headings are for convenience of reference only and
shall not affect its construction or interpretation.
(c) In this Master Agreement and in any Service Agreement, unless
otherwise specifically provided:
(i) In the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" each mean "to but excluding."
(ii) References to a specified Article, Section, subsection,
Schedule or other subdivision shall be construed as references to that specified
Article, Section, subsection, Schedule or other subdivision of this Master
Agreement or the applicable Service Agreement, unless the context otherwise
requires.
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(iii) The word "dollar" and the symbol "$" refer to United States
dollars.
(iv) References to "days" means calendar days unless "business
days" are specified.
(v) The term "including" means "including, without limitation,"
or "including, but not limited to."
(d) The Parties are sophisticated and have been represented by
counsel during the negotiation of this Master Agreement and each Service
Agreement. As a result, the Parties believe the presumption of any laws or rules
relating to the interpretation of contracts against the drafter thereof should
not apply, and hereby waive any such presumption.
SECTION 20.2 BINDING NATURE AND ASSIGNMENT
Neither Party may assign, voluntarily or by operation of law, any of
its rights or obligations under this Master Agreement without the prior written
consent of the other Party; provided, that Wards may assign its rights and
obligations under this Master Agreement or any Service Agreement to an
Affiliate, or to an entity which effects a merger transaction involving Wards or
otherwise acquires all or substantially all of the capital stock or assets of
Wards and any such Affiliate or successor in interest shall assume in writing
all obligations of Wards. Subject to the foregoing, this Master Agreement and
each Service Agreement shall be binding on the Parties and their respective
successors and assigns.
SECTION 20.3 EXPENSES
In this Master Agreement and each Service Agreement, unless otherwise
specifically provided, all costs and expenses (including the fees and
disbursements of legal counsel) incurred in connection with this Master
Agreement or the applicable Service Agreement, and the completion of the
transactions contemplated by this Master Agreement or the applicable Service
Agreement shall be paid by the Party incurring such expenses.
SECTION 20.4 AMENDMENT AND WAIVER
No supplement, modification, amendment or waiver of this Master
Agreement or any Service Agreement shall be binding unless executed in writing
by the Party against whom enforcement of such supplement, modification,
amendment or waiver is sought. No waiver of any of the provisions of this Master
Agreement or any Service Agreement shall constitute a waiver of any other
provision (whether or not similar) nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
SECTION 20.5 FURTHER ASSURANCES; CONSENTS AND APPROVALS
Each party shall provide such further documents or instruments required
by the other Party as may be reasonably necessary or desirable to give effect to
this Agreement and to carry
60
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out its provisions. Whenever this Master Agreement or any Service Agreement
requires or contemplates any action, consent or approval, such Party shall act
reasonably and in good faith and (unless the Agreement expressly allows exercise
of a Party's sole discretion) shall not unreasonably withhold or delay such
action, consent or approval.
SECTION 20.6 PUBLICITY
All media releases, public announcements and other disclosures by
either Party relating to this Master Agreement or any Service Agreement or the
subject matter hereof, including promotional or marketing materials, but
excluding announcements intended solely for internal distribution or to meet
legal or regulatory requirements, shall be coordinated with and approved by the
other Party prior to release. No license or right, either directly or by
implication, is granted to Supplier to use Wards' name or any of Wards' trade
names, trademarks, service marks, slogans, logos or designs for any advertising,
promotional or other purpose which is not material to Supplier's performance
under this Master Agreement without the prior, written permission of Wards.
SECTION 20.7 SEVERABILITY
Any provision in this Master Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 20.8 ENTIRE AGREEMENT
This Master Agreement and each of the Service Agreements thereto,
including the Schedules thereto, constitute the entire agreement between the
Parties pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties pertaining to the subject matter hereof.
SECTION 20.9 NOTICES
Any notice, demand or other communication required or permitted to be
given under this Master Agreement or any Service Agreement shall be in writing
and shall be deemed delivered to a Party (i) when delivered by hand or courier,
(ii) when sent by confirmed facsimile with a copy sent by another means
specified in this Section, or (iii) six (6) days after the date of mailing if
mailed by United States certified mail, return receipt requested, postage
prepaid, in each case to the address of such Party set forth below (or at such
other address as the Party may from time to specify by notice delivered in the
foregoing manner):
If to Supplier, to: Acxiom Corporation
1501 Opus Place
Downers Grove, IL 60515
Attention: Outsourcing Group, Business Leader
61
<PAGE>
With a Copy to: Acxiom Corporation
1501 Opus Place
Downers Grove, IL 60515
Attention: Outsourcing Group, Corporate Counsel
If to Wards, to: Montgomery Ward & Co., Incorporated
535 W. Chicago Avenue
Chicago, Illinois 60671-0042
Attention: Chief Information Officer
With a Copy to: Montgomery Ward & Co., Incorporated
535 W. Chicago Avenue
Chicago, Illinois 60671-0042
Attention: Legal/Secretary
SECTION 20.10 SURVIVAL
Any provision of this Master Agreement or of any Service Agreement
which contemplates performance or observance subsequent to any termination or
expiration of this Master Agreement or of any Service Agreement, including,
without limitation, Section 7.5 (Employment Offers), Section 8.4 (Work Product),
Section 8.5 (Use of Concepts, Know-how and Methods), Article 9
(Confidentiality), Article 11 (Audits), Section 13.3 (Taxes), Section 13.6
(Recordkeeping), Article 16 (Indemnification), Article 17 (Limitations on
Liability), Sections 18.7 through 18.11, inclusive (Termination) and Article 19
(Dispute Resolution) shall survive expiration or termination of this Master
Agreement or any Service Agreement.
SECTION 20.11 INDEPENDENT CONTRACTORS
Supplier shall perform its obligations under this Master Agreement and
all Service Agreements as an independent contractor of Wards. Nothing herein
shall be deemed to constitute Supplier and Wards as partners, joint venturers,
or principal and agent. Supplier has no authority to represent Wards as to any
matters, except as expressly authorized in this Master Agreement or in a Service
Agreement.
SECTION 20.12 THIRD PARTY BENEFICIARIES
Except as set forth in Article 16 (Indemnification) of this Master
Agreement, nothing in this Master Agreement or in any Service Agreement, express
or implied, is intended to confer on rights, benefits, remedies, obligations or
liabilities on any person (including, without limitation, any employees of the
Parties) other than the Parties or their respective successors or permitted
assigns.
SECTION 20.13 COUNTERPARTS
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This Master Agreement and each Service Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
taken together shall constitute one and the same instrument.
SECTION 20.14 BANKRUPTCY COURT APPROVAL
Wards is a debtor in a case pending before the United States Bankruptcy
Court for the District of Delaware, Case No. 97-1409 (PJW) (Jointly
Administered) (the "Bankruptcy Case"). Wards will undertake reasonable efforts
to have this Master Agreement and the applicable Service Agreements approved by
a final order entered in the Bankruptcy Case.
IN WITNESS WHEREOF the Parties have executed this Master Agreement as
of the day and year first above written.
MONTGOMERY WARD & CO., ACXIOM CORPORATION
INCORPORATED
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
---------------------------- -------------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
-------------------------- -----------------------------
Its: SVP, CIO Its: SVP-Outsourcing Services
--------------------------- ------------------------------
63
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10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 1: TRANSITION MANAGEMENT AND
---------------------------------------------------
MIGRATION SERVICES
------------------
THIS SERVICE AGREEMENT NO. 1: TRANSITION MANAGEMENT AND MIGRATION SERVICES
(the "Service Agreement") is made and entered into this 6th day of November,
1998, between Montgomery Ward & Co., Incorporated a Delaware corporation
("Wards"), andAcxiom Corporation, a Delaware corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in this Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into this Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITIONS
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
"ASSOCIATE HIRE DATE" has the meaning given in Section 5.2.
"ASSOCIATE TRANSITION PERIOD" has the meaning given in Section 5.1.
"SERVICE AGREEMENT COMMENCEMENT DATE" means the date immediately following
the date of Bankruptcy Court approval of the Master Agreement and all Service
Agreements..
"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"TRANSITION MANAGEMENT SERVICES" has the meaning given in Section 4.1.
<PAGE>
ARTICLE 2. TERM
2.1 TERM. The Service Agreement Term shall begin as of the Service
Agreement Commencement Date and shall continue until the Migration Services and
the Transition Management Services have been completed, unless further extended
or earlier terminated or renewed in accordance with the provisions of this
Service Agreement or the Master Agreement.
ARTICLE 3. MIGRATION SERVICES
3.1 MIGRATION SERVICES; PRELIMINARY MIGRATION PLAN. Throughout the
Service Agreement Term, Supplier shall provide Migration Services, in accordance
with Section 4.2 of the Master Agreement, for all of the Services described in
Service Agreements 2, 3, 4, 5, 6 and 7 under the Master Agreement. The
Preliminary Migration Plan is attached to this Service Agreement as Exhibit A,
---------
and a final Migration Plan will be furnished to Wards for approval under Section
4.2(b) of the Master Agreement. The Preliminary Migration Plan specifies the
Migration Milestones and Migration Completion Date required to effectively
migrate all of such Services to Supplier. Except for any specific
responsibilities assigned to Wards in Exhibit C to this Service Agreement, the
---------
Migration Services shall include all functions, responsibilities and tasks not
specifically described in the Preliminary Migration Plan or the Migration Plan
but which are required for the proper migration of the Services described above
and are an inherent part of, or a necessary sub-part included within, the
Migration Services. The Supplier Project Executive identified in Section 4.2 of
this Service Agreement shall act as a single point of contact for all of the
Migration Services performed by Supplier.
3.2 LIQUIDATED DAMAGES. Exhibit B to this Service Agreement sets forth
---------
the Migration Milestones and conditions for payment of liquidated damages in
accordance with Section 4.2(f) of the Master Agreement.
ARTICLE 4. TRANSITION MANAGEMENT
4.1 TRANSITION MANAGEMENT SERVICES. Throughout the Service Agreement
Term, Supplier shall assume operation and control of the Wards computing
environments that are generally described in Service Agreements 2, 3, 4, 5, 6
and 7 under the Master Agreement (the "Transition Management Services").
Transition Management Services includes the supervision and other duties related
to personnel as described in Article 5.
4.2 APPOINTMENT OF PROJECT EXECUTIVES. The Parties appoint the following
individuals as Project Executives under this Service Agreement:
Wards: Irving Hammer
2
<PAGE>
Supplier: Joseph Grossestreuer
4.3 RESPONSIBILITIES OF WARDS. Exhibit C to this Service Agreement
---------
identifies the responsibilities of Wards during the Service Agreement Term, as
such Exhibit may be amended and supplemented from time to time pursuant to the
Master Agreement.
ARTICLE 5. PERSONNEL MATTERS
5.1 PERSONNEL TRANSITION. During the period from the Service Agreement
Commencement Date to no later than February 15, 1999 (the "Associate Transition
Period"), Supplier shall manage the Transferred Associates in performing the
Transition Management Services. During the Associate Transition Period, the
Transferred Associates will continue to be employees of Wards, and will be
managed by Supplier in the same day-to-day responsibilities as they performed
prior to the Service Agreement Effective Date. Wards shall have the right to
make all personnel decisions (including hiring, firing, and discipline) for the
Transferred Associates during the Associate Transition Period. Supplier will
promptly inform Wards of any conduct of a Transferred Associate that it manages
that is relevant to such personnel decisions.
5.2 HIRING OF TRANSFERRED ASSOCIATES. Set forth in Exhibit D to this
---------
Service Agreement is a listing of all Wards associates to which Supplier intends
to offer employment. Offers shall be made by the Supplier no later than [JANUARY
15, 1999] for employment beginning on [FEBRUARY 15, 1999] (the "Associate Hire
Date"), unless otherwise agreed by the Parties. All offers shall be made
consistent with Section 7.1 of the Master Agreement. Beginning on [Februaryl 15,
1999] (or earlier date if agreed by Wards and Supplier for one or more
Transferred Associates), the Transferred Associates shall become employees of
Supplier.
ARTICLE 6. CHARGES
6.1 CHARGES FOR MIGRATION AND TRANSITION MANAGEMENT SERVICES. Exhibit E to
---------
this Service Agreement sets forth Supplier's Charges for the Migration and
Transition Management Services. All Charges and all Pass-Through Expenses are
subject to the provisions of Article 13 of the Master Agreement.
6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Services under
this Agreement, Supplier shall provide Wards with the information described in
Exhibit E in sufficient detail in order to allow Wards to verify invoices.
- - ---------
Invoice submission and payment shall be in accordance with Article 14 of the
Master Agreement.
ARTICLE 7. SERVICE LEVELS FOR TRANSITION MANAGEMENT SERVICES
7.1 SERVICE LEVEL AGREEMENT. Supplier will provide the Transition
Management Services at levels that are not less than the service levels
currently provided
3
<PAGE>
by Wards. In the event that Wards believes the services in any area have
declined below the levels of service that were maintained prior to the Service
Agreement Effective Date, Wards will notify Supplier of the problem and Supplier
will use Commercially Reasonable Efforts to promptly correct the problem
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 USE OF WARDS FACILITIES, SOFTWARE AND EQUIPMENT. During the Service
Agreement Term, Wards will provide Supplier access to the Wards Facilities,
Software and Wards Equipment within the scope of the Transition Management
Services and Supplier shall be responsible for the care, custody and control of
such Wards Facilities, Software and Wards Equipment. Supplier shall comply with
any reasonable physical and data security procedures and other administrative
procedures as directed by Wards. Title to any owned Wards Equipment shall
remain vested in Wards until the end of the Term of this Service Agreement, and
the purchase of any such Wards Equipment by Supplier shall thereafter be
controlled by the terms of the applicable Service Agreement. Supplier shall not
subject the Wards Facilities, Software or Wards Equipment to any lien or other
encumbrance.
8.2 THIRD PARTY CONTRACTS. On the Service Agreement Effective Date, and
subject to Supplier having received any Third Party Consents, Supplier shall
assume from Wards all of the administrative duties, and obtain or provide for
such other rights or consents as are necessary, under the Third Party Contracts
listed in the applicable Exhibits attached to each of the Service Agreements.
The terms of Section 6.3 of the Master Agreement shall apply with respect to the
Third Party Contracts and Third Party Software. This Service Agreement shall not
effect an assignment of any Third Party Contract, and the assignment of Third
Party Contracts shall thereafter be controlled by the terms of the applicable
Service Agreement.
8.3 WARDS SOFTWARE. Supplier is granted a limited, non-exclusive and
royalty-free license to use the Wards Software solely at the Wards Facilities
and solely to provide the Services described in this Service Agreement. The
terms of Section 8.1 of the Master Agreement shall apply with respect to the
Wards Software.
8.4 SUPPLIER SOFTWARE. Supplier shall not introduce any Supplier Software
into any Wards computing environment during the Term of this Service Agreement
without the prior written consent of Wards. In the event Supplier Software is
used, the use of such Supplier Software in providing the Services shall be in
accordance with Section 8.2 of the Master Agreement.
ARTICLE 9. TERMINATION
9.1 TERMINATION BY WARDS. Wards may terminate this Service Agreement:
4
<PAGE>
(a) upon failure of Supplier to cure a default in the Preliminary
Migration Plan or the Migration Plan within the time period set forth
in the Preliminary Migration Plan or the Migration Plan;
(b) if the damages resulting from the failure to meet a Migration
Milestone exceed the amount of liquidated damages specified in Exhibit
-------
C; or
-
(c) as provided in Article 18 of the Master Agreement.
In the event of termination under this Article 9, Wards shall not be
obligated to enter into any other Service Agreement. Wards shall be entitled to
hire any Transferred Associate under Section 18.11 of the Master Agreement.
Termination fees are stated in Exhibit E of this Service Agreement.
IN WITNESS WHEREOF the Parties have executed this Service Agreement as of
the day and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
---------------------- ----------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
-------------------- ---------------------------
Its: SVP, CIO Its: SVP-Outsourcing
--------------------- ---------------------------
5
<PAGE>
EXHIBITS TO MIGRATION/TRANSITION MANAGEMENT SERVICE
----------------------------------------------------
AGREEMENT
---------
EXHIBIT A PRELIMINARY MIGRATION PLAN
EXHIBIT B MIGRATION MILESTONES AND LIQUIDATED DAMAGES
EXHIBIT C WARDS RESPONSIBILITIES
EXHIBIT D TRANSFERRED ASSOCIATES
EXHIBIT E CHARGES
6
<PAGE>
EXHIBIT A
PRELIMINARY MIGRATION PLAN
7
<PAGE>
EXHIBIT B
MIGRATION MILESTONES AND LIQUIDATED DAMAGES
MIGRATION MILESTONES
The following events are Migration Milestones under Section 4.2(f) of the
Master Agreement:
A. Migration Plan and Cutover
Event Date
Final Migration Plan [Thirty days after start of Transition Services]
Network Connectivity Test [April 25, 1999]
Systems Software and Application Test [May 16, 1999]
Final Cutover of all Services [May 30, 1999]
B. Migration Validation
For the two week period following the Final Cutover, Supplier will
provide the Services to Wards to validate the completion of the migration
Services. Migration shall be deemed to be validated during such period
when Supplier achieves four (4) consecutive business days of operations
without the occurrence of a Severity 1 Problem, as defined in Section I.A.
of Master Schedule D.
LIQUIDATED DAMAGES
A. Damages for Failure to Meet Migration Plan and Cutover
The following liquidated damages shall apply for each of the
designated Milestones:
Milestone Liquidated Damages
Final Migration Plan $25,000
Network Connectivity Test $25,000
Systems Software and Application Test $25,000
Final Cutover of all Services $25,000
8
<PAGE>
Liquidated damages accrue upon the failure to meet any of the
Milestones, provided, however, that if the final Milestone is met by
Supplier, all accrued liquidated damages are waived by Wards.
B. Migration Validation Liquidated Damages
The liquidated damages for failure to meet the standard in Section 1.B
above for Migration Validation shall not exceed $100,000. The liquidated
damages shall become due upon the following events and in the amounts
stated:
Failure to achieve migration validation within the two week validation
period; liquidated damages = $100,000.
Occurrence of a Severity 1 Problem that affects external customers of
Wards; liquidated damages = $100,000.
EXCUSED PERFORMANCE
Supplier shall not be liable to pay Wards liquidated damages for any
failure to meet a Migration Milestone to the extent that such a failure is
directly attributable to (i) a Force Majuere Event; or (b) the failure of
Wards to meet a Wards responsibility that is specifically identified in the
Migration Plan, or in Exhibit C to this Service Agreement.
9
<PAGE>
EXHIBIT C
WARDS RESPONSIBILITIES
10
<PAGE>
EXHIBIT D
TRANSFERRED ASSOCIATES
11
<PAGE>
EXHIBIT E
CHARGES
ONE TIME MIGRATION CHARGE: ............................................$140,000
(payable in equal installments over 61 months commencing with the Service
Agreement Commencement Date for Service Agreement No. 2, plus 8% interest)
In addition, Wards shall pay Supplier monthly Special Charges of
$145,985.80 commencing in January 1999 and through the term of Service
Agreement No. 3 Midrange Services.
A. PASS - THROUGH EXPENSES:
- There is a $40,000 allowance for telecommunications charges for
connectivity between Wards' corporate complex, Signature and
Supplier's data center. Telecommunications charges will be
reconciled to actuals at the completion of the migration.
- Out of pocket expenses, including but not limited to travel, as may
be approved in advance by Wards.
- Actual payroll costs, including taxes and benefits, for Transferred
Employees hired by Supplier, to the extent such costs are incurred
prior to the Service Agreement Commencement Dates of Service
Agreements 2 through 7.
B. TERMINATION CHARGES
- In the event of termination for any reason, Wards shall repurchase
all equipment and software described in Wards' letter to Supplier
dated October 28, 1998, at the unamortized principal balance set
forth on the attached schedule.
- In the event of Termination for Convenience or Termination for
Cause by Supplier, Wards shall reimburse Supplier for documented
expenses of Supplier approved in advance by Wards and directly
related to the transfer and migration of Wards' data center and the
provision of services to Wards.
12
<PAGE>
10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 2: DATA CENTER SERVICES
----------------------------------------------
THIS SERVICE AGREEMENT NO. 2: DATA CENTER SERVICES (the "Service
Agreement") is made and entered into this 6th day of November, 1998, between
Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom
Corporation, a Delaware corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in this Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into this Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITIONS
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
"DATA CENTER" means the mainframe data processing center of Wards currently
located at the Wards corporate complex on Larabee Street in Chicago, Illinois.
"DATA CENTER SERVICES" has the meaning given in Section 5.1.
"INITIAL TERM" has the meaning given in Section 2.1.
"MASTER AGREEMENT" means the Master Service Agreement for Information
Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom
Corporation dated November 6, 1998, and all amendments thereto.
"RENEWAL TERM" has the meaning given in Section 2.2.
"SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration
Plan for Data Center Services has been implemented.
<PAGE>
"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any
Renewal Term.
"SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the
meaning given in Section 7.1 of this Service Agreement.
"TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning
given in Section 8.1 of this Service Agreement.
"WARDS PEAK SEASON" means the period in any year during the Service
Agreement Term from November 20 through December 31, as such dates may be
adjusted by Wards from time to time.
ARTICLE 2. TERM
2.1 INITIAL TERM. The initial term of this Service Agreement (the
"Initial Term") shall begin as of the Service Agreement Commencement Date and
shall continue for a period of sixty-one (61) months thereafter, unless earlier
terminated or renewed in accordance with the provisions of this Service
Agreement or the Master Agreement.
2.2 RENEWAL TERM. In accordance with Section 3.2 of the Master Agreement,
Wards shall have the option to renew this Service Agreement for an additional
two (2) year term (a "Renewal Term") by delivering written notice of such
renewal to Supplier at least ninety (90) days before expiration of the final
Contract Year under this Service Agreement. All of the terms of this Service
Agreement and the Master Agreement shall continue to apply without change during
the Renewal Term.
ARTICLE 3. TERMINATION
3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate
this Service Agreement for convenience in accordance with Section 18.2(a) of the
Master Agreement. The convenience termination charges, if any, shall be as
described in Exhibit C of this Service Agreement.
ARTICLE 4. PERSONNEL MATTERS
4.1 KEY SUPPLIER POSITIONS. Exhibit A to this Service Agreement also
---------
identifies the Key Supplier Positions that are subject to the provisions of
Section 7.2 of the Master Agreement.
2
<PAGE>
ARTICLE 5. SERVICES
5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide
the Services described in Exhibit B, as such Exhibit may be amended and
---------
supplemented from time to time pursuant to the Master Agreement (the "Data
Center Services"). The Data Center Services includes all of the responsibilities
(including Equipment, Software, personnel and expenses) associated with the Data
Center unless specifically identified as a Wards responsibility under Section
5.4 below. The Services include: (i) functions, responsibilities and tasks
performed by the Transferred Employees prior to the Service Agreement Effective
Date; (ii) functions, responsibilities and tasks not specifically described in
this Service Agreement but which are required for their proper performance and
are an inherent part of, or a necessary sub-part included within, the Services,
and (iii) functions, responsibilities and tasks that are a logical extension of
existing Services as a result of changes in technology, changes in Wards
business practices or changes resulting from change control procedures. Supplier
will be the exclusive provider of the Services identified in this Service
Agreement.
5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the
Service Agreement Effective Date to the Service Agreement Commencement Date,
Supplier will provide Data Center Services under Service Agreement No. 1
(Transition Migration Services). Following the Service Agreement Commencement
Date, the Service Level Agreement and other obligations of this Service
Agreement will become effective.
5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement
Commencement Date, the Parties will appoint individuals as Project Executives
under this Service Agreement to carry out the duties described in the Master
Agreement.
5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in
Exhibit B to this Service Agreement identifies the responsibilities of Wards
- - ---------
during the Term of this Service Agreement, as such Exhibit may be amended and
supplemented from time to time pursuant to the Master Agreement. The
responsibilities of Wards shall be limited to those items listed in the matrix.
ARTICLE 6. CHARGES
6.1 CHARGES FOR DATA CENTER SERVICES. Exhibit C to this Service
---------
Agreement sets forth Supplier's Charges for the Data Center Services. All
Charges and all Pass-Through Expenses are subject to the provisions of Article
13 of the Master Agreement.
3
<PAGE>
6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Data
Center Services, Supplier shall provide Wards with the information described in
Exhibit C in sufficient detail in order to allow Wards to verify invoices.
- - ---------
Invoice submission and payment shall be in accordance with Article 14 of the
Master Agreement.
ARTICLE 7. SERVICE LEVEL AGREEMENT
7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the
---------
Service Level Agreement applicable to the Data Center Services (the "Service
Level Agreement"). The Service Level Agreement will become effective upon the
Service Agreement Commencement Date. All of the terms of Article 5 of the
Master Agreement shall apply to the Service Level Agreement. Supplier
acknowledges that Wards may adjust schedules for availability and other items to
meet Wards' business needs during Wards Peak Season or other events (such as
extended sales) as is currently done and demonstrable today.
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date,
Wards shall assign, and Supplier shall purchase or assume, Wards' purchased
equipment or obligations under the applicable leases for the equipment listed on
Exhibit E (the "Transferred Equipment"). The terms of Section 6.1 of the Master
- - ---------
Agreement shall apply with respect to the Transferred Equipment.
8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2
of the Master Agreement, Wards shall provide the Wards Facilities and Wards
Equipment described in Exhibit F to this Service Agreement.
---------
8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the
Service Agreement Commencement Date, and subject to Supplier having received any
Third Party Consents, Supplier shall assume from Wards all of the rights and
obligations of Wards under the Third Party Contracts and the Third Party
Software that are listed in Exhibit G. The terms of Section 6.3 of the Master
---------
Agreement shall apply with respect to the Third Party Contracts and Third Party
Software.
8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is
---------
proprietary to Wards and that is used in the Data Center (the "Wards Software").
The terms of Section 8.1 of the Master Agreement shall apply with respect to the
Wards Software.
4
<PAGE>
8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by
Supplier to provide the Data Center Services is listed in Exhibit I. Use of
---------
Supplier Software in providing the Data Center Services shall be in accordance
with Section 8.2 of the Master Agreement.
ARTICLE 9. TERMINATION AND TRANSITION SERVICES
9.1 TERMINATION. Wards may terminate this Service Agreement without
penalty at any time prior to the Service Agreement Commencement Date if Supplier
does not complete the Migration Plan described in Service Agreement No. 1.
After the Service Agreement Commencement Date, Wards may terminate this Service
Agreement in accordance with the terms of the Master Agreement.
9.2 TRANSITION SERVICES. In the event of a termination or expiration of
this Service Agreement, Supplier shall provide the Termination/Expiration
Assistance as provided in Section 18.7 of the Master Agreement and as set forth
in Exhibit J.
IN WITNESS WHEREOF the Parties have executed this Service Agreement as of the
day and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
----------------------------- -------------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
--------------------------- ------------------------------
Its: SVP, CIO Its: SVP-Outsourcing
---------------------------- -------------------------------
5
<PAGE>
EXHIBITS TO DATA CENTER SERVICE AGREEMENT
-----------------------------------------
EXHIBIT A KEY SUPPLIER POSITIONS
EXHIBIT B SERVICES
EXHIBIT C CHARGES
EXHIBIT D SERVICE LEVEL AGREEMENT
EXHIBIT E TRANSFERRED EQUIPMENT
EXHIBIT F WARDS FACILITIES AND EQUIPMENT
EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE
EXHIBIT H WARDS SOFTWARE
EXHIBIT I SUPPLIER SOFTWARE
EXHIBIT J TERMINATION/EXPIRATION ASSISTANCE
6
<PAGE>
EXHIBIT A
KEY SUPPLIER POSITIONS
COMPUTER OPERATIONS AND OSA MANAGER
COMPUTER OPERATIONS SHIFT MANAGER
COMPUTER OPERATIONS SHIFT SUPERVISOR
COMPUTER RESOURCE MANAGER
DASD/DATA SECURITY SPECIALIST
DATA SECURITY & CUSTOMER SERVICE MANAGER
HARDWARE INSTALLATION SPECIALIST
LEAD NETWORK CONTROL TECHNICIAN
NATIONAL ACCOUNT REPRESENTATIVE
NETWORK CONTROL TEAM LEADER
NETWORK SOFTWARE MANAGER
OSA/QA DOCUMENTATION SPECIALIST
PRODUCTION CONTROL TECHNICIAN
PRODUCTION CONTROL TECHNICIAN MANAGER
SENIOR CAPACITY PLANNING SPECIALIST
SENIOR DASD MANAGEMENT SPECIALIST
SENIOR OSA DOCUMENTATION SPECIALIST
SHIFT PROCESS CONTROL SUPERVISOR
SYSTEMS SOFTWARE MANAGER
7
<PAGE>
EXHIBIT B
---------
SERVICES
DATA CENTER SERVICES
OVERVIEW
- - --------
The business objective of this service category is to provide dependable,
consistent and reliable levels of Data Center Services in support of Wards
mainframe environment, Help Desk, and Operation Systems Acceptance. The cost-
effective implementation of consistent data center infrastructure allows Wards
business units to rapidly respond to changing business needs. The intent of this
service description is to establish Wards expectations and criteria for
providing the described services.
The Supplier of Data Center Services has full responsibility for the
comprehensive operational support of the Mainframe environment. These
responsibilities extend to the day-to-day operations and management of the
operating environment including, but not limited to, data backup and restore
processes; infrastructure change management; production control; systems
monitoring and reporting; data center facility monitoring; maintenance and
reporting; and media management. Additionally, the Supplier will provide
disaster recovery hot site services in support of Ward's Disaster Recovery Plan,
for the mainframe operating environment, and test the Supplier's mainframe
disaster recovery hot site as agreed upon with, and scheduled as requested by
Wards management as outlined for these systems.
System Management will provide for the overall management and performance of IBM
MVS/JES3 mainframe processing environment. The Systems Management function will
work in an integrated fashion with all other service functions to provide
seamless support for the Wards business units. The Supplier will provide Wards
with a consistently high level of mainframe environment reliability,
availability, and performance. The system management function includes the
responsibility for the management of the in-scope infrastructure as well as
implementation of new technologies to support the changing business needs of
Wards.
The Supplier has responsibility for managing the Wards Help Desk, including
first contact with Wards staff and the customer service and support of the Wards
relationship. Additionally, the Supplier is responsible for opening the initial
problem tracking ticket utilizing the Supplier provided problem ticket tracking
system, routing of call/tickets to the appropriate Wards and third party
supplier(s), providing status and updates as requested, providing and updating a
problem tracking system for current users, escalating tickets with appropriate
Wards and Supplier management. Currently, Wards provides problem management
services for two Help Desks: End User Computing, which supports all 1/st/ level
desktop/server calls and the Network Help Desk, which supports all 1/st/ level
calls related to any communication, application or non desktop/server equipment
problem. When a problem falls into an area as designated in the other attached
Services Descriptions the Supplier has
8
<PAGE>
full responsibility for problem resolution, excluding Wards applications. If the
problem falls outside of these Services Descriptions, then the Help Desk has the
responsibility of routing the call to the correct third party or Wards resource
for resolution, and of managing the completion of the call to the user's
satisfaction as detailed in the Help Desk section of this document.
OPERATIONS MANAGEMENT
- - ---------------------
ACTIVITIES FOR OPERATIONS MANAGEMENT
The Supplier will be responsible for all operational aspects of the in-scope
mainframe computer environments.. The Supplier is expected to manage the
development, test, and production-processing environments utilizing Supplier and
Wards provided processes and management methodologies.
1. Supplier will provide console management functions to monitor, report,
operate and IPL/reboot the mainframe systems, associated peripherals, and
production job streams.
2. Supplier will provide production control as documented in the Procedures
Manual.
3. Supplier will provide and adhere to change management as documented in the
Procedures Manual.
4. Supplier will provide all Signature levels of service as indicated in the
Signature agreement..
5. Supplier will provide media management and media storage for all mainframe
processing environments.
SERVICE PARAMETERS FOR OPERATIONS MANAGEMENT
1. Supplier will provide operations management services for in-scope mainframe
processing environments, on a 24 x 7 x 365 basis.
2. Supplier will capture and retain sufficient detail data to provide all
required technical and managerial reports as specified within this document.
3. The Supplier will utilize and adhere to problem management procedures for
reporting and responding to mainframe issues in accordance with the
Procedures Manual.
4. Supplier will provide change management processes to include, but is not
limited to: Wards change control, Wards OSA process, and Wards application
code management between development, test, and production environments.
5. Supplier will provide production scheduling on a 7 x 24 x 365 basis.
6. No increase in the number of cross system POR's will result from the
Suppliers proposed LPAR environment.
7. Supplier will provide the Account Management function, as is provided by
Wards today.
8. Supplier will provide staff to maintain and support the six IBM OS/2 PC's
required to support Connect: Direct and Connect: Mail.
9. Supplier will provide Wards' OSA OLCR CHANGE MANAGEMENT process.
9
<PAGE>
10. The Supplier is responsible for controlling the movement of all Application,
Software, and Hardware changes into production using the existing OSA
Hardware/Software Change Management methodology.
11. The Supplier will also hold meetings with applications Development for all
application changes or new technology implementations to assure adherence to
Ward's standards for acceptance testing of functionality, recovery, and
validation of results with the end user.
12. Supplier will enforce all existing Wards' standards covering but not limited
to JCL, recovery & naming standards.
13. The Supplier will review System documentation for accuracy, standards
adherence, and thoroughness of restart/recovery and backup information.
14. Supplier will conduct training for new development associates and/or
consultants in the use of productivity tools, Wards' standards and
preparation of documentation, procs, ENDEVOR package naming and element
movement, RMDS forms, use of INFOMAN and JCLPREP.
15. Supplier will coordinate the movement of all Y2K development to and from
Production
MEASUREMENT TOOLS FOR OPERATIONS MANAGEMENT
- - -------------------------------------------
The Supplier will utilize tools and processes provided by Wards and already
in place in Wards mainframe processing environments. The Supplier is free to
recommend in writing to Wards additional or alternative tools or processes for
review and final approval. As a function of the Change Management Process Wards
must approve use of any new or equivalent tools and/or processes not already in
place at Wards, and this approval will not be unreasonably withheld
MVS
. ESP Scheduler
. MVS Utilities
. RACF
. MICS
. Omegamon
. Endevor
. Pacbase
SYSTEM MANAGEMENT
- - -----------------
ACTIVITIES FOR SYSTEM MANAGEMENT
10
<PAGE>
The Supplier has responsibility for availability, management and performance of
the in-scope mainframes, systems software, and mainframe peripherals. It is the
Supplier's responsibility to provide reliable, predictable, and consistent
operating environments for Wards' applications systems.
1) The Supplier will provide the appropriate management methodologies,
resources and tools to support the in-scope mainframe environments at
performance, capacity, and availability levels as good as, or better than,
prior to outsourcing.
2) The Supplier will provide proactive mainframe and peripheral performance
monitoring and tuning.
3) The Supplier will provide proactive mainframe and peripheral capacity
analysis, planning and resource adjustment.
4) The Supplier will utilize and adhere change management processes, and
procedures as documented in the Procedures Manual.
5) The Supplier will utilize and adhere to all problem management processes,
procedures and escalation guidelines as documented in the Procedures Manual.
SERVICE PARAMETERS FOR SYSTEM MANAGEMENT
1) The Supplier will maintain 24x7x365 System Management support for Wards.
2) The Supplier will maintain the confidentiality of all Wards data and
systems.
3) Supplier will provide off-hours on-site support during the Wards PEAK
Season. This will include a freeze on all but emergency changes
4) Supplier will provide for DB2, CICS, & IMS internal sub-second response
overall, except for conversational transactions.
5) The Supplier will provide hardware and software maintenance for mainframes,
peripherals, and all operating system and sub-system software for which
Supplier has contractual responsibility.
6) The Supplier will provide total problem solutions with the appropriate
technical resources, knowledge, procedures, and management methodologies to
maintain the availability and performance of the Wards development, test,
and production mainframe environments to documented service levels.
7) The Supplier will be required to execute emergency change management
procedures in support of the Wards mainframe environment as outlined in the
Procedures Manual.
8) Escalation required to resolve mainframe problems remain within the scope of
the Supplier's responsibility and are considered to be included in the
overall support cost.
9) The Supplier will provide hardware and software tools, and related
maintenance that is necessary to accomplish or help them accomplish the
Systems Management service levels as indicated in this document.
10) The Supplier will provide sufficient detail to the help desk, within the
text of each problem ticket, to include the background and history of each
problem for later root cause analysis and/or support resolution or
engineering corrective action.
11
<PAGE>
11) The Supplier will monitor, alarm, and apply corrective action to pre-defined
events and situations for the mainframes included in this agreement.
12) The Supplier will gather, store, and report statistics for the Wards
mainframes included in this agreement in a format that is readily
accessible.
13) The Supplier will work toward reducing the overall resolution time for
problem tickets regardless of where the root problem resides to commercially
reasonable efforts.
14) The Supplier will accept and resolve problems from the Supplier's Help Desk
as determined to be in the area of support of System Management by the Help
Desk within time frames as specified by severity.
15) The Supplier will re-route problems back to the Supplier's Help Desk as
they are determined to be outside of area of support of System Management.
16) The Supplier will document problem resolution activities as they are
completed or re-routed.
17) Supplier will provide the Technical Support function, as is provided by
Wards today.
TRACKING AND MEASUREMENT TOOLS FOR SYSTEMS MANAGEMENT
- - -----------------------------------------------------
The Supplier is responsible for supplying all tools necessary to satisfy the
specifications contained herein. The Supplier is free to recommend in writing to
Wards additional or alternative tools or processes for Wards review and final
approval. Wards must approve use of any new or equivalent tools and/or
processes not already in place at Wards. Any changes to the system management
tools will be approved through the Change Management process.
MVS
. MVS Utilities
. RACF
. MICS
. BGS
. SAS
. Omegamon
HELP DESK
- - ---------
ACTIVITIES FOR HELP DESK
The Activities and Service Parameters listed below will be broken down in to two
groups, the End-User Computing Help Desk and the Network Help Desk:
END USER COMPUTING HELP DESK ACTIVITIES
12
<PAGE>
1) The Supplier will page the relevant support personnel as designated by Wards
End User Computing Escalation Procedures.
2) The Supplier is responsible for the overall management of a problem from
receipt to satisfactory closure, including ownership of the problem as it
crosses multi-platform, and multi-vendor boundaries of support.
3) The Supplier's Help Desks will attempt to resolve all problem calls
concerning Wards' IT Infrastructure and Wards' desktop/server environment.
4) The Supplier will provide security administration for servers based on
documentation as included in the Procedures Manual.
5) The Supplier will provide software use assistance for MS Office Suite, (4.3,
Win 95 and Office 97), Extra, Lotus Notes, Lotus 123 and Internet.
SERVICE PARAMETERS FOR END USER COMPUTING HELP DESK:
1. The Supplier will implement and maintain a 6x12x365(excluding Holidays) Help
Desk operation for Wards. Coverage will start at 6:00a.m. to 6:00p.m central
time., Monday through Friday. The Supplier will be required to provide off-
hours support Via pager.
2. The Supplier will provide, develop, document, and maintain an automated
problem tracking system.
3. The Supplier will provide a process for searching existing problem
resolutions and ticket histories with associated scripts and questions to be
utilized by Supplier help desk personnel.
4. The Supplier will contact Wards users to provide problem status and receive
any severity level adjustment within agreed upon time frames by severity.
5. The Supplier will follow Wards provided escalation procedures for severity
level adjustments and problem ticket resolution.
6. The Supplier will provide a corrective action process whereby repetitive
problem tickets of a similar nature will be resolved to the extent possible.
7. The Supplier will work to reduce the overall resolution time for problem
tickets regardless of where the root problem resides.
8. Supplier will provide account maintenance functions including: userid
creation and modification and will follow Wards published standards
developed by the Systems management Supplier.
9. The Supplier will be responsible for providing total help desk solutions for
End User Computing and for all problem resolutions as per the Procedures
Manual.
10. The Supplier will be responsible for contacting Wards' staff by, but not
limited to: paging, email, voice mail, and conference calls in accordance
with the Procedures Manual.
11. The Supplier will adhere to the approved change management process for all
help desk activities.
12. The Supplier will provide network connectivity for the help desk and
maintain the connectivity without performance degradation.
13. The Supplier will utilize a VRU for direction of help desk calls.
13
<PAGE>
NETWORK HELP DESK ACTIVITIES
1) The Supplier will page the relevant support personnel as designated by Wards
Network Escalation Procedures.
2) The Supplier is responsible for the overall management of a problem from
receipt to satisfactory closure, including ownership of the problem as it
crosses multi-platform, and multi-vendor boundaries of support.
3) The Supplier's Help Desk will attempt to resolve all problem calls
concerning Wards' IT Infrastructure.
4) The Supplier will provide a process for searching existing problem
resolutions and ticket histories with associated scripts and questions to be
utilized by Supplier help desk personnel.
5)
6) The Supplier will ensure that Level of Service for Signature has been
reported correctly and that the Level of Service reports have been run. The
Supplier will also ensure that the monthly level of service reports are
maintained and that each outage reported is supported via an Infoman record.
7) The Supplier will be responsible for the weekly cycle of the @SPMC region,
(the primary Signature Region), Sunday A.M., and that appropriate
diskreaders are run while region is down. The Supplier must notify
Signature, before and after the region is cycled and must ensure
connectivity.
SERVICE PARAMETERS FOR NETWORK HELP DESK
1) The Supplier will implement and maintain a 7x24x365 Help Desk operation for
Wards The Network area will be manned with no less than two people at all
times.
2) The Supplier will provide, develop, document, and maintain an automated
problem tracking system.
3) The Supplier will be responsible for the start-up, monitoring, shutdown of
all Wards/Signature production and test onlines, as well as started tasks,
as documented in the Procedures Manual.
4) The Supplier will provide change management function for all Wards
environments. (Said scheduled changes can be viewed via Exception
Management, Weekend Plan Letter).
5) The Supplier will contact Wards' users to provide problem status and receive
any severity level adjustment within agreed upon time frames by severity.
6) The Supplier will follow Wards' provided escalation procedures for severity
level adjustments and problem ticket resolution.
7) The Supplier will provide a corrective action process whereby repetitive
problem tickets of a similar nature will be resolved to the extent possible.
8) The Supplier will utilize a VRU for direction of help desk calls.
9) The Supplier will provide commercially reasonable efforts to work toward
reducing the overall resolution time for problem tickets regardless of where
the root problem resides.
14
<PAGE>
10) Supplier will provide account maintenance functions including: userid
creation and modification, and following Wards published standards
developed by the Systems management Supplier.
11) The Supplier will be responsible for providing total help desk problem
solutions for the network and for all problem resolutions as per the
Procedures Manual.
12) The Supplier will be responsible for contacting Wards' staff by, but not
limited to: paging, email, voice mail, and conference calls in accordance
with the Procedures Manual.
13) The Supplier will adhere to the approved change management process for all
help desk activities.
MEASUREMENT TOOLS FOR HELP DESK
- - -------------------------------
The Supplier will make every effort to utilize tools and processes owned by
Wards and already in place within the Wards facilities. The Supplier is free to
recommend in writing to Wards additional or alternative tools or processes for
Wards review and final approval. Wards must approve use of any new or
equivalent tools and/or processes not already in place at Wards. Available
tools are listed below.
1) MS Office (Excel, Word, PowerPoint) or equivalent.
2) Wards MS-Access Desktop Inventory database
3) Wards IT asset inventory.
4) Wards Help Desk Escalation Procedures
15
<PAGE>
RESPONSIBILITY MATRIX
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. CHANGE MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
2. Participate in scheduled change management meetings x x
- - --------------------------------------------------------------------------------------------------------------------------------
3. Provide Wards with risk assessments and anticipated impact of all proposed changes to the x
operational and data center environments
- - --------------------------------------------------------------------------------------------------------------------------------
4. Implement changes in accordance with the Procedures Manual. x
- - --------------------------------------------------------------------------------------------------------------------------------
5. Provide support for both testing and production support of all changes implemented within the x
environments
- - --------------------------------------------------------------------------------------------------------------------------------
6. Conduct post-implementation review meetings with Wards to review changes process x x
- - --------------------------------------------------------------------------------------------------------------------------------
7. PROBLEM MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
8. Provide and maintain a single point of contact for the reporting and tracking of problems x
- - --------------------------------------------------------------------------------------------------------------------------------
9. Maintain an integrated problem management system for the centralized reporting and tracking x
of problems under the Supplier's control
- - --------------------------------------------------------------------------------------------------------------------------------
10. Provide and maintain a method for proper escalation of problems within both the Supplier's x x
and Wards' management
- - --------------------------------------------------------------------------------------------------------------------------------
11. Supplier will provide Wards with detail reporting and statistics on reported problems x
- - --------------------------------------------------------------------------------------------------------------------------------
12. Supplier will support new Wards initiatives as they may relate to Problem Management. x
- - --------------------------------------------------------------------------------------------------------------------------------
13. Supplier will provide a summary of all "Open" and "Closed" problems during the prior x
twenty-four(24) hours on a daily basis
- - --------------------------------------------------------------------------------------------------------------------------------
14. Changes to Wards escalation documentation will be completed within twenty-four(24) hours of a x
problem being recapped by Supplier through written or electronic means
- - --------------------------------------------------------------------------------------------------------------------------------
15. Supplier will provide the Problem Management processes on a 24x7x365 basis x
- - --------------------------------------------------------------------------------------------------------------------------------
16. Supplier will report progress to Wards based on the Wards assigned level of severity x
- - --------------------------------------------------------------------------------------------------------------------------------
17. Supplier will develop and enhance procedures for problem escalation x
- - --------------------------------------------------------------------------------------------------------------------------------
18. Supplier will conduct root cause analysis and review high-impact problems to identify x x
preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate
- - --------------------------------------------------------------------------------------------------------------------------------
19. COMPUTER OPERATIONS
- - --------------------------------------------------------------------------------------------------------------------------------
20. Provide operational installation support for hardware components x
- - --------------------------------------------------------------------------------------------------------------------------------
21. Perform all manual and automated console operations and operate computer equipment x
- - --------------------------------------------------------------------------------------------------------------------------------
22. Monitor performance of operating system and sub-systems and resolve problems/exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
23. Identify and resolve systems and sub-systems problems x
- - --------------------------------------------------------------------------------------------------------------------------------
24. Complete work, turnover and status logs x
- - --------------------------------------------------------------------------------------------------------------------------------
25. Monitor and report Computer Room environmental variances and resolve problems/exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
26. Provide all media, media storage units and in scope printing supplies and consumables; office x
supplies; PC's, workstations, monitoring tools etc. for Supplier's operations management staff.
- - --------------------------------------------------------------------------------------------------------------------------------
27. Adhere to all Wards IT standards, methods, processes and procedures. x
- - --------------------------------------------------------------------------------------------------------------------------------
28. PRODUCTION MONITORING AND SCHEDULING
- - --------------------------------------------------------------------------------------------------------------------------------
29. Provide production scheduling. using ESP software x
- - --------------------------------------------------------------------------------------------------------------------------------
30. Establish and maintain centralized responsibility over production systems and processes. x
- - --------------------------------------------------------------------------------------------------------------------------------
31. Provide resources for monitoring, reporting, and tracking of systems and processes. x
- - --------------------------------------------------------------------------------------------------------------------------------
32. Report, document, and track failures within the production systems. x
- - --------------------------------------------------------------------------------------------------------------------------------
33. Provide and maintain a method for proper escalation of failures. x
- - --------------------------------------------------------------------------------------------------------------------------------
34. Ensure overnight processing is completed as scheduled. x
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
35. Provide reporting on production systems, daily on critical systems. x
- - --------------------------------------------------------------------------------------------------------------------------------
36. Provide a master-scheduling function across environments. x
- - --------------------------------------------------------------------------------------------------------------------------------
37. Provide a process for change requests in the scheduling of processes and systems. x
- - --------------------------------------------------------------------------------------------------------------------------------
38. Develop, document, and enhance procedures for ensuring reliable monitoring and scheduling of x
critical processes.
- - --------------------------------------------------------------------------------------------------------------------------------
39. Conduct root cause analysis and review high-impact failures to identify preventative x
measures, assess risk, and bring to closure.
- - --------------------------------------------------------------------------------------------------------------------------------
40. Coordinate and integrate production schedules with applications groups. x
- - --------------------------------------------------------------------------------------------------------------------------------
41. Modify and verify batch production schedules without impacting service. x
- - --------------------------------------------------------------------------------------------------------------------------------
42. Maintain documentation and run books for production job streams and processes in accordance x
with the Procedures Manual
- - --------------------------------------------------------------------------------------------------------------------------------
43. Provide support for the OSA group for jobs moving into or out of production x
- - --------------------------------------------------------------------------------------------------------------------------------
44. Provide monitoring functions utilizing Wards automated tools wherever possible. x
- - --------------------------------------------------------------------------------------------------------------------------------
45. TAPE MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
46. Complete all tape mount requests x
- - --------------------------------------------------------------------------------------------------------------------------------
47. Monitor tape hardware for malfunction and resolve exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
48. Perform tape hardware maintenance x
- - --------------------------------------------------------------------------------------------------------------------------------
49. Produce reports on tape retention periods x
- - --------------------------------------------------------------------------------------------------------------------------------
50. Request changes to tape retention periods x x
- - --------------------------------------------------------------------------------------------------------------------------------
51. Implement requested changes to tape retention periods x
- - --------------------------------------------------------------------------------------------------------------------------------
52. TAPE LIBRARY x
- - --------------------------------------------------------------------------------------------------------------------------------
53. Maintain integrity of tape library system x
- - --------------------------------------------------------------------------------------------------------------------------------
54. Monitor tape usage and resolve problems/exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
55. Maintain and monitor "foreign" tape library and resolve exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
56. Initialize new tapes x
- - --------------------------------------------------------------------------------------------------------------------------------
57. Establish off-site storage requirements x
- - --------------------------------------------------------------------------------------------------------------------------------
58. Coordinate off-site storage functions including logging, tracking, labeling, ordering, x
receiving and sending tapes
- - --------------------------------------------------------------------------------------------------------------------------------
59. Approve third party supplier x
- - --------------------------------------------------------------------------------------------------------------------------------
60. Manage third party contract x
- - --------------------------------------------------------------------------------------------------------------------------------
61. Audit third party supplier annually x
- - --------------------------------------------------------------------------------------------------------------------------------
62. Provide a documented and consistent process for off-site data archiving for in scope x
processing environments
- - --------------------------------------------------------------------------------------------------------------------------------
63. Inspect/audit third party supplier facility as allowed by facility and with proper notice. x
- - --------------------------------------------------------------------------------------------------------------------------------
64. BACKUPS
- - --------------------------------------------------------------------------------------------------------------------------------
65. Determination of what data is backed up and when x
- - --------------------------------------------------------------------------------------------------------------------------------
66. Determination of how long data is kept x
- - --------------------------------------------------------------------------------------------------------------------------------
67. Perform backup as scheduled x
- - --------------------------------------------------------------------------------------------------------------------------------
68. Maintain library of backups x
- - --------------------------------------------------------------------------------------------------------------------------------
69. Management of off-site storage x
- - --------------------------------------------------------------------------------------------------------------------------------
70. Restore system data as required x
- - --------------------------------------------------------------------------------------------------------------------------------
71. Restore user data as required x
- - --------------------------------------------------------------------------------------------------------------------------------
72. PHYSICAL SECURITY ADMINISTRATION - SUPPLIER FACILITY
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
73. Provide Loss Prevention audit x
- - --------------------------------------------------------------------------------------------------------------------------------
74. Implement reasonable and industry standard security x
- - --------------------------------------------------------------------------------------------------------------------------------
75. Provide administrative and technical support for physical security x
- - --------------------------------------------------------------------------------------------------------------------------------
76. Monitor and respond to alarm system x
- - --------------------------------------------------------------------------------------------------------------------------------
77. Provide emergency response and notification (Fire etc.) x
- - --------------------------------------------------------------------------------------------------------------------------------
78. DISASTER RECOVERY SUPPORT
- - --------------------------------------------------------------------------------------------------------------------------------
79. Develop, maintain and test disaster recovery plan and procedure manuals including third x
party hot and cold site recovery plans for all services provided to Supplier
- - --------------------------------------------------------------------------------------------------------------------------------
80. Maintain capacity plan for disaster recovery for all services provided to Wards x
- - --------------------------------------------------------------------------------------------------------------------------------
81. Maintain an on-line document listing which platforms and applications are covered x
- - --------------------------------------------------------------------------------------------------------------------------------
82. Maintain third party contracts x
- - --------------------------------------------------------------------------------------------------------------------------------
83. Coordinate disaster recovery testing with Wards Account Mgr. x
- - --------------------------------------------------------------------------------------------------------------------------------
84. Participate in disaster recovery testing with Supplier and perform recovery tests for all x
services provided to Wards
- - --------------------------------------------------------------------------------------------------------------------------------
85. Perform disaster recovery testing, resolve cause of failure and re-test until successful for x
all services provided to Wards
- - --------------------------------------------------------------------------------------------------------------------------------
86. Report disaster recovery test results to Wards x
- - --------------------------------------------------------------------------------------------------------------------------------
87. Confirm test results to Wards x
- - --------------------------------------------------------------------------------------------------------------------------------
88. Implement recovery plan at hot site/cold site for all services provided to Wards x
- - --------------------------------------------------------------------------------------------------------------------------------
89. Provide requirements to prioritize recovery of data when disaster occurs x
- - --------------------------------------------------------------------------------------------------------------------------------
90. Restore Application Data Sets x
- - --------------------------------------------------------------------------------------------------------------------------------
91. Restore to normal operations in the event of a disaster within defined service levels x
- - --------------------------------------------------------------------------------------------------------------------------------
92. STRATEGY AND PLANNING
- - --------------------------------------------------------------------------------------------------------------------------------
93. Understand & document Ward's business requirements x x
- - --------------------------------------------------------------------------------------------------------------------------------
94. Assist with direction setting and updating of standards x
- - --------------------------------------------------------------------------------------------------------------------------------
95. Research emerging technology and propose effective solutions x
- - --------------------------------------------------------------------------------------------------------------------------------
96. Assist in developing Standard Operating Procedures (SOPs) x
- - --------------------------------------------------------------------------------------------------------------------------------
97. Provide support to convert from DFP to SMS and will support all planned activities such as x
the Wards big 6 projects,Y2K moves(not code changes) and conversion to parallel sysplex
commensurate with current level of support.
- - --------------------------------------------------------------------------------------------------------------------------------
98. CONTRACTS MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
99. Ensure compliance with in-scope maintenance and warranty agreements x
- - --------------------------------------------------------------------------------------------------------------------------------
100. Negotiate new and/or renew agreements for in-scope services x
- - --------------------------------------------------------------------------------------------------------------------------------
101. Manage contract terms and conditions (e.g. expiration date) for in-scope services x
- - --------------------------------------------------------------------------------------------------------------------------------
102. Communicate contract provisions internally and to Wards, as needed for in-scope services x
- - --------------------------------------------------------------------------------------------------------------------------------
103. STATUS REPORTING AND MEETINGS
- - --------------------------------------------------------------------------------------------------------------------------------
104. Conduct 2 daily operational status meetings with Wards at 8:10am CST and 4:10pm CST to report x
on operational, environmental and batch job completion status for the previous twenty-four
hour period.
- - --------------------------------------------------------------------------------------------------------------------------------
105. Conduct a daily status call with Signature. x
- - --------------------------------------------------------------------------------------------------------------------------------
106. Prepare weekly status report x
- - --------------------------------------------------------------------------------------------------------------------------------
107. Conduct weekly status meetings x
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
108. Review and edit weekly status report and attend weekly meeting x
- - --------------------------------------------------------------------------------------------------------------------------------
109. Prepare monthly service level / performance reports x
- - --------------------------------------------------------------------------------------------------------------------------------
110. Analyze results of monthly reports and historical trends x
- - --------------------------------------------------------------------------------------------------------------------------------
111. Identify areas for improvement x
- - --------------------------------------------------------------------------------------------------------------------------------
112. Prepare management briefing for service level results x
- - --------------------------------------------------------------------------------------------------------------------------------
113. Conduct monthly management review meeting x
- - --------------------------------------------------------------------------------------------------------------------------------
114. Attend monthly management review x
- - --------------------------------------------------------------------------------------------------------------------------------
115. Implement action items resulting from, & agreed to during, mgmt review meeting. x
- - --------------------------------------------------------------------------------------------------------------------------------
116. Audit/request service level/performance and activity reports as needed x
- - --------------------------------------------------------------------------------------------------------------------------------
117. Approve new or changes to service level/performance reports as needed. x
- - --------------------------------------------------------------------------------------------------------------------------------
118. HUMAN RESOURCES
- - --------------------------------------------------------------------------------------------------------------------------------
119. Ensure adequate training & review of all personnel performing Supplier activities. x
- - --------------------------------------------------------------------------------------------------------------------------------
120. Implement corrective actions as needed x
- - --------------------------------------------------------------------------------------------------------------------------------
121. FACILITIES MANAGEMENT - SUPPLIER FACILITIES
- - --------------------------------------------------------------------------------------------------------------------------------
122. Plan & manage installation of computer & environmental equipment in data center. x
- - --------------------------------------------------------------------------------------------------------------------------------
123. Oversee equipment moves/ensures operation to specifications post-move x
- - --------------------------------------------------------------------------------------------------------------------------------
124. Maintain physical inventory and blueprint of all hardware and accurate cabling diagrams. x
- - --------------------------------------------------------------------------------------------------------------------------------
125. Monitor and maintain all data center resources located at Supplier's site(s) to assure x
availability, including: HVAC, Power distribution units, uninterrupted power switch (UPS),
and backup power systems.
- - --------------------------------------------------------------------------------------------------------------------------------
126. Administer contract services and other third party agreements (Environmental, security and x
other companies)
- - --------------------------------------------------------------------------------------------------------------------------------
127. CAPACITY PLANNING
- - --------------------------------------------------------------------------------------------------------------------------------
128. Monitor system use and capacity, and resolve problems/exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
129. Forecast resource requirements x
- - --------------------------------------------------------------------------------------------------------------------------------
130. Ensure appropriate capacity to meet resource projections x
- - --------------------------------------------------------------------------------------------------------------------------------
131. Analyze workload capacity x
- - --------------------------------------------------------------------------------------------------------------------------------
132. Prepare and produce resource planning reports x
- - --------------------------------------------------------------------------------------------------------------------------------
133. Analyze and report resource trends x
- - --------------------------------------------------------------------------------------------------------------------------------
134. Make recommendations regarding resource consumption and trends x
- - --------------------------------------------------------------------------------------------------------------------------------
135. Report usage and resource capacity to Wards on a periodic basis x
- - --------------------------------------------------------------------------------------------------------------------------------
136. PERFORMANCE TUNING
- - --------------------------------------------------------------------------------------------------------------------------------
137. Conduct system performance tuning x
- - --------------------------------------------------------------------------------------------------------------------------------
138. Conduct application performance tuning x
- - --------------------------------------------------------------------------------------------------------------------------------
139. Provide performance reporting x
- - --------------------------------------------------------------------------------------------------------------------------------
140. Conduct application and hardware benchmarks, if required x
- - --------------------------------------------------------------------------------------------------------------------------------
141. Conduct system performance reviews x
- - --------------------------------------------------------------------------------------------------------------------------------
142. Measure and analyze system performance x
- - --------------------------------------------------------------------------------------------------------------------------------
143. Review system performance and request adjustments where deemed necessary x
- - --------------------------------------------------------------------------------------------------------------------------------
144. Provide strategies and suggestions on how to maximize mainframe performance by optimizing key x
process variables and implement them upon Wards' approval..
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
145. DASD MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
146. Provide DASD space allocations within Wards available resources x x
- - --------------------------------------------------------------------------------------------------------------------------------
147. Provide user support in using DASD and DASD tools x
- - --------------------------------------------------------------------------------------------------------------------------------
148. Delete expired and uncataloged data sets in accordance with Wards approved procedures. x
- - --------------------------------------------------------------------------------------------------------------------------------
149. Move data to correct DASD pools, and follow up with user to change JCL x
- - --------------------------------------------------------------------------------------------------------------------------------
150. Maintain inventory of DASD hardware, volumes and esoterics (unit=) x
- - --------------------------------------------------------------------------------------------------------------------------------
151. Clean up old data from catalogs, tapes or DASD x
- - --------------------------------------------------------------------------------------------------------------------------------
152. Create DASD pools and manage data sets within these pools x
- - --------------------------------------------------------------------------------------------------------------------------------
153. Review and repair GDG bases x
- - --------------------------------------------------------------------------------------------------------------------------------
154. Define new ICF catalogs when needed x
- - --------------------------------------------------------------------------------------------------------------------------------
155. Perform ICF daily backup, and fix errors x
- - --------------------------------------------------------------------------------------------------------------------------------
156. Define dataset aliases x
- - --------------------------------------------------------------------------------------------------------------------------------
157. Monitor and control storage performance and resolve exceptions x
- - --------------------------------------------------------------------------------------------------------------------------------
158. Assign and initialize volumes x
- - --------------------------------------------------------------------------------------------------------------------------------
159. Determine file and volume placement x
- - --------------------------------------------------------------------------------------------------------------------------------
160. Set and maintain storage resource efficiency x
- - --------------------------------------------------------------------------------------------------------------------------------
161. Maintain established storage standards x
- - --------------------------------------------------------------------------------------------------------------------------------
162. Initiate requests for storage resource increases and decreases x
- - --------------------------------------------------------------------------------------------------------------------------------
163. Solicit Wards' directors and ad hoc users twice a year for Resource Usage requirements in the x x
current year and in the coming year.
- - --------------------------------------------------------------------------------------------------------------------------------
164. Maintain space requirements according to Wards demand x
- - --------------------------------------------------------------------------------------------------------------------------------
165. Summarize the Resource Usage requirements and track DASD usage against these. x
- - --------------------------------------------------------------------------------------------------------------------------------
166. Perform data migration management x
- - --------------------------------------------------------------------------------------------------------------------------------
167. Manage HSM x
- - --------------------------------------------------------------------------------------------------------------------------------
168. DATA SECURITY ADMINISTRATION
- - --------------------------------------------------------------------------------------------------------------------------------
169. Define security policies x x
- - --------------------------------------------------------------------------------------------------------------------------------
170. Provide passwords and logon ids to security officer x
- - --------------------------------------------------------------------------------------------------------------------------------
171. Administer security databases (user privileges) x
- - --------------------------------------------------------------------------------------------------------------------------------
172. Implement reasonable and industry standard security audit recommendations x
- - --------------------------------------------------------------------------------------------------------------------------------
173. Enforce security standards x
- - --------------------------------------------------------------------------------------------------------------------------------
174. Create, document and maintain security schemas, profiles and procedures for all mainframe x
resources as directed by Wards security policy.
- - --------------------------------------------------------------------------------------------------------------------------------
175. SECURITY SOFTWARE MAINTENANCE
- - --------------------------------------------------------------------------------------------------------------------------------
176. Software update and implementation x
- - --------------------------------------------------------------------------------------------------------------------------------
177. Participate and approve results of changes to security software x
- - --------------------------------------------------------------------------------------------------------------------------------
178. Administer login Ids and reset passwords for data access x
- - --------------------------------------------------------------------------------------------------------------------------------
179. Information security classification x
- - --------------------------------------------------------------------------------------------------------------------------------
180. SYSTEM SOFTWARE MAINTENANCE
- - --------------------------------------------------------------------------------------------------------------------------------
181. Provide all existing software at Wards' current level of maintenance in accordance with x
Change Management procedures, as indicated in the Procedures Manual, and keep all software
at a vendor supportable level.
- - --------------------------------------------------------------------------------------------------------------------------------
182. Accept all Wards' existing naming conventions (DSN's, PROC's, Esoterics and Work spaces), x
Documentation and standards as indicated in the Procedures Manual.
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
183. Maintain or remove existing software exits/mods and will coordinate any changes with Wards. x
- - --------------------------------------------------------------------------------------------------------------------------------
184. Migration support to new versions of existing software in accordance with Change Management x
as indicated in the Procedures Manual.
- - --------------------------------------------------------------------------------------------------------------------------------
185. Make configuration changes for Connect:Direct and Connect:Mail x
- - --------------------------------------------------------------------------------------------------------------------------------
186. Coordinate file transfers using Connect:Direct and Connect:Mailbox. x
- - --------------------------------------------------------------------------------------------------------------------------------
187. Research, advise, and manipulate flat files in support of Wards database administration and x
applications development groups as directed by Wards.
- - --------------------------------------------------------------------------------------------------------------------------------
188. Install and maintain the system software environment for the software listed. x
- - --------------------------------------------------------------------------------------------------------------------------------
189. PROBLEM MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
190. Manage first contact with Wards x
- - --------------------------------------------------------------------------------------------------------------------------------
191. Interact with Wards staff in a professional, efficient and service oriented manner, x
consistent for every call
- - --------------------------------------------------------------------------------------------------------------------------------
192. Provide and maintain a single point of contact for the reporting and tracking of problems x
- - --------------------------------------------------------------------------------------------------------------------------------
193. Log call in a Problem Ticket, assign severity, and monitor progress of trouble calls. x
- - --------------------------------------------------------------------------------------------------------------------------------
194. Query the user to get all relevant information concerning the call, including, but not x
limited to, user name, user location/department, user phone number, call severity, expected
time of user call back from help desk and description of problem.
- - --------------------------------------------------------------------------------------------------------------------------------
195. Verify no trouble ticket already exists for a trouble call before opening a new ticket x
- - --------------------------------------------------------------------------------------------------------------------------------
196. Page relevant support personnel as designated by Procedures Manual. x
- - --------------------------------------------------------------------------------------------------------------------------------
197. Solve problem or route Problem Ticket to appropriate service provider. x
- - --------------------------------------------------------------------------------------------------------------------------------
198. Route tickets for all Wards IT Infrastructure hardware/break-fix or deskside software support x
problems for resolution within established time frames by severity and service specifications
in accordance with the Procedures Manual
- - --------------------------------------------------------------------------------------------------------------------------------
199. Provide status and updates on Problem Tickets at Wards' request or according to severity x
guidelines.
- - --------------------------------------------------------------------------------------------------------------------------------
200. Contact user prior to closing the call for verification that the problem has been resolved, x
that the call is complete, the user is satisfied and that the ticket can be closed
- - --------------------------------------------------------------------------------------------------------------------------------
201. Maintain and Report ACD statistics. x
- - --------------------------------------------------------------------------------------------------------------------------------
202. Escalate unresolved problems that exceed established timeframes to appropriate Wards and x
Supplier management as necessary.
- - --------------------------------------------------------------------------------------------------------------------------------
203. Provide First Call Resolution within established time frames x
- - --------------------------------------------------------------------------------------------------------------------------------
204. Re-route misdirected Problem Tickets x
- - --------------------------------------------------------------------------------------------------------------------------------
205. Problem Escalation - Provide Level 2 and higher support to resolve problems(including 3rd x
party provider, if needed)
- - --------------------------------------------------------------------------------------------------------------------------------
206. Maintain current status on open Problem Tickets x
- - --------------------------------------------------------------------------------------------------------------------------------
207. Report on problems within established time frames x
- - --------------------------------------------------------------------------------------------------------------------------------
208. Close Problem Ticket upon acceptable problem resolution as verified by Wards' user who opened x
the call, providing sufficient detail for history of problem and later analysis of trends.
- - --------------------------------------------------------------------------------------------------------------------------------
209. Provide performance metric reports x
- - --------------------------------------------------------------------------------------------------------------------------------
210. Enforce security standards and guidelines x
- - --------------------------------------------------------------------------------------------------------------------------------
211. MONITORING
- - --------------------------------------------------------------------------------------------------------------------------------
212. Monitor the Satellite Network via check of the Baseband Equipment, upon start of shift, and x
hourly check of Illuminet for down sites.
- - --------------------------------------------------------------------------------------------------------------------------------
213. Dispatch service upon confirmation of remote satellite equipment failure x
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------------------------------------
No. Responsibility Description WARDS SUPPLIER
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
214. Dispatch service upon confirmation of remote distribution center equipment failure x
- - --------------------------------------------------------------------------------------------------------------------------------
215. Monitor the Frame Relay Network in conjunction with MCI. x
- - --------------------------------------------------------------------------------------------------------------------------------
216. Monitor the Wards Server farm by confirming connectivity to each server via Managewise x
console and contacting the necessary personnel in the event of a down/unreachable condition
- - --------------------------------------------------------------------------------------------------------------------------------
217. Monitor the Health and Status of IMS, including the tracking, recovery of stopped/abended x
programs, transactions or databases.
- - --------------------------------------------------------------------------------------------------------------------------------
218. Clear the Omegamon monitor at each shift start-up to ensure accurate error detection x
- - --------------------------------------------------------------------------------------------------------------------------------
219. Monitor all file transfer applications. x
- - --------------------------------------------------------------------------------------------------------------------------------
220. Monitor health and status of Tandem system. x
- - --------------------------------------------------------------------------------------------------------------------------------
221. Monitor store connectivity, as well as related process, to the mainframe on an ongoing basis x
- - --------------------------------------------------------------------------------------------------------------------------------
222. Perform an orderly system shutdown/recovery of applications, NCP's and VTAM during a x
regularly scheduled IPL or system outage
- - --------------------------------------------------------------------------------------------------------------------------------
223. Perform the nightly cycle (reboot) of the Thin Client servers as well as the Sysmgate server x
- - --------------------------------------------------------------------------------------------------------------------------------
224. Monitor outbound and inbound transmissions x
- - --------------------------------------------------------------------------------------------------------------------------------
225. ADMINISTRATION
- - --------------------------------------------------------------------------------------------------------------------------------
226. Administer login Ids and reset passwords for data access x
- - --------------------------------------------------------------------------------------------------------------------------------
227. Provide passwords and logon ids to Wards x
- - --------------------------------------------------------------------------------------------------------------------------------
228. Update Wards associate profile information in problem tracking system whenever inaccurate x
profile information is discovered
- - --------------------------------------------------------------------------------------------------------------------------------
229. Prepare and distribute all reports including monthly service level/performance reports. x
- - --------------------------------------------------------------------------------------------------------------------------------
230. Attend monthly management review meeting x
- - --------------------------------------------------------------------------------------------------------------------------------
231. Provide data warehouse, (weekly), and media retrieval processing, (daily), on the Unix system x
- - --------------------------------------------------------------------------------------------------------------------------------
232. Audit service level, performance and activity reports as needed x
- - --------------------------------------------------------------------------------------------------------------------------------
233. Maintain an integrated problem management system for the centralized reporting and tracking x
of problems under the Supplier's control
- - --------------------------------------------------------------------------------------------------------------------------------
234. Provide and maintain a method for proper escalation of problems within both the Supplier's x
and Wards' management
- - --------------------------------------------------------------------------------------------------------------------------------
235. REPORTING
- - --------------------------------------------------------------------------------------------------------------------------------
236. Provide statistics and management reports to Wards on a regularly scheduled basis as detailed x
in the Procedures Manual
- - --------------------------------------------------------------------------------------------------------------------------------
237. Provide ad hoc reporting capabilities or provide access to Wards' staff to the problem x
tracking system
- - --------------------------------------------------------------------------------------------------------------------------------
238. Identify and communicate to Wards help desk areas for improvement and ideas to increase x
account efficiencies
- - --------------------------------------------------------------------------------------------------------------------------------
239. Supplier will provide Wards with detail reporting and statistics on reported problems x
- - --------------------------------------------------------------------------------------------------------------------------------
240. Supplier will support new Wards initiatives as they may relate to reporting. x
- - --------------------------------------------------------------------------------------------------------------------------------
241. Supplier will provide a summary of all "Open" and "Closed" problems during the prior x
twenty-four(24) hours on a daily basis
- - --------------------------------------------------------------------------------------------------------------------------------
242. Changes to Wards escalation documentation will be completed within twenty-four(24) hours of a x
change by Supplier through written or electronic means
- - --------------------------------------------------------------------------------------------------------------------------------
243. Supplier will provide the Problem Management processes on a 24x7x365 basis x
- - --------------------------------------------------------------------------------------------------------------------------------
244. Supplier will report progress to Wards based on the Wards assigned level of severity x
- - --------------------------------------------------------------------------------------------------------------------------------
245. Supplier will develop and enhance procedures for problem escalation x
- - --------------------------------------------------------------------------------------------------------------------------------
246. Supplier will conduct root cause analysis and review high-impact problems to identify x x
preventative measures, assess risk, and bring to closure, jointly with Wards, if appropriate
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DATA CENTER SERVICES MANAGEMENT
- - --------------------------------------------------------------------------------------------------
No. Responsibility Description Wards Supplier
- - --------------------------------------------------------------------------------------------------
preventative measures, assess risk, and bring to closure,
jointly with Wards, if appropriate
- - --------------------------------------------------------------------------------------------------
</TABLE>
GLOSSARY OF TERMINOLOGY
-----------------------
WARDS USER All users of Wards IT services including but not
COMMUNITY limited to Wards' associates, subcontractors, and
Customers.
CONTRACT Wards staff member responsible for Supplier
ADMINISTRATOR relationship and interface. Removal of a device from
the Wards computing environment.
DE-INSTALLATION This includes returning the device to the lessor.
PERIPHERAL Describes any accessory device used in conjunction
with other hardware or software devices.
PLOTTER Describes both individual and networked (-shared)
plotters in the Wards computing environment.
PRINTER Describes both individual and networked (-shared)
printers in the Wards computing environment.
PROBLEM Problem, deficiency, delay as reported by a member of
the Wards user community.
PROBLEM TRACKING Call Center database management and problem ticket
SYSTEM tracking software.
RELEASE MANAGEMENT Release Management is the management and structured
release of desktop, server, and network software
standards that are mutually determined by Wards and
Supplier.
SYSTEMS MANAGED STORAGE IBM product to manage storage currently managed by
(SMS) DFP and HSM in the Wards environment.
WARDS DISASTER RECOVERY The written plan for the recovery of Wards Mainframe
PLAN hardware and software in the event of a disaster or
catastrophe failure, as such plan may be modified by
Wards from time to time.
23
<PAGE>
ONLINE SERVICES:
<TABLE>
<CAPTION>
REGION APPLICATION DAILY SATURDAY SUNDAY USERS
<S> <C> <C> <C> <C> <C> <C> <C>
@WPDB BAL CATALOG 06:45-21:15 06:45-21:15 06:45-21:15 25
@WPDC CHI CATALOG 07:45-22:15 07:45-22:15 07:45-22:15 25
@WPDK KAN CATALOG 06:00-23:59 06:00-23:59 06:00-23:59 25
@WPDO OAK CATALOG 09:45-23:59 09:45-23:59 09:45-23:59 25
@WPM1 EMAIL 05:00-24:00 05:00-24:00 05:00-24:00 50
@WPFN FINANCE 06:00-19:30 06:00-19:30 06:00-19:30 50
@IMSADC IMS 00:01-24:00 00:01-24:00 00:01-24:00 1
@IRLM1 IRLM 00:01-24:00 00:01-24:00 00:01-24:00 1
@WPLN MIPS 08:00-19:30 08:00-19:30 50
@WPMP MPCS 06:00-19:30 06:00-19:30 300
NETMASTR NETMASTER 00:01-24:00 00:01-24:00 00:01-24:00 1
@WPDS NEW DISTRIBUTION 00:01-24:00 00:01-24:00 00:01-24:00 1
@WP02 PEOPLE 06:00-19:30 06:00-19:30 06:30-19:30 100
@WPTR PHOENIX 07:00-17:30 07:00-17:30 07:00-17:30 15
@WPFN PMS 06:00-19:30 06:00-19:30 06:00-19:30 25
@WPPS PRODUCT SVR 04:00-21:00 04:00-21:00 04:00-21:00 100
@GE75B00 RAPID REPLENIS 00:01-24:00 00:01-24:00 00:01-24:00 1
RJP RJP 00:01-24:00 00:01-24:00 00:01-24:00 17
RMDSPRDx RMDS ARCHIVERS 00:00-24:00 00:00-24:00 00:00-24:00 6
DBNVTAMx RMDS VIEWERS 00:01-24:00 00:01-24:00 00:01-24:00 400
@PTFFIN SIG CAS 06:00-23:00 06:00-23:00 3
@SPMC SIG CMS DAY 07:00-17:00 07:00-16:00 07:00-17:00 423
@SPMC SIG CMS EVE 17:00-24:00 16:00-24:00 17:00-24:00 158
@SPMC SIG CMS NIGHT 00:00-07:00 00:00-07:00 00:00-07:00 35
@PTFFIN SIG FINANCE 07:00-18:00 43
@SPPB SIG PACBASE 00:00-24:00 00:00-24:00 00:00-24:00 1
@SPPL SIG PALM 07:00-18:00 07:00-18:00 152
TSO SIG TSO 00:00-24:00 00:00-24:00 00:00-24:00 98
@PTFFIN SIG XYCOR 06:00-19:00 12
@WPME SMS MERCH 06:00-24:00 06:00-24:00 06:00-24:00 200
RJP SNA RJP 00:01-24:00 00:01-24:00 00:01-24:00 17
@Wtxx TEST CICS 08:00-21:00 08:00-21:00 08:00-21:00 10
TSO TSO 00:01-24:00 00:01-24:00 00:01-24:00 300
xGF43B01 WFI 00:01-24:00 00:00-24:00 00:00-24:00 21
</TABLE>
24
<PAGE>
BATCH REPORTS:
<TABLE>
<CAPTION>
APPLICATION DAILY SATURDAY SUNDAY COMMENTS
<S> <C> <C> <C> <C> <C>
ACCOUNTING 8:00 8:00 8:00 Mainframe UHB20* UHB45*
8:00 8:00 8:00 Generators UHB82*
ASAP Stk Ldgr UHW50*
ARTHUR 7:00 7:00 7:00 Rpts UJL*
BTMS 7:00 7:00 Rpts UJJD*
DBSS 7:00 7:00 7:00 Rpts UJE*
FASHIONS 7:00 8:00 Rpts UJF*
FAST FLOW 5:00 5:00 Scan Pits xGV80*
7:00 7:00 Load Reship UGF79*
7:30 7:30 Pick/Pack UGV26*
8:00 8:00 Cust. Pick Up xGV31*
8:00 8:00 Str. Rcpts UGV26N*
FLASH SALES 7:00 7:00 7:00 Rpts UEE10P*
IRIS 17:00 Payroll UIC62P*
6:00 Payroll-Mon UIC50P*
6:00 6:00 6:00 Rpts UIC50P*
LABOR SCHED 8:00 8:00 8:00 Rpts UES90* UES57*
MAPP 17:00 17:00 To MIAS UHP16*
8:00 Rpts UHP5*
PAYROLL 8:00 Ldgr chks 2 x monthly UOT35PLE
8:00 TC checks weekly UOT35P00
MPCS 7:00 7:00 Rpts UHYD*
NATIONAL PARTS 6:00 Rpts UDM*
PMS 10:00 10:00 Rpts UHV*
7:00 Rpts-Mon UHVW*
PPLU 7:00 Xmit to Stores UJJR77*
PS3 8:00 Tape ship-Mon UDD9X*
PVA 7:00 7:00 7:00 Rpts UHY*
RAPID REPL 16:00 16:00 16:00 Input from SMS UGE60*
RECEIVING 8:00 8:00 Rpts UGB30*
8:00 8:00 Update CIM xBG24*
SALES/CASH 8:00 8:00 8:00 Rpts UEH04*
ASAP ASAP ASAP Bank Recon UEH80*
SALES AUDIT 6:00 6:00 6:00 Broadcast xEA25P*
3:00 3:00 3:00 Credit interface xER15P00
18:00 Comm interface xER60P00
12:00 12:00 12:00 Rpts xER50P00
SMS 8:00 8:00 Order Run UJGD*
8:00 8:00 Rpts UJG27*
9:00 9:00 Rpts UJR32*
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
APPLICATION DAILY SATURDAY SUNDAY COMMENTS
<S> <C> <C> <C> <C> <C>
TANDEM 10:00 10:00 10:00 From Tandem UEL12T*
10:00 10:00 10:00 To Tandem UEL12M*
</TABLE>
CRITICAL BATCH REPORTS:
<TABLE>
<CAPTION>
APPLICATION DAILY SATURDAY SUNDAY COMMENTS
<S> <C> <C> <C> <C> <C>
PMS 10:00 Tue-Sat Checks UHV8T*
MAP 06:00 Monday Checks UHP26*
BTDC 05:00 Sun-Fri Reports URK*
IRIS 05:00 Mon-Sun Inbound UIC46P*
15:00 Mon-Fri Front End UIC41P*
Labor Sched 04:00 Sat To Stores UESW07*
PPLU 16:00 Wed Reports for stores UJJ87P02
Officer Reports 06:00 Mon-Fri Officer reports HW670202,
HW670205,
HW670211,
HW670230,
HW670242,
HW670285, EE300206,
EE300212, EE300213,
EE300218
</TABLE>
26
<PAGE>
SIGNATURE ONLINE AND BATCH SERVICES:
<TABLE>
<CAPTION>
BATCH ONLINE COMMENTS
<S> <C> <C> <C>
All reports P*
CAS 07:00 Mon-Fri 07:00 - 21:00 Mon - Sat
All reports P*
CMS 07:00 Mon - Fri 24 hours
All reports P*
FINANCIAL 07:00 Mon - Fri 07:00 - 18:00 Mon - Fri
All reports P*
PALM 06:00 Mon - Fri 07:00 - 18:00 Mon - Fri
All reports P*
XYCOR 07:00 Mon - Fri 07:00 - 19:00 Mon - Fri
</TABLE>
SIGNATURE TAPE HANDLING PROCEDURES:
CLIENT TAPES
1.) Client tapes will be returned to originating shipping location in 30 days
2.) All returning tapes shipped by 17:00 will be at the clients location by
10:00 the next day when reasonably possible.
3.) Special extra cost shipments picked up at Supplier Data Center by 10:00
will be shipped to any point in the United States the same day when
reasonably possible.
4.) Shipments required on weekends or holidays will be coordinated between
Signature and the Supplier tape library administrator.
5.) All outgoing tapes will be confirmed with copies of the DRA (Data Release
Authorization) to Signature by the next morning.
CLIENT TAPES RECEIVED AT Supplier Data Center
1.) Tapes received by noon will be slotted by the Supplier Tape Library by
17:00 and faxed to Signature with slot number.
2.) Tapes received after noon will be slotted by noon the next day.
27
<PAGE>
3.) All Signature client tapes will be managed by a dedicated Supplier tape
librarian. Hours are 06:00 - 18:00 Monday thru Saturday.
4.) All Signature client/production tapes will be entered into Foreign Tape
System. This is a Dbase program specifically designed for Signature. CDC
now owns this program & is responsible for its maintenance.
28
<PAGE>
WARDS DISASTER RECOVERY Summary
- - --------------------------------
1.) Wards has entered into an agreement with COMDISCO to provide hot-
site facilities. The entire contract is available for review.
COMDISCO will provide the highlights:
a.) 1 9021-900 CPU (1024 megs main, 1024 megs expanded)
1 3090-600J CPU (512 megs main, 512 megs expanded)
192 3390-3 DASD
208 3380-K DASD
16 3490 Cart
48 3480 Cart
2 3420 Tape
1 IBM 3725
b.) 1 VAX 6320
c.) 1 K20000 Tandem Himalayas
16 Mosiac Disk Drives
1 5196 Cart drive
d.) VSAT Hub
1 Out route
9 In Routes
9 Data port Clusters
e.) Recovery Facility
75 stations
75 Phone sets
75 PC/LAN Stations
2 Servers
f.) 1 7015-J40 RS/6000 w/256 mb of memory
24gb SCSI disk
2.) Wards has a contract Illinois. Contract delivery of with Data
Base inc. calls for 7days a critical data Located in Bensenville,
week, 365 days per files. Emergency year, pick-up and service
will be provided within 2 hours.
29
<PAGE>
ACCOUNT MANAGEMENT FUNCTIONS
PART OF THE IN-SCOPE SERVICES TO BE PROVIDED BY SUPPLIER IS THE MANAGEMENT
AND COORDINATION OF THE RELATIONSHIP BETWEEN THE WARDS APPLICATIONS DEVELOPMENT
GROUP, THE WARDS END USER COMMUNITY, AND THE DATA CENTER. SUPPLIER WILL PERFORM
THOSE FUNCTIONS CURRENTLY PERFORMED BY WARDS IS STAFF, INCLUDING THE FOLLOWING:
1) Supplier acts as interface between the data center and development
organizations
A) Coordinates changes / installs
B) Provides limited technical guidance to development
2) Supplier acts as interface between the data center and the user
community
A) Coordinates changes to processing schedules
B) Negotiaties level of service agreements between users/data
center
B) Initiates reprints on behalf of user
C) Follows escalation policy per the Procedures Manual
TECHNICAL SUPPORT - MISCELLANEOUS
1) Creates userids for all mainframe, Lotus Notes, UNIX, AS400 and E-Mail
2) Provides Level 1 support for all data security issues
3) Provides Level 1 support for all technical problems - MVS
4) Provides guidance in support of the disaster recovery effort
5) Manages the supply area function
30
<PAGE>
EXHIBIT C
CHARGES
INITIAL MONTHLY PROCESSING CHARGE (MPC) FOR 61 MONTH TERM:............$1,012,500
A. The Initial MPC shall be reduced during months 1 through 9 following
the Service Agreement Commencement Date by $222,222. In addition, the
MPC for the first month following the Service Agreement Commencement
Date shall be reduced to 50% of the Initial MPC, as adjusted,
resulting in an MPC of $395,239 for month 1 and an MPC of $790,478 for
months 2-9. The MPC for months 10-13 shall be $1,012,500. The MPC for
months 14-61 shall be $977,500. The foregoing amounts are subject to
adjustments as set forth below. For these purposes, month 1 shall be
deemed to be the calendar month in which the Service Agreement
Commencement Date occurs. If necessary, the MPC for month 1 and for
the last month of the term of the Service Agreement shall be pro-rated
appropriately. If month 1 is not a full calendar month, the MPC for
month 1 will be $790,478 (pro rated appropriately), and the MPC for
month 2 will be $395,239.
The MPC and MPC adjustment amounts described above assume that month 1
is April 1999 (completion of migration in April 1999) with the intent
that Wards is granted a $2,000,000 credit against the Initial MPC in
calendar year 1999. Therefore, if the migration is not completed in
April 1999 and month 1 is May 1999 or a subsequent month, then the
Initial MPC reduction described above for months 1 through 9 will be
adjusted to grant the $2,000,000 credit for month 1 and the remaining
months of 1999 and the 50% reduction will be applied to the adjusted
Initial MPC.
Supplier will pay to Wards or equipment lessors up to $2.4 million for
acquisition of hardware from Wards and assumption of equipment leases
by Supplier. In addition, Supplier shall be responsible for all
transfer, upgrade or other fees charged by third party vendors under
Third Party Contracts being assigned to Supplier.
The MPC includes amortization of one-time costs incurred by Supplier
in connection with the migration of Wards' data center, as set forth
on the attached schedule. Costs included in the amortization are
software transfer and upgrade costs; mainframe hardware acquisition
cost; mainframe lease obligations; network extension hardware and
software costs for the network extension to Supplier's data center
from Wards' corporate data center; and transition equipment and moves
(AS/400, Tandem, RS/6000's, DEC/VAX, Data Switch, Front-end equipment,
etc.).
If Wards elects to renew this Service Agreement at the end of the
sixty-one (61) month term, the Initial MPC should be reduced by
$125,000.
B. ALLOWANCES:
31
<PAGE>
- An Initial Monthly Processing Allowance (MPA) of up to 2,330 CPU Hours
(@ 103 MIPS)
- Includes all EXCP's
- Processing measured to 1/100 of CPU second
- CPU Hours includes TCB and SRB hours
-
- An Initial Monthly DASD Allowance of up to 2.7 TB (dedicated)
-
- An Initial Monthly On-Site Tape Storage Allowance of up to 175,000
cartridges
Definitions:
EXCP: Execute Channel Program, the initiation of a physical
input/output request to a computer processor channel subsystem and its
associated results.
SRB: Supervisor Request Block refers to that portion of the CPU time,
as reported by SMF, which was consumed indirectly by Wards'
application processing, such as the execution of supervisor and
operating system support functions.
TCB: Task Control Block refers to that portion of the CPU time, as
reported by SMF, which was consumed directly by Wards' application
processing.
SMF: System Management Facility refers to the IBM operating system
option which provides for the capture of system and application
perfromance and resource consumption. This is the basis for
accounting for the CPU time consumed by Wards' processing workloads.
C. GROWTH PROVISION
At any time, Wards may elect to increase its MPA, with corresponding
percentage increases to be made to its DASD and Tape Allowances, upon 60
days' prior written notice to Supplier. The MPC will be increased by the
product of 70% of the percentage increase over the Initial MPA times the
Initial MPC. No minimum purchase of additional capacity is required. In
the absence of such an advance election, Wards will be charged on a monthly
basis for resource usage in excess of allowances then in effect as set
forth below in paragraph E.
D. DOWNSIZING PROVISION
32
<PAGE>
(i) DOWNSIZING. The Target CPU Hour Consumption ("TCHC") at the
inception of this Agreement is 2,330 CPU hours (103 MIPS) per month. If
Wards' actual CPU consumption falls 15% below the TCHC (adjusted for PWR's
as described in (ii) below), Wards may elect to recalculate the MPC. The
MPC will be recalculated as follows:
The percentage reduction in CPU consumption below the TCHC will be
calculated. The MPC will be reduced by the product of 70% of the
percentage reduction in CPU consumption times the Initial MPC. Whenever a
recalculation is made, the MPA, the Monthly DASD Allowance and the Monthly
On-Site Tape Storage Allowance will each be reduced by the percentage
reduction in TCHC.
Wards may request a recalculation of the MPC under this section with 90
days' prior written notice to Supplier. Subsequent recalculations shall
require 90 days' prior written notice if the percentage reduction in CPU
consumption exceeds 10% and 60 days' notice if less than 10%. A
recalculation of the MPC may be requested up to once in each 12-month
period of this Agreement starting with the fourteenth (14th) month after
the Service Agreement Commencement Date. A recalculation of the MPC may
not be requested if the reduction in CPU consumption results from the
transfer of processing workload to another vendor.
PLANNED WORKLOAD REDUCTIONS. In addition, planned workload reductions
("PWR's") are described in the Table set forth below, and will result in
reductions to CPU, DASD and Tape Allowances and the MPC as set forth
therein The TCHC shall be adjusted to equal such revised CPU allowance.
If, however, such PWR's do not actually result in the projected decreases
in CPU, DASD and Tape consumption set forth in the Table, the cost
reductions will be decreased by the excess usage charges set forth in
paragraph E. Such PWR's shall result only from the sale of Signature, the
migration of the merchandising system to a mid-range environment or the
completion of Y2K testing, as the case may be, and not from the transfer of
such workload to another vendor. PWR's may be made at any time upon 60
day's notice to Supplier and shall not be counted as a recalculation of
the MPC pursuant to paragraph (i). Starting with the fourteenth (14th)
month after the Service Agreement Commencement Date, Supplier may provide
Services from a shared environment (dedicated LPAR) following a PWR.
Election of a PWR upon the occurrence of the sale of Signature, the
migration of the merchandising system to a mid-range environment, or the
completion of Y2K testing is at Wards' option and if Wards elects not to
take a PWR in any such event, the available capacity may be used by Wards
for normal processing volume growth subject to the other terms of this
Exhibit C.
WORKLOAD & COST REDUCTIONS
MONTGOMERY WARD MAINFRAME WORKLOAD PLANNED TO BE REMOVED
33
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
WORKLOAD CPU DASD Tape Cost
Reduction Reduction Reduction Reduction
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
614 hours
Signature (103) MIP) 526 GB 105,000 tapes $250,000
------------------------------------------------------------------------------------------------------
Merchandising 235 hours
System (103 MIP) 141 GB 4,300 tapes $ 55,500
------------------------------------------------------------------------------------------------------
74 hours
Y2K (103 MIP) 373 GB 1,500 tapes $ 40,000
------------------------------------------------------------------------------------------------------
</TABLE>
E. EXCESS USAGE CHARGES
- Wards agrees to pay $1,250 per CPU Hour (@ 103 MIPS) per month for all
CPU hours in excess of the then current Monthly Processing Allowance.
- Wards agrees to pay $390 per GB, per month, for all DASD in excess of
the then current Monthly DASD Allowance.
- Wards to pay $1.00 per tape, per month for all tapes or cartridges in
excess of the then current Monthly On-Site Tape Storage Allowance.
- The Parties agree that payment of Excess Usage Charges will be
assessed monthly.
F. PRINTING
Laser printing will be charged at the rate of $11.50 per 1000 feet (with
paper) or $9.50 per 1000 feet (without paper) and will be invoiced monthly.
Charges include one delivery per business day in the Chicago metropolitan
area. Additional deliveries or deliveries outside of the Chicago
metropolitan area will be invoiced at cost plus 20% unless such additional
deliveries are due to a failure to meet Service Levels.
G. PASS - THROUGH EXPENSES
All telecommunications line charges and associated channel extenders and
front-end processors necessary for connectivity between Wards' corporate
complex, Signature and Supplier's data center, shall be Pass-Through
Expenses, to be invoiced monthly to Wards without mark-up.
H. MINIMUM MPC
During the Term of this Service Agreement, the MPC shall in no event be
less than the Minimum MPC, calculated as follows:
34
<PAGE>
MMPC = MINIMUM MPC
PWR$ = REDUCTION TO THE MPC RESULTING FROM ACTUAL PWR'S, AS SET FORTH
ABOVE.
Months 1-13 - 1.0x($1,012,500 - PWR$) = MMPC
MONTHS 14-25 - 0.8X($1,012,500 - PWR$) = MMPC
MONTHS 26-61 - 0.6X($1,012,500 - PWR$) = MMPC
I. TERMINATION CHARGES
In the event of Termination for Convenience by Wards under Section
18.2(a) of the Master Agreement or Termination for Cause by Supplier
under Section 18.1(e) of the Master Agreement, Wards shall reimburse
Supplier for the remaining unamortized costs of Supplier related to
the transfer and migration of Wards' data center and the provision of
Services to Wards (reduced by the amount of any lease obligations
assumed by Wards), in accordance with the attached schedule. Upon such
payment, Supplier shall convey and assign any Transferred Equipment to
Wards, and Wards shall assume any related equipment lease and software
license obligations.
DATA CENTER ONE-TIME COSTS AMORTIZATION
---------------------------------------
SCHEDULE
--------
<TABLE>
<CAPTION>
Beginning Unamortized
Principal Monthly Interest Principal Principal
Month Balance Payment Expense Reduction Balance
- - ------- ------------------ --------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
1 $6,167,777.00 $125,060.28 $54,728.24 $ 70,332.04 $6,097,444.96
2 $6,097,444.96 $125,060.28 $60,835.30 $ 64,224.98 $6,033,219.98
3 $6,033,219.98 $125,060.28 $60,271.95 $ 64,788.32 $5,968,431.66
4 $5,968,431.66 $125,060.28 $59,704.86 $ 65,355.42 $5,903,076.23
5 $5,903,076.23 $125,060.28 $59,133.98 $ 65,926.30 $5,837,149.93
6 $5,837,149.93 $125,060.28 $58,559.29 $ 66,500.99 $5,770,648.94
7 $5,770,648.94 $125,060.28 $57,980.78 $ 67,079.50 $5,703,569.44
8 $5,703,569.44 $125,060.28 $57,398.40 $ 67,661.88 $5,635,907.57
9 $5,635,907.57 $125,060.28 $56,812.15 $ 68,248.13 $5,567,659.44
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
10 $5,567,659.44 $125,060.28 $56,221.98 $ 68,838.29 $5,498,821.14
11 $5,498,821.14 $125,060.28 $55,627.89 $ 69,432.39 $5,429,388.75
12 $5,429,388.75 $125,060.28 $55,029.83 $ 70,030.45 $5,359,358.30
13 $5,359,358.30 $125,060.28 $54,427.78 $ 70,632.50 $5,288,725.80
14 $5,288,725.80 $125,060.28 $53,821.72 $ 71,238.56 $5,217,487.25
15 $5,217,487.25 $125,060.28 $53,211.62 $ 71,848.65 $5,145,638.59
16 $5,145,638.59 $125,060.28 $52,597.46 $ 72,462.82 $5,073,175.77
17 $5,073,175.77 $125,060.28 $51,979.20 $ 73,081.08 $5,000,094.69
18 $5,000,094.69 $125,060.28 $51,356.81 $ 73,703.47 $4,926,391.22
19 $4,926,391.22 $125,060.28 $50,730.28 $ 74,330.00 $4,852,061.22
20 $4,852,061.22 $125,060.28 $50,099.57 $ 74,960.71 $4,777,100.52
21 $4,777,100.52 $125,060.28 $49,464.66 $ 75,595.62 $4,701,504.89
22 $4,701,504.89 $125,060.28 $48,825.51 $ 76,234.77 $4,625,270.13
23 $4,625,270.13 $125,060.28 $48,182.10 $ 76,878.18 $4,548,391.95
24 $4,548,391.95 $125,060.28 $47,534.40 $ 77,525.87 $4,470,866.08
25 $4,470,866.08 $125,060.28 $46,882.39 $ 78,177.89 $4,142,688.19
26 $4,142,688.19 $125,060.28 $46,226.03 $ 78,834.25 $4,063,853.94
27 $4,063,853.94 $125,060.28 $45,565.29 $ 79,494.99 $3,984,358.95
28 $3,984,358.95 $125,060.28 $44,900.15 $ 80,160.13 $3,904,198.82
29 $3,904,198.82 $125,060.28 $44,230.57 $ 80,829.71 $3,823,369.11
30 $3,823,369.11 $125,060.28 $43,556.53 $ 81,503.75 $3,741,865.36
31 $3,741,865.36 $125,060.28 $42,878.00 $ 82,182.28 $3,659,683.08
32 $3,659,683.08 $125,060.28 $42,194.94 $ 82,865.34 $3,576,817.74
33 $3,576,817.74 $125,060.28 $41,507.33 $ 83,552.95 $3,493,264.79
34 $3,493,264.79 $125,060.28 $40,815.13 $ 84,245.15 $3,409,019.64
35 $3,409,019.64 $125,060.28 $40,118.32 $ 84,941.96 $3,324,077.68
36 $3,324,077.68 $125,060.28 $39,416.86 $ 85,643.41 $3,238,434.27
37 $3,238,434.27 $125,060.28 $38,710.73 $ 86,349.55 $2,902,084.72
38 $2,902,084.72 $125,060.28 $37,999.89 $ 87,060.39 $2,815,024.33
39 $2,815,024.33 $125,060.28 $37,284.31 $ 87,775.96 $2,727,248.37
40 $2,727,248.37 $125,060.28 $36,563.97 $ 88,496.31 $2,638,752.06
41 $2,638,752.06 $125,060.28 $35,838.81 $ 89,221.46 $2,549,530.59
42 $2,549,530.59 $125,060.28 $35,108.83 $ 89,951.45 $2,459,579.14
43 $2,459,579.14 $125,060.28 $34,373.98 $ 90,686.30 $2,368,892.84
44 $2,368,892.84 $125,060.28 $33,634.22 $ 91,426.05 $2,277,466.79
45 $2,277,466.79 $125,060.28 $32,889.54 $ 92,170.74 $2,185,296.05
46 $2,185,296.05 $125,060.28 $32,139.89 $ 92,920.38 $2,092,375.67
47 $2,092,375.67 $125,060.28 $31,385.25 $ 93,675.03 $1,998,700.64
48 $1,998,700.64 $125,060.28 $30,625.57 $ 94,434.71 $1,904,265.93
49 $1,904,265.93 $125,060.28 $29,860.83 $ 95,199.45 $1,809,066.48
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
50 $1,809,066.48 $125,060.28 $29,090.99 $ 95,969.29 $1,713,097.20
51 $1,713,097.20 $125,060.28 $28,316.02 $ 96,744.26 $1,616,352.94
52 $1,616,352.94 $125,060.28 $27,535.88 $ 97,524.39 $1,518,828.55
53 $1,518,828.55 $125,060.28 $26,750.55 $ 98,309.73 $1,420,518.82
54 $1,420,518.82 $125,060.28 $25,959.97 $ 99,100.31 $1,321,418.51
55 $1,321,418.51 $125,060.28 $25,164.13 $ 99,896.15 $1,221,522.36
56 $1,221,522.36 $125,060.28 $24,362.98 $100,697.30 $1,120,825.06
57 $1,120,825.06 $125,060.28 $23,556.49 $101,503.79 $1,019,321.26
58 $1,019,321.26 $125,060.28 $22,744.62 $102,315.66 $ 917,005.60
59 $ 917,005.60 $125,060.28 $21,927.34 $103,132.94 $ 813,872.66
60 $ 813,872.66 $125,060.28 $21,104.61 $103,955.67 $ 709,916.99
</TABLE>
EXHIBIT D
SERVICE LEVEL AGREEMENT
FOR DATA CENTER SERVICES
------------------------
37
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. GENERAL.................................................. 1
A. General
B. Definitions.......................................... 1
C. Measurement.......................................... 2
D. Effective Date for Service Levels.................... 2
E. Revisions............................................ 2
F. Single Point of Contact.............................. 3
II. SERVICE LEVELS
A. Definitions.......................................... 3
B. Service Level Measures............................... 3
C. Service Levels....................................... 3
III. SERVICE LEVEL CREDITS.................................... 4
A. Credits.............................................. 4
B. Method of Calculation................................ 4
C. Frequency Factor..................................... 5
D. Excused Performance Problem.......................... 5
E. Time Limit........................................... 5
IV. SERVICE LEVEL TERMINATION EVENTS......................... 6
A. Definition........................................... 6
B. Repeated Service Level Failures...................... 6
C. Repeated Critical Service Level Failures............. 7
D. Catastrophic Level of Service........................ 7
E. Qualification........................................ 8
</TABLE>
<PAGE>
SERVICE LEVEL AGREEMENT
-----------------------
FOR DATA CENTER SERVICES
------------------------
I. GENERAL
A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT.
This Service Level Agreement is entered into under the Master Agreement for
Information Technology Services between Acxiom Corporation ("Supplier") and
Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and
pertains to Service Agreement No. 2: Data Center Services entered into by Wards
and Supplier. Any inconsistency between this Agreement, the Service Agreement
and the Master Agreement will be resolved pursuant to Section 2.3 of the Master
Agreement.
B. DEFINITIONS
In this Service Level Agreement ("SLA"), the terms listed below shall
have the indicated meanings. Other terms may be defined in other
sections of this SLA. Terms used in this SLA without definition have
the meanings ascribed to them in the Master Agreement or Service
Agreement.
1. Service Level Measure - For any Service identified in this SLA,
---------------------
the method specified in this SLA for quantitatively calculating
Supplier's actual performance. The results of these calculations
are compared with Service Levels to evaluate Supplier's
compliance with Service Levels.
2. Service Levels - For any Service identified in this SLA, the
--------------
required quantitative level or degree of performance by Supplier
specified in this SLA as the "Service Level." The Service Levels
are the minimally acceptable levels of service for the Services.
Any failure to meet a Service Level is unacceptable and may
constitute, depending upon the facts and circumstances, a
material breach of Supplier's obligations under the Service
Agreement.
3. Increased Impact Level - For any Service identified in this SLA,
----------------------
the required quantitative level or degree of performance by
Supplier specified in this SLA as the "Increased Impact Level."
Any failure to meet an Increased Impact Level is unacceptable and
may constitute, depending upon the facts and circumstances, a
material breach of Supplier's obligations under the Service
Agreement.
39
<PAGE>
4. Critical Service Levels - Service Levels associated with those
-----------------------
Services that are most important to the conduct of Wards'
operations, which are the subject of this Service Agreement.
5. Service Level Credits - The amounts which Wards shall have the
---------------------
option, but not the obligation, to recover as liquidated damages,
in lieu of any other monetary remedies Wards may have, each time
Supplier fails to meet the Service Levels for any reason other
than those specified in Section III.D of this SLA. Service Level
Credits are calculated in the manner described in Section III of
this SLA.
6. Service Level Termination Event - An occurrence or series of
-------------------------------
occurrences of deficient performance by Supplier in performing
the Services specified in this SLA as a "Service Level
Termination Event." The occurrence of a Service Level
Termination Event constitutes, depending upon the facts and
circumstances, a material breach of Supplier's performance
obligations under this Service Agreement and gives Wards the
right to terminate this Service Agreement for cause.
C. MEASUREMENT
Unless otherwise stated in this SLA, each Service Level Measure shall
be calculated on a complete calendar month basis. Performance results
shall be measured and reported based on actual results with any
exceptions for Excused Performance Problems reported separately.
D. EFFECTIVE DATE FOR SERVICE LEVELS
The Service Levels provided for in this SLA shall be applicable
beginning effective on the Service Agreement Commencement Date.
E. REVISIONS
1. From time to time during the Term, the Parties agree to negotiate
in good faith to add, delete, or modify then-existing Service
Level Measures, Service Levels, and Increased Impact Levels to
reflect changes in Wards' business requirements or objectives.
All such changes shall be adopted in the form of a signed written
amendment to this SLA.
2. In the event that any applicable system or function is replaced
during the Term by a comparable system or function, the Service
Level Measure, Service Level, and Increased Impact Level for such
replacement system or function shall, to the extent reasonably
practicable (i) be defined during the first 30 days of such
replacement, and (ii) must be at least equivalent
40
<PAGE>
to the then-existing Service Level Measure, Service Level, and
Increased Impact Level for the replaced system or function
(assuming the replacement system is capable of delivering the
same Service Levels as the replaced system).
3. At all times during the Term, Supplier shall provide the Services
in a manner that meets or exceeds the then-existing Service
Levels. The remedies for failure to do so shall include the
remedies defined in this SLA, the Service Agreement, and the
Master Agreement.
F. SINGLE POINT OF CONTACT
Regardless of whether any failure by Supplier to meet a Service Level
is attributable to Supplier or an Excused Performance Problem,
Supplier shall provide a single point of contact to address resolution
of such failure and shall act promptly to address the problem causing
the failure. Unless otherwise agreed by Wards, the Supplier Project
Executive or his/her designee, shall be the Supplier's single point of
contact.
II. SERVICE LEVELS
A. DEFINITIONS
Certain technical definitions are included in the Glossary of Terminology
included as part of Exhibit B to this Service Agreement.
B. SERVICE LEVEL MEASURES
ONLINE AVAILABILITY
--------------------
OBJECTIVE: Monitoring Online Services defined in Exhibit B (the "Online
Services") availability and performance according to defined
targets. Starting and stopping defined Online Services according
to specified service availability schedules. Initiating Problem
Management procedures to rectify any performance or availability
failures.
DEFINITION: To be available, each ONLINE SERVICES must be: (1) Accessible and
usable to Wards User Community according to Wards established
schedule indicated in Schedule ONLINE SERVICES set forth in
Exhibit B; (2) Minimum required files open and accessible to each
ONLINE SERVICES as documented in the Procedures Manual; (3)
Availability is calculated utilizing ONLINE SERVICES as:
WEIGHT is the total number of users per application as set forth
in Exhibit B(Online Services).
41
<PAGE>
WEIGHTED MINUTES SCHEDULED is defined as the number of users of an
application, as indicated in Online Services, times the number of
minutes that application is scheduled to be available as indicated in
Online Services.
WEIGHTED MINUTES LOST is defined as the number of users of an
application who are impacted by the loss of online usage of that
application, as indicated in Online Services, and is calculated as
(which will not include calculation of files unavailable when entire
region is down ):
(Minutes Scheduled for that application-Region Minutes Down for that
--------------------------------------------------------------------
application -File Unavailable Minutes for that application)* Weight
-------------------------------------------------------------------
for that application
--------------------
LEVEL OF SERVICE CALCULATION is the sum for all applications of:
-----------------------------
(Weighted Minutes Scheduled)-(Weighted minutes Lost)
----------------------------------------------------
Weighted Minutes Scheduled
METHOD: Monitoring all Online Services to ensure their performance and
availability remains within stated service levels.. The Supplier will
provide console or other appropriate management processes to control
the Wards mainframe environments within their control.
Service Level:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Values Metrics
----------------------------------------------------------------------
<S> <C>
Service Level - 99.5% of all Online Services have been
maintained to Wards schedules.
----------------------------------------------------------------------
Increased Impact - Less than 99.0% of all Online Services have
been maintained to Wards schedules.
----------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Associates, applications, distribution and stores.
RESPONSIBILITY: Supplier
PERIOD: As stated in ONLINE SERVICES in Exhibit B
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
BATCH REPORTS AVAILABILITY
--------------------------
42
<PAGE>
OBJECTIVE: Monitoring Batch Reports availability and performance according to
defined targets. Ensuring availability, electronically or otherwise
of defined Batch Reports according to the service schedules stated
in Exhibit B. Initiating Problem Management procedures to rectify
any performance or availability failures. Certain Applications have
been designated as critical to Wards' business and are included in
the Table of Critical Service Levels under Section II.C. of this
Service Level Agreement. The Critical Services Levels have batch
reports Service Levels that are calculated in the same manner as
provided below.
DEFINITION: The Suppliers processes for Batch Reports monitoring and control
within the Wards mainframe processing environments.
METHOD: Monitoring all Batch Reports to ensure their availability remains
within stated service levels. The Supplier will provide batch or
other appropriate management processes to control the Wards
mainframe environments within their control.
SERVICE LEVEL:
<TABLE>
<CAPTION>
-----------------------------------------------------------
Values Metrics
-----------------------------------------------------------
<S> <C>
Service Level - 99.7% of all Batch Reports have been
produced and made available according
to Ward's schedules as outlined in
Exhibit B.
-----------------------------------------------------------
Increased Impact - Less than 99.5% of all Batch Reports
have been produced and made available
according to Ward's schedules.
------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Associates, applications, distribution and stores.
RESPONSIBILITY: Supplier
PERIOD: As stated in BATCH SERVICES in Exhibit B
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
CRITICAL BATCH REPORTS AVAILABILITY
-----------------------------------
OBJECTIVE: Monitoring Critical Batch Reports availability according to
defined targets. Ensuring availability, electronically or
otherwise of defined Critical Batch Reports according to the
service schedules stated in Exhibit B. Initiating Problem
Management procedures to rectify any availability failures.
DEFINITION: The Suppliers processes for Critical Batch Reports monitoring
and control within the Wards mainframe processing
environments.
43
<PAGE>
METHOD: Monitoring all Critical Batch Reports to ensure their
availability remains within stated service levels. The
Supplier will provide batch or other appropriate management
processes to control the Wards mainframe environments within
their control.
SERVICE LEVEL:
<TABLE>
<CAPTION>
---------------------------------------------------------------
Values Metrics
---------------------------------------------------------------
<S> <C>
Service Level - No more than two (2) Critical Batch
Reports have been produced or made
available late according to Ward's
schedules as outlined in Exhibit B .
---------------------------------------------------------------
Increased Impact - More than three (3) Critical Batch
Reports have been produced or made
available late according to Ward's
schedules as outlined in Exhibit B .
---------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Associates, applications, distribution and stores.
RESPONSIBILITY: Supplier
PERIOD: As stated in CRITICAL BATCH SERVICES in Exhibit B
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
SIGNATURE ONLINE AVAILABILITY
------------------------------
OBJECTIVE: Monitoring SIGNATURE ONLINE SERVICES availability and
performance according to defined targets. Starting and
stopping defined Signature Online Services according to
specified service availability schedules. Initiating Problem
Management procedures to rectify any performance or
availability failures.
DEFINITION: To be available, each SIGNATURE ONLINE SERVICES must be: (1)
Accessible and usable to Wards User Community according to
Wards established schedule indicated in the schedule of
SIGNATURE ONLINE SERVICES set forth in Exhibit B; (2) Minimum
required files open and accessible to each SIGNATURE ONLINE
SERVICES as directed by Wards; (3) Availability is calculated
utilizing SIGNATURE ONLINE SERVICES as:
WEIGHT is the total number of users per application as set
forth in Exhibit B(Signature Online and Batch Services).
WEIGHTED MINUTES SCHEDULED is defined as the number of users
of an application, as indicated in Signature Online and Batch
Services, times the number of minutes that
44
<PAGE>
application is scheduled to be available as indicated in
Signature Online and Batch Services.
WEIGHTED MINUTES LOST is defined as the number of users of an
application who are impacted by the loss of online usage of
that application, as indicated in Signature Online and Batch
Services, and is calculated as (which will not include
calculation of files unavailable when entire region is
down):
(Minutes Scheduled for that application-Region Minutes Down
-----------------------------------------------------------
for that application -File Unavailable Minutes for that
-------------------------------------------------------
application)* Weight for that application
-----------------------------------------
LEVEL OF SERVICE CALCULATION is the sum for all applications
----------------------------
of:
(Weighted Minutes Scheduled)-(Weighted minutes Lost)
----------------------------------------------------
Weighted Minutes Scheduled
METHOD: Monitoring all Signature Online Services to ensure their
performance and availability remains within the stated
service levels. The Supplier will provide console or other
appropriate management processes to control the Wards
mainframe environments within their control.
SERVICE LEVEL:
<TABLE>
<CAPTION>
--------------------------------------------------------------
Values Metrics
--------------------------------------------------------------
<S> <C>
Service Level - 99.7% of all Signature
Online Services have
been maintained to
Wards schedules.
-------------------------------------------------------------
Increased Impact - Less than 99.5% of all
Signature Online
Services have been
maintained to Wards
schedules.
------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Ward's service level obligations to Signature
RESPONSIBILITY: Supplier
PERIOD: As stated in SIGNATURE ONLINE SERVICES in Exhibit B
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for Service
Level Metrics, Action Type-I
45
<PAGE>
SIGNATURE TAPE HANDLING ACCURACY
--------------------------------
OBJECTIVE: Ensuring accurate processing of Signature inbound tapes and
accurate distribution of Signature outbound tapes. Initiating
Problem Management procedures to rectify any tape handling
failures.
DEFINITION: The Suppliers processes for Signature Tape processing,
distribution and control within the Wards mainframe processing
environments.
METHOD: Monitoring all SIGNATURE TAPE HANDLING to ensure their
processing, distribution and control remains within specified
tolerances. The Supplier will provide tape management processes
to control the Signature Tape Handling within their control.
MEASUREMENT PERIOD: Monthly
SERVICE LEVEL:
<TABLE>
<CAPTION>
-------------------------------------------------------
Values Metrics
-------------------------------------------------------
<S> <C>
Service Level - More than one (1) Signature
tape sent to the wrong
recipient every rolling six
(6) months.
-------------------------------------------------------
Increased Impact - More than three (3) Signature
tapes sent to the wrong
recipient every rolling
six (6) months.
-------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Ward's service level obligations to Signature.
RESPONSIBILITY: Supplier
PERIOD: 24 hours/day, 7 days/week
RESOURCE RANGE: 150 Tapes every six months.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
SIGNATURE TAPE TURNAROUND TIME
------------------------------
OBJECTIVE: Ensuring processing of Signature inbound tapes and Signature
outbound tapes are performed in accordance with the Signature
Tape Handling procedures. Initiating Problem Management
procedures to rectify any tape handling failures.
46
<PAGE>
DEFINITION: Signature Tape Turnaround Time is defined as the time from which
a Signature inbound tape is received at the data center until it
is made available for use. All inbound Signature tapes are to be
hung in the tape library within twenty-four (24) hours upon
receipt at the data center.
METHOD: Monitoring all Signature Tape Handling to ensure turnaround time
remains within specified tolerances. The Supplier will provide
tape management processes to control the Signature Tape Handling
within their control.
SERVICE LEVEL:
<TABLE>
<CAPTION>
------------------------------------------------------------------
Values Metrics
-----------------------------------------------------------------
<S> <C>
Service Level - Supplier will be allowed no more than
one (1) Signature tape not available
within twenty-four (24) hours of
receipt at Supplier's data center for
use every rolling six (6) months.
-----------------------------------------------------------------
Increased Impact - Supplier will be allowed no more than
three (3) Signature tapes not available
for use within twenty-four (24) hours
of receipt at Supplier's data center,
every rolling six (6) months.
-----------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Ward's service level obligations to Signature.
RESPONSIBILITY: Supplier
PERIOD: 24 hours/day, 7 days/week
RESOURCE RANGE: 150 Tapes every six months.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for Service
Level Metrics, Action Type-I
SIGNATURE SCHEDULED DOWNTIME
----------------------------
OBJECTIVE: To provide for a minimum amount of required Signature scheduled
mainframe downtime for each mainframe.
DEFINITION: Signature scheduled downtime is the number of hours a Signature
computer system is scheduled down in a given time period.
47
<PAGE>
METHOD: The Supplier provided change management system will be used to
report on all requests for Signature scheduled downtime.
MEASURE PERIOD: Monthly
SERVICE LEVEL:
<TABLE>
<CAPTION>
-----------------------------------------------------------
Values Metrics
-----------------------------------------------------------
<S> <C>
Service Level - The number of hours that any
Signature mainframe is scheduled
down will not exceed six (6)
hours per month.
-----------------------------------------------------------
Increased Impact - The number of hours that any
Signature mainframe is scheduled
down will not exceed seven (7)
hours per month.
-----------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Ward's level of service obligations to Signature.
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 7x24x365.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-II
DATA BACKUP, ARCHIVING, AND RESTORATION
---------------------------------------
Objective: To ensure proper safeguards are being taken by the Supplier to
protect critical Wards data with consistent, reliable, and
documented process(es) for management of data backups, data
archives, and off-site data rotation across the Wards
environments under the Supplier's span of control.
DEFINITION: The Suppliers processes for Data Backup and Archiving of
critical data within the Wards environments. Ensuring the
Supplier processes are backing up or archiving these critical
files according to Wards specifications.
METHOD: The Supplier will document and maintain the location of
critical Wards data and the process used to backup and restore
this data if required. The Supplier will provide appropriate
tools and processes for managing and measuring compliance with
established Data Backup and Archiving guidelines within their
control.
48
<PAGE>
<TABLE>
<CAPTION>
SERVICE LEVEL:
----------------------------------------------------------------------------------------
VALUES METRICS
----------------------------------------------------------------------------------------
<S> <C>
Service Level - 99.9% of all critical data is being backed up and
stored as required according to Wards specifications.
----------------------------------------------------------------------------------------
Increased Impact - Less than 99.2% of all critical is being backed up
and stored as required according to Wards
specifications.
----------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Offices & Associates, Supplier's Operational Data
Restoration Interface Plan to Wards Disaster Recovery Plan
RESPONSIBILITY: Supplier
PERIOD: Monthly
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
DISASTER RECOVERY SERVICES
--------------------------
OBJECTIVE: To provide Mainframe Disaster Recovery services for the Wards
Disaster Recovery Plan, in the event of a declared disaster to
any site providing services for or to Wards by Supplier. The
target is to provide on-going MVS services to Wards within 24
hours of a declared disaster.
DEFINITION: A disaster is declared when Supplier services to Wards are
interrupted due to significant equipment, computer or network
related failure longer than a 24 hour period.
METHOD: A declared disaster will be announced by the Supplier Contract
Manager within 24 hours of the outage.
<TABLE>
<CAPTION>
SERVICE LEVEL:
----------------------------------------------------------------------------------------
VALUES METRICS
----------------------------------------------------------------------------------------
<S> <C>
Service Level Complete Operating System and sub-system
restoration of Supplier services to Wards
within twenty-four (24) hours of declaration of
disaster or as specified by the Wards
disaster recovery plan.
----------------------------------------------------------------------------------------
Increased Impact Complete Operating System and sub-system restoration
of Supplier services to Wards within thirty-
----------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
----------------------------------------------------------------------------------------
<S> <C>
six (36) hours of declaration of disaster or as specified
by the Wards disaster recovery plan.
----------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards
RESPONSIBILITY: Supplier
PERIOD: Daily
Hours of Operation: N/A
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
DISASTER RECOVERY TEST
----------------------
OBJECTIVE: To ensure the restoration of Wards' mainframe processing in the
event of a disaster, in accordance with the Wards' Disaster
Recovery Plan.
DEFINITION: The Supplier will define and demonstrate the accuracy of the
documented mainframe disaster recovery plan, which is
accomplished by conducting annual mainframe disaster recovery
testing.
METHOD: Complete restoration of mainframe operating system and sub-
systems at Supplier hot-site location.
<TABLE>
<CAPTION>
SERVICE LEVEL:
---------------------------------------------------------------------------------
VALUES Metrics
---------------------------------------------------------------------------------
<S> <C>
Service Level - 90% of all scheduled activities are completed
according to the Wards Disaster Recovery Test
Plan.
---------------------------------------------------------------------------------
Increased Impact - Less than 80% of all scheduled activities are
completed according to the Wards Disaster
Recovery Test Plan.
---------------------------------------------------------------------------------
</TABLE>
IMPACT: Low
AFFECTED AREA: All Wards' stores, offices, automobile centers, POS
locations, and data center
RESPONSIBILITY: Supplier
PERIOD: The Supplier on an annual basis will conduct a disaster
recovery test with selected Wards entities recovering
specific operations in accordance with the Wards
disaster recovery plan. The Supplier will report on the
success of each
50
<PAGE>
test within one week of the completion of a test with a
designated Wards' representative.
RESOURCE RANGE: This service level is valid as long as Wards
participates in the disaster recovery planning and
testing process as defined in the Wards Disaster
Recovery Plan and as mutually agreed to by Supplier and
Wards
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-III
SERVICE SPECIFICATIONS FOR SYSTEM MANAGEMENT
- - --------------------------------------------
REQUEST TIME TO COMPLETE
------------------------
OBJECTIVE: To insure that pre-defined mainframe environment modification
requests are completed in an acceptable amount of time as
mutually agreed upon by Wards and Supplier.
DEFINITION: Mainframe environment modification requests are those mainframe
management functions performed by the Supplier in routine
support of the mainframe processing environment as requested by
Wards.
METHOD: The Supplier provided change management system or Supplier
provided help desk problem tracking system will be used to
calculate time to complete.
<TABLE>
<CAPTION>
SERVICE LEVEL:
-----------------------------------------------------------------------------------------------
VALUES METRICS
-----------------------------------------------------------------------------------------------
<S> <C>
Service Level 95% of requests completed by target date as specified in
the Procedures Manual or as mutually agreed upon by Wards
and Supplier.
-----------------------------------------------------------------------------------------------
Increased Impact Less than 90% of requests completed by target date as
specified in the Procedures Manual or as mutually agreed
upon by Wards and Supplier.
-----------------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards associates.
RESPONSIBILITY: Supplier
PERIOD: Monthly
51
<PAGE>
HOURS OF OPERATION: 7x24x365.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - I
RESPONSE TIME
-------------
OBJECTIVE: Supplier will provide acceptable response times for end users.
DEFINITION: The first component of response time for the mainframe on-line
environment is measured by the percentage of transactions that
complete within the defined time limits (internally measured
elapsed time, which includes CICS and first period TSO).
METHOD: Data Capture: The Supplier will use Supplier provided manual
records, job logs, systems logs, and any other tools available to
determine the response time
Measurement Interval: At least once per period or by exception
(i.e. missing a threshold). Supplier will provide monthly summary
reports to Wards Management for review.
<TABLE>
<CAPTION>
SERVICE LEVEL:
--------------------------------------------------------------------------------------------------
DESCRIPTION DATA POINTS
--------------------------------------------------------------------------------------------------
<S> <C>
Service Level 98.5% of internal mainframe transactions are
completed in less than one (1) second.
--------------------------------------------------------------------------------------------------
Increased Impact Less than 98% of internal mainframe transactions
are completed in less than one (1) second
--------------------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Offices and Associates
RESPONSIBILITY: Service Performance: Supplier provides all services
related to this Service Level.
Compliance Management: Supplier provides calculation,
reporting and analysis for this Service Level
PERIOD: Monthly
HOURS OF OPERATION: 7 x 24 x 365.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
52
<PAGE>
SERVICE SPECIFICATIONS FOR HELP DESK
- - ------------------------------------
FIRST CALL RESOLUTION
---------------------
OBJECTIVE: To ensure the high quality and immediate resolution of user calls
on the first attempt to the Supplier's Help Desk group.
DEFINITION: The opening and closing of a problem ticket by the Supplier's
Help Desk when an Wards user places a call.
METHOD: Supplier will track and report first call resolution statistics
via its problem ticket system, and will report results and
resolution improvement programs to Wards monthly.
<TABLE>
<CAPTION>
SERVICE LEVEL:
----------------------------------------------------------------------------------------------
VALUES METRICS
----------------------------------------------------------------------------------------------
<S> <C>
Service Level 75% or more calls are resolved while user is on the
initial phone call within 10 minutes.
----------------------------------------------------------------------------------------------
Increased Impact Less than 65% calls are resolved while user is on the
initial phone call within 10 minutes.
----------------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards associates.
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 7x24x365.
RESOURCE RANGE: This service level is valid within a range of 12,000
calls per period.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type -III
ANSWER TIME
-----------
OBJECTIVE: To allow Wards personnel the ability to place calls to the
Supplier's Help Desk site during normal, high volume hours (Peak)
without an unreasonable number of rings before the call is
answered by a live agent.
DEFINITION: Answer time is the number of seconds it takes a Wards associate
or representative of Wards to connect with the Supplier.
53
<PAGE>
METHOD: Answer time will be measured in the number of seconds it takes
for a Wards associate or a representative of Wards to be
connected to the Supplier's representative. Reporting will be
tied to an automated Service Level monitoring and tracking
system.
<TABLE>
<CAPTION>
SERVICE LEVEL:
----------------------------------------------------------------------------------------------
VALUES METRICS
----------------------------------------------------------------------------------------------
<S> <C>
Service Level 93% of total calls answered by a live agent in less
than 30 seconds
----------------------------------------------------------------------------------------------
Increased Impact Less than 90% of total calls are answered by a live
agent in less than 30 seconds.
----------------------------------------------------------------------------------------------
</TABLE>
IMPACT: Medium
AFFECTED AREA: Wards associates.
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 7x24x365.
RESOURCE RANGE: This service level is valid within a range of 12,000
calls per period.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type -II
CALL ABANDONMENT
----------------
OBJECTIVE: To insure Wards user calls to Supplier's Help Desk group for
problem reporting and resolution are answered by the Supplier
prior to the user giving up on reporting the problem. This is
referred to as call abandonment rate.
DEFINITION: The call abandonment rate is the proportion of calls that come
into the Supplier's Help Desk which either hang up or are
disconnected before the Supplier answers the phone.
METHOD: The statistics for measuring call abandonment rates are captured
via an ACD system. The Supplier will utilize statistics generated
by the ACD to produce reporting that allows for the monitoring
and tracking of the Supplier's compliance with this service
specification.
<TABLE>
<CAPTION>
SERVICE LEVEL:
----------------------------------------------------------------------------------------------
VALUES METRICS
----------------------------------------------------------------------------------------------
<S> <C>
Service Level Call abandonment rate will not exceed 5% of total
received calls during any period
----------------------------------------------------------------------------------------------
Increased Impact Call abandonment rate exceeds 8% of received calls
during any period
----------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE>
IMPACT: Low
AFFECTED AREA: Wards associates.
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 7x24x365.
RESOURCE RANGE: This service level will be valid within a range of
12,000 calls per period.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type -III
HELP DESK SATISFACTION SURVEY
-----------------------------
OBJECTIVE: To ensure the service levels measure those criteria which impact
the Wards associates by testing to determine whether end user
feedback is consistent with the reported performance against
service levels. The satisfaction survey will measure the combined
efforts of the Supplier and Wards to deliver a consistently high
level of end support for Wards IS services.
DEFINITION: The Satisfaction Survey will rate Wards user satisfaction by
service category. A successful quality review is based upon the
degree of correlation between the user community's perceptions of
service performance and actual service level results.
METHOD: Data Capture: The Wards Satisfaction Survey will be conducted at
least annually. The Satisfaction Survey will be based on a scale
of 1-5, with 1 being worst and 5 being best level of
satisfaction. The results will be calculated by the Supplier and
audited by Wards for accuracy. Measurement Intervals shall be at
least once per period or at Wards's discretion.
<TABLE>
<CAPTION>
THRESHOLD:
-----------------------------------------------------------------------------------------------
VALUES METRICS
-----------------------------------------------------------------------------------------------
<S> <C>
Service Level The total average score for the Wards Satisfaction
Survey is 4.01 or higher.
-----------------------------------------------------------------------------------------------
Increased Impact The total average score for the Wards Satisfaction
Survey is less than 4.0
-----------------------------------------------------------------------------------------------
</TABLE>
IMPACT: Medium
AFFECTED AREA: Wards associates.
RESPONSIBILITY: Service Performance: The Supplier is responsible for
providing satisfactory service to all end users.
Compliance Management: The Supplier will provide the
calculations, reporting and analysis for this Service Level.
55
<PAGE>
PERIOD: At least annually
HOURS OF OPERATION: N/A
RESOURCE RANGE: N/A
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type -III
C. SERVICE LEVELS
The Service Levels are identified in the following table and in the Table
for Critical Service Levels. Each Service Level is assigned a Severity Weight
in either the following table or in this table for Critical Service Levels,
which is used in the calculation of the Service Level Credits. The Severity
Weights are expressed as percentages, totaling 100% for all Service Levels, and
approximate the relative severity of the impact on Wards operations of failures
to meet the respective Service Levels. The parties acknowledge that these
percentages are approximations of probable severity and relative importance and
do not limit Wards' right to contend that one or more failures to meet one or
more of the Service Levels may constitute a material breach of the Agreement.
Upon 60 days advance notice to Supplier, Wards may adjust the Severity Weights
of the respective Service Levels as Wards deems appropriate so long as the total
of such percentages does not exceed 100%.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
SERVICE LEVEL SERVICE
SERVICE LEVEL DESCRIPTION MEASUREMENT SEVERITY WEIGHT LEVEL INCREASED
STANDARD ID IMPACT LEVEL
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ONLINE SERVICES ONLINE 15 99.5% of all Less than
AVAILABILITY Online 99.0% of all
Services have Online
been Services have
maintained to been
Wards maintained to
schedules. Wards
schedules.
- - -----------------------------------------------------------------------------------------------------------
BATCH REPORTS BATCH REPORTS 5 99.7% of all Less than
AVAILABILITY Batch Reports 99.5% of all
have been Batch Reports
produced and have been
made available produced and
according to made available
Ward's according to
Ward's
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
schedules. schedules.
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CRITICAL BATCH BATCH REPORTS 30 No more than More than
REPORTS AVAILABILITY two (2) three (3)
Critical Batch Critical Batch
Reports have Reports have
been produced been produced
or made or made
available late available late
according to according to
Ward's Ward's
schedules as schedules as
outlined in outlined in
Exhibit B. Exhibit B.
- - -----------------------------------------------------------------------------------------------------------
SIGNATURE ONLINE SIGNATURE 15 99.7% of all Less than
SERVICES ONLINE Signature 99.5% of all
AVAILABILITY Online Signature
Services have Online
been Services have
maintained to been
Wards maintained to
schedules. Wards
schedules.
- - -----------------------------------------------------------------------------------------------------------
SIGNATURE TAPE 5 Supplier will Supplier will
HANDLING be allowed no be allowed no
ACCURACY more than one more than
(1) Signature three (3)
tape sent to Signature
the wrong tapes sent to
recipient the wrong
every rolling recipient
six (6) months. every rolling
six (6) months.
- - -----------------------------------------------------------------------------------------------------------
SIGNATURE TAPE 3 Supplier will Supplier will
TURNAROUND TIME be allowed no be allowed no
more than one more than
(1) Signature three (3)
tape not Signature
available tapes not
within available for
twenty-four use within
(24) hours of twenty-four
receipt at (24) hours of
Supplier's receipt at
data center Supplier's
for use data center,
every rolling
six (6)
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------
every months.
rolling six
(6) months.
- - -----------------------------------------------------------------------------------------------------------
SIGNATURE 3 The number of The number of
SCHEDULED hours that any hours that any
DOWNTIME Signature Signature
mainframe is mainframe is
scheduled down scheduled down
will not will not
exceed six (6) exceed seven
hours per (7) hours per
month. month.
- - -----------------------------------------------------------------------------------------------------------
DATA BACKUP, 2 99.9% of all Less than
ARCHIVING AND critical data 99.2% of all
RESTORATION is being critical is
backed up and being backed
stored as up and stored
required as required
according to according to
Wards Wards
specifications. specifications.
- - -----------------------------------------------------------------------------------------------------------
DISASTER Complete Complete
RECOVERY Operating Operating
SERVICES System and System and
sub-system sub-system
restoration of restoration of
Supplier Supplier
services to services to
Wards within Wards within
twenty-four thirty-six
(24) hours of (36) hours of
declaration of declaration of
disaster or as disaster or as
specified by specified by
the Wards the Wards
disaster disaster
recovery recovery plan.
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
<TABLE>
- - -----------------------------------------------------------------------------------------------------------
plan.
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DISASTER 1 90% of all Less than 80%
RECOVERY TEST scheduled of all
activities are scheduled
completed activities are
according to completed
the Wards according to
Disaster the Wards
Recovery Test Disaster
Plan. Recovery Test
Plan.
- - -----------------------------------------------------------------------------------------------------------
REQUEST TIME TO 2 95% of Less than 90%
COMPLETE requests of requests
completed by completed by
target date as target date as
specified in specified in
the Procedures the Procedures
Manual or as Manual or as
mutually mutually
agreed upon by agreed upon by
Wards and Wards and
Supplier. Supplier.
- - -----------------------------------------------------------------------------------------------------------
RESPONSE TIME 2 98.5% of Less than 98%
internal of internal
mainframe mainframe
transactions transactions
are completed are completed
in less than in less than
one (1) second. one (1) second.
- - -----------------------------------------------------------------------------------------------------------
FIRST CALL 5 75% or more Less than 65%
RESOLUTION calls are calls are
resolved while resolved while
user is on the user is on the
initial phone initial phone
call within 10 call within 10
minutes. minutes.
- - -----------------------------------------------------------------------------------------------------------
ANSWER TIME 5 93% of total Less than 90%
calls answered of total calls
by a live are answered
agent in less by a live
than 30 seconds agent in less
than 30
seconds.
- - -----------------------------------------------------------------------------------------------------------
CALL ABANDONMENT 2 Call Call
abandonment abandonment
rate will not rate exceeds
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------
exceed 5% of 8% of received
total received calls during
calls during any period
any period
- - -----------------------------------------------------------------------------------------------------------
HELP DESK 5 The total The total
SATISFACTION average score average score
SURVEY for the Wards for the Wards
Satisfaction Satisfaction
Survey is 4.01 Survey is
or higher. less than 4.0.
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
Critical Service Levels are those so important to Customer's business
that Vendor's continued failure to deliver can result in significant damage
to the business. The Critical Service Levels measure Critical Batch Report
Availability and are defined in the following table:
<TABLE>
<CAPTION>
SERVICE LEVEL APPLICATION DESCRIPTION
STANDARD ID
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PMS Checks
- - ----------------------------------------------------------------------------------------------------------------
MAP Checks
- - ----------------------------------------------------------------------------------------------------------------
BTDC Reports
- - ----------------------------------------------------------------------------------------------------------------
IRIS Inbound
- - ----------------------------------------------------------------------------------------------------------------
LABOR SCHED To Stores
- - ----------------------------------------------------------------------------------------------------------------
PPLU Reports for Stores
- - ----------------------------------------------------------------------------------------------------------------
OFFICER REPORTS Officer Reports
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
III. SERVICE LEVEL CREDITS
A. CREDITS
In each case of a failure to satisfy a Service Level Supplier will, within
five (5) days from the identification of the deviation from the applicable
Service Level, provide to Wards a plan of activities which will allow Supplier
to satisfy the applicable Service Level at the earliest date
<PAGE>
practicable. In addition, Wards shall be entitled to recover a Service Level
Credit for such Service Level calculated in the manner described below,
provided, however, that the aggregate amount of such Service Level Credits for
any given month will not exceed ten percent (10%) of Supplier's monthly charges,
under this Service Agreement, for the applicable month (excluding Pass-Through
Expenses, if any). If a single event directly causes the failure to achieve more
than one Service Level then only one Service Level Credit will apply. In such
event, Wards will select the Service Level that will be used for the calculation
of the Service Credit.
B. METHOD OF CALCULATION
If Supplier fails to meet or exceed a Service Level, the Severity Weight
corresponding to that Service Level, expressed as a percentage, will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any). If Supplier's performance fails to meet an Increased Impact
Level for any Service Level, the Severity Weight corresponding to that Service
Level, expressed as a percentage, will be doubled and such percentage will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) (this calculation being in lieu of, and not in addition to, the
credit calculation for the corresponding Service Level failure). To calculate
the total Service Level Credit due to Wards for the applicable month, the
amounts calculated for each Service Level or Increased Impact Level as described
above will be totaled and such amount shall be available as a credit to Wards
against Supplier's invoice for the applicable month.
C. FREQUENCY FACTOR
In any case where Supplier fails to achieve the same Service Level
(including failure to achieve the designated Increased Impact Level for that
Service Level) in two consecutive months or in any four months in any 12-month
period, the applicable Severity Weight shall be doubled and such percentage will
be multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month(excluding Pass-Through Expenses and Special
Charges, if any) and for any subsequent months in which Supplier fails to
achieve such Service Level or Increased Impact Level; provided, however, that in
no case will Supplier be liable for total Service Credits which exceed ten
percent (10%) of the applicable monthly invoice month(excluding Pass-Through
Expenses and Special Charges, if any).
The Service Credits will revert to the method of calculation provided in Section
III.A. above in the following circumstances:
1. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and
the failure in the second month is caused by a root problem that is
different from the root problem that was the cause of the failure in
the first month, the calculaton will revert to the method
61
<PAGE>
of calculation in Section III.A. following four consecutive months of
achieving the Service Level.
2. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and
the failure in the second month is caused by a root problem that is
the same as the root problem that was the cause of the failure in the
first month, the calculation will revert to the method of calculation
in Section III.A. following ten consecutive months of achieving the
Service Level.
Nothing in the preceding two paragraphs will excuse the application of the
frequency factor in the calculation of Service Credits if a subsequent failure
to achieve a Service Level would otherwise make the frequency factor apply.
D. EXCUSED PERFORMANCE PROBLEM
Supplier shall not be liable to pay Wards Service Level Credits for
any failure to meet a Service Level to the extent that such a failure
is directly attributable to (i) a Force Majeure Event; (ii) breaches
of this Agreement by Wards, provided that Supplier has provided Wards
with reasonable notice of such breach immediately after becoming aware
of it and determining that such breach will adversely impact
Supplier's performance of Services and Supplier has used all
Commercially Reasonable Efforts to perform notwithstanding such
breach; (iii) acts or omissions of Wards (including acts and omissions
of third parties acting on behalf of Wards under a written agreement),
provided that Supplier has provided Wards with reasonable notice of
such act or omission immediately after becoming aware of it and
determining that such breach will adversely impact Supplier's
performance of the Services and Supplier has used all commercially
Reasonable Efforts to perform notwithstanding such acts or omissions
or (iv) the first manifestation of an extraordinary latent error or
defect in Equipment used by Supplier in providing the Services (and
any related repeated instances pending the applicable Supplier's
correction of the defect) if such defect was (1) unknown to Supplier
and (2) not disclosed in any information distributed by the third
party licensor, manufacturer, or distributor and (3) not preventable
or discoverable through normal testing or maintenance procedures. The
foregoing are referred to herein collectively as an "Excused
Performance Problem." Supplier shall be liable to grant Wards Service
Level Credits for any failure to meet a Service Level attributable to
any cause other than causes expressly included in the categories
listed above.
E. TIME LIMIT
If Supplier does not notify Wards of any Excused Performance Problem
(as
62
<PAGE>
described in Section III.D above) within ninety (90) days of the date
Supplier provides Performance Reports covering the time period during
which the Excused Performance Problem is alleged to have occurred,
then Supplier shall be deemed to have waived the claim of an Excused
Performance Problem.
IV. SERVICE LEVEL TERMINATION EVENT
A. DEFINITION
1. Measurement Event - For purposes of this section, a "Measurement
-----------------
Event" will be the monthly calculation of Supplier's actual
performance for each Service Level or Critical Service Level. The
total possible Measurement Events during any specific period of
time is the product of the number of months in that time period
times the number of Service Levels or Critical Service Levels, as
applicable.
2. Failure Event - For purposes of this section a "Failure Event"
-------------
shall be a specific Measurement Event for which Supplier fails to
achieve the relevant Critical Service Level(s) or Service
Level(s); provided, however, that any such failure caused by an
event described in Section III.D of this SLA shall not be counted
as a Failure Event. Any single event, act or omission that
causes multiple Service Levels to be missed will be counted as
one Failure Event.
B. REPEATED SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Service
Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(SERVICE LEVELS) EVENTS IN MEASUREMENT
PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 11 67
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve 22 134
- - --------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
Events Months
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increased Impact Level Rolling Six Months 7 67
Failure Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 15 134
Failure Events
- - --------------------------------------------------------------------------------------------------
</TABLE>
C. REPEATED CRITICAL SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Critical
Service Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(CRITICAL SERVICE EVENTS IN MEASUREMENT
LEVELS) PERIOD
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 2 6
Events
- - --------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 4 12
Events
- - ---------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 2 6
Failure Events
- - ---------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 4 12
Failure Events
- - ---------------------------------------------------------------------------------------------
</TABLE>
D. CATASTROPHIC LEVEL OF SERVICE
Recovery of the Data Center Services within twenty-four hours of the
scheduled time to recover those Services under the Wards Disaster
Recovery Plan.
64
<PAGE>
E. QUALIFICATION
Nothing in this Section IV is intended to imply that any lesser number
or different combination of occurrences of deficient performance by
Supplier may not also constitute a material breach of Supplier's
obligations warranting termination of the Service Agreement by Wards
for cause.
65
<PAGE>
EXHIBIT E
TRANSFERRED EQUIPMENT
<TABLE>
<CAPTION>
SSID#
TYPE-MODEL MFG DESCRIPTION SERIAL NUM FEATURES UCB S
<S> <C> <C> <C> <C> <C>
5500-3128 EMC DASD 3390-3 (C27) 1814000561 CDA 2560MB CACHE 606F
5500-9M48 EMC DASD (C28) 1814001099 CDA 2560MB CACHE 101F
9393-T82 IBM DASD RVA2 RAID-6 TURBO 1322050 (1)210GB X (1)210GB A0AF
(C33) ARRAY
9393-T82 IBM DASD RVA2 RAID-6 TURBO 1322065 (1)080GB X (2)210GB F0FF
(C34) ARRAY
9032-2 DSW ESCON DIRECTOR 011133 IBM 9032-2 IN DSW 9B1/9B2
CABINET
9032-2 DSW ESCON DIRECTOR 011293 IBM 9032-2 IN DSW 9B1/9B2
CABINET
9032-2 DSW ESCON DIRECTOR 011131 IBM 9032-2 IN DSW 9B3/9B4
CABINET
9032-2 DSW ESCON DIRECTOR 011294 IBM 9032-2 IN DSW 9B3/9B4
CABINET
3172 IBM COMMUNICATION CTL. 03895
4410 STK LSM 403181 UPGRADED TO 9310 00L0
4410 STK LSM 404370 UPGRADED TO 9310 00L1
4410 STK LSM 404382 UPGRADED TO 9310 00L2
4410 STK LSM 404428 UPGRADED TO 9310 00L3
4410 STK LSM 406285 UPGRADED TO 9310 00L4
9310 STK LSM 401024 00L6
4411 STK LCU 803188 UPGRADED TO 9311 00L0
4411 STK LCU 804391 UPGRADED TO 9311 00L3
4411 STK LCU 804392 UPGRADED TO 9311 00L1
4411 STK LCU 804393 UPGRADED TO 9311 00L2
4411 STK LCU 806236 UPGRADED TO 9311 00L4
9311 STK LCU 810258 00L6
4430 STK LMU FEATURE #2604 DUAL PRI 601728 00LMU
4480-M20 STK TAPE-CTLR LSM 000 201003 46L0
4480-M20 STK TAPE-CTLR LSM 001 201329 41L1
4480-M20 STK TAPE-CTLR LSM 000 201330 46L0
4480-M20 STK TAPE-CTLR LSM 001 201378 41L1
4480-M20 STK TAPE-CTLR LSM 003 201566 49L3
4480-M20 STK TAPE-CTLR LSM 003 201567 49L3
4480-M202 STK TAPE-CTLR 2011420 44YY
4480-M202 STK TAPE-CTLR 2011465 44YY
4480-M202 STK TAPE-CTLR LSM 002 308906 47L2
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
SSID#
TYPE-MODEL MFG DESCRIPTION SERIAL NUM FEATURES UCB S
<S> <C> <C> <C> <C> <C>
4480-M202 STK TAPE-CTLR LSM 002 308913 47L2
ACX
4480-M22 STK TAPE-MANUAL CSL 3000990 44YY
4480-M22 STK TAPE-MANUAL CSL 3002299 41YY
4480-M22 STK TAPE-MANUAL CSL 3002301 41YY
4480-M22 STK TAPE-MANUAL CSL 3004001 44YY
4480-M22 STK TAPE-MANUAL CSL 3012380 44YY
4480-M22 STK TAPE-MANUAL CSL 3012398 44YY
4480-M24 STK TAPE-AUTO LSM 000 3001071 46YY-L0
4480-M24 STK TAPE-AUTO LSM 000 3001073 46YY-L0
4480-M24 STK TAPE-AUTO LSM 000 3001075 46YY-L0
4480-M24 STK TAPE-AUTO LSM 000 3001110 46YY-L0
4480-M24 STK TAPE-AUTO LSM 003 3001337 44YY-L3
4480-M24 STK TAPE-AUTO LSM 001 3001603 41YY-L1
4480-M24 STK TAPE-AUTO LSM 004 3002330 47YY-L4
4480-M24 STK TAPE-AUTO LSM 001 3002331 41YY-L1
4480-M24 STK TAPE-AUTO LSM 001 3002367 41YY-L1
4480-M24 STK TAPE-AUTO LSM 002 3002369 47YY-L2
4480-M24 STK TAPE-AUTO LSM 002 3002370 47YY-L2
4480-M24 STK TAPE-AUTO LSM 002 3002525 47YY-L2
4480-M24 STK TAPE-AUTO LSM 004 3002807 49YY-L4
4480-M24 STK TAPE-AUTO LSM 004 3004770 49YY-L4
4480-M24 STK TAPE-AUTO LSM 004 3018850 49YY-L4
9490- STK TAPE-AUTO LSM 003 232008985 4CYY-L3
9490- STK TAPE-AUTO LSM 003 232008972 4CYY-L3
9490- STK TAPE-AUTO LSM 006 232009171 4DYY-L6
9490- STK TAPE-AUTO LSM 006 232009173 4DYY-L6
9490- STK TAPE-AUTO LSM 006 232008973 4DYY-L6
9490- STK TAPE-AUTO LSM 005 232009172 4DYY-L5
ACX
</TABLE>
67
<PAGE>
EXHIBIT F
WARDS FACILITIES AND EQUIPMENT
The Supplier will be obligated to pay Wards actual cost, but not to exceed more
than $1,500.00 monthly as rent for an estimated 1800 sq. ft. of work space for
eighteen (18) Supplier staff members within the Wards Corporate Complex at
location(s) as directed by Wards.
68
<PAGE>
EXHIBIT G
THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<C> <S> <C> <C> <C> <C> <C> <C>
Complex Compuware Corporation XPEDITER/CICS
Complex Compuware Corporation XPEDITER/TSO & ISPF
Complex Systemware, Inc. AFP Option
Complex Systemware, Inc. CPU Comm Option
Complex Systemware, Inc. JHS
Complex Systemware, Inc. X/PTR
CPU CGI Systems PACBASE PACBASE Application One non-
Development System specific CPU
CPU CGI Systems PACBASE PACBASE Application One non-
Development Systems specific CPU
CPU CGI Systems PACBASE PACBASE DB2 Interface One non-
specific CPU
CPU CGI Systems PACBASE PACBASE Year 2000 One non-
module specific CPU
CPU Compuware Abend-Aid/XLS 3 CPU's up
Corporation to model
9021-982
CPU Cross Access Data Connection to One non-
Corporation VSAM on MVS specific CPU
CPU H&W Computer SYSM SYSM/Calendaring and One non-
Systems Scheduling specific CPU
CPU H&W Computer Systems SYSM SYSM/CICS One non-
specific CPU
CPU H&W Computer Systems SYSM SYSM/MHS Gateway One non-
specific CPU
CPU H&W Computer Systems SYSM SYSM/PC One non-
specific CPU
CPU Innovation Data Innovation Access 3 Non-
Processing Method (IAM) specific
CPUs
CPU Isomorphic Systems ISO*FORM One non-
specific CPU
CPU Pathlore Software Phoenix Single non-
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C> <C>
Corporation specific CPU
CPU Platinum Technology ZARA 3 to 5 Non-
specific
CPUs
CPU Software Engineering PDS Fast Three non-
of America specific
CPUs
CPU Softworks VSAM I/O Plus 3 Non-
specific
CPUs
CPU Sterling Commerce Connect:Mailbox/SPC SPC Base Option One Intel PC
CPU Sterling Commerce Connect:Tracs BSC Connections One non-
specific CPU
CPU Xenos Group Inc. Console-Master One non-
specific CPU
MIPS-based Candle Corporation DB/Explain
License
MIPS-based Candle Corporation OMEGAVIEW
License
MIPS-based Computer Associates DADS Plus 690 MIPS
License International, Inc.
MIPS-based Computer Associates Endevor/MVS 690 MIPS
License International, Inc.
MIPS-based Computer Associates Endevor/MVS Endevor MVS 690 MIPS
License International, Inc. Automated
Configuration Manager
MIPS-based Computer Associates Endevor/MVS Endevor MVS Extended 690 MIPS
License International, Inc. Processor
MIPS-based Computer Associates Endevor/MVS Endevor MVS External 690 MIPS
License International, Inc. Security Interface
MIPS-based Computer Associates Endevor/MVS Endevor MVS Parallel 690 MIPS
License International, Inc. Development Manager
MIPS-based Computer Associates MICS MICS Base Set 690 MIPS
License International, Inc.
MIPS- Computer Associates MICS MICS CICS 690 MIPS
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
CPU CPU MODEL LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL SCOPE COMPONENT NAME NUMBER RESTRICTION
NUMBER
<S> <C> <C> <C> <C> <C> <C> <C>
based Associates Analyzer
License International,Inc.
MIPS-based Computer Associates MICS MICS DB2 Analyzer 690 MIPS
License International, Inc.
MIPS-based Computer Associates MICS MICS IMS Analyzer 690 MIPS
License International, Inc. with IMS Log Data
MIPS-based Computer Associates MICS MICS MVS Model 690 MIPS
License International, Inc. Generator
MIPS-based Computer Associates MIPS-Based License Summary Record for 690 MIPS
License International, Inc. Agreement multiple software
products
MIPS-based Computer Associates Multi-Image Integrity 690 MIPS
License International, Inc.
MIPS-based Computer Associates OPS/MVS 690 MIPS
License International, Inc.
MIPS-based Computer Associates OPS/MVS OPS/MVS Multi-System 690 MIPS
License International, Inc. Facility
MIPS-based Computer Associates PMO 690 MIPS
License International, Inc.
MIPS-based Computer Associates Quick Fetch 690 MIPS
License International, Inc.
MIPS-based Computer Associates TSOMON TSOMON with Online 690 MIPS
License International, Inc. Facility
MIPS-based Cybermation Inc. ESP Encore 749.9 MIPS
Limit
License
MIPS-based Cybermation Inc. ESP Workload Manager 749.9 MIPS
Limit
License
Site License BGS Systems BEST1/MVS
Site License BGS Systems Capture/MVS
Site License Boole & Babbage SG-Auto
Site Candle Corporation OMEGAMON II Omegamon 772 MIPS
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
CPU CPU MODEL LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL SCOPE COMPONENT NAME NUMBER RESTRICTION
NUMBER
<S> <C> <C> <C> <C> <C> <C> <C>
License II/CICS
Site License Candle Corporation OMEGAMON II Omegamon II/IMS 772 MIPS
Site License Candle Corporation OMEGAMON II Omegamon II/MVS 772 MIPS
Site License Chicago Interface FastList
Group
Site License Chicago Interface Package Utilities
Group
Site License Ciber, Inc. JMS
Site License Computer Associates One MVS
International, Inc.
Site License Computer Associates Optimizer
International, Inc.
Site License Compuware Corporation Abend-Aid/MVS
Site License Compuware Corporation File-Aid/Batch
Site License CONSUL Risk Consul/RACF
Management, Inc
Site License GT Software Inc. GT/ASSIST DOCM/GT
Site License GT Software Inc. GT/ASSIST Tutor/GT
Site License Landmark The Monitor for
CICS/MVS
Site License MacKinney Systems CICS-Spy
Site License MacKinney Systems Kwik-Key
Site License MacKinney Systems Show & Tell II
Site License Sterling Software Vision:Builder
(IMD)
Site License Sterling Software Vision:Transact
(IMD)
Site License TSI International Keymaster
Software
01197 IBM 3725 CPU - Basic IBM Corporation Emulation Program 5735- Non-tiered
XXB CPU
01197 IBM 3725 FEP - Basic IBM Corporation ACF/NCP V4 5668- 3725 FEP
854
01198 IBM 3725 FEP - DSLO IBM Corporation ACF/NCP V4 5668- 3725 FEP
854
10295 IBM CPU H&W Computer SYSB-II One Group 90
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C> <C>
9021-962 Systems CPU
10295 IBM IBM Corporation ACF/VTAM for V4 MVS/ESA 5695-117 Group 80 - DSLO
9021-962
10295 IBM CPU IBM Corporation CICS/ESA V3 5685-083 Group 80 - DSLO
9021-962
10295 IBM CPU IBM Corporation Database 2 Version 4 5695-DB2 Group 80 - DSLO
9021-962
10295 IBM CPU IBM Corporation High Level Assembler 5696-234 Group 80 - DSLO
9021-962 MVS, VM, VSE
10295 IBM CPU IBM Corporation ISPF V4 5655-042 Group 80 CPU
9021-962
10295 IBM CPU IBM Corporation Language Environment 5688-198 Group 80 - DSLO
9021-962 MVS & VM
10295 IBM CPU IBM Corporation MVS/DFP 5665-XA3 Group 80 CPU-DSLO
9021-962
10295 IBM CPU IBM Corporation MVS/ESA SP-JES3 V5 5655-069 Group 80 - DSLO
9021-962
10295 IBM CPU IBM Corporation OS PL/I Library 5668-911 Group 80 -DSLO
9021-962
10295 IBM CPU IBM Corporation RACF Version 2 MVS 5695-039 Group 80 - DSLO
9021-962
10295 IBM CPU IBM Corporation Report 5665-310 Non-tiered CPU
9021-962 Management/Distribution
10295 IBM CPU IBM Corporation System TCP/IP for MVS Feature 3689 5655-HAL Group 80 - DSLO
9021-962 - Base Product
10295 IBM CPU IBM Corporation TCP/IP for MVS Feature 3889 5655-HAL Group 80 - DSLO
9021-962 - CICS - Base
10295 IBM CPU IBM Corporation TSO/E V2 Product 5685-025 Group 80 - DSLO
9021-962
10295 IBM CPU Information EDA/SQL Full Function
9021-962 Builders, Inc. Server
10295 IBM CPU Information EDA/SQL LU 2 Remote Access
9021-962 Builders, Inc. Protocol
10295 IBM CPU Information EDA/SQL R/W Driver DB2
9021-962 Builders, Inc.
10295 IBM CPU Information EDA/SQL Read Driver
9021-962 Builders, Inc. VSAM...FOCUS
10295 IBM CPU Information EDA/SQL Smartmode Query
9021-962 Builders, Inc. Governor
</TABLE> CPU
73
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C> <C>
10295 IBM CPU SAS Institute Inc. SAS Base SAS
9021-962
10295 IBM CPU Syncsort Incorporated SyncSort/OS One Non-Specific
9021-962 CPU
10295 IBM CPU Syncsort Incorporated PROC SyncSort
9021-962
10295 IBM CPU - DSLO IBM Corporation DFDSS 5665-327 Non-tiered CPU
9021-962
10295 IBM CPU - DSLO IBM Corporation DFHSM 5665-329 Non-tiered CPU
9021-962
10295 IBM Designated BMC Software, Inc. AR/CTL for IMS Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. Data Packer/IMS Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. Delta IMS Virtual Tier Group 90
9021-962 CPU Terminal
10295 IBM Designated BMC Software, Inc. Image Copy Plus Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. Mastermind for DB2 Alter Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. Mastermind for DB2 Catalog Manager Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. Mastermind for DB2 DASD Manager Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. Pointer Checker Tier Group 90
9021-962 CPU Plus/IMS
10295 IBM Designated BMC Software, Inc. Reorg Plus for DB2 Tier Group 90
9021-962 CPU
10295 IBM Designated BMC Software, Inc. SUPEROPTIMIZER/CICS Tier Group 90
9021-962 CPU
10295 IBM Designated IBM Corporation IMS/ESA Version 5 Features 0141 5695-176 Group 80 DSLO
9021-962 CPU & 0163
10295 IBM Designated IBM Corporation Library Only 5668-940 Group 80 BASIC
9021-962 CPU
10295 IBM Designated IBM Corporation Resource MSMT Facility 5655-084 Group 80 DSLO
9021-962 CPU V5
10295 IBM Designated Information Builders, FOCUS Data Management
9021-962 CPU Inc.
10295 IBM Designated Information Builders, FOCUS DB2 R/W Interface
9021-962 CPU Inc.
10295 IBM Designated Information Builders, FOCUS Extended Matrix
9021-962 CPU Inc. Reporting
10295 IBM Designated Information Builders, FOCUS FOCNET Server Kernel
9021-962 CPU Inc.
10295 IBM Designated Information Builders, FOCUS FOCUS DBMS Server
9021-962 CPU Inc.
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT
SERIAL MODEL SCOPE COMPONENT NUMBER
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C>
10295 IBM 9021-962 Designated Information Builders, FOCUS LU 2 Remote Access
CPU Inc. FOC
10295 IBM 9021-962 Designated Information Builders, FOCUS Multiple Session
CPU Inc. Option
10295 IBM 9021-962 Designated Information Builders, FOCUS Report Generator
CPU Inc.
10295 IBM 9021-962 Designated Information Builders, FOCUS Smartmode for FOCUS
CPU Inc.
10295 IBM 9021-962 Designated Sterling Software Solve:Central
CPU (OMD)
10295 IBM 9021-962 Designated Sterling Software Solve:Netmaster
CPU (OMD)
10295 IBM 9021-962 Designated Storage Technology HSC
CPU Corporation
10295 IBM 9021-962 Model Compuware Corporation Abend-Aid DB2
10295 IBM 9021-962 Model Compuware Corporation Abend-Aid IMS
10295 IBM 9021-962 Model Compuware Corporation CICS Abend-Aid/FX
11714 IBM 9021-962 SAS Institute Inc. SAS Base SAS
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/Access IMS-DL/I
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/CALC
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/ETS
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/ETS
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/FSP
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/IML
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/IML
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/STAT
11714 IBM 9021-962 SAS Institute Inc. SAS SAS/STAT
11714 IBM 9021-962 CPU Computer Associates Easytrieve Plus
International, Inc.
11714 IBM 9021-962 Model Compuware Corporation Abend-Aid DB2
11714 IBM 9021-962 Model Compuware Corporation Abend-Aid IMS
<CAPTION>
CPU LICENSE
SERIAL REGISTRATION
NUMBER
<S> <C>
10295
10295
10295
10295
10295
10295
10295
10295 Specific CPU
10295 Specific CPU
10295 Specific CPU
11714
11714
11714
11714
11714
11714
11714
11714
11714
11714
11714 Specific CPU,
replaceable
11714 Specific CPU
11714 Specific CPU
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT
SERIAL MODEL SCOPE COMPONENT NUMBER
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C>
11714 IBM 9021-962 Model Compuware Corporation CICS Abend-Aid/FX
11714 IBM 9021-962 Model Compuware Corporation File-Aid DB2
11714 IBM 9021-962 Model Compuware Corporation File-Aid/IMS (ISPF)
11714 IBM 9021-962 Model Compuware Corporation File-AID/RDX
11714 IBM 9021-962 Model Compuware Corporation File-Aid/SPF/XE
11714 IBM 9021-962 Model Compuware Corporation XPEDITER/Xchange
11741 IBM 9021-962 CPU Syncsort Incorporated SyncSort/OS
11741 IBM 9021-962 CPU Syncsort Incorporated PROC SyncSort
11741 IBM 9021-962 CPU Allen Systems Group ASG-JCLPREP
11741 IBM 9021-962 CPU IBM Corporation 3270-PC File Transfer 5665-311
Program
11741 IBM 9021-962 CPU IBM Corporation ACF/SSP 5655-041
11741 IBM 9021-962 CPU IBM Corporation ACF/SSP Version 3 for 5665-338
MVS
11741 IBM 9021-962 CPU IBM Corporation ACF/VTAM for V4 MVS/ESA 5695-117
11741 IBM 9021-962 CPU IBM Corporation BookManager Read/MVS 5695-046
11741 IBM 9021-962 CPU IBM Corporation C/370 Library V2 5688-188
11741 IBM 9021-962 CPU IBM Corporation CICS FOR MVS/ESA 5655-018
11741 IBM 9021-962 CPU IBM Corporation CICS/ESA V3 5685-083
11741 IBM 9021-962 CPU IBM Corporation COBOL and CICS/VS 5785-ABJ
Command Level Conv Aid
11741 IBM 9021-962 CPU IBM Corporation Database 2 Version 4 5695-DB2
11741 IBM 9021-962 CPU IBM Corporation DFSMS/MVS V1 5695-DF1
11741 IBM 9021-962 CPU IBM Corporation Document Composition 5748-XX9
Facility
11741 IBM 9021-962 CPU IBM Corporation DSX Version 3 5668-915
<CAPTION>
CPU LICENSE
SERIAL REGISTRATION
NUMBER
<S> <C>
11714 Specific CPU
11714 Specific CPU
11714 Specific CPU
11714 Specific CPU
11714 Specific CPU
11714 Specific CPU
11741 One Non-Specific
CPU
11741
11741 One Group 80 CPU
11741
11741 Group 80 - Basic
11741 Group 80 - Basic
11741 Group 80 - DSLO
11741 Group 80 - Basic
11741 Group 80 - Basic
11741 Group 80 Basic
11741 Group 80 - BASIC
11741 Non-tiered CPU
11741 Group 80 - Basic
11741 Group 80 - Basic
11741 Non-tiered CPU
11741 Group 80 - Basic
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT
SERIAL MODEL SCOPE COMPONENT NUMBER
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C>
11741 IBM 9021-962 CPU IBM Corporation GDDM/MVS 5665-356
11741 IBM 9021-962 CPU IBM Corporation High Level Assem MVS, 5696-234
VM, VSE
11741 IBM 9021-962 CPU IBM Corporation Host Command 5668-985
Facility/Version 2
11741 IBM 9021-962 CPU IBM Corporation IBM COBOL for MVS and 5688-197
VM
11741 IBM 9021-962 CPU IBM Corporation IBM 5664-322
Information/Management
V3 (INFOMAN)
11741 IBM 9021-962 CPU IBM Corporation IMS/ESA BTS V2 5655-A14
11741 IBM 9021-962 CPU IBM Corporation IMS/ESA MRQ 5655-038
11741 IBM 9021-962 CPU IBM Corporation IMS/ESA Version 5 Features 0009 5695-176
11741 IBM 9021-962 CPU IBM Corporation ISPF V4 & 0031 5655-042
11741 IBM 9021-962 CPU IBM Corporation Language Environment 5688-198
MVS & VM
11741 IBM 9021-962 CPU IBM Corporation MVS/DFP 5665-XA3
11741 IBM 9021-962 CPU IBM Corporation MVS/ESA SP-JES3 V5 5655-069
11741 IBM 9021-962 CPU IBM Corporation Print Services 5695-040
Facility/MVS V2
11741 IBM 9021-962 CPU IBM Corporation RACF Version 2 MVS 5695-039
11741 IBM 9021-962 CPU IBM Corporation Report 5665-310
Management/Distribution
System
11741 IBM 9021-962 CPU IBM Corporation SMP/E for 5668-949
OS/VS2(MVS)&OS/VS1
11741 IBM 9021-962 CPU IBM Corporation TSO/E V2 5685-025
11741 IBM 9021-962 CPU IBM Corporation VS COBOL II Compiler/Lib/Debug 5668-958
11741 IBM 9021-962 CPU - Basic IBM Corporation Batch Terminal V1 5668-948
Simulator
11741 IBM 9021-962 CPU - Basic IBM Corporation OGL/370 V1 5688-191
11741 IBM 9021-962 CPU - Basic IBM Corporation Page Print Format 5688-190
Aid/370 V1
<CAPTION>
CPU
SERIAL LICENSE
NUMBER RESTRICTION
<S> <C>
11741 Group 80 - Basic
11741 Group 80 - DSLO
11741 Group 80 - Basic
11741 Group 80 - Basic
11741 Group 80 CPU
11741 Group 80 - DSLO
11741 Group 80 - BASIC
11741 Group 80 - Basic
11741 Group 80 CPU
11741 Group 80 - DSLO
11741 Group 80 CPU-DSLO
11741 Group 80 - DSLO
11741 Tier 1, 2, 3, 4,
5, 6
11741 Group 80 - DSLO
11741 Non-tiered CPU
11741 Group 80 - Basic
11741 Group 80 - DSLO
11741 Group 80 - Basic
11741 Non-tiered CPU
11741 Non-tiered CPU
11741 Non-tiered CPU
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C> <C>
11741 IBM 9021-962 CPU - IBM Corporation S/370-IBM 4300 5735- Non-tiered
Basic Host Prep XR3 CPU
11741 IBM 9021-962 CPU - IBM Corporation SDF II MVS V1 5665- Non-tiered
Basic 366 CPU
11741 IBM 9021-962 DSLO IBM Corporation DFDSS 5665- Non-tiered
CPU - 327 CPU
11741 IBM 9021-962 DSLO IBM Corporation DFHSM 5665- Non-tiered
CPU - 329 CPU
11741 IBM 9021-962 Designated BMC Software, Inc. AR/CTL for IMS Tier Group 90
CPU
11741 IBM 9021-962 Designated BMC Software, Inc. Data Packer/IMS Tier Group 90
CPU
11741 IBM 9021-962 Designated BMC Software, Inc. Delta IMS Virtual Tier Group 90
CPU Terminal
11741 IBM 9021-962 Designated BMC Software, Inc. Image Copy Tier Group 90
CPU Plus/IMS
11741 IBM 9021-962 Designated BMC Software, Inc. Load Plus/IMS Tier Group 90
CPU
11741 IBM 9021-962 Designated BMC Software, Inc. Mastermind for Alter Tier Group 90
CPU DB2
11741 IBM 9021-962 Designated BMC Software, Inc. Mastermind for Catalog Tier Group 90
CPU DB2 Manager
11741 IBM 9021-962 Designated BMC Software, Inc. Mastermind for DASD Tier Group 90
CPU DB2 Manager
11741 IBM 9021-962 Designated BMC Software, Inc. Pointer Checker Tier Group 90
CPU Plus/IMS
11741 IBM 9021-962 Designated BMC Software, Inc. Prefix Resolution Tier Group 90
CPU Plus
11741 IBM 9021-962 Designated BMC Software, Inc. Reorg Plus for Tier Group 90
CPU DB2
11741 IBM 9021-962 Designated BMC Software, Inc. Secondary Index Tier Group 90
CPU Utility
11741 IBM 9021-962 Designated BMC Software, Inc. SUPEROPTIMIZER Tier Group 90
CPU /CICS
11741 IBM 9021-962 Designated BMC Software, Inc. Unload Plus Tier Group 90
CPU
11741 IBM 9021-962 Designated Dynasoft Corp. Dynaplan
CPU
11741 IBM 9021-962 Designated Information Builders, FOCUS Data
CPU Inc. Management
11741 IBM 9021-962 Designated Information Builders, FOCUS DB2 R/W
CPU Inc. Interface
11741 IBM 9021-962 Designated Information Builders, FOCUS Extended
CPU Inc. Matrix
Reporting
11741 IBM 9021-962 Designated Information Builders, FOCUS FOCNET
CPU Inc. Server Kernel
11741 IBM 9021-962 Designated Information Builders, FOCUS FOCUS
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C> <C>
9021-962 d CPU Builders, Inc. DBMS Server
11741 IBM 9021-962 Designated Information Builders, FOCUS LU 2 Remote
d CPU Inc. Access FOC
11741 IBM 9021-962 Designated Information Builders, FOCUS Multiple
d CPU Inc. Option
Session
11741 IBM 9021-962 Designated Information Builders, FOCUS Report
d CPU Inc. Generator
11741 IBM 9021-962 Designated Information Builders, FOCUS Smartmode
d CPU Inc. for FOCUS
11741 IBM 9021-962 Designated Siemens Nixdorf NMS Maintenance RPQ951
d CPU Information (FT,DH,RO) 7(18,19)M
Systems UP 3
11741 IBM 9021-962 Designated Sterling Software Solve:Central
d CPU (OMD)
11741 IBM 9021-962 Designated Sterling Software Solve:Netmaster
d CPU (OMD)
11741 IBM 9021-962 Designated Storage Technology HSC
d CPU Corporation
11741 IBM 9021-962 Designated Tone Software OMC-Flash Flasher-JES3
d CPU Corporation
11741 IBM 9021-962 CPU IBM Corporation IBM C/C++ for 5655- Group 80
MVS/ESA V3 121 CPU
11741 IBM 9021-962 CPU IBM Corporation OS PL/I Compiler 5668- Group 80 -
& Library 910 Basic
40325 IBM Designated Levi, Ray & Shoup VMCF/VTAM
3090-600J d CPU
40325 IBM Designated Levi, Ray & Shoup VPS/TCPIP
3090-600J d CPU
40325 IBM Designated Levi, Ray & Shoup VPS/VTAM
3090-600J d CPU
40325 IBM Designated SAS Institute Inc. SAS Base SAS
3090-600J d CPU
40325 IBM Designated SAS Institute Inc. SAS SAS/CALC
3090-600J d CPU
40325 IBM Designated SAS Institute Inc. SAS SAS/ETS
3090-600J d CPU
40325 IBM Designated SAS Institute Inc. SAS SAS/FSP
3090-600J d CPU
40325 IBM Designated SAS Institute Inc. SAS SAS/IML
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
CPU CPU LICENSE VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
SERIAL MODEL SCOPE COMPONENT NUMBER RESTRICTION
NUMBER NAME
<S> <C> <C> <C> <C> <C> <C> <C>
40325 IBM d CPU
3090-
600J
40325 IBM Designate SAS Institute Inc. SAS SAS/STAT
3090- d CPU
600J
40325 IBM Designate Sterling Commerce Connect:Direct Shared DASD
3090- d CPU for MVS Facility
600J
40325 IBM Designate Sterling Commerce Connect:Direct SNA
3090- d CPU for MVS Connections
600J
40325 IBM Designate Syncsort Incorporated PROC SyncSort
3090- d CPU
600J
40325 IBM Designate Tone Software OMC-Flash Flasher-JES3
3090- d CPU Corporation
600J
40325 IBM CPU IBM Corporation ACF/VTAM for 5695-117 Group 60 - Basic
3090- V4 MVS/ESA
600J
40325 IBM CPU IBM Corporation High Level 5696-234 Group 60 - Basic
3090- Assembler
600J MVS, VM, VSE
40325 IBM CPU IBM Corporation ISPF V4 5655-042 Group 60 CPU
3090-
600J
40325 IBM CPU IBM Corporation Language 5688-198 Group 60 - Basic
3090- Environment
600J MVS & VM
40325 IBM CPU IBM Corporation MVS/DFP 5665-XA3 Group 60 CPU
3090-
600J
40325 IBM CPU IBM Corporation MVS/ESA SP- 5655-069 GROUP 60 BASIC
3090- JES3 V5
600J
40325 IBM CPU IBM Corporation OS PL/I Library 5668-911 Group 60-BASIC
3090-
600J
40325 IBM CPU IBM Corporation RACF Version 2 5695-039 Group 60 - Basic
3090- MVS
600J
40325 IBM CPU IBM Corporation Resource 5655-084 Group 60 - Basic
3090- Management
600J Facility V5
40325 IBM CPU IBM Corporation TCP/IP for MVS Feature 5655-HAL Group 60 - Basic
3090- 3633 - Base
600J Product
40325 IBM CPU IBM Corporation TCP/IP for MVS Feature 5655-HAL Group 60 - Basic
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
CPU CPU License VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
Serial Model Scope COMPONENT NUMBER RESTRICTION
Number NAME
<S> <C> <C> <C> <C> <C> <C> <C>
3090- 3833 - CICS HAL BASIC
600J
40325 IBM CPU IBM Corporation TSO/E V2 5685-025 Group 60 - Basic
3090-
600J
40325 IBM CPU Sterling Commerce Connect:Mailbox / Interconnect Specific CPU
3090- MVS Option
600J
40325 IBM CPU Sterling Commerce Connect:Mailbox / Mailbox Tiered, specific
3090- MVS MVS CPU
600J
40325 IBM CPU Sterling Software Sams:Disk
3090- (SMD)
600J
40325 IBM CPU Syncsort SyncSort/OS One Non-Specific
3090- Incorporated CPU
600J
40325 IBM CPU - IBM Corporation DFDSS 5665-327 Non-tiered
3090- Basic CPU
600J
40325 IBM CPU - IBM Corporation DFHSM 5665-329 Non-tiered
3090- Basic CPU
600J
40325 IBM Designate BMC Software, Inc. SUPEROPTIMIZER Tier Group 60
3090- d CPU /CICS
600J
40325 IBM Designate Sterling Commerce Connect:Mailbox/
3090- d CPU MVS
600J
40325 IBM Designate Sterling Software Solve:Central
3090- d CPU (OMD)
600J
40325 IBM Designate Sterling Software Solve:Netmaster
3090- d CPU (OMD)
600J
40325 IBM Designate Storage ExLM
3090- d CPU Technology
600J Corporation
40325 IBM Designate Storage ExPR
3090- d CPU Technology
600J Corporation
40325 IBM Designate Storage HSC
3090- d CPU Technology
600J Corporation
40325 IBM Model Compuware Abend-Aid DB2 Specific CPU
3090- Corporation
600J
40325 IBM Model Compuware File-Aid DB2 Specific CPU
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
CPU CPU License VENDOR NAME PRODUCT NAME PRODUCT PRODUCT LICENSE
Serial Model Scope COMPONENT NUMBER RESTRICTION
Number NAME
<S> <C> <C> <C> <C> <C> <C> <C>
3090- Corporation
600J
40325 IBM Model Compuware File-AID/RDX Specific CPU
3090- Corporation
600J
40325 IBM Model Compuware File-Aid/SPF/XE Specific CPU
3090- Corporation
600J
40325 IBM Non IBM Corporation Library Only 5668-940 DSLO
3090- specific
600J CPU
41209 IBM 3745 CPU IBM Corporation ACF/NCP V7 5648-063 Tier 1, 2, 2.5,
3, 4
E7289 IBM 3174 CPU IBM Corporation IBM Extended 5648-A17 Non-tiered CPU
Facilities Product
</TABLE>
82
<PAGE>
EXHIBIT H
WARDS SOFTWARE
APPLICATIONS
*CB - CREDIT/GE INTERFACE(JOBS *CB48 ONLY)
*GF - RETAIL DISTRIBUTION SYS(RDS)
*GN - WARDEX TRANSPORTATION CHARGES
*GS - SMALL TKT OP-REMNANTS(JOBS *GS12,*GS50,*GL50)
*GV - FORMAT NEW LABELS(JOBS *GV72,*GV74,*GV79)
*GV - NEW FAST FLOW(JOBS UGV06P00 THRU UGV15P00)
*GV - PROCESS SCANNED LABELS(REMAINING *GV JOBS)
*MC - MICS DATA BASE
*RG - INVENORY PROCESSING
*RK - BTDC OP ALLOCATION(JOBS *RK74 THRU *RK94)
*RK - BTDC OP DBSS EXTRACT(JOBS URK61,*RC05,*RK11)
*RK - BTDC OP TICKETS(JOBS *RK39 THRU *RK89)
*RK - NEXT DAY HOME DELIVERY(JOBS *RK87, 88)
BHY - PLAN VS ACTUAL(PVA)
CGF - RETAIL DISTRIBUTION SYSTEM(RDS)
CHY - PLAN VS ACTUAL(PVA)
COP - PEOPLE
COX - PEOPLE
COY - PEOPLE
ESP - SCHEDULER ADMINISTRATION JOBS
KHY - PLAN VS ACTUAL(PVA)
LDD - LECHMERE PRODUCT SERVICE(PS3)
LHY - DECISION SUPPORT(JOB LHYE0P07)
OHY - PLAN VS ACTUAL(PVA)
UBF - CATALOG MDSE
UBM - CATALOG MDSE
UBN - RECEIPTS
UBP - CATALOG MDSE
UBT - CATALOG MDSE
UBU - CATALOG MDSE
UBX - CATALOG MDSE
UBY - CATALOG MDSE
UDA - PRODUCT SERVICE
UDA - PRODUCT SERVICE DSX(JOBS UDA01 & UDA50)
UDC - PRODUCT TRACKING
UDD - PRODUCT SERVICE(PS3)
UDM - NATIONAL PARTS
UDR - PRODUCT SERVICE(PS3)
UDT - EXCESS STOCKED PARTS(ESP)
83
<PAGE>
UDX - MODEL INDEX
UDY - PARTS BY PHONE
UEA - SALES AUDIT
UEC - NAME/ADDR LOOKUP(JOBS UEC38,41-43,39PXX ONLY)
UEC - THIRD PARTY PAYMENT(TPPS)
UEE - FLASH SALES
UEE - FOCUS(JOB UEE02P01 ONLY)
UEH - SALES & CASH
UEK - NON RECEIPT REFUND(TANDEM)
UEL - CHECK AUTHORIZATION(TANDEM)
UEP - CELLULAR PHONE
UER - SALES AUDIT
UES - CENTRALIZED PAYROLL MGMT SYSTEM(CPMS)
UEV - AMERICAN GENERAL FINANCE(AGF)
UEX - DECISION SUPPORT(JOBS UEX01-UEX04)
UGE - RETAIL DISTRIBUTION SYSTEM(RDS)
UGF - NEW
UGG - VENDOR COMPLIANCE
UGN - ORDER ROUTING
UGV - FAST FLOW
UGY - ORDER TRACKING
UHA - POM(JOBS UHA50 - UHA60 ONLY)
UHA - VENDOR PURCHASE ORDERS(VPO)
UHB - MIAS
UHB - MIAS(JOBS UHB17 & UHB49 ONLY)
UHB - MIAS(JOBS UHB82P01, 05, 09, 20 ONLY)
UHC - MIAS(IRIS INTERFACE)
UHF - MIAS
UHJ - PRICE MANAGEMENT FACT SHEETS
UHK - MPCS(EXCEPT JOBS WITH UHKAW)
UHK - PROMO PLAN SUMMARY(UHKAW)
UHM - RETIREMENT/BENEFITS
UHN - VCB AUTHORIZATION
UHP - MAP
UHR - FIXED ASSETS(FA)
UHS - CENTRAL INVOICE MATCH SYSTEM(CIMS)
UHT - CORPORATE TAX(JOB UHT80P00 ONLY)
UHT - SALES TAX TABLE
UHU - MPCS
UHV - PROCUREMENT MANAGEMENT SYSTEM(PMS)
UHW - STOCK LEDGER
UHW - STOCK LEDGER (ALL UHW5XXXX JOBS ONLY)
UHX - ROBS
UHY - DECISION SUPPORT(JOBS UHYE0P04-P07)
84
<PAGE>
UHY - MPCS(JOBS UHYA-UHYD)
UHY - MPCS(JOBS UHYH-UHYK)
UHY - MPCS(JOBS UHYN-UHYZ)
UHY - MPCS(JOBS UHY1-UHY9)
UHY - PLAN VS ACTUAL(PVA) (JOBS UHYE-UHYG)
UHY - RATE OF SALE(ROS) (JOBS UHYL-UHYM)
UH1 - COBRA/CO-OP ADVERTISING
UH2 - NAPA/VCB CONTROL NUMBER(JOB UH219 ONLY)
UH2 - VCB - RGA
UH2 - VCB RETURNS
UH4 - VENDOR REPORT CARD
UH7 - MERCHANDISE RETURN/TRANSFER SYS (MROTS)
UIC - IRIS BATCH
UIP - CUSTOMER SATIFACTION
UIS - AUTO EXPRESS
UJA - PREFERRED CUST HANDLING
UJB - CAPP/RMP
UJC - MIPS
UJD - FACTORY ORDERS
UJE - DBSS (UJE03 JOBS ONLY)
UJE - DBSS SUPPORT SYSTEMS
UJE - FACT TAG(PRGMS BEGIN WITH UJE05A50 AND UP)
UJE - GENCO(JOBS BEGINNING WITH UJE29)
UJF - FASHION PURCH ORD(FPO) (EXCEPT UJF87 & UJF88)
UJF - FASHION REPORTING(JOBS UJF87 & UJF88 ONLY)
UJG - E3 SYSTEM (UJG53 JOBS)
UJG - SMS
UJH - MARI
UH7 - MERCHANDISE RETURN/TRANSFER SYS (MROTS)
UIC - IRIS BATCH
UIP - CUSTOMER SATIFACTION
UIS - AUTO EXPRESS
UJA - PREFERRED CUST HANDLING
UJB - CAPP/RMP
UJC - MIPS
UJD - FACTORY ORDERS
UJE - DBSS (UJE03 JOBS ONLY)
UJE - DBSS SUPPORT SYSTEMS
UJE - FACT TAG(PRGMS BEGIN WITH UJE05A50 AND UP)
UJE - GENCO(JOBS BEGINNING WITH UJE29)
UJF - FASHION PURCH ORD(FPO) (EXCEPT UJF87 & UJF88)
UJF - FASHION REPORTING(JOBS UJF87 & UJF88 ONLY)
UJG - E3 SYSTEM (UJG53 JOBS)
UJG - SMS
85
<PAGE>
UJH - MARI
UJH - SKU EXPLOSION(JOBS UJH22-UJH24 ONLY)
UJH - SMS AND POM SPLITTER(JOB UJH42)
UJI - SMS
UJJ - BIG TICKET MGMT SYS(BTMS) (JOBS UJJ01-UJJ69)
UJJ - PROMO SYSTEMS(JOBS UJJ70-UJJ99 & UJJ87P16)
UJK - BOIS(JOBS UJK40)
UJK - SMS
UJL - ARTHUR
UJL - ARTHUR DOWNLOAD(JOBS UJL(B,D,Z)BR15, UHYZBR14)
UJO - SMS
UJP - FAST FLOW(FASHIONS)
UJQ - SMS
UJR - SMS (ALL UJR JOBS)
UJT - DATA WAREHOUSE (AIX)
UJT - DATA WAREHOUSE (MVS)
UJV - EDI
UJW - EDI
UJX - SMS
UJY - PRICE MANAGEMENT PRICE CHANGE(PCS)
UJZ - MERCHANDISING XREF
UKA - CONSUMER AFFAIRS
ULF - EDI
UND - AIMS
UOR - PEOPLE AD-HOC
UOS - PEOPLE MONTHEND
UOT - TIMECARD AND MANAGEMENT PAYROLL
UOW - COMMISSIONS
UOX - PEOPLE
UOY - PEOPLE TABLE MAINTENANCE
URM - NEW DISTRO SYS(JOBS NOT DEFINED AS SMALL TKT)
URM - NEW SMALL TKT(JOBS ORY8A THRU URM45 AND UGV39)
URY - NEW DISTRIBUTION SYSTEM
USA - BIG TICKET SALES HISTORY
USM - ELECTRONIC MAIL(EMAIL)
UZA - ENDEVOR BACKUPS
86
<PAGE>
EXHIBIT I
SUPPLIER SOFTWARE
NONE
87
<PAGE>
EXHIBIT J
---------
TERMINATION/EXPIRATION ASSISTANCE
---------------------------------
1. GENERAL
a. Upon termination of the Agreement and regardless of the reason for
termination, Supplier will provide such information and reasonable assistance as
Wards reasonably requests to facilitate the smooth transition of the Services
being performed by Supplier or its agents to Wards or its designee (collectively
"Successor"). In the event this Service Agreement is terminated by Supplier for
cause, Supplier's pre-migration transition assistance obligations will be
provided at the hourly rate set forth in Schedule E to the Master Agreement,
payable in advance.
b. Supplier shall cooperate fully with and provide reasonable and
necessary input to Successor in the Successor's development of a plan for the
transition of all requested and appropriate operations from Supplier, which plan
will include performance of the Services described in Sections 2 through 4
below, and such other, similar services as Wards may reasonably require. Upon
request for such assistance, Supplier shall respond as promptly as possible, but
in any event within fifteen (15) days of the request, with a description of the
assistance to be provided by Supplier in connection with the transition.
c. Supplier's assistance in the development of the transition plan shall
include but not be limited to consulting services in the areas of defining
system software configurations and requirements, transferring or otherwise
transitioning systems software licenses and other third party contracts, and
other general assistance to the Successor to facilitate the transition of the
Services to Successor. Such consulting support shall include, at a minimum, the
detailed specification of Wards' hardware, software, and telecommunications
configurations and capacity requirements existing at the time of termination and
any future plans or requirements known at the time of termination.
d. To the extent allowable, Supplier shall provide to Successor copies of
software currently licensed and data (collectively "Backups") as described in
Section 2 through 4 below. All such Backups shall be in machine readable form,
either tape copies or direct electronic transmissions to Successor as reasonably
requested by Successor. All Backups of data shall be in a reasonable format
mutually agreed to and may be in an "unloaded, flat file" form or as an "image
copy" that preserves the existing data base or other file structures. In
addition, Supplier shall provide Wards, upon request, all most current tapes
containing Wards data or software.
Copies of documentation and the other types of control files or systems
management information described in Sections 2 through 4 below shall be in hard
copy form and, if available, in machine readable form.
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<PAGE>
e. Supplier shall provide to Successor reasonable access to Equipment,
Software, personnel, third parties and other resources, and shall provide
reasonable use of Equipment and Software then being used by Supplier to provide
the Services to Wards. With regard to Software transferred to the Successor to
the extent Supplier has the necessary rights, Supplier will provide available
program documentation to the Successor. Supplier's obligations under this
Paragraph (e) are subject to any prohibitions or restrictions on the use or
disclosure of Third Party Software contained in applicable license agreements.
Supplier shall provide Successor with complete and accurate copies of all
leases, licenses and other documents pertinent to the resources described
herein.
f. Supplier shall provide the Successor with such Wards specific
information and procedures as is then available regarding the Services as is
reasonably prudent or necessary in order for the Successor to assume
responsibility for the performance of the Services in an orderly manner and will
make reasonable efforts to minimize, as much as possible, disruption in the
operations of Wards.
g. Prior to providing termination/expiration assistance, Supplier will
have the right to require and receive from the Successor (if the Successor is
not Wards) written assurances reasonably acceptable to Supplier that the
Successor will maintain the confidentiality of Supplier's Confidential
Information disclosed or provided to the Successor in the course of receiving
the termination/expiration assistance.
2. PRE-MIGRATION SERVICES
Supplier's functions shall include the following pre-migration services:
a. Provide to the Successor copies of documentation used by Supplier in
performing the Services.
b. Provide to the Successor copies of other information then available
regarding the Services that may be required to implement the transition plan,
including but not limited to the following:
i. a list of all libraries required to provide the Services to Wards;
ii. copies of all security tables and rules utilized in the provision
of the Services to Wards;
iii. copies of all terminal definition tables;
iv. system modifications created on behalf of Wards, if any,
including documentation, run sheets, and job scheduling information;
89
<PAGE>
v. copies of all manuals for Wards owned or retained Equipment, or
Equipment acquired by Wards at the end of the Term.
c. Identify and provide the control release levels for Systems Software.
d. Deliver the Procedures Manual to the Successor's operations staff.
e. Upon Wards' request, freeze all Software changes other than
modifications necessary to address problems, to implement regulatory changes or
to comply with the current service level agreements.
f. Provide reasonable assistance to the Successor in notifying third party
Suppliers of the procedures to be followed during the turnover phase.
g. Assist Successor's operations staff by providing information for the
review, test, and production Software libraries.
h. Assist the Successor in establishing naming conventions by providing
information about naming conventions then in effect.
i. Assist the Successor in its analysis of the space required for Software
libraries, by providing reasonable information of then current space
requirements.
j. Assist with the transfer to Successor of Third Party Software then in
use to provide Services.
k. Delivery to Wards of source code, object code, executables, related
work product, technical specifications, database definitions and materials and
technical and use documentation (where it exists) for the mainframe Wards
Software and Supplier Software (and Third Party Software if permitted) used in
providing the Services (subject, in the case of Supplier Software, to the
licensing of object code and execution of a mutually acceptable license or
access Agreement in accordance with Section 18.9 of the Master Agreement, to the
extent provided for therein).
l. Deliver appropriate materials and information to enable the Successor
to operate the Software, including job streams and associated job control
language, run documentation and Production Control applications support
documentation.
m. Provide to Successor reasonable access to Supplier's personnel who were
performing the Services.
n. Provide to Successor interim backups of Wards Data, as reasonably
requested.
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<PAGE>
o. Provide to Successor backups of Wards DASD volumes as requested by the
Successor.
p. Cooperate with the Successor and provide reasonable support for the
conduct of migration testing for to ensure the orderly transfer of Services.
q. Perform tests of the creation and restoring of the Backups of software
and data.
r. Perform "dry runs" of Supplier's components of the complete final
transition and migration processes.
s. Provide to the Successor current and pending project plans and status
authorized by Wards.
t. Participate in the coordination of the final transition schedule.
3. MIGRATION SERVICES
As part of the termination/expiration assistance, Supplier's functions
shall include the following migration services.
a. Create final backups of all requested software and data files and other
Wards Data subject to a release from Wards.
b. Create final backups of all requested software and data files (with
content listing) and printouts of control file information to the Successor.
c. Provide fallback and recovery support if necessary in the event of an
unsuccessful transition, including resumption of full processing at the current
applicable Charges.
4. POST-MIGRATION SERVICES
As part of the termination/expiration assistance, Supplier's functions
shall include the following post-migration services:
a. Provide additional assistance at Wards' request to assure continuity of
operations (subject to Wards and Suppliers mutual agreement to commercially
reasonable rates for such assistance).
b. Return to Wards, at Wards' request and expense, any remaining Wards
Data in Supplier's possession, including any remaining reports, data and other
Confidential Information (provided that Wards releases Supplier from any audit
or record retention obligations under the Master Agreement).
91
<PAGE>
c. Certify to Wards in writing that all Wards Data and files have been
removed from Supplier's system, and all Wards Confidential Information has been
returned to Wards or the Successor (provided that Wards releases Supplier from
any audit or record retention obligations under the Master Agreement).
92
<PAGE>
10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 3: MIDRANGE PROCESSING SEVICES
----------------------------------------------------
THIS SERVICE AGREEMENT NO. 3: MIDRANGE PROCESSING SERVICES (the "Service
Agreement") is made and entered into this 6th day of November, 1998 between
Montgomery Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom
Corporation, a Delaware__ corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in the Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into the Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITION
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
"INITIAL TERM" has the meaning given in Section 2.1.
"MASTER AGREEMENT" means the Master Service Agreement for Information
Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom
Corporation dated November 6, 1998, and all amendments thereto.
"MIDRANGE PROCESSING" means the Wards application server environment
(including RS/6000 and AS/400 Servers) as such environment is developed under
this Service Agreement.
"MIDRANGE PROCESSING SERVICES" has the meaning given in Section 5.1.
"RENEWAL TERM" has the meaning given in Section 2.2.
"SERVICE AGREEMENT COMMENCEMENT DATE" means the date upon which the
Migration Plan for Midrange Processing Services has been implemented under
Service Agreement No. 1.
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"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any
Renewal Term.
"SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the
meaning given in Section 7.1 of this Service Agreement.
"TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning
given in Section 8.1 of this Service Agreement.
"WARDS PEAK SEASON" means the period in any year during the Service
Agreement Term from November 20 through December 31, and as such dates may be
adjusted by Wards from time to time.
ARTICLE 2. TERM
2.1 INITIAL TERM. The initial term of this Service Agreement (the
"Initial Term") shall begin as of the Service Agreement Commencement Date and
shall continue for a period of thirty-seven (37) months thereafter, unless
earlier terminated or renewed in accordance with the provisions of this Service
Agreement or the Master Agreement.
2.2 RENEWAL TERM. Wards shall have the option to renew this Service
Agreement for up to two (2) additional annual terms (each a "Renewal Term")by
delivering written notice of such renewal to Supplier at least ninety (90) days
before expiration of the final applicable Contract Year under this Service
Agreement and before expiration of each annual period thereafter as applicable.
All of the terms of this Service Agreement and the Master Agreement shall
continue to apply without change during any renewal period(s).
ARTICLE 3. TERMINATION
3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate
this Service Agreement for convenience in accordance with Section 18.2(a) of the
Master Agreement. The convenience termination charges, if any, shall be as
described in Exhibit C to this Service Agreement.
ARTICLE 4. PERSONNEL MATTERS
4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier
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Positions that are subject to the provisions of Section 7.2 of the Master
Agreement.
ARTICLE 5. SERVICES
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GENERAL. Throughout the Service Agreement Term, Supplier shall provide the
Services described in Exhibit B, as such Exhibit may be amended and supplemented
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from time to time pursuant to the Master Agreement (the "Midrange Processing
Services"). The Midrange Processing Services includes all of the
responsibilities (including Equipment, Software, personnel and expenses)
associated with the Midrange Processing, unless specifically identified as a
Wards responsibility under Section 5.3 below. The Services include (i)
functions, responsibilities and tasks performed by the Transferred Employees
prior to the Service Agreement Effective Date; (ii) functions, responsibilities
and tasks not specifically described in this Service Agreement but which are
required for their proper performance and are an inherent part of, or a
necessary sub-part included within, the Services; and (iii) functions,
responsibilities and tasks that are a logical extension of existing Services as
a result of changes in technology, changes in Wards business practices, or
changes resulting from change control procedures.Supplier will be the exclusive
provider of the Services that are identified in this Service Agreement.
5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the
Service Agreement Effective Date to the Service Agreement Commencement Date,
Supplier will provide Midrange Services under Service Agreement No. 1
(Transition and Migration Services). Following the Service Agreement
Commencement Date, the Service Level Agreement and other obligations of this
Service Agreement shall become effective.
5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement
Commencement Date, the Parties will appoint individuals as Project Executives
under this Service Agreement to carry out the duties described in the Master
Agreement.
5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in
Exhibit B to this Service Agreement identifies the responsibilities of Wards
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during the Term of this Service Agreement, as such Exhibit may be amended and
supplemented from time to time pursuant to the Master Agreement. The
responsibilities of Wards shall be limited to those items listed in the matrix.
ARTICLE 6. CHARGES
6.1 CHARGES FOR MIDRANGE PROCESSING SERVICES. Exhibit C to this Service
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Agreement sets forth the Charges for the Midrange Processing Services that may
be charged by Supplier. All Charges and all Pass-Through Expenses are subject
to the provisions of Article 13 of the Master Agreement.
6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Midrange
Processing Services, Supplier shall provide Wards with the information described
in Exhibit C in sufficient detail in order to allow Wards to verify invoices.
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Invoice submission and payment shall be in accordance with Article 14 of the
Master Agreement.
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ARTICLE 7. SERVICE LEVEL AGREEMENT
7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the
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Service Level Agreement applicable to the Midrange Processing Services (the
"Service Level Agreement"). All of the terms of Article 5 of the Master
Agreement shall apply to the Service Level Agreement. The Parties acknowledge
that the Midrange processing environment of Wards is still in development and
will not be in production on the Service Agreement Effective Date. Accordingly,
Service Levels and the associated performance metrics will be baselined during
the six (6) month period beginning on the Service Agreement Commencement Date,
will be established jointly by the Parties during such 6-month period and shall
become effective beginning with the seventh (7th) month following the Service
Agreement Commencement Date.
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date,
Wards shall assign, and Supplier shall assume, Wards' obligations under the
applicable leases for the equipment listed on Exhibit E (the "Transferred
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Equipment"). The terms of Section 6.1 of the Master Agreement shall apply with
respect to the Transferred Equipment.
8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2
of the Master Agreement, Wards shall provide the Wards Facilities and Wards
owned Equipment and Third Party Software licensed to Wards described in Exhibit
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F to this Service Agreement. For any Wards Equipment that is transferred to
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Supplier's facilities, Supplier agrees that it will (a) maintain the Wards
Equipment consistent with industry practice; (b) insure the Wards Equipment
against loss; (c) keep the Wards Equipment free of any claim, lien or
encumbrance of supplier or any third party; and (d) return the Equipment to
Wards upon termination of this Service Agreement.
8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the
Service Agreement Commencement Date, and subject to Supplier having received
any Third Party Consents, Supplier shall obtain the rights necessary to use the
Third Party Software that is listed in Exhibit G.
8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is
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proprietary to Wards and that is used in Midrange Processing (the "Wards
Software"). The terms of Section 8.1 of the Master Agreement shall apply with
respect to the Wards Software.
8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by
Supplier to provide the Midrange Processing Services is listed in Exhibit I.
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Use of Supplier Software in providing the Midrange Processing Services shall be
in accordance with Section 8.2 of the Master Agreement.
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ARTICLE 9. TERMINATION AND TRANSITION SERVICES
9.1 TERMINATION. Wards may terminate this Service Agreement without
penalty at any time prior to the Service Agreement Commencement Date if Supplier
does not complete the Migration Plan described in Service Agreement No. 1.
After the Service Agreement Commencement Date, Wards may terminate this Service
Agreement in accordance with the terms of the Master Agreement.
9.2 TRANSITION SERVICES. In the event of a termination or expiration of
this Service Agreement, Supplier shall provide the Termination/Expiration
Assistance as provided in Section 18.7 of the Master Agreement.
IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day
and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
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Name: Don Bernheisel Name: Joseph C. Grossestreuer
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Its: SVP, CIO Its: SVP-Outsourcing Services
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EXHIBITS TO MIDRANGE SERVICE AGREEMENT
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EXHIBIT A KEY SUPPLIER POSITIONS
EXHIBIT B SERVICES
EXHIBIT C CHARGES
EXHIBIT D SERVICE LEVEL AGREEMENT
EXHIBIT E TRANSFERRED EQUIPMENT
EXHIBIT F WARDS FACILITIES AND EQUIPMENT
EXHIBIT G THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
EXHIBIT H WARDS SOFTWARE
EXHIBIT I SUPPLIER SOFTWARE
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EXHIBIT A
KEY SUPPLIER POSITIONS
SENIOR SYSTEMS ENGINEER
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EXHIBIT B
SERVICES
OVERVIEW
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The business objective of this service category is to provide midrange
operations and systems management to establish consistent and reliable levels of
Midrange services in support of Wards' business units, regardless of the IT
architecture deployed. The Supplier of Midrange Processing Services will assist
Wards with transitioning all existing midrange platforms from a development
environment into a controlled production environment. The Wards midrange
platforms are currently supported on an "as needed" basis to assist with
development efforts. The Supplier will be required to provide managed operations
and system administration support services as these platforms are transitioned
into production according to Wards Operation System Acceptance guidelines that
are described in Exhibit B of Service Agreement No. 2 (Data Center Services).
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The cost-effective implementation of a midrange management infrastructure allows
Wards business units to rapidly respond to changing business needs. The
documented service descriptions are designed to give the Supplier an
understanding of Wards business objectives for Midrange Processing Services
while allowing the Supplier latitude to define their own processes and methods
for providing the Services. The intent of this service description is to
establish the Supplier's responsibilities and criteria for providing the
Midrange Processing Services.
The Supplier of Midrange Processing Services has full responsibility for the
comprehensive operational support of the Wards Midrange environments that are in
scope as described herein. These responsibilities extend to the day-to-day
operations and management of the operating environment including, but not
limited to, data backup, archival and restore processes; production control;
systems monitoring and reporting; data center monitoring, and maintenance; and
media management. Additionally, the Supplier will participate in the creation
of Wards formal Disaster Recovery Plan for the midrange environment and test the
plan as agreed upon with Wards.
The Supplier of Midrange System Management will provide the comprehensive
management of Wards' midrange environment that are in scope as described herein.
System Management includes, but is not limited to: comprehensive management of
the existing infrastructure, and implementation of new midrange systems and new
technologies to support the changing business needs of Wards. Scope of
responsibility currently provided includes the support of the existing Midrange
operating systems, software utilities, programming languages, and related
software program products. Systems Management will work in an integrated fashion
with all other service functions to provide seamless support for the Wards
business units.
OPERATIONS MANAGEMENT
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ACTIVITIES FOR OPERATIONS MANAGEMENT
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The Supplier will be responsible for all operational aspects of the Wards
midrange environments described in this Exhibit B. The Supplier is expected to
manage the development, and production-processing environments utilizing
Supplier and Wards provided processes and management methodologies.
1. Supplier will provide console management functions to monitor, report,
operate and IPL/reboot the midrange systems and associated peripherals.
2. Supplier will provide system backup, archival and restoration.
3. Supplier will provide operations support to Wards for the transition of
midrange platforms from development to production.
4. Supplier will provide production control for the Wards midrange production
environment.
5. Supplier will provide media management and media storage for all the
midrange processing environments.
6. Supplier will develop and maintain disaster recovery services for Wards'
midrange production environment in accordance with the Wards Disaster
Recovery Plan.
SERVICE PARAMETERS FOR OPERATIONS MANAGEMENT
1. Supplier will provide operations support as directed by Wards for those
midrange platforms identified by Wards as development.
2. Supplier will provide operations support as indicated in this document for
those midrange platforms to be identified by Wards as production.
3. Supplier will adhere to the change management procedures as documented in
the Procedures Manual.
4. Supplier will utilize their help desk to notify Supplier staff, Wards and
other vendors of hardware, software, and environmental failures according to
the severity definitions and reporting/escalation guidelines as listed in
the Procedures Manual and Master Schedule D.
5. Supplier will provide all supplies, PCs, workstations, monitoring tools,
printing consumables, media and media storage units, etc. for Supplier's
operations staff.
6. Supplier will provide and maintain documentation and run books for
production job streams in accordance with the Procedures Manual, as these
midrange platforms are transitioned into production.
7. Supplier will provide monitoring utilizing automated tools wherever
possible.
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MEASUREMENT TOOLS FOR OPERATIONS MANAGEMENT
The Supplier will make every effort to utilize tools and processes provided
by Wards and already in place in Wards processing environments. The Supplier is
free to recommend in writing to Wards' additional or alternative tools or
processes for review and final approval. Wards must approve use of any new or
equivalent tools and/or processes not already in place at Wards.
RS/6000
. Cybermation ESP Workload Manager Extensions RS/6000 Uniprocessor
. Sterling Commerce Connect:Direct for Unix (AIX)
. Syncsort for UNIX.
. Intersolv PVCS
. Unix Utilities
AS/400
. Sterling Commerce Connect:Direct for OS/400
. Cybermation ESP Workload Manager Agent for AS/400
SYSTEMS MANAGEMENT
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ACTIVITIES FOR SYSTEM MANAGEMENT
The Supplier has responsibility for management and performance of the Wards'
midrange systems, midrange systems software, and peripherals described in this
Exhibit B.. It is the Supplier's responsibility to provide reliable,
predictable, and consistent operating environments for Wards' applications
systems.
1. The Supplier will provide the appropriate management methodologies,
resources and tools to support the Wards midrange environments at
performance, capacity, and availability levels as good as, or better than
prior to outsourcing.
2. The Supplier will provide proactive server and peripheral performance
monitoring and tuning.
3. The Supplier will provide proactive server and peripheral capacity analysis,
planning and resource adjustment.
4. Supplier will provide systems support to Wards for the transition of
midrange platforms from development to production.
SERVICE PARAMETERS FOR SYSTEM MANAGEMENT
1. Supplier will provide systems support as directed by Wards for those
midrange platforms identified by Wards as development.
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2. Supplier will provide systems support as indicated in this document for
those midrange platforms to be identified by Wards as production.
3. The Supplier will utilize and adhere to all change management processes, and
procedures as documented in the Procedures Manual.
4. The Supplier will utilize and adhere to all problem management processes,
procedures and escalation guidelines as documented in the Procedures Manual.
5. The Supplier will provide hardware maintenance and system software
maintenance for the Wards midrange systems.
6. The Supplier will maintain 24x7x365 System Management support for Wards, as
is provided today and as updated as Midrange Processing moves into
production
7. The Supplier will provide total problem solutions with the appropriate
technical resources, knowledge, procedures, and management methodologies to
maintain the availability and performance of the Wards' development, test,
and production server environments to documented service levels.
8. The Supplier will provide hardware and software tools, and related
maintenance that is necessary to accomplish or help them accomplish the
Systems Management service levels as indicated in this document.
9. The Supplier will provide sufficient detail to the help desk, within the
text of each problem ticket, to include the background and history of each
problem for later root cause analysis and/or support resolution or vendor
corrective action.
10. The Supplier will monitor, alarm, and apply corrective action to pre-defined
events and situations for the midrange environments included in this
agreement.
11. The Supplier will gather, store, and report statistics on key process
variables mutually agreed to by Wards and the Supplier for the Wards
midrange environment included in this agreement in a format that is readily
accessible to standard ODBC type analysis tools.
12. The Supplier will create, document and maintain security schemas, profiles
and procedures for all midrange environments as directed in the Procedures
Manual.
13. The Supplier will work to reduce the overall resolution time for problem
tickets regardless of where the root problem resides.
14. The Supplier will conduct a monthly account status review meeting with
designated Wards' management. The Supplier will utilize this meeting to
review regular performance reports with Wards.
15. The Supplier will work with Wards' vendors of choice for hardware, software,
hardware maintenance, and software maintenance.
16. The Supplier will recommend, evaluate, and perform all tasks that mandate
advanced privileges for each midrange system managed within strict
guidelines of change control.
17. The Supplier will accept and resolve problems from the Supplier's Help Desk
as determined to be in the area of midrange System Management support by the
Help Desk within time frames as specified by severity.
18. The Supplier will re-route problems back to the Supplier's Help Desk as they
are determined to be outside of area of support of System Management.
19. The Supplier will provide all installation planning, site-preparation and
installation coordination for midrange systems and associated peripherals to
be managed by Supplier.
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MEASUREMENT TOOLS FOR SYSTEMS MANAGEMENT
The Supplier is responsible for supplying all tools necessary to satisfy the
specifications contained herein. The Supplier is free to recommend in writing
to Wards additional or alternative tools or processes for Wards review and final
approval. Wards must approve use of any new or equivalent tools and/or
processes not already in place at Wards.
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MIDRANGE RESPONSIBILITY MATRIX
<TABLE>
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MIDRANGE MANAGEMENT
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RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
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<S> <C> <C>
COMPLIANCE MANAGEMENT
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Understand and document Wards in-scope business requirements X X
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Assist in developing Standard Operating Procedures (SOPs) X X
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Review requests for changes X
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Determine if request is within SOPs and conforms with other standards X
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Implement as required X
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Document changes to the database or system application computer equipment X
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Maintain and update system inventory database X
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Upon request, provide documents and logs referring to qualified environment X
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Initiate internal compliance audits X
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Review and understand information regarding the new products X
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Conduct regular reviews of quality standards and processes and make X
recommendations on improvements to these standards and processes
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Report to Wards any activity within the environments under the control of the X
Supplier, which do not comply with documented standards defined in the
Procedures Manual or manufacturer specifications
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Adhere to all Wards IT standards, methods, processes and procedures. X
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CHANGE MANAGEMENT(OSA)
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Implement changes within the Wards environments using a standard and X
documented process or processes
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Provide Wards with a means to properly test all proposed changes to the X
environments that are in scope prior to the implementation of the proposed
change into production
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Support Wards activities including hardware maintenance, X
installation/de-installation, facility changes, software, systems, and
applications installation, upgrades, and support
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Provide Wards with risk assessments and anticipated impact of all proposed X
changes to the operational and data center environments (not including
applications)
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Provide support for both testing and production changes implemented within the X
environments
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PROBLEM MANAGEMENT
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Provide Wards with detail reporting and statistics on reported problems X
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Supplier will support new Wards initiatives X
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Supplier will report progress to Wards based on the Wards assigned level of severity X
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Supplier will develop and enhance procedures for problem escalation X
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Supplier will conduct root cause analysis and review high-impact problems to X
identify preventative measures, assess risk, and bring to closure, jointly
with Wards, if appropriate
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COMPUTER OPERATIONS
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Perform all manual and automated console operations and operate computer equipment X
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Monitor performance of operating system and sub-systems and resolve X
problems/exceptions
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Identify and resolve systems and sub-systems problems X
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Complete work, turnover and status logs X
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Monitor and report Computer Room environmental variances and resolve X
problems/exceptions
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</TABLE>
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<TABLE>
<CAPTION>
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MIDRANGE MANAGEMENT
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RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
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<S> <C> <C>
Provide operational installation support for hardware components replacement. X
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Capture and retain sufficient detail data to provide all required technical X
and managerial reports as specified within this document.
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PRODUCTION MONITORING AND SCHEDULING
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Establish and maintain centralized responsibility over production systems and processes. X
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Provide resources for monitoring, reporting, and tracking of systems and processes. X
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Report, document, and track failures within the production systems. X
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Provide and maintain a method for proper escalation of failures. X
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Ensure overnight processing is completed as scheduled. X
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Provide reporting on production systems, daily on critical systems. X
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Provide a process for change requests in the scheduling of processes and systems. X
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Develop, document, and enhance procedures for ensuring reliable monitoring and X
scheduling of critical processes.
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Conduct root cause analysis and review high-impact failures to identify X
preventative measures, assess risk, and bring to closure.
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Coordinate and integrate production schedules with applications groups. X
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Modify and verify batch production schedules. X
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Provide production scheduling on a 7 x 24 basis for midrange platforms as they X
move into production.
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TAPE MANAGEMENT
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Complete all tape mount requests X
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Monitor tape hardware for malfunction and resolve exceptions X
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Perform daily tape hardware maintenance X
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Produce reports on tape retention periods X
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Request changes to tape retention periods X
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Implement requested changes to tape retention periods X
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TAPE LIBRARY
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Maintain integrity of tape library system X
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Monitor tape usage and resolve problems/exceptions X
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Maintain and monitor "foreign" tape library and resolve exceptions X
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Initialize new tapes X
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Establish off-site storage requirements X X
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Coordinate offsite storage functions including logging, tracking, labeling, X
ordering, receiving and sending tapes
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Provide a documented and consistent process for offsite data archiving for X
processing environments.
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Approve third party offsite storage suppliers and facility X X
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Manage third party offsite storage contracts X
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Audit third party supplier annually X
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Inspect/audit third party supplier facility as allowed X
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BACKUPS
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Determination of what data is backed up and how often X
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Determination of how long data is kept X
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Perform backups as scheduled X
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</TABLE>
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<TABLE>
<CAPTION>
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MIDRANGE MANAGEMENT
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RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
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<S> <C> <C>
Maintain library of backups X
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Management of backup tapes in off-site storage X
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Restore system data as provided in the Procedures Manual X
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Restore user data as provided in the Procedures Manual X
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FACILITIES MANAGEMENT
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Plan & manage installation of computer & environmental equipment in data center. X
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Oversee equipment moves/ensures operation to specifications post-move X
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Maintain physical inventory and blueprint of all hardware and accurate cabling X
diagrams.
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Administer contract services and other third party agreements (Environmental, X
security and other companies)
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Monitor and maintain all data center resources located at Supplier's site(s) X
to assure availability, including: HVAC, Power distribution units,
uninterrupted power switch (UPS), and backup power systems.
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PHYSICAL SECURITY ADMINISTRATION
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Provide security audit recommendations X
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Implement agreed security audit recommendations X
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Provide administrative and technical support for physical security X
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Monitor and respond to alarm systems X
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Provide emergency response and notification (Police, Fire etc.) X
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DISASTER RECOVERY SUPPORT- IF ELECTED BY WARDS
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Develop, maintain and test disaster recovery plan and procedure manuals X
including third party hot site recovery plans for all services provided to Wards
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Maintain capacity plan for disaster recovery for all services provided to Wards X
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Maintain an on-line document listing which platforms and applications are covered X
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Maintain third party disaster recovery contracts X
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Coordinate disaster recovery testing with Wards X
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Participate in disaster recovery testing with Supplier and perform recovery X
tests for all services provided by Supplier
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Perform disaster recovery testing, resolve cause of failure and re-test until X
successful for all services provided by Supplier
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Report disaster recovery test results to Wards X
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Confirm disaster recovery test results X
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Prioritize recovery of data when disaster occurs X
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Restore to normal operations in the event of a disaster within defined service levels X
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STRATEGY AND PLANNING
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Understand & document Wards business requirements X X
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Assist with direction setting and updating of standards X
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Research emerging technology and propose effective solutions X
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Assist in developing Standard Operating Procedures (SOPs) X X
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CONTRACTS MANAGEMENT
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Ensure compliance with Equipment and Software maintenance and warranty X
agreements
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Negotiate new and/or renew agreements for Equipment and Software X
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</TABLE>
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<TABLE>
<CAPTION>
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MIDRANGE MANAGEMENT
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RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
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<S> <C> <C>
Manage contract terms and conditions (e.g. expiration date) of Equipment and Software X
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Communicate contract provisions internally and to Wards, as needed X
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STATUS REPORTING AND MEETINGS
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Participate in Wards' daily operational status meeting to report on X
operational, environmental and batch job completion for the prior 24-hour period.
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Prepare monthly service level / performance reports X
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Analyze results of monthly reports and historical trends X
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Identify areas for improvement X
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Conduct monthly management review meeting X
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Attend monthly management review X X
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Implement action items resulting from, & agreed to during, mgmt review meeting. X
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Audit/request service level/performance and activity reports as needed X
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Approve new or changes to service level/performance reports as needed. X
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HUMAN RESOURCES
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Provide input into Suppliers personnel performance and reviews X X
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Ensure adequate training & review of all personnel performing Supplier activities. X
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Implement corrective actions as needed X
- - -------------------------------------------------------------------------------------------------------------------
CAPACITY PLANNING
- - -------------------------------------------------------------------------------------------------------------------
Monitor system use and capacity, and resolve problems/exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Forecast resource requirements X X
- - -------------------------------------------------------------------------------------------------------------------
Ensure appropriate capacity to meet resource projections X
- - -------------------------------------------------------------------------------------------------------------------
Analyze workload capacity X
- - -------------------------------------------------------------------------------------------------------------------
Prepare and produce resource planning reports X
- - -------------------------------------------------------------------------------------------------------------------
Analyze and report resource trends X
- - -------------------------------------------------------------------------------------------------------------------
Make recommendations regarding resource consumption and trends X
- - -------------------------------------------------------------------------------------------------------------------
Report usage and resource capacity to Supplier on a periodic basis X
- - -------------------------------------------------------------------------------------------------------------------
PERFORMANCE TUNING
- - -------------------------------------------------------------------------------------------------------------------
Conduct system performance tuning X
- - -------------------------------------------------------------------------------------------------------------------
Conduct application performance tuning X
- - -------------------------------------------------------------------------------------------------------------------
Provide performance reporting X
- - -------------------------------------------------------------------------------------------------------------------
Conduct application and hardware benchmarks, if required X
- - -------------------------------------------------------------------------------------------------------------------
Conduct system performance reviews X
- - -------------------------------------------------------------------------------------------------------------------
Measure and analyze system performance X
- - -------------------------------------------------------------------------------------------------------------------
Review system performance and request adjustments where deemed necessary X
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
DISK MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Monitor and control storage performance and resolve exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Assign and initialize volumes X
- - -------------------------------------------------------------------------------------------------------------------
Determine file and volume placement X X
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
MIDRANGE MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Set and maintain storage resource efficiency X
- - -------------------------------------------------------------------------------------------------------------------
Establish and maintain storage standards X X
- - -------------------------------------------------------------------------------------------------------------------
Maintain space requirements according to Wards demand X
- - -------------------------------------------------------------------------------------------------------------------
Approve requests for storage resource increases and decreases X
- - -------------------------------------------------------------------------------------------------------------------
Implement requests for storage resource increases and decreases X
- - -------------------------------------------------------------------------------------------------------------------
Perform data migration management X
- - -------------------------------------------------------------------------------------------------------------------
DATA SECURITY ADMINISTRATION
- - -------------------------------------------------------------------------------------------------------------------
Define security standards and guidelines X
- - -------------------------------------------------------------------------------------------------------------------
Approve security requests X
- - -------------------------------------------------------------------------------------------------------------------
Implement security requests X
- - -------------------------------------------------------------------------------------------------------------------
Approve password and logon id requests X
- - -------------------------------------------------------------------------------------------------------------------
Implement password and logon id requests X
- - -------------------------------------------------------------------------------------------------------------------
Administer security databases (user privileges) X
- - -------------------------------------------------------------------------------------------------------------------
Provide security audit recommendations X
- - -------------------------------------------------------------------------------------------------------------------
Implement agreed security audit recommendations X
- - -------------------------------------------------------------------------------------------------------------------
Enforce security standards X
- - -------------------------------------------------------------------------------------------------------------------
SYSTEMS ADMINISTRATION
- - -------------------------------------------------------------------------------------------------------------------
Research, advise, and provide information in support of Wards database X
administration and applications development groups relating to in scope systems
- - -------------------------------------------------------------------------------------------------------------------
Provide strategies and suggestions on how to maximize midrange performance by X
optimizing key process variables. and implement them upon Wards' approval.....
- - -------------------------------------------------------------------------------------------------------------------
Approve strategies and suggestions on how to maximize midrange performance by X
optimizing key process variables
- - -------------------------------------------------------------------------------------------------------------------
Implement approved strategies and suggestions on how to maximize midrange X
performance by optimizing key process variables
- - -------------------------------------------------------------------------------------------------------------------
Research, replace, configure, and activate midrange components, including, but X
not limited to operating system generation, and dynamic environment
generation for new and replacement components.
- - -------------------------------------------------------------------------------------------------------------------
Document problem resolution activities as they are completed or re-routed X
- - -------------------------------------------------------------------------------------------------------------------
Identify and correct problems within the midrange environments. X
- - -------------------------------------------------------------------------------------------------------------------
SECURITY SOFTWARE MAINTENANCE
- - -------------------------------------------------------------------------------------------------------------------
Software update and implementation X
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
Participate and approve changes to security software X
- - -------------------------------------------------------------------------------------------------------------------
Administer login Ids and reset passwords for data access X
- - -------------------------------------------------------------------------------------------------------------------
Determine information security classification X
- - -------------------------------------------------------------------------------------------------------------------
Implement and maintain security classifications X
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
SYSTEM SOFTWARE SUPPORT
- - -------------------------------------------------------------------------------------------------------------------
Identify currently installed software products that can be de-installed due to X
obsolescence
- - -------------------------------------------------------------------------------------------------------------------
Review and evaluate proposed software program products for possible acquisition, X X
making a determination as to compatibility with current software, cost/benefit
considerations, vendor support, and value compared to similar products available
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
MIDRANGE MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Create and/or maintain internal documentation that describes the development, X
installation, and support requirements for software program products
- - -------------------------------------------------------------------------------------------------------------------
Provide technical support for the DB2 DBMS operating under AIX, and related X
utility software and utilities.
- - -------------------------------------------------------------------------------------------------------------------
Provide a knowledge of the internal functioning of operating systems software X
for the purposes of problem resolution and development of local modifications
- - -------------------------------------------------------------------------------------------------------------------
Install new software products and updated versions/releases of current software X
products.
- - -------------------------------------------------------------------------------------------------------------------
Perform problem determination activities for in-scope Software, including X
problem source identification to be performed in concert with Software
vendor's Technical Support personnel.
- - -------------------------------------------------------------------------------------------------------------------
Perform regression testing activities to validate preventive service within X
the locally configured environment
- - -------------------------------------------------------------------------------------------------------------------
Install preventive service to supported software products X
- - -------------------------------------------------------------------------------------------------------------------
Install corrective service to supported software products X
- - -------------------------------------------------------------------------------------------------------------------
Coordinate the support functions for operating system and related program products X
- - -------------------------------------------------------------------------------------------------------------------
Review and approve software changes X
- - -------------------------------------------------------------------------------------------------------------------
Participates in feasibility studies of new software or services with X
application development groups, and vendor personnel, coordinating and
reviewing results of technical evaluations
- - -------------------------------------------------------------------------------------------------------------------
Supports off-site Disaster Recovery planning for supported operating systems software X
- - -------------------------------------------------------------------------------------------------------------------
Prepares and distributes a schedule to the application development groups for X
systems software changes
- - -------------------------------------------------------------------------------------------------------------------
Acting as a technical advisor, maintains an effective interface with software X
vendors in order to assess their products for possible utilization.
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
GLOSSARY OF TERMINOLOGY
-----------------------
PVCS means the system utility configuration used in the Midrange Processing
environment
Connect:Direct / File Transfer software for moving data between different
computing platforms
Vendor - Provider of hardware, software or services.
Supplier - Provider of outsourcing services
Wards Disaster Recovery Plan /the Wards plan for recovery of midrange processing
that is or will be developed, and as modified from time to time.
19
<PAGE>
EXHIBIT C
CHARGES
MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM:........................$115,000
SPECIAL CHARGES AS SET FORTH ON THE ATTACHED SCHEDULE, WHICH COMMENCED JANUARY
1999 PER SERVICE AGREEMENT NO. 1, SHALL BE ADDED TO THE MSC AND PAYABLE MONTHLY.
A. THE MSC SHALL INCLUDE:
Mid-range support services of the mid-range environment (as it exists
on the Service Agreement Effective Date) consisting of:
. Eight (8) RS6000 SP2 (3 - SP2, 2 - 570 Ravens, 1 - J40, 1- G30 and
1 - F30).
. One (1) DEC/VAX.
. One (1) AS/400.
. System management support of mid-range environment as set forth in
Exhibit B.
---------
B. OUT-OF-SCOPE
- The MSC includes only implementation support for projects beyond the
scope of the services description in Exhibit B (including by way of
---------
example but not by limitation, Sunrise, Smart Store, Auto Express, Data
Propagator, UOB Database implementation, ADSM implementation). Wards
shall retain primary responsibility for such projects. Mid-range
services currently provided by consultants retained by Wards shall
remain Wards' responsibility.
- Wards may, at its option, elect to have Supplier provide Disaster
Recovery services. Such Disaster Recovery services, including support
for testing, shall be provided to Wards at third-party cost plus 15%.
C. PASS-THROUGH EXPENSES
1. Wards shall retain ownership and financial responsibility for mid-range
Equipment and Software leases, licenses and maintenance. If Supplier
pays such obligations directly, it shall invoice such expenses as Pass-
Through Expenses to Wards at cost.
2. All telecommunications expenses, including but not limited to
connectivity between Wards' corporate complex, Signature and Supplier's
data center.
D. EXCESS USAGE
In the event that Wards requires the use of additional Equipment or Wards
Equipment at Supplier's facility, Wards agrees to pay, in addition to the
MSC, the following:
1. With Wards' approval, $1500 per month per 100 square feet in excess of
the initial square footage used to provide the Services.
2. With Wards' approval, $5000 per month per additional full-time
equivalent employee needed in excess of the initial number of
Transferred Employees used to provide the Services.
3. The cost of the installation of such Equipment and Software as Pass-
Through Expenses.
E. DOWNSIZING
In the event that the resources used to provide the Services under this
Service Agreement are reduced below those used as of the Service Agreement
Commencement Date, the following reductions shall be made to the MSC:
1. With Wards' approval, $1000 per month per one hundred (100) square feet
at Supplier's facility removed from the initial square footage used to
provide the Services.
20
<PAGE>
2. With Wards' approval, $4000 per month per full-time equivalent employee
who is no longer dedicated to providing the Services.
F. MINIMUM MONTHLY CHARGE
- Months 1-13 -- $115,000 (as adjusted as set forth above) plus Special
Charges.
- Months 14-25 -- $92,000 plus Special Charges.
- Months 26-37 -- $69,000 plus Special Charges.
G. TERMINATION CHARGES
- In the event of termination for any reason, Wards shall repurchase all
equipment and software described in Wards' letter to Supplier dated
October 28, 1998, at the unamortized principal balance set forth on the
attached schedule.
21
<PAGE>
RS6000 - SP2 EQUIPMENT AMORTIZATION
-----------------------------------
SCHEDULE
--------
<TABLE>
<CAPTION>
Beginning Unamortized
Principal Monthly Interest Principal Principal
Month Balance Payment Expense Reduction Balance
----- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
1 $4,658,670.51 $145,985.80 $31,057.80 $114,928.00 $4,543,742.51
2 $4,543,742.51 $145,985.80 $30,291.62 $115,694.18 $4,428,048.33
3 $4,428,048.33 $145,985.80 $29,520.32 $116,465.48 $4,311,582.85
4 $4,311,582.85 $145,985.80 $28,743.89 $117,241.92 $4,194,340.93
5 $4,194,340.93 $145,985.80 $27,962.27 $118,023.53 $4,076,317.40
6 $4,076,317.40 $145,985.80 $27,175.45 $118,810.35 $3,957,507.05
7 $3,957,507.05 $145,985.80 $26,383.38 $119,602.42 $3,837,904.63
8 $3,837,904.63 $145,985.80 $25,586.03 $120,399.77 $3,717,504.86
9 $3,717,504.86 $145,985.80 $24,783.37 $121,202.44 $3,596,302.42
10 $3,596,302.42 $145,985.80 $23,975.35 $122,010.45 $3,474,291.97
11 $3,474,291.97 $145,985.80 $23,161.95 $122,823.86 $3,351,468.11
12 $3,351,468.11 $145,985.80 $22,343.12 $123,642.68 $3,227,825.43
13 $3,227,825.43 $145,985.80 $21,518.84 $124,466.97 $3,103,358.47
14 $3,103,358.47 $145,985.80 $20,689.06 $125,296.75 $2,978,061.72
15 $2,978,061.72 $145,985.80 $19,853.74 $126,132.06 $2,851,929.67
16 $2,851,929.67 $145,985.80 $19,012.86 $126,972.94 $2,724,956.73
17 $2,724,956.73 $145,985.80 $18,166.38 $127,819.42 $2,597,137.31
18 $2,597,137.31 $145,985.80 $17,314.25 $128,671.55 $2,468,465.75
19 $2,468,465.75 $145,985.80 $16,456.44 $129,529.36 $2,338,936.39
20 $2,338,936.39 $145,985.80 $15,592.91 $130,392.89 $2,208,543.50
21 $2,208,543.50 $145,985.80 $14,723.62 $131,262.18 $2,077,281.32
22 $2,077,281.32 $145,985.80 $13,848.54 $132,137.26 $1,945,144.06
23 $1,945,144.06 $145,985.80 $12,967.63 $133,018.17 $1,812,125.88
24 $1,812,125.88 $145,985.80 $12,080.84 $133,904.96 $1,678,220.92
25 $1,678,220.92 $145,985.80 $11,188.14 $134,797.66 $1,543,423.26
26 $1,543,423.26 $145,985.80 $10,289.49 $135,696.31 $1,407,726.95
27 $1,407,726.95 $145,985.80 $ 9,384.85 $136,600.96 $1,271,125.99
28 $1,271,125.99 $145,985.80 $ 8,474.17 $137,511.63 $1,133,614.36
29 $1,133,614.36 $145,985.80 $ 7,557.43 $138,428.37 $ 995,185.99
30 $ 995,185.99 $145,985.80 $ 6,634.57 $139,351.23 $ 855,834.76
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
31 $ 855,834.76 $145,985.80 $ 5,705.57 $140,280.24 $ 715,554.53
32 $ 715,554.53 $145,985.80 $ 4,770.36 $141,215.44 $ 574,339.09
33 $ 574,339.09 $145,985.80 $ 3,828.93 $142,156.87 $ 432,182.21
34 $ 432,182.21 $145,985.80 $ 2,881.21 $143,104.59 $ 289,077.63
35 $ 289,077.63 $145,985.80 $ 1,927.18 $144,058.62 $ 145,019.01
36 $ 145,019.01 $145,985.80 $ 966.79 $145,019.01 ($0.00)
</TABLE>
23
<PAGE>
EXHIBIT D
SERVICE LEVEL AGREEMENT
SERVICE LEVEL AGREEMENT
-----------------------
FOR MIDRANGE PROCESSING SERVICES
--------------------------------
24
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. GENERAL...................................................... 1
A. General
B. Definitions............................................. 1
C. Measurement............................................. 2
D. Effective Date for Service Levels....................... 2
E. Revisions............................................... 2
F. Single Point of Contact................................. 3
II. SERVICE LEVELS
A. Definitions............................................. 3
B. Service Level Measures.................................. 3
C. Service Levels.......................................... 3
III. SERVICE LEVEL CREDITS........................................ 4
A. Credits................................................. 4
B. Method of Calculation................................... 4
C. Frequency Factor........................................ 5
D. Excused Performance Problem............................. 5
E. Time Limit.............................................. 5
IV. SERVICE LEVEL TERMINATION EVENTS............................. 6
A. Definition.............................................. 6
B. Repeated Service Level Failures......................... 6
C. Repeated Critical Service Level Failures................ 7
D. Catastrophic Level of Service........................... 7
E. Qualification........................................... 8
</TABLE>
<PAGE>
SERVICE LEVEL AGREEMENT
-----------------------
FOR MIDRANGE PROCESSING SERVICES
--------------------------------
I. GENERAL
A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT.
This Service Level Agreement is entered into under the Master Agreement for
Information Technology Services between Acxiom Corporation ("Supplier") and
Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and
pertains to Service Agreement No. 3: Midrange Processing Services entered into
by Wards and Supplier. Any inconsistency between this Agreement, the Service
Agreement and the Master Agreement will be resolved pursuant to Section 2.3 of
the Master Agreement.
B. DEFINITIONS
In this Service Level Agreement ("SLA"), the terms listed below shall
have the indicated meanings. Other terms may be defined in other
sections of this SLA. Terms used in this SLA without definition have
the meanings ascribed to them in the Master Agreement or Service
Agreement.
1. Service Level Measure - For any Service identified in this SLA,
---------------------
the method specified in this SLA for quantitatively calculating
Supplier's actual performance. The results of these calculations
are compared with Service Levels to evaluate Supplier's
compliance with Service Levels.
2. Service Levels - For any Service identified in this SLA, the
--------------
required quantitative level or degree of performance by Supplier
specified in this SLA as the "Service Level." The Service Levels
are the minimally acceptable levels of service for the Services.
Any failure to meet a Service Level is unacceptable and may
constitute, based upon the facts and circumstances, a material
breach of Supplier's obligations under the Service Agreement.
3. Increased Impact Level - For any Service identified in this SLA,
----------------------
the required quantitative level or degree of performance by
Supplier specified in this SLA as the "Increased Impact Level."
Any failure to meet an Increased Impact Level is unacceptable and
may constitute, based upon the facts and circumstances, a
material breach of Supplier's obligations under the Service
Agreement.
4. Critical Service Levels - Service Levels associated with those
-----------------------
Services that are most important to the conduct of Wards'
operations, which are the subject of this Service Agreement.
5. Service Level Credits - The amounts which Wards shall have the
---------------------
option, but not the obligation, to recover as liquidated damages,
in lieu of any other monetary remedies Wards may have, each time
Supplier fails to meet the Service Levels for any reason other
than those specified in Section III.D of this SLA. Service Level
Credits are calculated in the
<PAGE>
manner described in Section III of this SLA.
6. Service Level Termination Event - An occurrence or series of
-------------------------------
occurrences of deficient performance by Supplier in performing
the Services specified in this SLA as a "Service Level
Termination Event." The occurrence of a Service Level Termination
Event constitutes, based upon the facts and circumstances, a
material breach of Supplier's performance obligations under this
Service Agreement and gives Wards the right to terminate this
Service Agreement for cause.
C. MEASUREMENT
Unless otherwise stated in this SLA, each Service Level Measure shall
be calculated on a complete calendar month basis. Performance results
shall be measured and reported based on actual results with any
exceptions for Excused Performance Problems reported separately.
D. EFFECTIVE DATE FOR SERVICE LEVELS
The Service Levels provided for in this SLA shall become effective as
provided for in Section 7.1 of the Service Agreement.
E. REVISIONS
1. From time to time during the Term, the Parties agree to negotiate
in good faith to add, delete, or modify then-existing Service
Level Measures, Service Levels, and Increased Impact Levels to
reflect changes in Wards' business requirements or objectives.
All such changes shall be adopted in the form of a signed written
amendment to this SLA.
2. In the event that any applicable system or function is replaced
during the Term by a comparable system or function, the Service
Level Measure, Service Level, and Increased Impact Level for such
replacement system or function shall, to the extent reasonably
practicable (i) be defined during the first 30 days of such
replacement, and (ii) must be at least equivalent to the then-
existing Service Level Measure, Service Level, and Increased
Impact Level for the replaced system or function (assuming the
replacement system is capable of delivering the same Service
Levels as the replaced system).
3. At all times during the Term, Supplier shall provide the Services
in a manner that meets or exceeds the then-existing Service
Levels. The remedies for failure to do so shall include the
remedies defined in this SLA, the Service Agreement, and the
Master Agreement.
F. SINGLE POINT OF CONTACT
Regardless of whether any failure by Supplier to meet a Service Level
is attributable to Supplier or an Excused Performance Problem,
Supplier shall provide a single point of contact to address resolution
of such failure and shall act promptly to address the problem causing
the failure. Unless otherwise agreed by
27
<PAGE>
Wards, the Supplier Project Executive or his or her designee shall be
the Supplier's single point of contact.
II. SERVICE LEVELS
A. DEFINITIONS
Certain technical definitions are included in the Glossary of Terminology
attached as Appendix A to Exhibit B of the Service Agreement.
B. SERVICE LEVEL MEASURES
DATA BACKUP, ARCHIVING AND RESTORATION
--------------------------------------
OBJECTIVE: To ensure proper safeguards are being taken by the Supplier to
protect critical Wards data as identified by Wards with
consistent, reliable, and documented process(es) for management
of data backups, data archives, off-site data rotation and data
restoration across the Wards environments under the Supplier's
span of control.
DEFINITION: The Suppliers process(es) for midrange data backup, archiving and
restoration of data within the Wards midrange environments.
Ensuring the Suppliers process(es) are backing up, archiving and
restoring these files as identified by Wards.
METHOD: The Supplier will document and maintain the processes used to
backup and restore the Wards identified data. The Supplier will
provide appropriate tools and processes for managing and
measuring compliance with established Data Backup, archiving and
restoration guidelines as indicated in the Procedures Manual.
SERVICE LEVEL:
<TABLE>
<CAPTION>
Values Metrics
---------------------------------------------------------------------------------------
<S> <C>
Service Level - 99.9% of all critical data identified by
Wards is being backed up and stored as
required per the Procedures Manual.
---------------------------------------------------------------------------------------
Increased Impact - Less than 99.2% of all critical data
identified by Wards is being backed up and
stored as required per the Procedures Manual.
---------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards applications and Supplier's Disaster Recovery Plan
RESPONSIBILITY: Supplier
PERIOD: Monthly
REPORT: See Master Agreement Schedule D, Reporting
28
<PAGE>
ACTION: See Master Agreement Schedule D, Corrective Action for Service Level
Metrics, Action Type-I
DISASTER RECOVERY SERVICES
--------------------------
OBJECTIVE: To provide midrange disaster recovery services for the Wards
Disaster Recovery Plan, which is a non-contractual document. The
target is to provide on-going midrange services to Wards within 48
hours of a declared disaster, including system processes as well as
all Wards' critical midrange applications
DEFINITION: Supplier declares a disaster when Supplier services to Wards are
interrupted due to significant equipment, computer or network
related failure longer than the period defined in Wards Disaster
Recovery Plan.
METHOD: A declared disaster will be announced by the Supplier Account
Manager in compliance with the Wards Disaster Recovery Plan..
SERVICE LEVEL:
<TABLE>
<CAPTION>
Values Metrics
------------------------------------------------------------------------------------------------------------
<S> <C>
Service Level Restoration of midrange operating system software and
critical applications to Wards within 48 hours of a
declared disaster and restoration of remaining applications
as provided in the Wards Disaster Recovery Plan.
------------------------------------------------------------------------------------------------------------
Increased Impact Restoration of critical midrange operating system
software and critical applications to Wards within 72
hours of a declared disaster and restoration of other
applications by no more than 12 hours after the time
specified in the Wards Disaster Recovery Plan.
------------------------------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards midrange applications and Users
RESPONSIBILITY: Supplier
PERIOD:
Resource Range: All midrange platforms under the control of the Supplier
that are in scope and included in the Wards Disaster
Recovery Plan.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
29
<PAGE>
DISASTER RECOVERY TEST
----------------------
OBJECTIVE: Supplier will demonstrate its ability to restore Wards Midrange
systems in accordance with the Wards Disaster Recovery Plan,
which is a non-contractual document, in the event of a disaster.
Supplier will be responsible for the successful execution of the
Wards disaster recovery test plan for Wards Midrange processing.
DEFINITION: Disaster recovery testing is the process by which Supplier
ensures that the disaster recovery services being provided to
Wards can be restored in a swift and accurate manner following a
disaster situation in accordance with the Wards Disaster Recovery
plan, which is a non-contractual document. This service level is
valid as long as Wards participates in the disaster recovery
planning, interface and testing process as defined in the
Procedures Manual and as mutually agreed to by Supplier and
Wards.
METHOD: Supplier will test the midrange Disaster Recovery Plan as defined
in the Wards Disaster Recovery Plan. Supplier will provide test
results to Wards within one week of test completion.
SERVICE LEVEL:
<TABLE>
<CAPTION>
Values Metrics
----------------------------------------------------------------------------------------
<S> <C>
Service Level 90% of all scheduled activities are completed
according to the Wards Disaster Recovery Test
Plan.
----------------------------------------------------------------------------------------
Increased Impact Less than 80% of all scheduled activities are
completed according to the Wards Disaster
Recovery Test Plan.
----------------------------------------------------------------------------------------
</TABLE>
IMPACT: Medium
AFFECTED AREA: Wards Midrange Platforms
RESPONSIBILITY: Supplier
PERIOD: Annually
RESOURCE RANGE: All midrange platforms under the control of the Supplier and
agreed to be included in the Test.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-II
SYSTEMS AVAILABILITY
---------------------
OBJECTIVE: Monitoring Systems availability and performance according to
defined targets. Starting and stopping defined Systems Services
according to specified service
30
<PAGE>
availability schedules. Initiating Problem Management procedures to
rectify any performance or availability failures.
DEFINITION: Eachpplication/server is available during hours of scheduled
availability. To be available, each Online Service must be: (1)
Accessible and usable to Wards User Community according to
Scheduled Availability; (2) Minimum required files open and
accessible to each Online Service as directed by Wards; (3)
Availability calculated as:
(Scheduled Available - Unscheduled Outage) / scheduled available =
% available
i.e. (100-10)/100=90% Available
SCHEDULED AVAILABILITY MEANS:
MIDRANGE SCHEDULED AVAILABILITY
-------------------------------
APPLICATION/SERVER AVAILABILITY
Data Warehouse Mon.- Sat. 04:00 - 18:00
SP Complex
Sunrise Development Mon.-Sun. 05:00 - 23:59
Sunrise Production
Raven 1-2
E3 Mon. -Sun. 07:00 - 19:00
Wards SE3
ADS Mon. - Sun. 00:00-01:59
MW PROD QA 04:00-23:59
NPS/2 Mon.-Sun. 00:00-01:59
MW PROD QA 04:00-23:59
METHOD: Monitoring all Online Services to ensure their performance and
availability remains within the service levels. The Supplier will
provide console or other appropriate management processes to
control the Wards Midrange environments within their control.
<TABLE>
<CAPTION>
SERVICE LEVEL:
Values Metrics
------------------------------------------------------------------
<S> <C>
Service Level - 95% of all Online Services have been
maintained to Wards schedules.
------------------------------------------------------------------
Increased Impact - Less than 90% of all Online Services
been maintained to Wards schedules.
------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Employees, applications, distribution and stores.
31
<PAGE>
RESPONSIBILITY: Supplier
PERIOD: Monthly
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
BATCH REPORTS AVAILABILITY
--------------------------
OBJECTIVE: Monitoring Batch Reports availability and performance according to
defined targets. Ensuring availability, electronically or otherwise
of defined Batch Reports according to specified service schedules.
Initiating Problem Management procedures to rectify any performance
or availability failures.
DEFINITION: The Suppliers processes for Batch Reports monitoring and control
within the Wards Midrange environments.
METHOD: Monitoring all Batch Reports to ensure their availability remains
within specified tolerances. The Supplier will provide batch
management processes to control the Wards Midrange environments
within their control.
<TABLE>
<CAPTION>
SERVICE LEVEL:
Values Metrics
-------------------------------------------------------------------
<S> <C>
Service Level - Batch Reports have been produced and made
available according to Ward's schedules
with no more than one delivery that is
late by no more than 4 hours.
-------------------------------------------------------------------
Increased Impact - Batch Reports have been produced and made
available according to Ward's schedules
with more than one delivery or the late
report is not delivered within 8 hours of
scheduled time.
-------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Employees, applications, distribution and stores.
RESPONSIBILITY: Supplier
PERIOD: Monthly
RESOURCE RANGE: Performance within this specification is to the extent of
the Supplier's span of control.
REPORT: See Master Agreement Schedule D, Reporting
32
<PAGE>
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
REQUEST TIME TO COMPLETE
------------------------
OBJECTIVE: To insure that midrange environment modification requests are
completed in an acceptable amount of time.
DEFINITION: Midrange environment modification requests are those system
management functions performed by the Supplier in routine support
of the midrange processing environment.
METHOD: The Supplier provided change management system or Supplier provided
help desk problem tracking system will be used to calculate time to
complete.
<TABLE>
<CAPTION>
SERVICE LEVEL:
VALUES Metrics
-------------------------------------------------------------------
<S> <C>
Service Level - 90% of requests completed by target
date as mutually agreed upon.
-------------------------------------------------------------------
Increased Impact - Less than 85% of requests completed by
target date as mutually agreed upon.
-------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards User Community
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 24x7x365.
RESOURCE RANGE: For all Wards' midrange systems, present and future, which
are under the Supplier's control.
Report: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - I
RESPONSE TIME
-------------
OBJECTIVE: Supplier will provide acceptable response times for end users.
DEFINITION: The first component of response time for the midrange on-line
environment is measured by the percentage of transactions that
complete within the defined time limits (internally measured
elapsed time). Each online environment has its own response time
objectives based on the workload they support and their
33
<PAGE>
historical response time trends. The baseline for response times
will be tracked by Supplier during the period from the Service
Agreement Effective Date to the Service Agreement Commencement Date
and included in this Service Level.
<TABLE>
<CAPTION>
TRANSACTION BY OPERATING Baseline Measurement
SYSTEM
-------------------------------------------------------------------
<S> <C>
RS/6000 Baseline provided by Supplier and
agreed upon by Wards.
-------------------------------------------------------------------
AS/400 Baseline provided by Supplier and
agreed upon by Wards.
-------------------------------------------------------------------
</TABLE>
METHOD: Data Capture: The Supplier will use Supplier provided manual
records, job logs, systems logs, and any other tools available to
determine the response time Measurement Interval: At least once per
period or by exception (i.e. missing a threshold). Supplier will
provide monthly summary reports to Wards Management for review.
<TABLE>
<CAPTION>
SERVICE LEVEL:
Description Data Points
-------------------------------------------------------------------
<S> <C>
Service Level 98% of midrange system transactions
are completed[based upon measurement
methods determined during the
Transition Period].
-------------------------------------------------------------------
Increased Impact Less than 95% of midrange system
transactions are completed [based
upon measurement methods determined
during the Transition Period].
-------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Offices and Employees
RESPONSIBILITY: Service Performance: Supplier provides baseline and all
services related to this Service Level.
Compliance Management: Supplier provides calculation,
reporting and analysis for this Service Level
PERIOD: Monthly
HOURS OF OPERATION: 24x7x365
RESOURCE RANGE: This service level is valid, provided the transaction
volumes do not exceed baseline transaction volumes per day:
Report: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Type-I
34
<PAGE>
C. SERVICE LEVELS
The Service Levels are identified in the following table(s). Each Service
Level is assigned a Severity Weight in the following table(s), which is used in
the calculation of the Service Level Credits. The Severity Weights are
expressed as percentages, totaling 100% for all Service Levels, and approximate
the relative severity of the impact on Wards' operations of failures to meet the
respective Service Levels. The parties acknowledge that these percentages are
approximations of probable severity and relative importance and do not limit
Wards' right to contend that one or more failures to meet one or more of the
Service Levels may constitute a material breach of the Agreement. Upon 30 days
advance notice to Supplier, Wards may adjust the Severity Weights of the
respective Service Levels as Wards deems appropriate so long as the total of
such percentages does not exceed 100%.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------
SERVICE
LEVEL DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED
STANDARD ID MEASUREMENT WEIGHT IMPACT LEVEL
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DATA BACKUP, PERCENTAGE 15 99.9% LESS THAN
ARCHIVING BACKED UP 99.2%
AND RESTORATION
- - ------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY RESTORATION 10 WITHIN 48 WITHIN 72
PLAN TIME HOURS HOURS
- - ------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY TEST 5 90% of all Less than 80%
TEST PERFORMANCE scheduled of all
activities are scheduled
completed activities are
according to completed
the Wards according to
Disaster the Wards
Recovery Test Disaster
Plan. Recovery Test
Plan.
- - ------------------------------------------------------------------------------------------------------------------
SYSTEMS AVAILABILITY PERFORMANCE 20 95% of all Less than 90%
Online Services of all Online
have been Services have
maintained to been maintained
Wards schedules. to Wards
schedules.
- - ------------------------------------------------------------------------------------------------------------------
BATCH REPORT PERFORMANCE 15 Batch Reports Batch Reports
AVAILABILITY have been have been
produced and produced and
made available made available
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
according to according to
Ward's Ward's
schedules with schedules with
no more than more than one
one delivery delivery or the
that is late by late report is
no more than 4 not delivered
hours. within 8 hours
of scheduled
time.
- - -------------------------------------------------------------------------------------------------------------------
REQUEST TIME TO PERFORMANCE 15 90% of requests Less than 85%
COMPLETE completed by of requests
target date as completed by
mutually agreed target date as
upon. mutually agreed
upon.
- - -------------------------------------------------------------------------------------------------------------------
RESPONSE TIME TRANSACTION TIME 20 98% of midrange Less than 95%
system of midrange
transactions system
are transactions
completed[based are completed
upon [based upon
measurement measurement
methods methods
determined determined
during the during the
Transition Transition
Period Period
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
The following Service Levels are designated as Critical Service Levels:
---------------------------------------------------------------------------
SERVICE APPLICATION DESCRIPTION
LEVEL
STANDARD
ID
---------------------------------------------------------------------------
ONLINE AVAILABILITY
---------------------------------------------------------------------------
RESPONSE TIME
---------------------------------------------------------------------------
III. SERVICE LEVEL CREDITS
A. CREDITS
In each case of a failure to satisfy a Service Level Supplier will, within
five (5) days from the identification of the deviation from the applicable
Service Level, provide to Wards a plan of activities which will allow Supplier
to satisfy the applicable Service Level at the earliest date practicable. In
addition, Wards shall be entitled to recover a Service Level Credit for such
Service Level calculated in the manner described below,
36
<PAGE>
provided, however, that the aggregate amount of such Service Level Credits for
any given month will not exceed ten percent (10%) of Supplier's monthly charges
under this Service Agreement for the applicable month (excluding Pass-Through
Expenses, if any). If a single event directly causes a failure to achieve more
than one Service Level, then only one Service Credit will apply. In such event,
Wards will select the Service Level that will be used for the calculation of the
Service Credit.
B. METHOD OF CALCULATION
If Supplier fails to meet or exceed a Service Level, the Severity Weight
corresponding to that Service Level, expressed as a percentage, will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any). If Supplier's performance fails to meet an Increased Impact
Level for any Service Level, the Severity Weight corresponding to that Service
Level, expressed as a percentage, will be doubled and such percentage will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) (this calculation being in lieu of, and not in addition to, the
credit calculation for the corresponding Service Level failure). To calculate
the total Service Level Credit due to Wards for the applicable month, the
amounts calculated for each Service Level or Increased Impact Level as described
above will be totaled and such amount shall be available as a credit to Wards
against Supplier's invoice for the applicable month.
C. FREQUENCY FACTOR
In any case where Supplier fails to achieve the same Service Level
(including failure to achieve the designated Increased Impact Level for that
Service Level) in two consecutive months or in any four months in any 12-month
period, the applicable Severity Weight shall be doubled and such percentage will
be multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any), and for any subsequent months in which Supplier fails to
achieve such Service Level or Increased Impact Level; provided, however, that in
no case will Supplier be liable for total Service Credits which exceed ten
percent (10%) of the applicable monthly invoice (excluding Pass-Through Expenses
and Special Charges, if any).
The Service Credits will revert to the method of calculation provided in Section
III.A. above in the following circumstances:
1. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and the
failure in the second month is caused by a root problem that is
different from the root problem that was the cause of the failure in
the first month, the calculation will revert to the method of
calculation in Section III.A. following four consecutive months of
achieving the Service Level.
37
<PAGE>
2. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and the
failure in the second month is caused by a root problem that is the
same as the root problem that was the cause of the failure in the first
month, the calculation will revert to the method of calculation in
Section III.A. following ten consecutive months of achieving the
Service Level.
Nothing in the preceding two paragraphs will excuse the application of the
frequency factor in the calculation of Service Credits if a subsequent failure
to achieve a Service Level would otherwise make the frequency factor apply.
D. EXCUSED PERFORMANCE PROBLEM
Supplier shall not be liable to pay Wards Service Level Credits for any
failure to meet a Service Level to the extent that such a failure is directly
attributable to (i) a Force Majeure Event; (ii) breaches of this Agreement by
Wards, provided that Supplier has provided Wards with reasonable notice of such
breach immediately after becoming aware of it and determining that such breach
will adversely impact Supplier's performance of Services and Supplier has used
all Commercially Reasonable Efforts to perform notwithstanding such breach;
(iii) acts or omissions of Wards (or third parties acting on behalf of Wards
under a written agreement), provided that Supplier has provided Wards with
reasonable notice of such act of omission immediately after becoming aware of it
and determining that such problem will adversely impact Supplier's performance
of the Services and Supplier has used Commercially Reasonable Efforts to perform
notwithstanding the act or omission; or (iv) the first manifestation of an
extraordinary latent error or defect in Equipment used by Supplier in providing
the Services (and any related repeated instances pending the applicable
Supplier's correction of the defect) if such defect was (1) unknown to Supplier
and (2) not disclosed in any information distributed by the third party
licensor, manufacturer, or distributor and (3) not preventable or discoverable
through normal testing or maintenance procedures. The foregoing are referred to
herein collectively as an "Excused Performance Problem." Supplier shall be
liable to grant Wards Service Level Credits for any failure to meet a Service
Level attributable to any cause other than causes expressly included in the
categories listed above.
E. TIME LIMIT
If Supplier does not notify Wards of any Excused Performance Problem (as
described in Section III.D above) within ninety (90) days of the date Supplier
provides Performance Reports covering the time period during which the Excused
Performance Problem is alleged to have occurred, then Supplier shall be deemed
to have waived the claim of an Excused Performance Problem.
IV. SERVICE LEVEL TERMINATION EVENT
38
<PAGE>
A. DEFINITION
1. Measurement Event - For purposes of this section, a "Measurement
-----------------
Event" will be the monthly calculation of Supplier's actual
performance for each Service Level or Critical Service Level. The
total possible Measurement Events during any specific period of
time is the product of the number of months in that time period
times the number of Service Levels or Critical Service Levels, as
applicable.
2. Failure Event - For purposes of this section a "Failure Event"
-------------
shall be a specific Measurement Event for which Supplier fails to
achieve the relevant Critical Service Level(s) or Service
Level(s); provided, however, that any such failure caused by an
event described in Section III.D of this SLA shall not be counted
as a Failure Event. Any single event, act or omission that causes
multiple Service Levels to be missed will be counted as one
Failure Event.
B. REPEATED SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Service
Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(CRITICAL SERVICE EVENTS IN MEASUREMENT
LEVELS) PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 6 18
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 12 37
Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 6 18
Failure Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 12 37
Failure Events
- - --------------------------------------------------------------------------------------------------
</TABLE>
C. REPEATED CRITICAL SERVICE LEVEL FAILURES
39
<PAGE>
Certain repeated failures by Supplier to achieve the required Critical
Service Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(CRITICAL SERVICE EVENTS IN MEASUREMENT
LEVELS) PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 3 12
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 6 24
Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 3 12
Failure Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 6 24
Failure Events
- - --------------------------------------------------------------------------------------------------
</TABLE>
D. CATASTROPHIC LEVEL OF SERVICE
Recovery of the Midrange Services identified as in production, within
seventy-two (72) hours of any Failure Event.
E. QUALIFICATION
Nothing in this Section IV is intended to imply that any lesser number
or different combination of occurrences of deficient performance by
Supplier may not also constitute a material breach of Supplier's
obligations warranting termination of the Service Agreement by Wards
for cause.
40
<PAGE>
EXHIBIT E
TRANSFERRED EQUIPMENT
NONE
41
<PAGE>
EXHIBIT F
WARDS FACILITIES AND EQUIPMENT
MIDRANGE HARDWARE
DATA WAREHOUSE SP2
SERIAL NUMBER 78788
9076-30A RS/6000 SP
1009 EXP FRAME-604E HIGH NODE 1
1250 STND CUSTOMIZE PREINSTALL 1
2009 ONE 604E HIGH NODE EXP DRA 2
2022 EXP DRAWER 2-160 MHZ TN 4
2412 ENHANCED SCSI-2 DIFF F/W A 2
2415 SCSI-2 F/W ADAPTER /A 3
2424 0.6M 16-BIT SCSI-2 SYS CBL 1
2426 16-BIT Y-CBL FOR SCSI-2 F/ W 1
2980 ETHERNET LAN ADAPTER 7
3031 2.2GB SCSI-2 DISK DRIVE 7
3034 4.5GB SCSI-2 F/W DISK 10
4011 SP SWITCH 2
4020 SP SWITCH ADAPTER 13
4030 1GB SMP DIMMS ON 1GB CARD 3
4089 256MB S6 MEMORY CARD 20
4154 512MB SMP DIMMS ON 1GB CAR 2
4158 512MB MEMORY CARD 4
4224 ETHERNET 10BASET TRANSCEIV 4
4324 604E SMP 2W 200 MHZ PROC 6
6217 SSA 4-PORT RAID ADAPTOR 14
9203 SP WIDE NODE SRVC LADDER 1
9310 SP SWITCH CABLE-10 METERS 16
9420 AIX 4.2 AND PSSP FOR AIX 13
9422 AIX V4.2 AND PSSP V2.2 13
9920 LOW VOLTAGE POWER 1
9986 LINE CORD, CHICAGO 1
7133-020 SSA DISK SUBSYSTEM 4
3416 4.5GB DSK DRV 64
5100 10.0M SSA COPPER CABLE 32
7133-020 SSA DISK SUBSYSTEM 4
3416 4.5GB DSK DRV 64
5100 10.0M SSA COPPER CABLE 32
7133-020 SSA DISK SUBSYSTEM 2
3416 4.5GB DSK DRV 32
5100 10.0M SSA COPPER CABLE 16
3590-B11 TAPE DRIVE WITH RACL 2
42
<PAGE>
7015-R00 RISC SYSTEM 6000 2
CONTROL WORKSTATION
7025-F30 RISC SYSTEM 6000 1
2839 POWER GXT110P GRAPHICS ADAPTER 1
2901 4.5GB ULTRA-SCSI 16-BIT HOT SW 1
2902 4.5GB ULTRA-SCSI 16-BIT HOT S 1
2931 8PORT ASYNCH ADPT EIA-232 1
2985 PCI ETHERNET BNC/RJ-45 ADAPTER 3
3614 P200 COLOR MONITOR 1
4164 64MB DIMM MEM 1
4168 128MB DIMM MEM 1
4314 166MHZ POWERPC 604E PROC 1MB 1
5005 AIX OPERATING SYSTEM PREINSTAL 1
6041 3 BUTTON MOUSE 1
6147 5GB/10GB 8MM INTERNAL TAPE DR 1
MWRAVEN1
SERIAL NUMBER 91334
7017-S70 ENTERPRISE SERVER 1
0009 LT MFG INDICATOR-DO NOT BUILD 1
2901 4.5GB ULTR-SCSI16BIT HOT SWAP 2
2963 TURBOWAYS 155 PCI UTP ATM ADA 2
2979 PCI AUTO LANSTRTOKEN-RING ADAP 1
2986 3COM 10/100 MBPS FST ETHERLINK 2
4175 2048MB R1 MEM GROUP (4X512MB) 1
4176 2048MB R1 MEM GRP (4X512) SEL 1
5316 PROC.,4W, 262MHZ, 8MB L2,RIGHT 1
6154 20/40GB 16BIT 8MM INT TAPE DR 1
6171 PWR DIST UNIT SIDE MNT, 1-PHS 1
6215 PCI SSA, 4-PORTMULTI-INTI ADAP 2
9060 BASE I/O RACK 1
9136 BASE PCI SCSI-2 F/W SINGLE-EN 2
9171 PWR DIST UNIT SPECIFY-BASE/SI 1
9295 BASE SCSI I/O DRAWER 7EIA 1
9300 LANGUAGE GROUP SPEC-US ENGLISH 1
9394 BASE 4.5GB F/W ULTRA SCSI DISK 1
9619 BASE 12-20X CD-ROM WITH 16B CO 1
9800 PWR CORD SPEC-US/CANADA 1
7133-020 SSA DISK SUBSYSTEM 3
3416 4.5GB DSK DRV 42
5100 10.0M SSA COPPER CABLE 16
43
<PAGE>
MWRAVEN2
SERIAL NUMBER 91256
7017-S70 ENTERPRISE SERVER 1
0009 LT MFG INDICATOR-DO NOT BUILD 1
2901 4.5GB ULTR-SCSI16BIT HOT SWAP 2
2963 TURBOWAYS 155 PCI UTP ATM ADA 2
2979 PCI AUTO LANSTRTOKEN-RING ADAP 1
2986 3COM 10/100 MBPS FST ETHERLINK 2
4175 2048MB R1 MEM GROUP (4X512MB) 1
4176 2048MB R1 MEM GRP (4X512) SEL 1
5316 PROC.,4W, 262MHZ, 8MB L2,RIGHT 1
6154 20/40GB 16BIT 8MM INT TAPE DR 1
6171 PWR DIST UNIT SIDE MNT, 1-PHS 1
6215 PCI SSA, 4-PORTMULTI-INTI ADAP 2
9060 BASE I/O RACK 1
9136 BASE PCI SCSI-2 F/W SINGLE-EN 2
9171 PWR DIST UNIT SPECIFY-BASE/SI 1
9295 BASE SCSI I/O DRAWER 7EIA 1
9300 LANGUAGE GROUP SPEC-US ENGLISH 1
9394 BASE 4.5GB F/W ULTRA SCSI DISK 1
9619 BASE 12-20X CD-ROM WITH 16B CO 1
9800 PWR CORD SPEC-US/CANADA 1
7133-020 SSA DISK SUBSYSTEM 2
3416 4.5GB DSK DRV 32
5100 10.0M SSA COPPER CABLE 16
MWPRODQA J30
SERIAL NUMBER 50647
7012-340 RISC/6000 1
2555 1GB SCSI-2 DISK DRIVE 2
2558 1GB SCSI-2 DISK DR SELECT 1
2790 POWER GT4X 8-BIT FEATURE 1
2810 GRAPHICS APPL INPU ADP 1
4074 64MB HD3 MEMORY SELECT FEATURE 1
5005 SOFTWARE PRE-LOAD 1
6010 KEYBOARD U.S. 101 KEYS 1
6041 3 BUTTON MOUSE 1
9000 ETHERNET THICK THIN CONN SPE 1
9221 3.5" DISKETTE SPECIFY 1
44
<PAGE>
9300 LANGUAGE GROUP U.S.ENGLISH 1
9800 LINE CORD 1
6091-019 19 INCH COLOR DISPLAY MONITO 1
MWPROD01 G30
SERIAL NUMBER 84848
7012-G30 RISC SYSTEM/6000
2415 SCSI-2 FAST/WIDE ADPT/A 1
2416 SCSI-2 DIFFERENTIAL FW ADPT 2
2936 ASYN CBL EIA232/V.24 1
2937 PTR/TERM INTERP EIA232 1
2980 ETHER HI PERF LAN ADPT 1
3034 4.5GB SCS-2 F/W DSK DR 2
3056 2.2GB SCSI-2 F/W DSK DR SEL 1
4142 256MB MP/DT MEM SELECT 1
4224 ETHERNT 10BASET TRANSCEIVER 1
5005 SOFTWARE PRE-LOAD 1
5307 DUAL POWERPC604 PROC CD UP 1
6511 MEDIA DSK BAY CONV HW 1
6513 INTERPOSER 16-8BIT CBL CONV 1
9216 SCSI-2 F/W ADPT/A SPECIFY 1
9221 3.5" DISKETTE SPECIFY 1
9300 LANGUAGE GROUP U.S.ENGLISH 1
9440 BASE CBL SCSI INT 4DROP 16BIT 1
9606 8X SPEED TRAY LOADING CD-ROM 1
9800 LINE CORD 1
ISERV01 G30
SERIAL NUMBER 84849
7012-G30 RISC SYSTEM/
2416 SCSI-2 DIFFERENTIAL FW ADPT 2
2936 ASYN CBL EIA232/V.24 1
2937 PTR/TERM INTERP EIA232 1
2980 ETHER HI PERF LAN ADPT 2
3033 2.2GB SCSI-2 F/W DSK DR 2
3056 2.2GB SCSI-2 F/W DSK DR SEL 1
4142 256MB MP/DT MEM SELECT 1
4224 ETHERNT 10BASET TRANSCEIVER 2
5005 SOFTWARE PRE-LOAD 1
5307 DUAL POWERPC604 PROC CD UP 1
6511 MEDIA DSK BAY CONV HW 1
6513 INTERPOSER 16-8BIT CBL CONV 1
9216 SCSI-2 F/W ADPT/A SPECIFY 1
9221 3.5" DISKETTE SPECIFY 1
9300 LANGUAGE GROUP U.S.ENGLISH 1
9440 BASE CBL SCSI INT 4DROP 16BIT 1
9606 8X SPEED TRAY LOADING CD-ROM 1
9800 LINE CORD 1
WARDSE3
SERIAL NUMBER 10-2RRMM
45
<PAGE>
9406-640 AS/400E SYSTEM UNIT 1
0003 ORDER INSTALLED BY IBM 1
0028 MIGRATE 3490E C10,C11,C22 1
0044 DATA LOSS PROTECTION 1
0330 V.24/EIA232 20-FT CABLE 3
2237 MODEL 640 PROCESSOR 1
2644 3490 MAGNETIC TAPE ATTACH/HP 1
2688 OPTICAL LINK PROC(1063MBPS) 1
2699 TWO-LINE WAN IOA 1
2810 LAN/WAN IOP 5
2815 PCI 155MBPS UTP OC3 ATM 2
2816 PCI 155MBPS MMF ATM 2
2838 PCI 100/10MBPS ETHERNET IOA 1
2924 ENGLISH 1
5024 SOFTWARE VERSION V4R2 1
5055 STORAGE EXPANSION UNIT 1
5058 STORAGE EXPANSION UNIT 2
5073 1063MBPS SYS UNIT EXP TOWER 1
5083 1063MBPS STORAGE EXP TOWER 1
5151 POWER SUPPLY (650 WATTS) 1
5512 ALT IPL SPEC FOR 3490 CXX 1
5520 COMPLETE SYSTEM ORDER 1
5540 ATTACH TWNAXAL WKSTA CTRL 1
6533 RAID DISK UNIT CONTROLLER 3
6534 MAGNETIC MEDIA CONTROLLER 1
6907 4.19GB DISK UNIT 65
8180 OPT BASE 512MB MAIN STORAGE 2
9082 14 FOOT LINE CORD 1
9083 LOCKING LINE CORD PLUG 1
9182 14FT LINE CORD SPECIFY 1
9183 LOCKING LINE CORD PLUG SPECIFY 1
9280 BASE TWINAXIAL WSC 1
9699 BASE TWO-LINE WAN IOA 1
9754 BASE MFIOP WITH RAID 1
9907 BASE 4.19GB DISK UNIT 1
9309-002 RACK ENCLOSURE, 1.6 METER 1
9171 GENERAL PURPOSE I/O RACK 1
9986 6 FT CABLE (CHICAGO) 1
46
<PAGE>
EXHIBIT G
THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
MIDRANGE SOFTWARE
DATA WAREHOUSE SP2
SERIAL NUMBER 78788
5765-C34 AIX VERSION 4
5765-421 C SET + + FOR AIX VERSION 3 1
5765-654 PERF TBX NETWK FOR AIX V 2.2 1
5765-145 LOADLEVELER RS6000 SP FAMILY 1
DB2 UDB EEE 5.0
ADSM CLIENT / SERVER
MWRAVEN1
SERIAL NUMBER 91334
5765-C34 AIX VERSION 4
5270 IBM C and C++ Compiler
8297 ADSM User
MWRAVEN2
SERIAL NUMBER 91256
5765-C34 AIX VERSION 4
5270 IBM C and C++ Compiler
8297 ADSM User
MWPRODQA J30
SERIAL NUMBER 50647
5601-257 AIX WINDOWS ENVMNT/6000 1
0173 GRAD GRP E5 BASIC OTC 1
0960 PG E5 BASIC OTC 1
0966 BASIC 3D UPDATE GRP E5 1
3407 8MM TAPE 1
3444 SERIAL NUMBER ONLY 1
3466 PRELOAD FXD W/BKP COPY OPT 1
4968 PRELOAD DASD W/BKP OPT OTC 1
5005 PRELOAD FIXED DISK STORAGE 1
5051 3D PRODUCT CODE 1
5052 PRODUCT CODE 2D 1
7960 PERSONAL GRAPHIGS 1
7961 GKS-CO 1
9001 ASSET REGISTRATION 1
5756-030 AIX V/3 FOR RISC SYS/6000 1
47
<PAGE>
0190 SW LEV AIX V3.2.3 R6000 BSE 1
0193 AIX VER 3.2.5 1
1504 BASIC OTC GRP E5 UL 1-2 1
3317 OTC 8MM PROCESS CHARGE 1
3444 SERIAL NUMBER ONLY 1
3466 PRELOAD W/BKP COPY OPT 1
4961 PRELOAD W/BKP COPY OPT 1
5050 PRODUCT CODE 1
5061 VISUAL SYS MGR 1
5445 PREINSTAL DASD 1
5700 UPGRADE/RECONFIGURATION 1
9001 ASSET REGISTRATION 1
5601-457 AIX XSTATION MANAGER/6000 1
1121 GRAD GRP E5 BASIC OTC 1
3407 8MM TAPE 1
3444 SYSTEM PROGRAM ORDER 1
4268 MASTER COPY FEATURE 1
5051 PRODUCT CODE 1
9001 ASSET REGISTRATION 1
5696-907 PEX AND PHIGS VERSION 4.1.5 1
3444 SERIAL NUMBER ONLY 1
4003 PG G5 BUPG VER 4.1 1
9001 ASSET REGISTRATION 1
5765-393 AIX VERSION 4.1 1
3444 SERIAL NUMBER ONLY 1
3621 BUPG PG G5 V3.2-4.1 (3603) 1
3632 BUPG V3.2-4.1 NSU 1 2
9001 ASSET REGISTRATION 1
5765-660 PEX & PHIGS AIX 4.2 1
4003 UPG F P&PH V4.1 T P&PH V4.2 1
9001 ASSET REGISTRATION 1
5765-C34 AIX VERSION 4 (REPACKAGED) 1
4038 FR 5765-393 TO C34 UPG 1-2 1
4044 FR 5765-393 TO C34 UPG NS U AL 2
5012 NETSCAPE 4.2.X NON-EXP NA 1
5014 LOTUS DOM 64B 4.2.X NA 1
9001 ASSET REGISTRATION 1
5750-AFC SYSTEM PROGRAM ORDER 1
0400 5756-030 3.2 1
0409 5601-257 3D 1
0419 BOTC AIX XL FORTRAN 2.3.0 1
0457 5601-257 2D 1
0465 BOTC AIX XSTATION MGR 1.4.1 1
0482 VISUAL SYS MGR 1
3407 8MM TAPE 1
5700 UPGRADE/RECONFIGURATION 1
48
<PAGE>
7960 BOTC GRAPHIGS PUB 1
7961 BOTC GKS PUBS 1
9001 ASSET REGISTRATION 1
5692-AIX SYSTEM PROGRAM ORDER 1
0808 5765-660 PEX & PHIGS F AIX V4 1
0821 BONUS PACK FOR AIX 4.2 1
0852 5765-C34 AIX 4.2.X 1
3430 HARDCOPY DOCUMENTATION 1
3470 SHIP MEDIA ONLY 1
9001 ASSET REGISTRATION 1
5692-ADV SW UPGRADE PROTECTION FOR AI 1
4776 BOTC 5765-C34 AIX V4 1
9001 ASSET REGISTRATION 1
MWPROD01 G30
SERIAL NUMBER 84848
5765-393 AIX VERSION 4.1 1
3603 BOTC PG G5 1-2 USERS 1
3604 BOTC DS USERS 1 14
5005 PREINSTALL OPTION (AIX V4.1) 1
9001 ASSET REGISTRATION 1
5765-652 COMM SERVER FOR AIX, V4 1
4000 BOTC 1 USER SESS 1
4018 USE PK 10 USER SESS 1
9001 ASSET REGISTRATION 1
5765-C34 AIX VERSION 4 (REPACKAGED) 1
4038 FR 5765-393 TO C34 UPG 1-2 1
4042 FR 5765-393TOC34 UPG DS U E5+ 14
5012 NETSCAPE 4.2.X NON-EXP NA 1
5014 LOTUS DOM 64B 4.2.X NA 1
9001 ASSET REGISTRATION 1
5692-AIX SYSTEM PROGRAM ORDER 1
0821 BONUS PACK FOR AIX 4.2 1
0852 5765-C34 AIX 4.2.X 1
1008 CD-ROM UPG 1
3410 CD-ROM 1
9001 ASSET REGISTRATION 1
ISERV01 G30
SERIAL NUMBER 84849
5765-393 AIX VERSION 4.1 1
3444 SERIAL NUMBER ONLY 1
3603 BOTC PG G5 1-2 USERS 1
3604 BOTC DS USERS 1 14
49
<PAGE>
5005 PREINSTALL OPTION (AIX V4.1) 1
9001 ASSET REGISTRATION 1
5765-C34 AIX VERSION 4 (REPACKAGED) 1
4038 FR 5765-393 TO C34 UPG 1-2 1
4042 FR 5765-393TOC34 UPG DS U E5+ 14
5012 NETSCAPE 4.2.X NON-EXP NA 1
5014 LOTUS DOM 64B 4.2.X NA 1
9001 ASSET REGISTRATION 1
5692-AIX SYSTEM PROGRAM ORDER 1
0821 BONUS PACK FOR AIX 4.2 1
0852 5765-C34 AIX 4.2.X 1
1002 BASIC MRM SPO 8MM TAPE 1
3407 8MM TAPE 1
9001 ASSET REGISTRATION 1
WARDSE3
SERIAL NUMBER 10-2RRMM
5716-CX5 VISUALAGE FOR C++ FOR AS400 1
2689 PG P40 BASIC OTC 1
3645 VIS C++ WIN95 PER USER OTC 1
9001 ASSET REGISTRATION 1
5755-AS5 V4 SYSTEM PROGRAM ORDER 1
1463 VALUPAK (5769-VP1) 1
2132 VIS AGE C++ WIN (5716-CX5) 1
2220 VIS AGE WIN 95 CLI (5716CX5) 1
2501 OS/400 (5769-SS1) 1
2508 QUERY (5769-QU1) 1
2511 DB2 QRY KIT (5769-ST1) 1
2512 ILE RPG (5769-RG1) 1
2516 CA WINDOWS (5769-XW1) 1
2525 PERF TOOLS (5769-PT1) 1
2526 ADTS (5769-PW1) 1
2529 TCP/IP/400 (5769-SS1) 1
2556 PERF MANAGER (5769-SS1) 1
2585 JAVA TOOLS (5769-SS1) 1
2586 JAVA KIT (5769-SS1) 1
2610 PT/400 MGR (5769-PT1) 1
2691 PSF/400 (5769-SS1) 1
2924 ENGLISH U/L SBCS PRIMARY 1
3410 CD-ROM MEDIA 1
3446 CUSTOMER EXPEDITE CHARGE 1
3520 VERSION 4 RELEASE 2.0 1
8115 RPG400-RPG III-NEW CUST (RG1) 1
8124 ADTS FOR OS/400 5716-RG1 1
50
<PAGE>
9001 ASSET REGISTRATION 1
5769-PT1 PERFORMANCE TOOLS 1
1104 P40 BASIC BASE OTC VP,GP 1
1109 P40 BASIC OTC MGR VP,GP 1
9001 BASIC ASSET REGISTRATION 1
9500 BASIC PKG REGISTR VP,GP 1
5769-PW1 APPL DEVEL TOOLSET 1
0899 P40 BASIC OTC 1
9001 BASIC ASSET REGISTRATION 1
5769-QU1 QUERY FOR AS/400 1
0352 PG P40 BASIC OTC VP,GP 1
9001 BASIC ASSET REGISTRATION 1
9500 BASIC PKG REGISTRATION VP 1
5769-RG1 ILE RPG FOR AS/400 1
0989 P40 BASIC OTC 1
9001 BASIC ASSET REGISTRATION 1
5769-SS1 OPERATING SYSTEM/400 1
0279 PG P40 BASIC OTC 1
0359 PSF/400 1-19 IPM, VP 1
9001 BASIC ASSET REGISTRATION 1
9500 BASIC PCKG REGISTRATION - VP 1
5769-ST1 DB2 QUERY MGR & SQL DEV KIT 1
0357 PG P40 BASIC OTC VP,GP 1
9001 BASIC ASSET REGISTRATION 1
9500 BASIC PKG REGISTRATION VP 1
5769-VP1 VALUPAK FOR AS/400 1
0347 PG P40 BASIC OTC 1
9001 BASIC ASSET REGISTRATION 1
9500 BASIC PKG REGISTRATION VP 1
5769-XW1 AS400 CLIENT ACCESS WIN FAMILY 1
0264 P40 GROUP, CAP = 200 1
0358 PER USER, VP, GP 125
9001 BASIC ASSET REGISTRATION 1
9500 BASIC PKG REGISTRATION VP 1
51
<PAGE>
APPLICATION SOFTWARE:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------
PLATFORM SYSTEM BUSINESS APPLICATION SOFTWARE APPLICATION VENDOR
SYSTEM
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AS/400 WARDSE3 Merchandise Replenishment E3SLIM E3
Corporation
- - ------------------------------------------------------------------------------------------------------
RS/6000 MWRAVEN1 Merchandise Planning Evolution, DecisionMaster Intrepid
MWRAVEN2 Systems, Inc.
- - ------------------------------------------------------------------------------------------------------
RS/6000 ISERV01 Backup Fire Wall
- - ------------------------------------------------------------------------------------------------------
RS/6000 Data Data Warehouse DB2 UDB EEE IBM
Warehouse Corporation
SP2
- - ------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE>
EXHIBIT H
WARDS SOFTWARE
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
PLATFORM SYSTEM BUSINESS APPLICATION SOFTWARE APPLICATION VENDOR
SYSTEM
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - --------------------------------------------------------------------------------------------
RS/6000 MWPROD01 Development In-House
- - --------------------------------------------------------------------------------------------
RS/6000 MWPRODQA Delivery System & Parts System ADS & NPS/II In-House
- - --------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
EXHIBIT I
SUPPLIER SOFTWARE
NONE
54
<PAGE>
10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 4: NETWORK SERVICES
-----------------------------------------
THIS SERVICE AGREEMENT NO. 4: NETWORK SERVICES (the "Service Agreement") is
made and entered into this 6th day of November, 1998 between Montgomery Ward &
--- --------
Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a
Delaware corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in the Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into the Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITION
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
"INITIAL TERM" has the meaning given in Section 2.1.
"MASTER AGREEMENT" means the Master Service Agreement for Information
Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom
Corporation dated November 6, 1998, and all amendments thereto.
"NETWORK SERVICES" has the meaning given in Section 5.1.
"NETWORK SYSTEM" means the switches, hubs, routers, relays and other
connectivity systems utilized by Wards as of the Service Agreement Effective
Date and as subsequently modified under this Service Agreement.
"RENEWAL TERM" has the meaning given in Section 2.2.
"SERVICE AGREEMENT COMMENCEMENT DATE" means the Date upon which the
Migration Plan for Network Services has been implemented under Service Agreement
No. 1.
<PAGE>
"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any
Renewal Term.
"SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the
meaning given in Section 7.1 of this Service Agreement.
"TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning
given in Section 8.1 of this Service Agreement.
"WARDS PEAK SEASON" means the period in any year during the Service
Agreement term from November 20 through December 31, and as such dates may be
adjusted by Wards from time to time.
ARTICLE 2. TERM
2.1 INITIAL TERM. The initial term of this Service Agreement (the
"Initial Term") shall begin as of the Service Agreement Commencement Date and
shall continue for a period of thirty-seven (37) months thereafter, unless
earlier terminated or renewed in accordance with the provisions of this Service
Agreement or the Master Agreement.
2.2 RENEWAL TERM. Wards shall have the option to renew this Service
Agreement for up to two (2) additional annual terms (each a "Renewal Term")by
delivering written notice of such renewal to Supplier at least ninety (90) days
before expiration of the final applicable Contract Year under this Service
Agreement and before expiration of each annual period thereafter as applicable.
All of the terms of this Service Agreement and the Master Agreement shall
continue to apply without change during any renewal period(s).
ARTICLE 3. TERMINATION
3.1 Convenience Termination Fee. Wards shall have the option to terminate
this Service Agreement for Convenience in accordance with Section 18.2(a) of the
Master Agreement. The Convenience termination charges, if any, shall be as
described in Exhibit C to this Service Agreement.
ARTICLE 4. PERSONNEL MATTERS
4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier
---------
Positions that are subject to the provisions of Section 7.2 of the Master
Agreement.
ARTICLE 5. SERVICES
5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall provide
the Services described in Exhibit B, as such Exhibit may be amended and
---------
supplemented from time to
<PAGE>
time pursuant to the Master Agreement (the "Network Services"). The Network
Services includes all of the responsibilities (including Equipment, Software,
personnel and expenses) associated with the Network Systems unless specifically
identified as a Wards responsibility under Section 5.4 below. The Services
include: (i) functions, responsibilities and tasks performed by the Transferred
Employees prior to the Service Agreement Effective Date; (ii) functions,
responsibilities and tasks not specifically described in this Service Agreement
but which are required for their proper performance and are an inherent part of,
or a necessary sub-part included within, the Services, and (iii) functions,
responsibilities and tasks that are a logical extension of existing services as
a result of changes in technology, changes in Wards business practices or
changes resulting from change control procedures. Supplier will be the exclusive
provider of the Services described in this Service Agreement.
5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the
Service Agreement Effective Date to the Service Agreement Commencement Date,
Supplier will provide Network Services under Service Agreement No. 1 (Transition
and Migration Services). Following the Service Agreement Commencement Date, the
Service Level Agreement and other obligations of this Service Agreement shall
become effective.
5.3 APPOINTMENT OF PROJECT EXECUTIVES. Upon the Service Agreement
Commencement Date the Parties will appoint individuals as Project Executives
under this Service Agreement to carry out the duties described in the Master
Agreement:
5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in
Exhibit B to this Service Agreement identifies the responsibilities of Wards
- - ---------
during the Term of this Service Agreement, as such Exhibit may be amended and
supplemented from time to time pursuant to the Master Agreement. The
responsibilities of Wards shall be limited to those items listed in the matrix.
ARTICLE 6. CHARGES
6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement
---------
sets forth the Charges for the Network Services that may be charged by Supplier.
All Charges and all Pass-Through Expenses are subject to the provisions of
Article 13 of the Master Agreement.
6.2 INVOICES for Charges and Expenses. In all invoices for Network
Services, Supplier shall provide Wards with the information described in Exhibit
-------
C in sufficient detail in order to allow Wards to verify invoices. Invoice
- - -
submission and payment shall be in accordance with Article 14 of the Master
Agreement.
ARTICLE 7. SERVICE LEVEL AGREEMENT
7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the
---------
Service Level Agreement applicable to the Network Services (the "Service Level
Agreement") All of the terms of Article 5 of the Master Agreement shall apply
to the Service Level Agreement. Supplier further acknowledges that Wards may
adjust schedules contained in Service Levels
3
<PAGE>
(such as availability) to meet Wards' needs during Wards Peak Season or other
events (such as extended sales) as is currently done and demonstrable today.
Service Levels and associated performances metric will be baselined during the
six (6) month period beginning on the Service Agreement Commencement Date, will
be established jointly by the Parties during such 6-month period and shall
become effective beginning with the seventh (7th) month following the Service
Agreement Commencement Date.
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date,
Wards shall assign, and Supplier shall purchase or assume, Wards' purchased
equipment or obligations under the applicable leases for the equipment listed on
Exhibit E (the "Transferred Equipment"). The terms of Section 6.1 of the
- - ---------
Master Agreement shall apply with respect to the Transferred Equipment.
8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2
of the Master Agreement, Wards shall provide the Wards Facilities and Wards
Equipment described in Exhibit F to this Service Agreement.
---------
8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the
Service Agreement Commencement Date, and subject to Supplier having received
any Third Party Consents, Supplier shall assume from Wards all of the rights and
obligations of Wards under the Third Party Contracts and the Third Party
Software that are listed in Exhibit G. The terms of Section 6.3 of the
----------
Master Agreement shall apply with respect to such to Third Party Contracts and
the Third Party Software.
8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is
---------
proprietary to Wards and that is used in Network Systems (the "Wards Software").
The terms of Section 8.1 of the Master Agreement shall apply with respect to the
Wards Software.
8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by
Supplier to provide the Network Services is listed in Exhibit I. Use of
---------
Supplier Software in providing the Network Services shall be in accordance with
Section 8.2 of the Master Agreement.
ARTICLE 9. TERMINATION AND TRANSITION SERVICES
9.1 TERMINATION. Wards may terminate this Service Agreement without
penalty at any time prior to the Service Agreement Commencement Date if Supplier
does not complete the Migration Plan described in Service Agreement No. 1.
After the Service Agreement Commencement Date, Wards may terminate this Service
Agreement in accordance with the terms of the Master Agreement.
4
<PAGE>
9.2 TRANSITION SERVICES. In the event of a termination or expiration of
this Service Agreement, Supplier shall provide the Termination/Expiration
Assistance as provided in Section 18.7 of the Master Agreement.
IN WITNESS WHEREOF the Parties have executed this Master Agreement as of
the day and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
---------------------------- ------------------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
-------------------------- ----------------------------------
Its: SVP, CIO Its: SVP-Outsourcing Services
--------------------------- -----------------------------------
5
<PAGE>
EXHIBITS TO NETWORK SERVICE AGREEMENT
-------------------------------------
EXHIBIT A KEY SUPPLIER POSITIONS
EXHIBIT B SERVICES
EXHIBIT C CHARGES
EXHIBIT D SERVICE LEVEL AGREEMENT
EXHIBIT E TRANSFERRED EQUIPMENT
EXHIBIT F WARDS FACILITIES AND EQUIPMENT
EXHIBIT G THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
Exhibit H WARDS SOFTWARE
EXHIBIT I SUPPLIER SOFTWARE
6
<PAGE>
EXHIBIT A
KEY SUPPLIER POSITIONS
DATA TELECOMMUNICATIONS MANAGER
DATA NETWORK DESIGN MANAGER
DATA NETWORK INSTALLATION AND MAINTENANCE MANAGER
NETWORK PLANNING MANAGER
TELECOMMUNICATIONS ENGINEER/ANALYST
7
<PAGE>
EXHIBIT B
SERVICES
OVERVIEW
- - --------
This detailed service description establishes the processes, measurement tools,
service specifications, and assumptions associated with IS Network Services for
Wards. The documented service descriptions are designed to give the Supplier an
understanding of Wards' business objectives for Network Services while allowing
the Supplier latitude to define their own processes and methods for providing
the services. A glossary of terminology and definitions may be found in
Appendix A.
The business objective of this service category is to provide Wards with
consistently efficient network support and cost-effective telecommunications
procurement. The Supplier will provide and maintain Wards' data network
provisioning, design, network installation, a network management methodology, a
monitoring platform, and tools to support the Wards network. Wards will retain
responsibility over Wards local and long distance voice services and equipment
defined as: PBX and voice mail administration, associated hardware and software,
telephone moves, adds, and changes, CO trunks, CO access T1 and fiber
facilities, DID numbers, and associated terminating equipment.
Network Services will provide for the overall management and performance of
Wards' LAN and WAN services. This includes support of network
telecommunications including: T1's, Frame-Relay, Internet access, and point-to-
point circuits (PTP). The Network management function will work in an
integrated fashion with all other service functions to provide seamless support
for the Wards business units. Costs for network circuit provisioning will be
passed through to Wards at cost with no mark up or service fee.
All pricing provided to Wards by the Supplier for this service category will be
considered inclusive of all charges related to the Supplier's performance of the
service within the described level of service, including, but not limited to,
escalation to hardware/software manufacturer(s) and escalation to
telecommunications service providers. The Supplier's responsibilities for
performance of this service description include, but are not limited to, the
following:
ACTIVITIES FOR NETWORK SERVICES
It is the Supplier's responsibility to provide a reliable, predictable, and
consistent network environment for Wards' location connectivity and application
access.
1. The Supplier will proactively monitor Wards network for availability and
performance.
2. The Supplier will provide problem resolution for all Wards network outages
and network performance degradation.
3. The Supplier will provide the telecommunications facilities and data
communications equipment pricing and provisioning function according to
Wards' requests and acceptance criteria.
4. The Supplier will provide the provisioning, design and planning function
for all network components including hardware, software, telecommunications
and facilities at In-scope Locations.
8
<PAGE>
5. The Supplier will coordinate the installation function for all network
components including hardware, software, telecommunications and facilities
at In-scope Locations.
6. The Supplier will utilize and adhere to the change management procedures
stated in the Procedures Manual for implementing changes to the Wards'
network infrastructure.
7. The Supplier will utilize and adhere to problem management procedures for
reporting and responding to network issues.
8. The Supplier will provide network disaster recovery services for the Wards
network in accordance with Wards' disaster recovery plan.
SERVICE PARAMETERS FOR NETWORK SERVICES
1. The Supplier will provide the appropriate resources, reports, tools,
procedures and management methodologies to comprehensively manage,
proactively monitor and support all Wards network problem resolutions and
performance degradation corrective actions.
2. The Supplier will be required to design, price, propose and plan new Wards'
initiatives, and Wards' network growth at In-scope Locations.
3. Supplier will be required to provide network management on a 24x7x365
basis.
4. Supplier will provide proactive monitoring, performance tuning and
corrective actions for the WAN and all LAN segments indicating impending
network problems.
5. The Supplier will provide proactive automated or manual monitoring of
managed and unmanaged network devices via a Supplier provided, installed,
and maintained network management platform, which will be accessible to any
Wards on-site, or Supplier on-site network personnel.
6. When a network outage or performance degradation is identified, the
Supplier will provide notification and escalation to Wards management
utilizing the problem management procedures, methodologies and tools stated
in the Procedures Manual.
7. The Supplier will provision all network hardware, software, and facilities
with a focus on cost while maintaining a stable infrastructure.
8. The Supplier will schedule all planned network modifications and outages
through the Supplier provided change management process in accordance with
the Procedures Manual.
9. The Supplier will provide advisement for selecting and installing new
network technology.
10. The Supplier will provide and maintain documentation of Wards' network
topology.
11. The Supplier will provide and maintain documentation of Wards' network
operations, circuits, and equipment.
12. The Supplier will periodically report on Wards' network availability,
performance and service level attainment to Wards' management as required
in Master Schedule E.
13. The Supplier will act as Wards' agent for obtaining network circuits,
hardware, software and maintenance for Wards provided or Supplier provided
services.
14. The Supplier will provide support for remote network dial-in access.
15. The Supplier will provide WAN support and maintenance for the Wards network
including, but not limited to, Cisco router configurations and stat
mux/modem support.
16. The Supplier will provide physical LAN troubleshooting and support for
WardsCORPORATE COMPLEX locations.
17. The Supplier will provide support, documentation, address allocation and
maintenance for all required protocols including, but not limited to,
TCP/IP, AppleTalk, SNA, Bi-sync, IPX, LAT and DECnet.
19
<PAGE>
18. The Supplier will document and report problems with associated corrective
actions to Wards in the weekly status meeting that will address all events,
issues and activities for the previous seven (7) day period.
19. The Supplier will provide and perform to the network baselines to establish
acceptable response time and performance for the Wards network.
20. The Supplier will perform all data network design, provisioning, and
installation in accordance with Wards' requirements and mutually agreed
timeframes.
21. The Supplier will schedule all planned network modifications and outages
through the established change management process in accordance with the
Procedures Manual.
22. The Supplier will adhere to Wards reporting requirements as stipulated in
Master Agreement Schedule D.
23. The Supplier will provide network Disaster Recovery testing on an agreed to
schedule in accordance with Wards' disaster recovery plan.
MEASUREMENT TOOLS FOR NETWORK MANAGEMENT
The Supplier is free to recommend in writing to Wards any additional or
alternative tools or processes for Wards review and final approval. Wards must
approve use of any new or equivalent tools and/or processes not already in place
at Wards. A list of available tools is shown below:
1) Compass
2) MS Office or equivalent
3) Network Sniffer or equivalent
10
<PAGE>
<TABLE>
<CAPTION>
NETWORK RESPONSIBILITY MATRIX
- - ---------------------------------------------------------------------------------------------------------------------------------
NETWORK MANAGEMENT
- - ---------------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPACITY PLANNING
- - ---------------------------------------------------------------------------------------------------------------------------------
Monitor network use and capacity, and resolve problems and performance degradation X
- - ---------------------------------------------------------------------------------------------------------------------------------
Forecast capacity and bandwidth requirements X
- - ---------------------------------------------------------------------------------------------------------------------------------
Ensure appropriate bandwidth to meet capacity projections X
- - ---------------------------------------------------------------------------------------------------------------------------------
Make recommendations regarding bandwidth consumption and trends X
- - ---------------------------------------------------------------------------------------------------------------------------------
Make recommendations regarding configuration changes X
- - ---------------------------------------------------------------------------------------------------------------------------------
Implement approved configuration changes X
- - ---------------------------------------------------------------------------------------------------------------------------------
Report usage and bandwidth capacity to Wards on a periodic basis X
- - ---------------------------------------------------------------------------------------------------------------------------------
PROCUREMENT AND ADMINISTRATION
- - ---------------------------------------------------------------------------------------------------------------------------------
Research and price network devices and network software/firmware from manufacturer, aggregator or reseller X
- - ---------------------------------------------------------------------------------------------------------------------------------
Approve procurement of network devices and network software/firmware X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain network devices and network software/firmware from manufacturer, aggregator or reseller X
- - ---------------------------------------------------------------------------------------------------------------------------------
Manage Purchase Orders, verify and advise Wards of receipt of equipment and assist WardS accounting with X
invoice resolution.
- - ---------------------------------------------------------------------------------------------------------------------------------
Research and price telecommunications from service provider X
- - ---------------------------------------------------------------------------------------------------------------------------------
Approve procurement of telecommunications from service provider X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain telecommunications from service provider X
- - ---------------------------------------------------------------------------------------------------------------------------------
Configure network devices according to pre-defined hardware, software/firmware and performance definitions X
(Currently performed by aggregator)
- - ---------------------------------------------------------------------------------------------------------------------------------
Monitor, control, and manage recovery from any virus invasion X
- - ---------------------------------------------------------------------------------------------------------------------------------
NETWORK DEVICES INSTALLATION
- - ---------------------------------------------------------------------------------------------------------------------------------
Schedule network devices installation activity with WardS in accordance with change management procedures X
- - ---------------------------------------------------------------------------------------------------------------------------------
Install network devices at Wards site within specified time frame X
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on network devices, X X
software/firmware
- - ---------------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for installation X
- - ---------------------------------------------------------------------------------------------------------------------------------
De-install and remove displaced network devices, as required X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off as required by the procedures manual X
- - ---------------------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and asset management system to X
reflect changes
- - ---------------------------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE PLANNING AND MANAGEMENT
- - ---------------------------------------------------------------------------------------------------------------------------------
Notify Wards of new releases of appropriate software/firmware per network device model X
- - ---------------------------------------------------------------------------------------------------------------------------------
Plan and schedule major software/firmware changes such as operating system installs X
- - ---------------------------------------------------------------------------------------------------------------------------------
Approve major software/firmware changes such as operating system installs X
- - ---------------------------------------------------------------------------------------------------------------------------------
Install maintenance (i.e. patches) on Supplier supported software/firmware in accordance with defined X
service levels
- - ---------------------------------------------------------------------------------------------------------------------------------
Monitor, control, and manage recovery from any virus invasion X
- - ---------------------------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE INSTALLATION AND UPGRADES
- - ---------------------------------------------------------------------------------------------------------------------------------
Schedule software/firmware installation activity with Wards in accordance with change management procedures X
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on network devices, X X
software/firmware
- - ---------------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for installation or upgrade X
- - ---------------------------------------------------------------------------------------------------------------------------------
Provide initial instructions to end customers for the new software/firmware X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off as required by the procedures manual. X
- - ---------------------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and asset management system to X
reflect changes
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
NETWORK MANAGEMENT
- - ---------------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NETWORK CONNECTION
- - ---------------------------------------------------------------------------------------------------------------------------------
Define logical network X
- - ---------------------------------------------------------------------------------------------------------------------------------
Create logical connections and assign IP address as necessary X
- - ---------------------------------------------------------------------------------------------------------------------------------
Install cabling required for connection to network node (from wall jack to network interface card) X
- - ---------------------------------------------------------------------------------------------------------------------------------
Coordinate network connection with Supplier help desk X
- - ---------------------------------------------------------------------------------------------------------------------------------
Verify network access and availability of authorized network resources X
- - ---------------------------------------------------------------------------------------------------------------------------------
Review and understand network performance, implications; make necessary adjustments X
- - ---------------------------------------------------------------------------------------------------------------------------------
MOVES
- - ---------------------------------------------------------------------------------------------------------------------------------
Schedule network devices move with Wards X
- - ---------------------------------------------------------------------------------------------------------------------------------
Visit receiving Wards Corporate Complex location to review space, electricity, and cabling requirements if X
necessary and approved by Wards
- - ---------------------------------------------------------------------------------------------------------------------------------
Disconnect network devices from network X
- - ---------------------------------------------------------------------------------------------------------------------------------
Leave the service location in a clean and orderly manner X
- - ---------------------------------------------------------------------------------------------------------------------------------
Physically move network devices to new location and install X
- - ---------------------------------------------------------------------------------------------------------------------------------
Re-connect network devices to network at new location X
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on network devices, X X
software/firmware
- - ---------------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for reinstallation X
- - ---------------------------------------------------------------------------------------------------------------------------------
De-install and remove displaced network devices, as required X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - ---------------------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and asset management system to X
reflect changes
- - ---------------------------------------------------------------------------------------------------------------------------------
NETWORK DEVICES BREAK/FIX
- - ---------------------------------------------------------------------------------------------------------------------------------
Schedule network devices repair activity with WardS in accordance with change management procedures X
- - ---------------------------------------------------------------------------------------------------------------------------------
Identify problems X
- - ---------------------------------------------------------------------------------------------------------------------------------
Install and test needed replacement parts for network devices X
- - ---------------------------------------------------------------------------------------------------------------------------------
Resolve problems X
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on network devices, X X
software/firmware
- - ---------------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - ---------------------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and asset management system to X
reflect changes
- - ---------------------------------------------------------------------------------------------------------------------------------
Manage use of manufacturer warranty, reseller replacement/repair policies, etc. to limit total repair costs X
in accordance with asset management function
- - ---------------------------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE SUPPORT
- - ---------------------------------------------------------------------------------------------------------------------------------
Identify problems X
- - ---------------------------------------------------------------------------------------------------------------------------------
Resolve problems X
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on network devices, X X
software/firmware
- - ---------------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required X
- - ---------------------------------------------------------------------------------------------------------------------------------
Provide initial instructions to end customers X
- - ---------------------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - ---------------------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and asset management system to X
reflect changes
- - ---------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE TUNING
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct network performance tuning X
- - ---------------------------------------------------------------------------------------------------------------------------------
Conduct application performance tuning for supported applications X X
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
NETWORK MANAGEMENT
- - ---------------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Measure and analyze network availability and performance X
- - ---------------------------------------------------------------------------------------------------------------------------------
Approve use of any Supplier provided measurement and monitoring tools X
- - ---------------------------------------------------------------------------------------------------------------------------------
Administer measuring and monitoring tools as required X
- - ---------------------------------------------------------------------------------------------------------------------------------
Review network performance and make adjustments as necessary X
- - ---------------------------------------------------------------------------------------------------------------------------------
Provide performance reporting X
- - ---------------------------------------------------------------------------------------------------------------------------------
DISPOSAL (DISPOSITION)
- - ---------------------------------------------------------------------------------------------------------------------------------
Determine final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X
- - ---------------------------------------------------------------------------------------------------------------------------------
Verify final disposition of asset (e.g. lease return, scrap, return to manufacturer for replacement, etc.) X
- - ---------------------------------------------------------------------------------------------------------------------------------
Remove all data files, custom configurations, licensed software/firmware, etc. X
- - ---------------------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and asset management system to X
reflect changes
- - ---------------------------------------------------------------------------------------------------------------------------------
"Warehouse" of network devices components for later use X
- - --------------------------------------------------------------------------------------------------------------------------------
"Warehouse" of software/firmware licenses for reuse X
- - --------------------------------------------------------------------------------------------------------------------------------
Reload leased machines with original configuration prior to return X
- - --------------------------------------------------------------------------------------------------------------------------------
Return assets to lessor, Asset inventory or manufacturer X
- - --------------------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY SUPPORT
- - --------------------------------------------------------------------------------------------------------------------------------
Develop, maintain and test network Disaster Recovery Plan and procedure manuals X
- - --------------------------------------------------------------------------------------------------------------------------------
Coordinate network disaster recovery testing with Wards X
- - --------------------------------------------------------------------------------------------------------------------------------
Participate in network disaster recovery test X
- - --------------------------------------------------------------------------------------------------------------------------------
Perform periodic network disaster recovery testing, resolve cause of failure and re-test X
- - --------------------------------------------------------------------------------------------------------------------------------
Review network disaster recovery test results X
- - --------------------------------------------------------------------------------------------------------------------------------
Report network disaster recovery test results to Wards X
- - --------------------------------------------------------------------------------------------------------------------------------
Declare disaster (when necessary) to initiate Supplier's recovery plan execution X
- - --------------------------------------------------------------------------------------------------------------------------------
In the event of a disaster, restore network to pre-defined operations capability within defined service X
levels in accordance with the existing Wards disaster recovery plan
- - --------------------------------------------------------------------------------------------------------------------------------
OUT-OF-SCOPE SERVICE REQUESTS
- - --------------------------------------------------------------------------------------------------------------------------------
Initiate service requests X
- - --------------------------------------------------------------------------------------------------------------------------------
Receive, record, monitor and report service requests X
- - --------------------------------------------------------------------------------------------------------------------------------
Create/review project plans and cost of service request X
- - --------------------------------------------------------------------------------------------------------------------------------
Estimate time and costs for changes where applicable X
- - --------------------------------------------------------------------------------------------------------------------------------
Write cost justification X
- - --------------------------------------------------------------------------------------------------------------------------------
Identify and communicate alternatives X
- - --------------------------------------------------------------------------------------------------------------------------------
Approve, prioritize, and re-prioritize service requests X
- - --------------------------------------------------------------------------------------------------------------------------------
Assist in prioritization of service requests X
- - --------------------------------------------------------------------------------------------------------------------------------
Maintain and communicate prioritization and schedule of service requests X
- - --------------------------------------------------------------------------------------------------------------------------------
Perform approved Out-of-Scope Service Request activities within budget and schedule X
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
GLOSSARY OF TERMINOLOGY
DATA COMMUNICATIONS EQUIPMENT: Modems; CSUs; DSUs; multiplexers (muxes);
FRADs; routers; bridges; ethernet or token
ring hubs; ATM, ethernet or token ring
switches; cluster controllers; data
communication matrix switches; channel
switches; FEPs; and other similar or related
equipment or components and modules thereof.
WARDS DISASTER RECOVERY PLAN: The Wards approved Plan for providing
required standard data communications
services to the appropriate Wards facilities
where circumstances, events, or safety
concerns at a central or hub location
prevents these standard services to be
provided. This plan is to be developed so
that standard business operations can resume
as normal in an organized, timely, and
effective manner.
FACILITIES: Elements that support or allow effective
communications to occur between two Data
Communication Equipment devices. This
includes, but is not limited to: coaxial
cable; fiber optic cable; radio frequency;
copper twisted pair cable (e.g. 10BaseT);
telephone company service, wire, cable, and
components.
PROVISIONING: Acquiring proper and necessary materials
and/or services required to fulfill
initiatives led or supported by the network
management team. The cost of such provisioned
equipment will be the responsibility of
Wards.
WARDS IN-SCOPE LOCATIONS: Defined as the Wide-Area Network (WAN) from
the Wards corporate complex, to the remote
point-of-presence, including any modem or
router at the remote location or store, and
also the Local Area Network (LAN) from any
network interface card on a server or device
to any other network interface card on a
server or device located at the Wards
corporate complex.
14
<PAGE>
WARDS CRITICAL APPLICATIONS: Defined as those applications required by
Wards to conduct normal business operations
as described in the Wards Disaster Recovery
Plan.
15
<PAGE>
EXHIBIT C
CHARGES
THE MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM:....................$85,000
A. ALLOWANCES:
Current Volumes Module Size
--------------- -----------
Servers supported 17 5
Locations supported 380 50
B. PRICING ADJUSTMENT
For each increase by one module in the number of servers or locations
supported, the MSC shall be increased by $75,000 per year, such
increase to commence with the MSC for the following month.
For each decrease by one module in the number of servers or locations
supported, the MSC shall be decreased by $55,000 per year, such
decrease to commence with the MSC for the following month.
C. OUT-OF-SCOPE
- The MSC does not include support for POS equipment or store LAN
support.
- Wards may, at its option, elect to have Supplier provide Disaster
Recovery services. Such Disaster Recovery services, including support
for testing, shall be provided to Wards at third-party cost plus 15%.
D. PASS-THROUGH EXPENSES
- Network circuit costs including but not limited to, MCI Data Circuits.
- Telecommunications charges, including but not limited to connectivity
between Wards' corporate complex, Signature and Supplier's data
center.
E. MINIMUM MONTHLY SERVICE CHARGE (EXCLUSIVE OF PASS-THROUGH EXPENSES)
- Months 1-13 -- $85,000
- Months 14-25 -- $68,000
- Months 26-37 -- $51,000
F. TERMINATION FEES
There are no termination fees under this Service Agreement.
16
<PAGE>
EXHIBIT D
SERVICE LEVEL AGREEMENT
SERVICE LEVEL AGREEMENT
-----------------------
FOR NETWORK SERVICES
--------------------
17
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. GENERAL.......................................................... 19
A. General.................................................... 19
B. Definitions................................................ 19
C. Measurement................................................ 20
D. Effective Date for Service Levels.......................... 20
E. Revisions.................................................. 20
F. Single Point of Contact.................................... 20
II. SERVICE LEVELS
A. Definitions................................................ 21
B. Service Level Measures..................................... 21
C. Service Levels............................................. 26
III. SERVICE LEVEL CREDITS............................................ 28
A. Credits.................................................... 29
B. Method of Calculation...................................... 29
C. Frequency Factor........................................... 29
D. Excused Performance Problem................................ 29
E. Time Limit................................................. 30
IV. SERVICE LEVEL TERMINATION EVENTS................................. 30
A. Definition................................................. 31
B. Repeated Service Level Failures............................ 31
C. Repeated Critical Service Level Failures................... 31
D. Catastrophic Level of Service.............................. 32
E. Qualification.............................................. 32
</TABLE>
<PAGE>
SERVICE LEVEL AGREEMENT
-----------------------
FOR NETWORK SERVICES
--------------------
I. GENERAL
A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT.
This Service Level Agreement is entered into under the Master Agreement for
Information Technology Services between Acxiom Corporation ("Supplier") and
Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and
pertains to Service Agreement No. 4: Network Services entered into by Wards and
Supplier. Any inconsistency between this Agreement, the Service Agreement and
the Master Agreement will be resolved pursuant to Section 2.3 of the Master
Agreement.
B. DEFINITIONS
In this Service Level Agreement ("SLA"), the terms listed below shall
have the indicated meanings. Other terms may be defined in other
sections of this SLA. Terms used in this SLA without definition have
the meanings ascribed to them in the Master Agreement or Service
Agreement.
1. Service Level Measure - For any Service identified in this SLA,
---------------------
the method specified in this SLA for quantitatively calculating
Supplier's actual performance. The results of these calculations
are compared with Service Levels to evaluate Supplier's
compliance with Service Levels.
2. Service Levels - For any Service identified in this SLA, the
--------------
required quantitative level or degree of performance by Supplier
specified in this SLA as the "Service Level." The Service Levels
are the minimally acceptable levels of service for the Services.
Any failure to meet a Service Level is unacceptable and may
constitute, based upon the facts and circumstances, a material
breach of Supplier's obligations under the Service Agreement.
3. Increased Impact Level - For any Service identified in this SLA,
----------------------
the required quantitative level or degree of performance by
Supplier specified in this SLA as the "Increased Impact Level."
Any failure to meet an Increased Impact Level is unacceptable and
may constitute, based upon the facts and circumstances, a
material breach of Supplier's obligations under the Service
Agreement.
4. Critical Service Levels - Service Levels associated with those
-----------------------
Services that are most important to the conduct of Wards'
operations, which are the subject of this Service Agreement.
5. Service Level Credits - The amounts which Wards shall have the
---------------------
option, but not the obligation, to recover as liquidated damages,
in lieu of any other monetary remedies Wards may have, each time
Supplier fails to meet the Service Levels for any reason other
than those specified in Section III.D of this SLA. Service Level
Credits are calculated in the manner described in Section III of
this SLA.
6. Service Level Termination Event - An occurrence or series of
-------------------------------
occurrences of deficient performance by Supplier in performing
the Services specified in this
<PAGE>
SLA as a "Service Level Termination Event." The occurrence of a
Service Level Termination Event constitutes, based upon the facts
and circumstances, a material breach of Supplier's performance
obligations under this Service Agreement and gives Wards the
right to terminate this Service Agreement for cause.
C. MEASUREMENT
Unless otherwise stated in this SLA, each Service Level Measure shall
be calculated on a complete calendar month basis. Performance results
shall be measured and reported based on actual results with any
exceptions for Excused Performance Problems reported separately.
D. EFFECTIVE DATE FOR SERVICE LEVELS
The Service Levels provided for in this SLA shall become effective as
provided for in Section 7.1 of this Service Agreement.
E. REVISIONS
1. From time to time during the Term, the Parties agree to negotiate
in good faith to add, delete, or modify then-existing Service
Level Measures, Service Levels, and Increased Impact Levels to
reflect changes in Wards' business requirements or objectives.
All such changes shall be adopted in the form of a signed written
amendment to this SLA.
2. In the event that any applicable system or function is replaced
during the Term by a comparable system or function, the Service
Level Measure, Service Level, and Increased Impact Level for such
replacement system or function shall, to the extent reasonably
practicable (i) be defined during the first 30 days of such
replacement, and (ii) must be at least equivalent to the then-
existing Service Level Measure, Service Level, and Increased
Impact Level for the replaced system or function (assuming the
replacement system is capable of delivering the same Service
Levels as the replaced system).
3. At all times during the Term, Supplier shall provide the Services
in a manner that meets or exceeds the then-existing Service
Levels. The remedies for failure to do so shall include the
remedies defined in this SLA, the Service Agreement, and the
Master Agreement.
F. SINGLE POINT OF CONTACT
Regardless of whether any failure by Supplier to meet a Service Level
is attributable to Supplier or an Excused Performance Problem,
Supplier shall provide a single point of contact to address resolution
of such failure and shall act promptly to address the problem causing
the failure. Unless otherwie agreed by Wards, the Supplier Project
Executive or his or her designee shall be the Supplier's single point
of contact.
20
<PAGE>
II. SERVICE LEVELS
A. DEFINITIONS
Certain technical definitions are included in the Glossary of
Terminology included as Appendix A to Exhibit B of the Service
Agreement.
B. SERVICE LEVEL MEASURES
NETWORK AVAILABILITY
--------------------
OBJECTIVE: For the Supplier to determine and maintain the availability of
the devices and data communications services that comprise the
Wards network.
DEFINITION "Availability" is calculated by subtracting Unscheduled Downtime
from total amount of Scheduled Availability and dividing the
result by the total amount of Scheduled Availability.
"Unscheduled Downtime" means the elapsed time from when any
network hardware or software component prevents a user from
connecting to a device within or across the WAN or any LAN
segments until processing is available again, or degraded
performance to a point that the network device is unusable for
the necessary business purpose. "Scheduled Availability" means
the network is available to Wards users, subject to adjustment
for Wards Peak Season and special events]
METHOD: Data Capture: Wards, Supplier and telecommunications Vendor
initiated network availability problem tickets as tracked and
reported through the problem management system per the Procedures
Manual or Supplier initiated problem tickets, logs, timestamps or
alerts as proactively identified through the Supplier's network
monitoring and performance tools.
Measurement Interval: Monthly
SERVICE LEVEL:
-----------------------------------------------------------------
Description Data Points
-----------------------------------------------------------------
Service Level Wards network maintains 99.5% of Availability.
-----------------------------------------------------------------
Increased Impact Wards network maintains 99.0% of Availability.
-----------------------------------------------------------------
IMPACT: High
AFFECTED AREAS: All Wards Offices, Associates & Outprocessors
RESPONSIBILITY: Service Performance: Supplier provides all services and
infrastructure related to network availability.
Compliance Management: Supplier provides calculation,
reporting and analysis for this Service Level.
REPORTING PERIOD: Monthly HOURS OF OPERATIONS: 24x7x365
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level
21
<PAGE>
Metrics, Action Type-I
NETWORK INSTALLATIONS / DE-INSTALLATIONS
----------------------------------------
OBJECTIVE: For the Supplier to perform installations and de-installations in
accordance with the requirements and schedules identified by
Wards through the Change Management process in accordance with
the Procedures Manual.
DEFINITION Installations and de-installations of network LAN and WAN
facilities which support Wards business, legal, or regulatory
requirements.
METHOD: Installations and de-installations involve a process of learning
the Wards requirements; designing the new network environment;
provisioning for or planning redeployment or removal of the
equipment, facilities, and software; and installing or de-
installing the network entities in a non-disruptive manner.
Measurement Interval: Monthly
SERVICE LEVEL:
-----------------------------------------------------------------
Description Data Points
-----------------------------------------------------------------
Service Level Wards network installations and de-
installations are completed within
mutually agreed time frames.
-----------------------------------------------------------------
Increased Impact Less than 90% of Wards network
installations and de-installations are
completed within the mutually agreed
time frame.
-----------------------------------------------------------------
IMPACT: High
AFFECTED AREAS: All Wards Offices, Associates & Outprocessors
RESPONSIBILITY: Service Performance: Supplier provides all services and
infrastructure related to network installations / de-
installations.
REPORTING PERIOD: As required under Master Schedule D.
HOURS OF OPERATIONS: 24 x 7 x 365
RESOURCE RANGE: This service level relates to network requirements ranging
from the addition of a single user device upward to entire
Wards Offices and Operation Centers.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
NETWORK RESPONSE TIME
---------------------
OBJECTIVE: Supplier will establish and perform to the network response time
and performance baseline for the Wards network.
DEFINITION: Response time for the Wards network is defined as the amount of
time it takes to receive a response from the destination network
device, once a Wards end user has initiated any
22
<PAGE>
action to communicate to it from the source network device.
Network includes protocols and topologies to be maintained
throughout the year regardless of peak or non-peak seasonal
activity.
METHOD: Data Capture: Response time will be measured by Supplier provided
network monitoring and performance tools or periodic manual
checks from end user network attached devices. Wards network
response time issues will also be captured in the Supplier
provided problem management system for any Wards or Supplier
reported network response time problems.
Measurement Interval: Monthly
SERVICE LEVEL:
-----------------------------------------------------------------
Description Data Points
-----------------------------------------------------------------
Service Level Average response time is ___ seconds
or less
-----------------------------------------------------------------
Increased Impact Average response time is more than ___
seconds
-----------------------------------------------------------------
IMPACT: High
AFFECTED AREA: All Wards Offices, Associates and Outprocessors
RESPONSIBILITY: Service Performance: Supplier is responsible for all
services related to this Service Level
Compliance Management: Supplier provides calculation,
reporting and analysis for this Service Level.
REPORTING PERIOD: Monthly.
HOURS OF OPERATION: During Scheduled Availability.
RESOURCE RANGE: This service specification will apply to all network
mediums and protocols in use by Wards during peak and
non-peak seasonal periods. This service level does not
apply during scheduled network downtime.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-II
DISASTER RECOVERY PLANNING
--------------------------
OBJECTIVE: To ensure the Supplier has developed and documented a
comprehensive network disaster recovery plan for each Wards In-
scope Location in accordance with the existing Wards Disaster
Recovery plan, which is a non-contractual document.
DEFINITION: The goal of the Supplier's documented network disaster recovery
plan is to restore Wards network connectivity and continuity
within times specified in the Wards Disaster Recovery Plan.
METHOD: The Supplier will participate and provide documented network
disaster recovery plans during the Wards disaster recovery
planning meetings or as requested by Wards.
SERVICE LEVEL:
-----------------------------------------------------------------
VALUES METRICS
-----------------------------------------------------------------
23
<PAGE>
-----------------------------------------------------------------
-----------------------------------------------------------------
Service Level - Recovery of network connectivity and
continuity to support Wards' Critical
Applications within the timeframes
outlined in the Wards Disaster Recovery
Plan.
-----------------------------------------------------------------
Increased Impact - Recovery of network connectivity and
continuity to support Wards' Critical
Applications within 12 hours of the
timeframes outlined in the Wards Disaster
Recovery Plan.
-----------------------------------------------------------------
IMPACT: Medium
AFFECTED AREA: Wards Offices & Associates
RESPONSIBILITY: Supplier
PERIOD: Duration of any declared disaster
HOURS OF OPERATION: N/A
RESOURCE RANGE: Bandwidth to process all Wards' critical applications
during a disaster in accordance with Wards Disaster
Recovery Plan.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-III
DISASTER RECOVERY TEST (WAN)
----------------------------
OBJECTIVE: To ensure restoration of Wards Critical Applications as
documented within the Supplier disaster recovery plans for
the Wide Area Network.
DEFINITION: The Supplier will define and demonstrate the accuracy of the
documented network disaster recovery plans by conducting one
disaster recovery test per year for Wide Area network
connectivity.
METHOD: Disconnect all or an agreed upon subset of the Wide Area
Network and verify that the backup connection is functional.
SERVICE LEVEL:
-----------------------------------------------------------------
VALUES METRICS
-----------------------------------------------------------------
Service Level - 90% of the scheduled recovery activities
are performed during the test using the
documented plans.
-----------------------------------------------------------------
Increased Impact - Less than 80% of the scheduled recovery
activities are performed during the test
using the documented plans.
-----------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Offices and Associates
RESPONSIBILITY: Supplier
24
<PAGE>
PERIOD: Semi-annually.
RESOURCE RANGE: This service level is valid as long as Wards participates
in the disaster recovery planning and testing process as
defined in the Wards disaster recovery plan and as
mutually agreed to by Supplier and Wards.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-III
PROBLEM RESPONSE TIME
----------------------
OBJECTIVE: To ensure repairs to network devices, software/firmware, and
telecommunications within the Wards enterprise are completed in a
timely and orderly manner such that end-users may resume their
duties as quickly as possible.
DEFINITION: A reactive maintenance activity required to repair, reroute
and/or replace network devices, telecommunications or
software/firmware. The service levels are measured in terms of
overall time to have the third party supplier respond to the
request for repair. Time starts accumulating from the point at
which a problem ticket is opened and a corresponding problem
ticket number has been assigned. Problems within the Supplier's
control will be handled through standard problem management
procedures. This Service Level applies to problems that are not
within Supplier's direct control.
METHOD: Problem tracking for initial entry, arrival times and repair
times are recorded and reported using the automated problem
ticket tracking system.
Number of tickets closed within the standard set of hours /
number of tickets opened during the period.
SERVICE LEVEL:
-----------------------------------------------------------------
VALUES METRICS
-----------------------------------------------------------------
Service Level - More than one network problem not within
Supplier's direct control is not responded
to within four hours of the time the
problem is reported
-----------------------------------------------------------------
Increased Impact - More than two network problems not within
Supplier's direct control are not
responded to within four hours of the time
the problem is reported
-----------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Offices, Associates and Outprocessors
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 24 x 7 x 365
RESOURCE RANGE: All Wards network devices and facilities in all
Distribution Centers and areas affecting 100 or more
users within the Wards enterprise.
25
<PAGE>
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for Service
Level Metrics, Action Type - I
SOFTWARE/FIRMWARE RELEASE MANAGEMENT
------------------------------------
OBJECTIVE: To maintain the currency and thereby the capability for support
of the Wards investment in software/firmware within the
facilities. To ensure the Supplier implements changes to the
Wards environment in the prescribed manner in accordance with the
change management processes with minimal impact on Wards' users
and processing schedules.
DEFINITION: Software release management is the process of maintaining a
consistent level of currency and compatibility across network
devices, ensuring they are at a level that supports business
initiatives and regulatory requirements. The Supplier and Wards
personnel will have access to a Supplier-provided isolated
network test environment to support initial and quality assurance
testing of changes to the Wards network prior to implementation.
METHOD: All software installations, maintenance implementations and
enhancements will follow the standard change management process.
SERVICE LEVEL:
VALUES METRICS
------------------------------------------------------------
Service Level - software/firmware maintained at a
release level of n-2 or to a
mutually agreed level
------------------------------------------------------------
Increased Impact - software/firmware maintained at a
release level of n-3 or to a
mutually agreed release level
------------------------------------------------------------
IMPACT: Medium
AFFECTED AREA: Wards Offices, Associates and Outprocessors
RESPONSIBILITY: Supplier
PERIOD: Monthly
RESOURCE RANGE: None
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - II
C. SERVICE LEVELS
The Service Levels are identified in the following table(s). Each Service
Level is assigned a Severity Weight in the following table(s), which is used in
the calculation of the Service Level Credits. The Severity Weights are expressed
as percentages, totaling 100% for all Service Levels, and approximate the
relative severity of the impact on Wards' operations of failures to meet the
respective Service Levels. The parties acknowledge that these percentages are
approximations of probable severity and relative importance and do not limit
Wards' right to contend that one or more failures to meet one or more of the
Service Levels may constitute a material breach of the Agreement. Upon sixty
(60) days
26
<PAGE>
advance notice to Supplier, Wards may adjust the Severity Weights of the
respective Service Levels as Wards deems appropriate so long as the total of
such percentages does not exceed 100%.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
SERVICE INCREASED IMPACT
LEVEL DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL LEVEL
STANDARD MEASUREMENT WEIGHT
ID
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NETWORK AVAILABILITY MINUTES OF 25 99.5% 99.0%
NETWORK AVAILABILITY AVAILABILITY
DOWNTIME
- - -----------------------------------------------------------------------------------------------------------------
NETWORK PERFORMANCE 5 NOT LESS THAN 90% OF
INSTALLATION/DE- COMPLETED WARDS NETWORK
INSTALLATION WITHIN AGREED INSTALLATIONS AND
TIME FRAMES DE-INSTALLATIONS
ARE COMPLETED
WITHIN THE
MUTUALLY AGREED
TIME FRAME
- - -----------------------------------------------------------------------------------------------------------------
NETWORK RESPONSE PERFORMANCE 25 __ SECONDS OR MORE THAN ___
TIME LESS SECONDS
- - -----------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY RESTORATION 5 RECOVERY OF RECOVERY OF
PLANNING TIME NETWORK NETWORK
CONNECTIVITY CONNECTIVITY
AND AND CONTINUITY
CONTINUITY TO TO SUPPORT
SUPPORT WARDS' CRITICAL
WARDS' APPLICATIONS
CRITICAL WITHIN 12 HOURS
APPLICATIONS OF THE
WITHIN THE TIMEFRAMES
TIMEFRAMES OUTLINED IN THE
OUTLINED IN WARDS DISASTER
THE WARDS RECOVERY PLAN.
DISASTER
RECOVERY
PLAN.
- - -----------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY TEST TEST 15 90% OF THE LESS THAN 80%
(WAN) PERFORMANCE SCHEDULED OF THE
RECOVERY SCHEDULED
ACTIVITIES ARE RECOVERY
PERFORMED ACTIVITIES ARE
DURING THE PERFORMED
TEST USING DURING THE TEST
THE USING THE
DOCUMENTED DOCUMENTED
PLANS. PLANS.
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROBLEM RESPONSE TIME PERFORMANCE 20 MORE THAN ONE MORE THAN TWO
NETWORK PROBLEM NETWORK PROBLEMS
not within not within
Supplier's Supplier's direct
direct control control ARE NOT
IS NOT RESPONDED TO
RESPONDED TO WITHIN FOUR HOURS
WITHIN FOUR OF THE TIME THE
HOURS OF THE PROBLEM IS
TIME THE REPORTED
PROBLEM IS
REPORTED
- - ----------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE RELEASE PERFORMANCE 5 ALL SOFTWARE AT ALL SOFTWARE AT
MANAGEMENT LEAST AT N-2 LEAST AT N-3
RELEASE LEVEL RELEASE LEVEL OR
OR AS AGREED AS AGREED
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
The following Service Levels are designated as Critical Service Levels:
<TABLE>
<CAPTION>
SERVICE APPLICATION DESCRIPTION
LEVEL
STANDARD
ID
--------------------------------------------------------------------------------------
<S> <C> <C>
NETWORK AVAILABILITY
--------------------------------------------------------------------------------------
NETWORK RESPONSE TIME
--------------------------------------------------------------------------------------
</TABLE>
III. SERVICE LEVEL CREDITS
A. CREDITS
In each case of a failure to satisfy a Service Level Supplier will, within
five (5) days from the identification of the deviation from the applicable
Service Level, provide to Wards a plan of activities which will allow Supplier
to satisfy the applicable Service Level at the earliest date practicable. In
addition, Wards shall be entitled to recover a Service Level Credit for such
Service Level calculated in the manner described below, provided, however, that
the aggregate amount of such Service Level Credits for any given month will not
exceed ten percent (10%) of Supplier's monthly charges under this Service
Agreement for the applicable month (excluding Pass-Through Expenses, if any). If
a single event directly
28
<PAGE>
causes a failure to achieve more than one Service Level, then only one Service
Credit will apply. In such event, Wards will select the Service Level that will
be used for the calculation of the Service Credit.
B. METHOD OF CALCULATION
If Supplier fails to meet or exceed a Service Level, the Severity Weight
corresponding to that Service Level, expressed as a percentage, will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any). If Supplier's performance fails to meet an Increased Impact
Level for any Service Level, the Severity Weight corresponding to that Service
Level, expressed as a percentage, will be doubled and such percentage will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) (this calculation being in lieu of, and not in addition to, the
credit calculation for the corresponding Service Level failure). To calculate
the total Service Level Credit due to Wards for the applicable month, the
amounts calculated for each Service Level or Increased Impact Level as described
above will be totaled and such amount shall be available as a credit to Wards
against Supplier's invoice for the applicable month.
C. FREQUENCY FACTOR
In any case where Supplier fails to achieve the same Service Level
(including failure to achieve the designated Increased Impact Level for that
Service Level) in two consecutive months or in any four months in any 12-month
period, the applicable Severity Weight shall be doubled and such percentage will
be multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) and for any subsequent months in which Supplier fails to
achieve such Service Level or Increased Impact Level; provided, however, that in
no case will Supplier be liable for total Service Credits which exceed ten
percent (10%) of the applicable monthly invoice (excluding Pass-Through Expenses
and Special Charges, if any).
The Service Credits will revert to the method of calculation provided in Section
III.A. above in the following circumstances:
1. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and the
failure in the second month is caused by a root problem that is
different from the root problem that was the cause of the failure in
the first month, the calculation will revert to the method of
calculation in Section III.A. following four consecutive months of
achieving the Service Level.
2. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and the
failure in the second month is caused by a root problem that is the
same as the root problem that was the cause of the failure in the first
month, the calculation will revert to the method of calculation in
Section III.A. following ten consecutive months of achieving the
Service Level.
Nothing in the preceding two paragraphs will excuse the application of the
frequency factor in the calculation of Service Credits if a subsequent failure
to achieve a Service Level would otherwise make the frequency factor apply.
D. EXCUSED PERFORMANCE PROBLEM
Supplier shall not be liable to pay Wards Service Level Credits for any
failure to meet a Service Level to the extent that such a failure is
directly attributable to (i) a Force
29
<PAGE>
Majeure Event; (ii) breaches of this Agreement by Wards, provided that
Supplier has provided Wards with reasonable notice of such breach
immediately after becoming aware of it and determining that such breach
will adversely impact Supplier's performance of Services and Supplier
has used all Commercially Reasonable Efforts to perform notwithstanding
such breach; (iii) acts or omissions of Wards (or third parties acting
on behalf of Wards under a written agreement), provided that Supplier
has provided Wards with reasonable notice of such software problem
immediately after becoming aware of it and determining that such
problem will adversely impact Supplier's performance of the Services
and Supplier has used Commercially Reasonable Efforts to perform
notwithstanding such breach; or (iv) the first manifestation of an
extraordinary latent error or defect in Equipment used by Supplier in
providing the Services (and any related repeated instances pending the
applicable Supplier's correction of the defect) if such defect was (1)
unknown to Supplier and (2) not disclosed in any information
distributed by the third party licensor, manufacturer, or distributor
and (3) not preventable or discoverable through normal testing or
maintenance procedures. The foregoing are referred to herein
collectively as an "Excused Performance Problem." Supplier shall be
liable to grant Wards Service Level Credits for any failure to meet a
Service Level attributable to any cause other than causes expressly
included in the categories listed above.
E. TIME LIMIT
If Supplier does not notify Wards of any Excused Performance Problem
(as described in Section III.D above) within ninety (90) days of the
date Supplier provides Performance Reports covering the time period
during which the Excused Performance Problem is alleged to have
occurred, then Supplier shall be deemed to have waived the claim of an
Excused Performance Problem.
IV. SERVICE LEVEL TERMINATION EVENT
A. DEFINITION
1. Measurement Event - For purposes of this section, a "Measurement
-----------------
Event" will be the monthly calculation of Supplier's actual
performance for each Service Level or Critical Service Level. The
total possible Measurement Events during any specific period of
time is the product of the number of months in that time period
times the number of Service Levels or Critical Service Levels, as
applicable.
2. Failure Event - For purposes of this section a "Failure Event"
-------------
shall be a specific Measurement Event for which Supplier fails to
achieve the relevant Critical Service Level(s) or Service
Level(s); provided, however, that any such failure caused by an
event described in Section III.D of this SLA shall not be counted
as a Failure Event. Any single event, act or omission that causes
multiple Service Levels to be missed will be counted as one
Failure Event.
B. REPEATED SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Service
Levels will constitute a Service Level Termination Event.
30
<PAGE>
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT EVENTS
(SERVICE LEVELS) IN MEASUREMENT PERIOD
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 6 19
Events
- - ----------------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 12 37
Events
- - ----------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 4 19
Failure Events
- - ----------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 8 37
Failure Events
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
C. REPEATED CRITICAL SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Critical
Service Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(CRITICAL SERVICE EVENTS IN MEASUREMENT
LEVELS) PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 2 12
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 4 24
Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 2 12
- - --------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Failure Events
- - ---------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 4 24
Failure Events
- - --------------------------------------------------------------------------------------------------
</TABLE>
D. CATASTROPHIC LEVEL OF SERVICE
Recovery of the Network Services within twenty-four hours of the
scheduled time to recover those Services under the Wards Disaster
Recovery Plan.
E. QUALIFICATION
Nothing in this Section IV is intended to imply that any lesser number
or different combination of occurrences of deficient performance by
Supplier may not also constitute a material breach of Supplier's
obligations warranting termination of the Service Agreement by Wards
for cause.
32
<PAGE>
EXHIBIT E
TRANSFERRED EQUIPMENT
NONE
33
<PAGE>
EXHIBIT F
WARDS FACILITIES AND EQUIPMENT
Wards Facilities that have been designated for use by Supplier at the Wards'
headquarters as described in Service Agreement No. 2 (Data Center Services).
SUMMARY OF NETWORK DEVICES
- - --------------------------
MODEMS / MUXES:
200 - General DataComm (GDC) NMS9600 Standalone Modems
100 - GDC NMS9600 Rackmount Modems
60 - GDC 500/600 Series Desktop Modems
130 - 3/rd/ Party provided and supported miscellaneous modems
5 - GDC Megamuxes
ROUTERS:
1 - Cisco 7513
2 - Cisco 4000 Series
40 - Cisco 2500 Series
ETHERNET HUBS:
30 - Synoptics 300 Series and Allied Telesyn (Corporate Campus)
Multiple remote devices (See attached)
ETHERNET SWITCHES:
25 - IBM 8271-524
39 - IBM 8271-624
30 - IBM 8271-712
ATM SWITCHES:
4 - IBM 8274
4 - IBM 8210
MATRIX SWITCHES:
1 - Bytex Unity50-LE; 448X448 RS232 32X32 V.35
CHANNEL SWITCHES:
34
<PAGE>
1 - Beall 6E, Group 1, 12X16
REMOTE LOCATIONS
- - ----------------
CHARLOTTE
Number of HUBS = 1
Number of PORTS = 8
Number of Ports in Use = 8
Make and Model = CentreCom MR820TR
PHOENIX
1 - 3Com office connect 4 port
1 - 3Com super stack 24 port (in use)
3 - 100 Base-T 3Com super stack 12 port
1 - 10 Base-T 3Com super stack 12 port
KANSAS CITY
3COM HUB10 SUPERSTACK 24 PORTS 24 IN USE
3COM HUB10 SUPERSTACK 24 PORTS 11 IN USE
CISCO 1503 MICRO HUB 8 PORTS 5 IN USE
SACRAMENTO
Two hubs - HP HPJ2601p-24 ports per hub. One port open
BRANDYWINE
3Com:
1.) 2 Super Stack II Hub 100 TX
2.) 3 Super Stack II Hub 10
3.) 1 Super Stack II Port Switch Hub
4.) 1 Super Stack II PS Hub 40
Number of ports in the Hub:
1.) 2 have 12
2.) 2 have 12 and 1 has 24
3.) 12
4.) 12
Number of ports being used:
1.) 10 and 12 used
35
<PAGE>
2.) 12 & 20 & 3 used
3.) 6 used
4.) 3 used
PENNSAUKEN
In operation: 3 Com Super Stack II with 24 ports. 11 in use
TAMPA
?
HOUSTON
1 Cisco 2500-Super Stack II, Hub 10
Model: All are 3Com Super Stack II
GARDEN GROVE
Model: All are 3Com Super Stack II
Total Ports Ports in Use In Use At
12 8 Computer Room/Whse Office
24 2 Computer Room/Whse Office
12 4 Receiving Office
12 2 Sortation/LP Office
24 15 Customer Care/Main Whse Office
24 18 Customer Care/Main Whse Office
GRAND LEDGE
1 HUB
24 PORTS
17 PORTS IN USE
7 PORTS AVAILABLE
3COM SUPERSTACK II HUB10
NEW STANTON
36
<PAGE>
1 HUB - 3COM SUPERSTACK II HUB10
24 PORTS ....23 IN USE....1 AVAILABLE
NOTE: There are two repeater HUBS in the ceiling for linear runs of over 300
Ft. to timeclocks in the building.
PORTLAND
3COM, Super Stack II, 24 Port Hub, 13 ports in use
FT. WORTH
1 Cisco Router
2 3COM SUPERSTACK II HUBS
24 Ports Each
23 Ports Available
ROMEOVILLE
Computer Room Synoptics Lattiss Hub 2813 16 5
Computer Room Synoptics Lattiss Hub 2813 16 0
Computer Room Synoptics Lattiss Hub 2803 16 1
Computer Room Synoptics Lattiss Hub 2803 16 0
Computer Room Synoptics Lattiss Hub 2803 16 1
Computer Room Synoptics Lattiss Hub 2803 16 3
Computer Room 3Com Super Stack 20 2
Computer Room Bay Networks Baystack 12 11
Computer Room Bay Networks Baystack 12 12
Computer Room Bay Networks Baystack 12 12
Computer Room Bay Networks Distributed 5000 14 1
Shipping 3Com Super Stack 20 16
Receiving Bay Networks Distributed 5000 12 6
ST. PAUL
1-24 port 3Com Super Stack II
18 are available
37
<PAGE>
EXHIBIT G
THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
MCI DATA CIRCUITS CONTRACT PROVIDED UNDER SEPARATE COVER.
38
<PAGE>
EXHIBIT H
WARDS SOFTWARE
NONE
39
<PAGE>
EXHIBIT I
SUPPLIER SOFTWARE
NONE
40
<PAGE>
10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 5: DESKTOP/LAN SERVICES
---------------------------------------------
THIS SERVICE AGREEMENT NO. 5: DESKTOP/LAN (the "Service Agreement") is made
and entered into this 6th day of November, 1998 between Montgomery Ward & Co.,
Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a
Delaware corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in the Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into the Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITION
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
DESKTOP/LAN ENVIRONMENT" means all of the desktop, laptop, peripheral devices,
servers(only those on Schedule E which will be amended based on final asset
inventory) and local area network devices utilized by Wards at the Wards
Corporate Complex, as of the Service Agreement Effective Date and as
subsequently modified under this Service Agreement.
"DESKTOP/LAN SERVICES" has the meaning given in Section 5.1.
"INITIAL TERM" has the meaning given in Section 2.1.
"MASTER AGREEMENT" means the Master Service Agreement for Information
Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom
Corporation dated November 6, 1998, and all amendments thereto.
"RENEWAL TERM" has the meaning given in Section 2.2.
<PAGE>
"SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration
Plan for Desktop/LAN Services has been implemented.
"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any
Renewal Term.
"SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the
meaning given in Section 7.1 of this Service Agreement.
"TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning
given in Section 8.1 of this Service Agreement.
"WARDS PEAK SEASON" means the period in any year during the Service
Agreement Term from November 20 through December 31, as such dates may be
adjusted by Wards from time to time.
ARTICLE 2. TERM
2.1 INITIAL TERM. The initial term of this Service Agreement (the
"Initial Term") shall begin as of the Service Agreement Commencement Date and
shall continue for a period of thirty-seven (37) months thereafter, unless
earlier terminated or renewed in accordance with the provisions of this Service
Agreement or the Master Agreement.
2.2 RENEWAL TERM. Wards shall have the option to renew this Service
Agreement for up to two (2) additional annual terms (each a "Renewal Term")by
delivering written notice of such renewal to Supplier at least ninety (90) days
before expiration of the final applicable Contract Year under this Service
Agreement and before expiration of each annual period thereafter as applicable.
All of the terms of this Service Agreement and the Master Agreement shall
continue to apply without change during any renewal period(s).
ARTICLE 3. TERMINATION
3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate
this Service Agreement for Convenience in accordance with Section 18.2(a) of the
Master Agreement. The Convenience termination charges, if any, shall be as
described in Exhibit C to this Service Agreement.
ARTICLE 4. PERSONNEL MATTERS
4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier
---------
Positions that are subject to the provisions of Section 7.2 of the Master
Agreement.
2
<PAGE>
ARTICLE 5. SERVICES
5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall
provide the Services described in Exhibit B, as such Exhibit may be amended and
---------
supplemented from time to time pursuant to the Master Agreement (the
"Desktop/LAN Services"). The Desktop/LAN Services includes all of the
responsibilities associated with the Desktop/LAN Environment, unless
specifically identified as a Wards responsibility under Section 6.3 below. The
Services include (i) functions, responsibilities and tasks performed by the
Transferred Employees prior to the Service Agreement Effective Date; (ii)
functions, responsibilities and tasks not specifically described in this Service
Agreement but which are required for their proper performance and are an
inherent part of, or a necessary sub-part included within, the Services; and
(iii) functions, responsibilities and tasks that are a logical extension of
existing Services as a result of changes in technology, changes in Wards
business practices, or changes resulting from change control procedures.
Supplier will be the exclusive provider of the services described in this
Service Agreement.
5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the
Service Agreement Effective Date through the Service Agreement Commencement
Date, Supplier will provide the Desktop/LAN Services under Service Agreement No.
1 (Transition and Migration Services). Following the Service Agreement
Commencement Date, the Service Level Agreement and other obligations of this
Service Agreement will become effective.
5.3 APPOINTMENT OF PROJECT EXECUTIVES. Upon the Service Agreement
Commencement Date the Parties will appoint individuals as Project Executives
under this Service Agreement to carry out the duties described in the Master
Agreement.
5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in
Exhibit B to this Service Agreement identifies the responsibilities of Wards
- - ---------
during the Term of this Service Agreement, as such Exhibit may be amended and
supplemented from time to time pursuant to the Master Agreement. The
responsibilities of Wards shall be limited to those items listed in the matrix.
ARTICLE 6. CHARGES
6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement
---------
sets forth the Charges for the Desktop/LAN Services that may be charged by
Supplier. All Charges and all Pass-Through Expenses are subject to the
provisions of Article 13 of the Master Agreement.
6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Desktop/LAN
Services, Supplier shall provide Wards with the information described in Exhibit
-------
C in sufficient detail in order to allow Wards to verify invoices. Invoice
- - -
submission and payment shall be in accordance with Article 14 of the Master
Agreement.
3
<PAGE>
ARTICLE 7. SERVICE LEVEL AGREEMENT
7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the
---------
Service Level Agreement applicable to contains quantitative Service Levels for
the Desktop/LAN Services (the "Service Level Agreement"). The Service Level
Agreement will become effective upon the Service Agreement Commencement Date.
Service Levels and the associated performance metrics will be baselined during
the six (6) month period beginning on the Service Agreement Commencement Date,
will be established jointly by the Parties during such 6-month period and shall
become effective beginning with the seventh (7/th/) month following the Service
Agreement Commencement Date..
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date,
Wards shall assign, and Supplier shall assume, Wards' obligations under the
applicable leases for the equipment listed on Exhibit E (the "Transferred
---------
Equipment"). The terms of Section 6.1 of the Master Agreement shall apply with
respect to the Transferred Equipment.
8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2
of the Master Agreement, Wards shall provide the Wards Facilities and Wards
Equipment described in Exhibit F to this Service Agreement.
---------
8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the
Service Agreement Commencement Date, and subject to Supplier having received
any Third Party Consents, Supplier shall assume from Wards all of the rights and
obligations of Wards under the Third Party Contracts and the Third Party
Software that are listed in Exhibit G. The terms of Section 6.3 of the Master
---------
Agreement shall apply with respect to Third Party Contracts and to Third Party
Software.
8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is
---------
proprietary to Wards and that is used in Desktop/LAN Systems (the "Wards
Software"). The terms of Section 8.1 of the Master Agreement shall apply with
respect to the Wards Software.
8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by
Supplier to provide the Desktop/LAN Services is listed in Exhibit I. Use of
---------
Supplier Software in providing the Desktop/LAN Services shall be in accordance
with Section 8.2 of the Master Agreement.
ARTICLE 9. TERMINATION AND TRANSITION SERVICES
9.1 TERMINATION. Wards may terminate the Service Agreement without
penalty at any time prior to the Service Agreement Commencement Date if Supplier
does not complete the Migration Plan described in Service Agreement No. 1.
After the Service Agreement
4
<PAGE>
Commencement Date, this Service Agreement may be terminated pursuant to the
terms of the Master Agreement.
9.2 TRANSITION SERVICES. In the event of a termination or expiration of
this Service Agreement, Supplier shall provide the Termination/Expiration
Assistance as provided in Section 18.7 of the Master Agreement.
IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day
and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
----------------------------- ------------------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
--------------------------- ----------------------------------
Its: SVP, CIO Its: SVP-Outsourcing Services
---------------------------- -----------------------------------
5
<PAGE>
EXHIBITS TO DESKTOP/LAN SERVICE AGREEMENT
-----------------------------------------
EXHIBIT A KEY SUPPLIER POSITIONS
Exhibit B SERVICES
EXHIBIT C CHARGES
EXHIBIT D SERVICE LEVEL AGREEMENT
EXHIBIT E TRANSFERRED EQUIPMENT
EXHIBIT F WARDS FACILITIES AND EQUIPMENT
EXHIBIT G THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE
EXHIBIT H WARDS SOFTWARE
EXHIBIT I SUPPLIER SOFTWARE
6
<PAGE>
EXHIBIT A
KEY SUPPLIER POSITIONS
NETWORK SERVICES AND SUPPORT MANAGER
PC PROJECT AND SUPPORT MANAGER
PC PROCUREMENT MANAGER
SENIOR PC/LAN SUPPORT SPECIALIST
SENIOR PC PRODUCT ANALYST
7
<PAGE>
EXHIBIT B
SERVICES
DESKTOP MANAGEMENT
OVERVIEW
- - --------
This detailed service description establishes the processes, measurement
tools, service specifications, and assumptions associated with Desktop
Management for Wards IS. The documented service descriptions are designed to
give the Supplier an understanding of Wards' business objectives for Desktop
Management while allowing the Supplier latitude to define their own processes
and methods for providing the services.
The intent of the Desktop/Server Management service agreement is for the
Supplier to provide hardware and software support in the Wards end-user
computing environment. The Supplier will be expected to provide Wards end-user
installations, upgrades and Wards' end-user problem resolution for hardware and
software. Provided that such installations and upgrades that affect more than
20 users will be treated as a project and will be subject to the terms of the
jointly developed project plan. The Supplier will provide desktop and server
hardware, software, and project support to ensure user satisfaction with the
Wards NT and other LAN environments. The desktop/server group provides server
interface support for various other Wards' platforms and departments such as
Store Support, Store Planning, Advertising, product service, and merchandise
distribution departments. The Supplier will be expected to provide total support
from receipt of the problem or request, through the resolution and closing of
the problem or requests, by the Wards user who initiated the problem or request.
The Supplier will be expected to provide software use assistance for the Wards
standard software configuration products.
ACTIVITIES FOR DESKTOP MANAGEMENT
- - ---------------------------------
1. The Supplier will provide hardware break/fix labor solutions for both
mission critical (VIP) and non-mission critical (non-VIP) hardware at the
Wards Corporate Complex. Wards will fund third-party hardware maintenance
adequate for Supplier to meet the service levels.
2. The Supplier will provide software break/fix solutions and work-around at
the Wards Corporate Complex including, but not limited to: operating systems
and contained components, file corruption and deletion, Wards standard
software configuration products., and will provide best effort support for
Wards non-standard software products.
3. The Supplier will provide and coordinate the hardware installation function
for new, upgrade and redeployment situations at the Wards corporate complex.
8
<PAGE>
4. The Supplier will provide the software upgrade function, the software
installation and the software distribution function for Wards' standard
software configuration products and best effort on Wards' non-standard
software products at the Wards corporate complex.
5. The Supplier will provide software use assistance, through the Supplier help
desk, for Wards' standard software products and best effort on Wards' non-
standard software products at the Wards corporate complex.
6. The Supplier will provide the parts administration function such as parts
ordering, parts receipt and distribution, parts warranty administration and
stocking recommendations for Supplier provided or Wards provided parts.
7. The Supplier will provide preventative maintenance for all assets, in
accordance with change management procedures as documented in the Procedures
Manual.
SERVICE PARAMETERS FOR DESKTOP/SERVER MANAGEMENT
- - ------------------------------------------------
1. The Supplier will be required to provide desktop management services 6am-6pm
Monday through Friday, CT. Desktop management support will be available
during all off-hour periods reachable via pager.
2. Desktop management support will be required for on-site support during Wards
Peak Season and off-hours periods as problem resolutions may dictate.
3. Supplier will be required to support all Wards Corporate Complex hardware
and software on-site at the location of the failed hardware or software per
the problem escalation procedures specified during normal business hours,
and best effort at all other times.
4. The Supplier, if contracted to supply the hardware, will be required to
contact the user within three (3) business days of the purchase order
receipt to schedule a mutually agreeable installation date, and the user
should expect installation within five (5) business days from receipt of the
purchase order by the Supplier.
5. The Supplier, if not contracted to supply the hardware, will schedule the
installation with the user within three (3) business days of the equipment
receipt, and the user should expect installation within five (5) business
days from equipment receipt at Wards.
6. The Supplier will provide software certified support staff who are competent
with the standard software product image and hardware certified support
staff who are competent with standard hardware configuration.
7. The Supplier will be required to research, create, document and validate the
Wards standard software image and the Wards standard hardware configuration
for all new images and configurations based upon Wards' approval.
8. The Supplier will be required to provide any and all resources or level of
expertise needed to resolve any problems or issues governed by the service
levels stated in this agreement, except for non-standard software products
and non-standard configurations.
9. Devices within the Supplier's scope of responsibility include network
interface cards or equivalent, and network access methods (e.g. wireless
Ethernet interface cards).
10. The Supplier will provide initial technical expertise for Wards' end-user
initiatives dependent upon Wards' approval and the determination whether the
request is in scope or out of scope.
9
<PAGE>
11. The Supplier will provide those functions required to de-install any end-
user asset including, software removal, hard drive reformatting, removal
from asset inventory. Supplier will remove decommissioned asset according
to Wards' directive for either lease return, storage, or disposal.
12. The Supplier will be required to research and present the most economical
pricing options for hardware and software procurement while ensuring
compatibility (i.e. meeting manufacturers' specifications) of all parts and
equipment used in hardware installation and break/fix for Wards end-user
computing assets.
13. The Supplier will be responsible to ensure correct application of all
expected credits for returned hardware and software.
14. The Supplier will assist Wards Human Resources department with asset
control related to departing associates.
15. The Supplier will track and manage any desktop/server requests and Help
Desk tickets for Wards' users.
16. The Supplier, while not currently responsible for the daily support of any
Wards' Apple MacIntosh assets, will provide secondary support for device
connectivity to host and LAN environments, provided that if the number of
MacIntosh assets increases, Supplier will pass-thru any additional costs
incurred.
17. The Supplier will be responsible to assist Wards in completing the thin
client implementation. This is considered out-of-scope work currently in
progress and should not be construed as permanent in regards to staffing
levels.
18. The Supplier will be required to assist Wards in the completion of the
building/facility consolidation, which is currently scheduled to be
complete by 12/31/98. Tasks would include, but not be limited to
Desktop/Server de-install and install, and documentation of Corporate
Inventory. This is considered out-of-scope work currently in progress and
should not be construed as permanent in regards to staffing levels.
10
<PAGE>
MEASUREMENT TOOLS FOR DESKTOP MANAGEMENT
- - ----------------------------------------
The Supplier is free to recommend in writing to Wards any additional or
alternative tools or processes for Wards review and final approval. Wards
must approve use of any new or equivalent tools and/or processes not
already in place at Wards. Available tools are listed below.
1) Microsoft Internet Explorer web browser or equivalent
2) MS Exchange Email or equivalent
3) CA-Advance Help Desk(HD) or equivalent(Purchased & Planned)
4) MS Office (Excel, Word, PowerPoint) or equivalent
5) Equipment manufacturer technical manuals
6) MS-Access Proprietary Help Desk/Inventory Software or equivalent
11
<PAGE>
RESPONSIBILITY MATRIX
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
DESKTOP/SERVER MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SERVICE AREA ACCOUNT ADMINISTRATION
- - -------------------------------------------------------------------------------------------------------------------------
Set Standards, Architecture and Design (using Wards products whenever possible) X
- - -------------------------------------------------------------------------------------------------------------------------
Document and approve any exceptions to standards X
- - -------------------------------------------------------------------------------------------------------------------------
Test compatibility of new Standards, Architecture and Design with existing
infrastructure X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct product evaluations, for proposed product procurement, including testing
compatibility with existing infrastructure and ensure year 2000 compliance X
- - -------------------------------------------------------------------------------------------------------------------------
Support staff will interface and respond to Supplier primary help desk X
- - -------------------------------------------------------------------------------------------------------------------------
Log all new problem calls if calls do not originate at the help desk X
- - -------------------------------------------------------------------------------------------------------------------------
Prepare and distribute all reports including monthly service level / performance
reports X
- - -------------------------------------------------------------------------------------------------------------------------
Prepare monthly hardware repair and software support activity report for monthly
review X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct monthly management review meeting X
- - -------------------------------------------------------------------------------------------------------------------------
Attend monthly management review X
- - -------------------------------------------------------------------------------------------------------------------------
Audit service level, performance and activity reports as needed X
- - -------------------------------------------------------------------------------------------------------------------------
Manage consequences (e.g. failure to meet service levels) resulting from monthly
management review X
- - -------------------------------------------------------------------------------------------------------------------------
Approve new or changed service level/performance reports as needed X
- - -------------------------------------------------------------------------------------------------------------------------
Identify areas for improvement X
- - -------------------------------------------------------------------------------------------------------------------------
Implement action items from monthly management review meeting X
- - -------------------------------------------------------------------------------------------------------------------------
HARDWARE PROCUREMENT
- - -------------------------------------------------------------------------------------------------------------------------
Wards user to submit requisition to Supplier X
- - -------------------------------------------------------------------------------------------------------------------------
Supplier to research, price and verify availability and return information to Wards X
- - -------------------------------------------------------------------------------------------------------------------------
Accept or reject procurement X
- - -------------------------------------------------------------------------------------------------------------------------
Track all hardware orders requested by Wards X
- - -------------------------------------------------------------------------------------------------------------------------
Provide confirmation of correct order receipt X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain hardware from manufacturer, aggregator or reseller X
- - -------------------------------------------------------------------------------------------------------------------------
Configure hardware according to pre-defined hardware, software and performance
definitions (Currently performed by PC aggregator) X
- - -------------------------------------------------------------------------------------------------------------------------
INSTALLATION AT WARDS CORPORATE COMPLEX
- - -------------------------------------------------------------------------------------------------------------------------
Visit Wards end customer location to review space, electricity, and cabling
requirements if necessary X
- - -------------------------------------------------------------------------------------------------------------------------
Schedule hardware installation activity with end customer X
- - -------------------------------------------------------------------------------------------------------------------------
Transport or ship any equipment between or within any Wards' site or Supplier site
contained within acceptable packaging. X
- - -------------------------------------------------------------------------------------------------------------------------
Provide and install OEM parts where and when directed by Wards X
- - -------------------------------------------------------------------------------------------------------------------------
Install additional approved devices X
- - -------------------------------------------------------------------------------------------------------------------------
Install hardware at end customer site within specified time frame X
- - -------------------------------------------------------------------------------------------------------------------------
Backup and transfer of any end customer data and/or applications X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
hardware, software and peripherals X X
- - -------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for installation X
- - -------------------------------------------------------------------------------------------------------------------------
Provide initial instructions to the end customer for the new system X
- - -------------------------------------------------------------------------------------------------------------------------
De-install and remove displaced hardware, as required X
- - -------------------------------------------------------------------------------------------------------------------------
Ensure work area is returned to a neat and orderly state prior to departing X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain end customer's sign-off X
- - -------------------------------------------------------------------------------------------------------------------------
Update problem ticket, electronic inventory and asset inventory system to reflect
changes X
- - -------------------------------------------------------------------------------------------------------------------------
MOVES
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
DESKTOP/SERVER MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RESPONSIBILITY DESCRIPTION
- - -------------------------------------------------------------------------------------------------------------------------
Schedule hardware move with Wards end customers X
- - -------------------------------------------------------------------------------------------------------------------------
Visit receiving end customer location to review space, electricity, and cabling
requirements if necessary X
- - -------------------------------------------------------------------------------------------------------------------------
Disconnect hardware from network X
- - -------------------------------------------------------------------------------------------------------------------------
Leave the "from" location in a clean and orderly manner X
- - -------------------------------------------------------------------------------------------------------------------------
Physically move hardware to new location and install X
- - -------------------------------------------------------------------------------------------------------------------------
Install additional approved applications X
- - -------------------------------------------------------------------------------------------------------------------------
Backup and transfer of any end customer data and/or applications X
- - -------------------------------------------------------------------------------------------------------------------------
Re-connect hardware to network (if necessary) at new location X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
hardware, software and peripherals X X
- - -------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for reinstallation X
- - -------------------------------------------------------------------------------------------------------------------------
Provide initial instructions to the end customer for the hardware X
- - -------------------------------------------------------------------------------------------------------------------------
De-install and remove displaced hardware, as required X
- - -------------------------------------------------------------------------------------------------------------------------
Ensure work area is returned to a neat and orderly state prior to departing X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain end customer's sign-off X
- - -------------------------------------------------------------------------------------------------------------------------
Update problem ticket, electronic inventory and asset inventory system to reflect
changes X
- - -------------------------------------------------------------------------------------------------------------------------
HARDWARE BREAK/FIX
- - -------------------------------------------------------------------------------------------------------------------------
Schedule hardware repair activity with Wards end customer X
- - -------------------------------------------------------------------------------------------------------------------------
Identify problems X
- - -------------------------------------------------------------------------------------------------------------------------
Backup LAN attached end customer data and/or applications if necessary X
- - -------------------------------------------------------------------------------------------------------------------------
Install and test needed replacement parts for hardware X
- - -------------------------------------------------------------------------------------------------------------------------
Resolve problems X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
hardware, software and peripherals X
- - -------------------------------------------------------------------------------------------------------------------------
Provide or adjust configuration options as required X
- - -------------------------------------------------------------------------------------------------------------------------
Ensure work area is returned to a neat and orderly state X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain end customer's sign-off X
- - -------------------------------------------------------------------------------------------------------------------------
Update problem ticket, electronic inventory and asset inventory system to reflect
changes X
- - -------------------------------------------------------------------------------------------------------------------------
Manage use of manufacturer warranty, reseller replacement/repair policies, etc. to
limit total repair costs X
- - -------------------------------------------------------------------------------------------------------------------------
Perform and manage all Return Material Authorization (RMA)/shipping arrangements,
provided that Wards is responsible for shipping costs X
- - -------------------------------------------------------------------------------------------------------------------------
Manage hardware spare parts X
- - -------------------------------------------------------------------------------------------------------------------------
Provide Wards with timely invoicing for hardware and software purchases made on
Wards behalf X
- - -------------------------------------------------------------------------------------------------------------------------
Provide monthly status reports detailing hardware repair activity X
- - -------------------------------------------------------------------------------------------------------------------------
Provide monthly report showing hardware spare parts inventory & usage rates X
- - -------------------------------------------------------------------------------------------------------------------------
DISPOSAL (DISPOSITION)
- - -------------------------------------------------------------------------------------------------------------------------
All shipping to be borne by Wards X
- - -------------------------------------------------------------------------------------------------------------------------
Verify final disposition of asset (e.g. lease return, scrap, return to manufacturer
for replacement, etc.) X
- - -------------------------------------------------------------------------------------------------------------------------
Gain Wards approval for replacement or disposal of any Wards failed desktop/server
device X
- - -------------------------------------------------------------------------------------------------------------------------
Remove all data files, custom applications, licensed software, etc. X
- - -------------------------------------------------------------------------------------------------------------------------
Update problem ticket, electronic inventory and asset inventory system to reflect
changes X
- - -------------------------------------------------------------------------------------------------------------------------
"Warehouse" of hardware components in Wards provided space at Wards corporate
complex.for later disposition to be provided by Wards. X
- - -------------------------------------------------------------------------------------------------------------------------
"Warehouse" of software licenses (i.e. MS Office license) for reuse at Wards
corporate complex. X
- - -------------------------------------------------------------------------------------------------------------------------
Return assets to lessor, Strategic Asset Redeployment (SAR) or manufacturer X
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
DESKTOP/SERVER MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLIER SUPPORTED SOFTWARE PLANNING AND MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------------
Notify liason of new releases of Supplier supported software X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct performance tuning on Supplier support software X
- - -------------------------------------------------------------------------------------------------------------------------
Plan and schedule major software changes such as operating system installs X
- - -------------------------------------------------------------------------------------------------------------------------
Install maintenance (i.e. patches) on Supplier supported software in accordance with
defined service levels X
- - -------------------------------------------------------------------------------------------------------------------------
Monitor, control, and manage recovery from any virus invasion X
- - -------------------------------------------------------------------------------------------------------------------------
Maintain and validate Wards' standard software product image for all new images. X
- - -------------------------------------------------------------------------------------------------------------------------
Train end customer on Supplier supported software and upgrades X
- - -------------------------------------------------------------------------------------------------------------------------
SOFTWARE PROCUREMENT
- - -------------------------------------------------------------------------------------------------------------------------
Wards user to submit requisition to Supplier X
- - -------------------------------------------------------------------------------------------------------------------------
Supplier to research, price and verify availability and return information to Wards X
- - -------------------------------------------------------------------------------------------------------------------------
Accept or reject procurement X
- - -------------------------------------------------------------------------------------------------------------------------
Track all software orders requested by Wards X
- - -------------------------------------------------------------------------------------------------------------------------
Provide confirmation of correct order receipt X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain software, or software upgrade from manufacturer, aggregator or reseller X
- - -------------------------------------------------------------------------------------------------------------------------
Configure software according to pre-defined hardware, software and performance
definitions X
- - -------------------------------------------------------------------------------------------------------------------------
SUPPLIER SUPPORTED STANDARD SOFTWARE INSTALLATION AND UPGRADES
- - -------------------------------------------------------------------------------------------------------------------------
Schedule software installation activity with end customer X
- - -------------------------------------------------------------------------------------------------------------------------
Backup and transfer of any LAN attached end customer data and/or applications X
- - -------------------------------------------------------------------------------------------------------------------------
Check, test, against viruses X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
hardware, software and peripherals X X
- - -------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for installation X
- - -------------------------------------------------------------------------------------------------------------------------
Provide initial instructions to the end customer for the new software X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain end customer's sign-off X
- - -------------------------------------------------------------------------------------------------------------------------
Update problem ticket, electronic inventory and asset inventory system to reflect
changes X
- - -------------------------------------------------------------------------------------------------------------------------
SOFTWARE SUPPORT
- - -------------------------------------------------------------------------------------------------------------------------
Identify problems X
- - -------------------------------------------------------------------------------------------------------------------------
Backup and transfer of any end customer data and/or applications X
- - -------------------------------------------------------------------------------------------------------------------------
Assist users with data restoration from backup media on the various Wards servers. X
- - -------------------------------------------------------------------------------------------------------------------------
Check, test, and warrant against viruses X
- - -------------------------------------------------------------------------------------------------------------------------
Resolve problems following Wards documented Escalation Procedures X
- - -------------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
hardware, software and peripherals X X
- - -------------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required X
- - -------------------------------------------------------------------------------------------------------------------------
Provide initial instructions to the end customer X
- - -------------------------------------------------------------------------------------------------------------------------
Obtain end customer's sign-off X
- - -------------------------------------------------------------------------------------------------------------------------
Update problem ticket, electronic inventory and asset inventory system to reflect
changes X
- - -------------------------------------------------------------------------------------------------------------------------
OUT-OF-SCOPE SERVICE REQUESTS
- - -------------------------------------------------------------------------------------------------------------------------
Initiate service requests X
- - -------------------------------------------------------------------------------------------------------------------------
Receive, record, monitor and report service requests X
- - -------------------------------------------------------------------------------------------------------------------------
Create/cost of service request X
- - -------------------------------------------------------------------------------------------------------------------------
Review project plans X
- - -------------------------------------------------------------------------------------------------------------------------
Estimate time and costs for changes where applicable X
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------
DESKTOP/SERVER MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Quote resource rates and obtain Wards' pre-authorization for any overtime or special
project activity X
- - -------------------------------------------------------------------------------------------------------------------------
Write cost justification X
- - -------------------------------------------------------------------------------------------------------------------------
Identify and communicate alternatives X
- - -------------------------------------------------------------------------------------------------------------------------
Approve, prioritize, and reprioritize service requests X
- - -------------------------------------------------------------------------------------------------------------------------
Assist in prioritization of service requests X
- - -------------------------------------------------------------------------------------------------------------------------
Maintain and communicate prioritization and schedule of service requests X
- - -------------------------------------------------------------------------------------------------------------------------
Perform approved Out-of-Scope Service Request activities within budget and schedule X
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
GLOSSARY OF TERMINOLOGY
-----------------------
EUC End User Computing. User community at Wards corporate
complex related to use of desktop/server hardware and
software and desktop/server applications.
WARDS DEVELOPED Describes any software application developed by Wards
SOFTWARE personnel as a stand alone application, client or
server application, system device driver, adjunct or
peripheral device driver, or application enhancement
capable of operating in the Wards network computing
environment.
WARDS PURCHASED Describes any software application not developed by
SOFTWARE Wards personnel capable of operating in the Wards
network-computing environment.
WARDS USER All users of Wards IT services including but not
COMMUNITY limited to Wards' associates, subcontractors, and
customers.
HARDWARE MOVE, A move describes physically relocating a hardware
ADD, CHANGE (MAC) device. Add is a new installation of a hardware
device. Change is an upgrade, or reconfiguration of a
hardware device.
MEDIA Any removable and transportable data storage medium
used to backup, retain, and restore data, including but
not limited to: reel tape, cartridge tape (3490, TK50,
TK70, DAT, 4mm, 8mm), keyboards or Compact Disc.
PERIPHERAL Describes any accessory device used in conjunction with
other hardware or software devices.
PLOTTER Describes both individual and networked (-shared)
plotters in the Wards computing environment.
PRINTER Describes both individual and networked (-shared)
printers in the Wards computing environment.
PROBLEM Problem, deficiency, delay or request as reported by a
member of the Wards user community.
PROBLEM TRACKING Call Center database management and problem ticket
SYSTEM tracking software.
16
<PAGE>
RELEASE Release Management is the management and structured
MANAGEMENT release of desktop, server, and network software
standards that are mutually determined by Wards and
Supplier.
SERVER Describes a networked computer hosting applications or
services to client computers on the network. Currently
servers at Wards are based. In the future the Operating
Systems for Servers may change as technology and
business requirements demand.
SOFTWARE MOVE, A move describes physically relocating a software
ADD, CHANGE (MAC) license. Add is a new installation of software. Change
is an upgrade, or reconfiguration of software.
SYSTEMS MANAGED MS remote system management software used to
SOFTWARE (SMS) distribute software.
EUC - HELP DESK PROBLEM DEFINITION, CLASSIFICATION AND ACTION REQUIREMENTS
- - --------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEVERITY PROBLEM DESCRIPTION ACTION RESPONSE ESCALATION
- - -------- ------------------- ------ -------- ----------
<S> <C> <C> <C> <C>
1 All or large portion of *Group1 page sent to all EUC Assigned L3 arrives If unresolved after 30
------------
Client/Server user environment staff, and Mgmt. (6am-6pm). or calls NetOps ASAP, min, - call/page to
is down or degraded. - Follow escalate list for NSS Mgr.
Examples: Merch Server is down. offshift. Call/page L3 tech, (within 10 min). After 1hr, TS/EUC
page NSS Mgr, TS/EUC Mgr, and * Group1 page sent Mgr, & IT Plan Dir.
-------------
IT Plan Dir. when problem resolved. 2hr - CIO
1-VIP Officer, VIP, or their Admin *Group2 Page to Swat Team, Assigned ST member If unresolved after 30
------------
is down, or has problem requiring TS/EUC Mgr, IT Plan Dir calls NetOps ASAP. min, - call/page to
service. (within 10 min) NSS Mgr.
ST member onsite After 1hr, TS/EUC
...If it is a minor problem that with VIP-User within Mgr. 2hr - IT Plan
can be handle deffectively over 30 min. Dir, & CIO
phone, such as access permission, * Group1 page sent
-------------
....no need to dispatch SWAT. when problem
resolved.
2 Single user down or can't get HD assigns problem to L2, Tech assigned and If no response within
work done and indentifies problem as B/F, or L3 onsite within 2-4 4 hrs, or not fixed
business critical. hrs. Resolved in 8 hours - call/page
within 4-8 hrs. Mgr, & escalate to
-----------
Sev-1. After 6 hrs,
-----
TS/EUC Mgr.
3 User impacted but not critical, HD assigns problem to L2, Tech assigned and If no response within
or user has a workaround. B/F, or L3 onsite within 24 24 hrs, or not resolved
hrs. Resolved in 48, call /page Mgr,
within 48 hrs. and escalate to Sev-2.
-----------------
4 User question or response HD assigns problem to L2, Tech assigned and If no response within
requested. B/F, or L3 contact to user 48 hrs, or resolved in
within 48 hrs. 72 hrs, 3 days, -
Resolved in 72 notify Mgr, and
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
hours. escalate to Sev-3.
-----------------
</TABLE>
LOS OBJECTIVES
- - --------------
Until we have some history, we will follow these objectives as guidelines.
After a few weeks of gathering data, we will formalize objectives, and make any
adjustments and/or staffing changes.
GROUP1 PAGE (SEV-1) GROUP2 PAGE - SWAT TEAM (SEV-1 AND VIP)
- - ------------------- ---------------------------------------
IT Planning & Tech Dir. - Morton Assoc Tech Spec -EUC L3 - Carlos Acosta
Tech Serv & EUC Mgr. - TBD Assoc Tech Spec -EUC L3- John Boekeloo
Network Serv & Soft Mgr - Josh Sr Netk Tech - Netwk L3 - Bob Davenport
VP Comp Servs - Irv Netwk Data Inst Mgr - Henry Harper
Prod Mgr Opers - Larry Adv Sys Desgn Mgr - Bobby Ervin
EUC Staff - All Network Serv & Soft Mgr - Josh Taylor
18
<PAGE>
MISSION CRITICAL DEVICES AND APPLICATIONS
-----------------------------------------
MISSION CRITICAL(VIP) DESKTOP/LAPTOP HARDWARE
TSO ID USER NAME: VIP INDICATOR SYSTEM
TH0760 VOLLMAN, SANDY Y DT
TH1118 PELEJ, LINDA Y LT
TO5107 JENKINS, CHERYL Y DT
TO5510 ANDRESEN, JOANNE Y DT
TO6056 GARRETT, REG Y DT
TO6213 MAIER, MICHELLE Y DT
TS0023 DOSHAN, JEFFREY R. Y DT
TS0078 RUFFALO, MARGARET Y DT
TS0269 MCDOWELL, STEVE Y DT
TS0360 COPENHAVER, MIKE Y DT
TS0567 JUDY GUSTAFSON Y DT
TS1023 PEIRINI, MARY JANE Y DT
ts1125 Staack, Craig Y DT
TS1218 Tim Watkins Y DT
TS3074 DIGANGI, AL Y LT
TS3136 Gatewood, Dan Y DT
TS3720 BASS, BILL Y TC
TS3824 NUGENT, RON Y DT
TS4046 ZUCCHERO, MARYANN Y DT
TS4487 BYRD, DIANA Y DT
TS4755 STEFANIAK, MAMIE Y DT
TS5188 DELK, PHILIP Y DT
TS5251 FARMER, ROSIE Y DT
TS5311 TOENINGS, JUDITH Y DT
TS5614 WEIL, KATHY Y TC
TS5620 KRAWCZYK, RITA Y DT
ts5640 Laura M. Martinez Y DT
TS5853 WOODS, INITA Y DT
TS5923 SILVESTRI, COOKIE Y DT
TS5930 SAMPSON, GAIL Y DT
TS5939 Jenny Alvarez Y DT
TS6239 MENDEZ, ELEANOR Y DT
TS6301 JOANNA DWYER Y DT
TS6378 BOLDA, IRENE Y TC
B
TS6425 HEINE, SPENCER Y DT
TS6535 MORTON MEASE Y LT/TC
19
<PAGE>
TSO ID USER NAME: VIP INDICATOR SYSTEM
TS6849 BOHNTINSKY, JOHN Y DT
TS6958 BUREL, MARK Y DT
TS7158 BURDI, ANGIE Y DT
TS7272 LAY, SCOTT Y DT
TS7466 ARMSTRONG, CHARLES Y LT
TS7653 CLAXTON, ROBERT Y DT
TS7663 FREEMAN, KEVIN Y TC
TS8098 HURLEY, KATHY Y DT
TS8140 SEARLES, MIKE Y DT
TS8370 BERNHEISEL, DON Y LT
TS8503 KYSER, ERIC Y DT
TS8540 BAIRD, BOB Y DT
TS8766 GODDU, ROGER Y LT/DT
TS9014 TAYLOR, KARL Y LT
TS9213 CIVGIN, DON Y LT
ts9245 Austin, Tom Y LT
TS9246 Caporale, Louis (Lou) Y LT
TS9573 PAUP, THOMAS J. Y DT
TS9620 WANGSTAD, KAROLYN Y DT
TS9641 KLEIN, STEWART Y LT
TS9844 STEIN, ANDY Y LT
TY1242 HAMMER, IRVING Y TC
MISSION CRITICAL(VIP) LAN SERVERS
All Servers at Wards Corporate Complex
MISSION CRITICAL(VIP) APPLICATIONS
MS-NT
Novell
Lotus-Notes
Windows 95
`Standard' Server Applications
20
<PAGE>
STANDARD HARDWARE CONFIGURATION (NEW PURCHASE)
Processor model within 2 versions of most recently released
32 MB Memory
4 GB Hard Drive
CD Drive
17" Monitor
Standard Hardware Configuration Selection Criteria
1. Special user needs (i.e. IBM workstation for DB2 developers)
2. Thinclient where available and appropriate
3. Re-utilization of existing assets where available and appropriate
4. Standard Hardware Configuration (new purchase)
21
<PAGE>
EXHIBIT C
CHARGES
MONTHLY SERVICES CHARGE (MSC) FOR 37 MONTH TERM:.....................$85,000
A. ALLOWANCES:
- Up to 250 shrink wrap software service calls per month
- Up to 1500 keyboards, including associated devices such as
terminals, printers, scanners, workstations and PCs, at Wards
corporate headquarters
B. PRICING ADJUSTMENTS
Any increase or decrease in the number of keyboards or number of end
users shall result in adjustments to the MSC as follows:
(i) For each 100 unit increase in keyboards, the MSC shall be increased
by $75,000 per year, such increase to commence with the MSC for the
following month.
(ii) For any 100 unit decrease in keyboards, the MSC shall be decreased by
$55,000 per year, such decrease to take effect with the MSC for the
following month.
(iii) The MSC shall be increased by (x) $25 per month for each additional
non-thin-client desktop/laptop device (non-mission critical) beyond an
initial allowance of 300 and (y) $50 per month for each distributed
client/server mission critical device.
C. PASS -THROUGH EXPENSES
- All telecommunications line charges necessary for connectivity
between Wards' corporate complex, Signature and Supplier's data center,
shall be Pass-Through Expenses, to be invoiced monthly to Wards without
mark-up.
D. OUT OF SCOPE
- Wards will provide all desktop-related Equipment and Software.
- Optional pricing available for technology refresh.
- Wards may at its option, elect to have Supplier provide disaster
recovery services. Such disaster recovery services, including support for
testing, shall be provided to Wards at third-party cost plus 15%.
- IMACs except at Wards corporate headquarters tower.
22
<PAGE>
E. MINIMUM MONTHLY CHARGE
- Months 1-13 -- $85,000
- Months 14-25 -- $68,000
- Months 26-37 -- $51,000
F. TERMINATION FEES
There are no termination fees under this Service Agreement.
23
<PAGE>
EXHIBIT D
SERVICE LEVEL AGREEMENT
FOR DESKTOP SERVICES
--------------------
24
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. GENERAL.............................................................. 26
A. General........................................................ 26
B. Definitions.................................................... 26
C. Measurement.................................................... 27
D. Effective Date for Service Levels.............................. 27
E. Revisions...................................................... 27
F. Single Point of Contact........................................ 28
II. SERVICE LEVELS
A. Definitions.................................................... 28
B. Service Level Measures......................................... 28
C. Service Levels................................................. 34
III. SERVICE LEVEL CREDITS................................................ 36
A. Credits........................................................ 36
B. Method of Calculation.......................................... 36
C. Frequency Factor............................................... 36
D. Excused Performance Problem.................................... 37
E. Time Limit..................................................... 38
IV. SERVICE LEVEL TERMINATION EVENTS..................................... 38
A. Definition..................................................... 38
B. Repeated Service Level Failures................................ 38
C. Repeated Critical Service Level Failures....................... 39
D. Catastrophic Level of Service.................................. 40
E. Qualification.................................................. 40
</TABLE>
<PAGE>
SERVICE LEVEL AGREEMENT
-----------------------
FOR DESKTOP SERVICES
--------------------
I. GENERAL
A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT.
This Service Level Agreement is entered into under the Master Agreement for
Information Technology Services between Acxiom Corporation ("Supplier") and
Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and
pertains to Service Agreement No. 5: Desktop Services entered into by Wards and
Supplier. Any inconsistency between this Agreement, the Service Agreement and
the Master Agreement will be resolved pursuant to Section 2.3 of the Master
Agreement.
B. DEFINITIONS
In this Service Level Agreement ("SLA"), the terms listed below shall
have the indicated meanings. Other terms may be defined in other
sections of this SLA. Terms used in this SLA without definition have
the meanings ascribed to them in the Master Agreement or Service
Agreement.
1. Service Level Measure - For any Service identified in this
---------------------
SLA, the method specified in this SLA for quantitatively
calculating Supplier's actual performance. The results of these
calculations are compared with Service Levels to evaluate
Supplier's compliance with Service Levels.
2. Service Levels - For any Service identified in this SLA, the
--------------
required quantitative level or degree of performance by Supplier
specified in this SLA as the "Service Level." The Service Levels
are the minimally acceptable levels of service for the Services.
Any failure to meet a Service Level is unacceptable and may
constitute, based upon the facts and circumstances, a material
breach of Supplier's obligations under the Service Agreement.
3. Increased Impact Level - For any Service identified in this
----------------------
SLA, the required quantitative level or degree of performance by
Supplier specified in this SLA as the "Increased Impact Level."
Any failure to meet an Increased Impact Level is unacceptable and
may constitute, based upon the facts and circumstances, a
material breach of Supplier's obligations under the Service
Agreement.
4. Critical Service Levels - Service Levels associated with
-----------------------
those Services that are most important to the conduct of Wards'
operations, which are the subject of this Service Agreement.
<PAGE>
5. Service Level Credits - The amounts which Wards shall have
---------------------
the option, but not the obligation, to recover as liquidated
damages, in lieu of any other monetary remedies Wards may have,
each time Supplier fails to meet the Service Levels for any
reason other than those specified in Section III.D of this SLA.
Service Level Credits are calculated in the manner described in
Section III of this SLA.
6. Service Level Termination Event - An occurrence or series of
-------------------------------
occurrences of deficient performance by Supplier in performing
the Services specified in this SLA as a "Service Level
Termination Event." The occurrence of a Service Level
Termination Event constitutes, based upon the facts and
circumstances, a material breach of Supplier's performance
obligations under this Service Agreement and gives Wards the
right to terminate this Service Agreement for cause.
C. MEASUREMENT
Unless otherwise stated in this SLA, each Service Level Measure shall
be calculated on a complete calendar month basis. Performance results
shall be measured and reported based on actual results with any
exceptions for Excused Performance Problems reported separately.
D. EFFECTIVE DATE FOR SERVICE LEVELS
The Service Levels provided for in this SLA shall become effective as
provided for in Section 7.1 of the Service Agreement.
E. REVISIONS
1. From time to time during the Term, the Parties agree to
negotiate in good faith to add, delete, or modify then-existing
Service Level Measures, Service Levels, and Increased Impact
Levels to reflect changes in Wards' business requirements or
objectives. All such changes shall be adopted in the form of a
signed written amendment to this SLA.
2. In the event that any applicable system or function is
replaced during the Term by a comparable system or function, the
Service Level Measure, Service Level, and Increased Impact Level
for such replacement system or function shall, to the extent
reasonably practicable (i) be defined during the first 30 days
of such replacement, and (ii) must be at least equivalent to the
then-existing Service Level Measure, Service Level, and Increased
Impact Level for the replaced system or function (assuming the
replacement system is capable of delivering the same Service
Levels as the replaced system).
3. At all times during the Term, Supplier shall provide the
Services in a manner that meets or exceeds the then-existing
Service Levels. The
27
<PAGE>
remedies for failure to do so shall include the remedies
defined in this SLA, the Service Agreement, and the Master
Agreement.
F. SINGLE POINT OF CONTACT
Regardless of whether any failure by Supplier to meet a Service
Level is attributable to Supplier or an Excused Performance
Problem, Supplier shall provide a single point of contact to
address resolution of such failure and shall act promptly to
address the problem causing the failure. Unless otherwise agreed
by Wards, the Supplier Project Executive shall be the Supplier's
single point of contact.
II. SERVICE LEVELS
A. DEFINITIONS
Certain technical definitions are included in the Glossary of
Terminology included as part of Exhibit B to this Service Agreement.
B. SERVICE LEVEL MEASURES
SERVER AVAILABILITY
-------------------
OBJECTIVE: Monitoring LAN Servers availability and performance according to
defined targets. Starting and stopping defined Online Services
according to specified service availability schedules. Initiating
Problem Management procedures to rectify any performance or
availability failures.
DEFINITION: To be available, each LAN Servers must be accessible and usable
to Wards Associates according to Wards established schedule.
Ward's LAN Servers are scheduled to be available as follows:
7x22x365 04:00-02:00 CT everyday
Availability is calculated as:
(Minutes Scheduled)-( Minutes Lost)
-----------------------------------
Minutes Scheduled
METHOD: Monitoring all LAN Servers to ensure their performance and
availability remains within stated service levels. The Supplier
will provide console or other appropriate management processes to
control the Wards LAN Server environments within their control.
SERVICE LEVEL:
----------------------------------------------------------------
VALUES METRICS
----------------------------------------------------------------
28
<PAGE>
----------------------------------------------------------------
----------------------------------------------------------------
Service Level - 99.5% availability of all LAN
Servers have been maintained to
Wards schedules.
----------------------------------------------------------------
Increased Impact - Less than 98.5% availability
of all LAN Servers have been
maintained to Wards schedules.
----------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Associates, applications, distribution and stores.
RESPONSIBILITY: Supplier
PERIOD: 7x22x365 as stated above.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
PROBLEM RESPONSE TIME
---------------------
OBJECTIVE: To ensure that Supplier's response and initiation of corrective
measures for mission critical desktop problems are accomplished
in a timely and orderly manner.
DEFINITION: The timeframe within which Supplier staff must be on-site at the
location of the failed device or software. Time starts
accumulating from the point at which a problem ticket is opened
and a corresponding problem ticket number is assigned, based on
the escalation procedures. Tickets are categorized as mission
critical or non-mission critical. Mission critical desktop
devices are required for Wards to conduct business, with the
required on-site response time of forty (40) minutes during
normal business hours or best effort at all other times. The
overall time to respond to non-mission critical desktop devices
is only restricted by the service specification for desktop
problem resolution time which stipulates non-mission critical
desktop devices and software must be operational within two (2)
business day of an initial problem ticket being opened with a
corresponding problem ticket number.
METHOD: Problem tracking for initial entry, arrival times and repair
times are recorded and reported using the help desk's ACD and
automated problem ticket tracking system. Measurement will be
performed, for reporting purposes, at the first hour and one
business day from opening of the help desk problem ticket for
mission critical and non-mission critical problem tickets,
respectively.
SERVICE LEVEL:
- - --------------------------------------------------------------------------------
VALUES METRICS
- - --------------------------------------------------------------------------------
Service Level - Response to Mission critical problems accomplished 95
% of the time within forty (40) minutes during normal
business hours or best effort at all other times of a
problem ticket being created with a corresponding
problem ticket number, per the escalation procedures.
- - --------------------------------------------------------------------------------
Increased Impact - Response to Mission critical problems accomplished 90
% of the time
- - --------------------------------------------------------------------------------
29
<PAGE>
- - --------------------------------------------------------------------------------
within forty (40) minutes during normal business hours
or best effort at all other times of a problem ticket
being created with a corresponding problem ticket
number, per the escalation procedures.
- - --------------------------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Offices & Associates
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 06:00-18:00 Monday-Friday, best effort during off-hours
RESOURCE RANGE: For all Wards designated mission critical hardware and
applications
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - I
PROBLEM RESOLUTION TIME
-----------------------
OBJECTIVE: To ensure that repairs to equipment, software and systems within
the Wards environment are completed in a timely and orderly
manner such that end-users may resume their duties as quickly as
possible.
DEFINITION: A reactive maintenance activity required to repair and/or replace
a piece of equipment or one of its components and or software.
The service levels are measured in terms of overall time to
repair. Time starts accumulating from the point at a problem
management ticket is opened at the Supplier help desk. Tickets
are categorized as mission critical or non-mission critical.
Mission critical desktop devices are required for Wards to
conduct business with the overall time to repair or provide
workaround within two (2) hours (elapsed clock time) of
Supplier's on-site response. The overall time to repair non-
mission critical desktop devices is in accordance with the EUC
escalation procedures.
METHOD: Problem tracking for initial entry, arrival times and repair
times are recorded and reported using the help desk's problem
ticket tracking system Calculations will be performed separately
for mission critical and non-mission critical problem tickets.
PERFORMANCE MEASUREMENT FOR MISSION CRITICAL REPAIR TICKETS:
SERVICE LEVEL:
- - -------------------------------------------------------------------------------
VALUES METRICS
- - -------------------------------------------------------------------------------
Service Level - Mission critical repairs completed 95 % of the time
within two (2) hours of Supplier's initial on-site
arrival or user contact
- - -------------------------------------------------------------------------------
Increased Impact - Mission critical repairs completed 90 % of the time
within two (2) hours of Supplier's initial on-site
arrival or user contact
- - -------------------------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Corporate Offices & Associates
RESPONSIBILITY: Supplier
30
<PAGE>
PERIOD: Monthly
HOURS OF OPERATION: 06:00-18:00 central Monday thru Friday; best effort
during off-hours.
RESOURCE RANGE: For all Wards designated mission critical(VIP) hardware
and applications.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement, Corrective Action for Service
Level Metrics, Action Type - I
PERFORMANCE MEASUREMENT FOR NON-MISSION CRITICAL REPAIR TICKETS:
SERVICE LEVEL:
- - -------------------------------------------------------------------------------
VALUES METRICS
- - -------------------------------------------------------------------------------
Service Level - Non-mission critical repairs completed 95% of the
time within timeframes established by the EUC
escalation procedures.
- - -------------------------------------------------------------------------------
Increased Impact - Non-mission critical repairs completed 90% of the
time within timeframes established by the EUC
escalation procedures.
- - -------------------------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Corporate Offices & Associates
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 06:00-18:00 central Monday through Friday; best effort
during off-hours.
RESOURCE RANGE: For all Wards designated non-mission critical hardware
and software
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - I
STANDARD HARDWARE AND SOFTWARE INSTALLATIONS/UPGRADES/RE-DEPLOYMENTS
--------------------------------------------------------------------
OBJECTIVE: To provide Wards with timely installation, upgrade and re-
deployment of Wards standard hardware and software for non-
project requests only. Project requests will be scheduled.
DEFINITION: The Supplier will schedule and install, upgrade or re-deploy
Wards hardware and software assets based on the following
scheduling criteria:
Installation, upgrade or re-deployment is to be scheduled with
the Wards user and completed within:
a) Five (5) days from receipt of the Wards standard hardware or
software, if the Supplier is responsible for providing the
required Wards standard hardware or software;
b) Five (5) days from receipt of the Wards standard hardware or
software, if the Supplier is not responsible for providing
the required Wards standard hardware or software;
31
<PAGE>
c) Five (5) days from the user availability or user requested
date if the user requested date is beyond the timeframes
indicated in a) or b) above.
METHOD: The Supplier, using Supplier provided manual/automated change
management and tracking processes will log and manage the date,
time, and Wards personnel spo ken with to schedule installations.
<TABLE>
<CAPTION>
SERVICE LEVEL:
- - ------------------------------------------------------------------------------
Values Metrics
- - ------------------------------------------------------------------------------
<S> <C>
Service Level - On average, 95% of all installation/upgrade/re-
deployment requests will be scheduled and completed
according to the scheduling criteria defined above.
- - ------------------------------------------------------------------------------
Increased Impact - On average, less than 90% of all installation/upgrade
/re-deployment requests will be scheduled and
completed according to the scheduling criteria
defined above.
- - ------------------------------------------------------------------------------
</TABLE>
IMPACT: Medium
AFFECTED AREA: Wards Corporate Offices & Associates
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: N/A
RESOURCE RANGE: N/A
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - II
SOFTWARE RELEASE MANAGEMENT
---------------------------
OBJECTIVE: To maintain the current version and thereby the capability for
manufacturer support of the Wards investment in software. To ensure
the Supplier implements changes to the Wards environment in the
prescribed manner with minimal impact on Wards' users and processing
schedules.
DEFINITION: Software release management is the process of maintaining a
consistent level of software version across platforms. Software will
be maintained at no older than the current minus two(n-2) version,
unless otherwise mutually agreed.
METHOD: The Supplier will research and notify Wards about all software
version upgrades, as they become available. Upon Wards' approval,
Supplier will plan all software installations, upgrades, maintenance
implementations and enhancements following the documented change
management process.
<TABLE>
<CAPTION>
SERVICE LEVEL:
----------------------------------------------------
Values Metrics
----------------------------------------------------
<S> <C>
Service Level - 95% of all software installs and
upgrades are
----------------------------------------------------
</TABLE>
32
<PAGE>
---------------------------------------------------------------
completed as scheduled
---------------------------------------------------------------
Increased Impact - 90% or less of all software installs and
upgrades are completed as scheduled
---------------------------------------------------------------
IMPACT: Low
AFFECTED AREA: Wards Offices & Associates
RESPONSIBILITY: Supplier
PERIOD: Semi-annual
RESOURCE RANGE: The Supplier and Wards personnel will have access to a
Supplier-provided isolated test environment to support
initial and quality assurance testing of changes to the
environment prior to implementati on.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type - III
DESKTOP/SERVER, REPEAT TICKETS/REWORK
-------------------------------------
OBJECTIVE: To insure the Supplier provides personnel skilled in the disciplines
appropriate to their assignments.
DEFINITION: Supplier personnel will perform their duties with a minimum of
rework.
METHOD: The Supplier will monitor and report on calls that resulted from
incorrect actions being initially performed by Supplier personnel.
<TABLE>
<CAPTION>
SERVICE LEVEL:
-------------------------------------------------------------
values Metrics
-------------------------------------------------------------
<S> <C>
Service Level - 95% of calls will be resolved
successfully the first time the
Supplier desktop solution is
implemented.
-------------------------------------------------------------
Increased Impact - 90% or less of calls will be resolved
successfully the first time the
Supplier desktop solution is implemented.
---------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards Offices & Associates
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: N/A.
RESOURCE RANGE: Limited to a total of 7,000 calls per month(total current
EUC calls).
33
<PAGE>
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action
for Service Level Metrics, Action Type - I
C. SERVICE LEVELS
The Service Levels are identified in the following table(s). Each Service
Level is assigned a Severity Weight in the following table(s), which is used in
the calculation of the Service Level Credits. The Severity Weights are
expressed as percentages, totaling 100% for all Service Levels, and approximate
the relative severity of the impact on Wards operations of failures to meet the
respective Service Levels. The parties acknowledge that these percentages are
approximations of probable severity and relative importance and do not limit
Wards' right to contend that one or more failures to meet one or more of the
Service Levels may constitute a material breach of the Agreement. Upon 30 days
advance notice to Supplier, Wards may adjust the Severity Weights of the
respective Service Levels as Wards deems appropriate so long as the total of
such percentages does not exceed 100%.
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
SERVICE DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED
LEVEL ------------- WEIGHT IMPACT LEVEL
STANDARD ID MEASUREMENT
-------------
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SERVER 25 99.5% of all LAN Servers have Less than 98.5% of
AVAILABILITY been maintained to Wards all LAN Servers
schedules. have been maintained
to Wards schedules.
- - ------------------------------------------------------------------------------------------------------------------------------------
PROBLEM 25 Response to Mission critical Response to Mission
RESPONSE TIME the time within forty (40) critical problems
hour or best effort at all accomplished 90 %
other times of a problem of the time within
ticket being created forty (40) minutes
with a corresponding problem during normal
ticket number, per the business hours or
escalation procedures. best effort at all
other times of a
problem ticket
being created with
a corresponding
problem ticket
number, per the
escalation
procedures.
- - -----------------------------------------------------------------------------------------------------------------------------------
PROBLEM 25 Mission critical Mission critical
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
SERVICE DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED
LEVEL ------------- WEIGHT IMPACT LEVEL
STANDARD ID MEASUREMENT
-------------
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESOLUTION TIME repairs completed 95 % of the repairs completed 90%
time within two (2) hours of of the time within
Supplier's initial on-site two (2) hours of
arrival or user contact. Supplier's initial
Non-mission critical repairs on- site arrival or
completed 95% ofthe time within user contact. Non-
timeframes established by the mission critical
EUC escalation procedures. repairs completed
90% of the time within
timeframes established
by the EUC escalation
procedures.
- - ------------------------------------------------------------------------------------------------------------------------------------
STANDARD HARDWARE 5 On average, 95% of all On average, less than
AND SOFTWARE installation/upgrade/ 90% of all installation
INSTALLATIONS/UPGRADES re-deployment requests /upgrade/re-deployment
/RE-DEPLOYMENTS will be scheduled and request will be
completed as according scheduled and completed
to the scheduling criteria according to the
defined above. scheduling criteria
defined above.
- - -----------------------------------------------------------------------------------------------------------------------------------
SOFTWARE RELEASE 5 95% of all software installs 90% or less of all
MANAGEMENT and upgrades are completed as software installs and
scheduled upgrades are completed
as scheduled
- - ------------------------------------------------------------------------------------------------------------------------------------
DESKTOP/SERVER 15 95% calls will be resolved 90% or less of calls
REPEAT TICKETS/REWORK successfully the first time will be resolved
the Supplier desktop solution successfully the first
is implemented. time the Supplier
desktop solution is
implemented.
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following Service Levels are designated as Critical Service Levels:
35
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------
SERVICE LEVEL APPLICATION DESCRIPTION
STANDARD ID ----------- ------------
- - -------------
- - -------------------------------------------------------------
<S> <C> <C>
SERVER AVAILABILITY
- - -------------------------------------------------------------
PROBLEM RESPONSE TIME
- - -------------------------------------------------------------
PROBLEM RESOLUTION TIME
- - -------------------------------------------------------------
</TABLE>
III. SERVICE LEVEL CREDITS
A. CREDITS
In each case of a failure to satisfy a Service Level Supplier will, within
five (5) days from the identification of the deviation from the applicable
Service Level, provide to Wards a plan of activities which will allow Supplier
to satisfy the applicable Service Level at the earliest date practicable. In
addition, Wards shall be entitled to recover a Service Level Credit for such
Service Level calculated in the manner described below, provided, however, that
the aggregate amount of such Service Level Credits for any given month will not
exceed ten percent (10%) of Supplier's monthly charges under this Service
Agreement for the applicable month (excluding Pass-Through Expenses, if any). If
a single event directly causes a failure to achieve more than one Service Level,
then only one Service Credit will apply. In such event, Wards will select the
Service Level that will be used for the calculation of the Service Credit.
B. METHOD OF CALCULATION
If Supplier fails to meet or exceed a Service Level, the Severity Weight
corresponding to that Service Level, expressed as a percentage, will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any). If Supplier's performance fails to meet an Increased Impact
Level for any Service Level, the Severity Weight corresponding to that Service
Level, expressed as a percentage, will be doubled and such percentage will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) (this calculation being in lieu of, and not in addition to, the
credit calculation for the corresponding Service Level failure). To calculate
the total Service Level Credit due to Wards for the applicable month, the
amounts calculated for each Service Level or Increased Impact Level as described
above will be totaled and such amount shall be available as a credit to Wards
against Supplier's invoice for the applicable month.
C. FREQUENCY FACTOR
36
<PAGE>
In any case where Supplier fails to achieve the same Service Level
(including failure to achieve the designated Increased Impact Level for that
Service Level) in two consecutive months or in any four months in any 12-month
period, the applicable Severity Weight shall be doubled and such percentage will
be multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any), and for any subsequent months in which Supplier fails to
achieve such Service Level or Increased Impact Level; provided, however, that in
no case will Supplier be liable for total Service Credits which exceed ten
percent (10%) of the applicable monthly invoice (excluding Pass-Through Expenses
and Special Charges, if any).
The Service Credits will revert to the method of calculation provided in Section
III.A. above in the following circumstances:
1. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and the
failure in the second month is caused by a root problem that is
different from the root problem that was the cause of the failure in
the first month, the calculation will revert to the method of
calculation in Section III.A. following four consecutive months of
achieving the Service Level.
2. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and the
failure in the second month is caused by a root problem that is the
same as the root problem that was the cause of the failure in the first
month, the calculation will revert to the method of calculation in
Section III.A. following ten consecutive months of achieving the
Service Level.
Nothing in the preceding two paragraphs will excuse the application of the
frequency factor in the calculation of Service Credits if a subsequent failure
to achieve a Service Level would otherwise make the frequency factor apply.
D. EXCUSED PERFORMANCE PROBLEM
Supplier shall not be liable to pay Wards Service Level Credits for
any failure to meet a Service Level to the extent that such a failure
is directly attributable to (i) a Force Majeure Event; (ii) breaches
of this Agreement by Wards, provided that Supplier has provided Wards
with reasonable notice of such breach immediately after becoming aware
of it and determining that such breach will adversely impact
Supplier's performance of Services and Supplier has used all
Commercially Reasonable Efforts to perform notwithstanding such
breach; (iii) Wards acts or omissions (or those of third parties
acting on behalf of Wards under a written agreement), provided that
Supplier has provided Wards with reasonable notice of such act or
omission immediately after becoming aware of it and determining such
act or omission will adversely impact Supplier's performance of the
Services and Supplier has used Commercially Reasonable Efforts to
perform notwithstanding the problem; or (iv) the first manifestation
of an extraordinary latent error or defect in Equipment used by
Supplier in providing the Services (and any related repeated instances
pending the applicable Supplier's correction of
37
<PAGE>
the defect) if such defect was (1) unknown to Supplier and (2) not
disclosed in any information distributed by the third party licensor,
manufacturer, or distributor and (3) not preventable or discoverable
through normal testing or maintenance procedures. The foregoing are
referred to herein collectively as an "Excused Performance Problem."
Supplier shall be liable to grant Wards Service Level Credits for any
failure to meet a Service Level attributable to any cause other than
causes expressly included in the categories listed above.
E. TIME LIMIT
If Supplier does not notify Wards of any Excused Performance Problem
(as described in Section III.D above) within ninety (90) days of the
date Supplier provides Performance Reports covering the time period
during which the Excused Performance Problem is alleged to have
occurred, then Supplier shall be deemed to have waived the claim of an
Excused Performance Problem.
IV. SERVICE LEVEL TERMINATION EVENT
A. DEFINITION
1. Measurement Event - For purposes of this section, a
-----------------
"Measurement Event" will be the monthly calculation of Supplier's
actual performance for each Service Level or Critical Service
Level. The total possible Measurement Events during any specific
period of time is the product of the number of months in that
time period times the number of Service Levels or Critical
Service Levels, as applicable.
2. Failure Event - For purposes of this section a "Failure
-------------
Event" shall be a specific Measurement Event for which Supplier
fails to achieve the relevant Critical Service Level(s) or
Service Level(s); provided, however, that any such failure caused
by an event described in Section III.D of this SLA shall not be
counted as a Failure Event. Any single event, act or omission
that causes multiple Service Levels to be missed will be counted
as one Failure Event.
B. REPEATED SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Service
Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
38
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(SERVICE LEVELS) EVENTS IN MEASUREMENT
PERIOD
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 6 13
Events
- - ------------------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 12 26
Events
- - ------------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 6 13
Failure Events
- - ------------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 12 26
Failure Events
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
C. REPEATED CRITICAL SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Critical
Service Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
(CRITICAL SERVICE EVENTS IN MEASUREMENT
LEVELS) PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 3 18
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 6 36
Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 3 18
Failure Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 6 36
Failure Events
- - --------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
---------------------------------------------------------------------
---------------------------------------------------------------------
D. CATASTROPHIC LEVEL OF SERVICE
Recovery of the Desktop/LAN Services within twenty-four hours of the
Scheduled time to recover such Services under the Wards Disaster
Recovery Plan.
E. QUALIFICATION
Nothing in this Section IV is intended to imply that any lesser number
or different combination of occurrences of deficient performance by
Supplier may not also constitute a material breach of Supplier's
obligations warranting termination of the Service Agreement by Wards
for cause.
40
<PAGE>
EXHIBIT E
TRANSFERRED EQUIPMENT
NONE
41
<PAGE>
EXHIBIT F
WARDS FACILITIES AND EQUIPMENT
THE WARDS FACILITIES DESIGNATED FOR USE BY SUPPLIER IN THE WARDS CORPORATE
HEADQUARTERS AS DESCRIBED IN EXHIBIT F TO SERVICE AGREEMENT NO. 2 (DATA CENTER
SERVICES).
Wards Desktop and LAN Equipment: To be determined by Acxiom physical
inventory
42
<PAGE>
EXHIBIT G
THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
TO BE RETAINED BY WARDS.
43
<PAGE>
EXHIBIT H
WARDS SOFTWARE
None
44
<PAGE>
EXHIBIT I
SUPPLIER SOFTWARE
NONE
45
<PAGE>
10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 6: SATELLITE SERVICES
-------------------------------------------
THIS SERVICE AGREEMENT NO. 6: SATELLITE SERVICES (the "Service Agreement")
is made and entered into this 6th day of November, 1998, between Montgomery Ward
& Co., Incorporated a Delaware corporation ("Wards"), and Acxiom Corporation, a
Delaware corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in the Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into the Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITION
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
"INITIAL TERM" has the mean given in Section 2.1.
"MASTER AGREEMENT" means the Master Service Agreement for Information
Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom
Corporation dated November 6, 1998, and all amendments thereto.
"RENEWAL TERM" has the meaning given in Section 2.2.
"SATELLITE ENVIRONMENT" means the satellite hub, personal earth stations
and related devices used by Wards to transmit information between the Wards Data
Center and remote locations.
"SATELLITE SERVICES" has the meaning given in Section 5.1.
"SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration
Plan for Satellite Service has been implemented.
<PAGE>
"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any
Renewal Term.
"SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the
meaning given in Section 7.1 of this Service Agreement.
"TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning
given in Section 8.1 of this Service Agreement.
"WARDS PEAK SEASON" means the period in any year during the Service
Agreement Term from November 20 through December 31, and as such dates are
adjusted by Wards from time to time.
ARTICLE 2. TERM
2.1 INITIAL TERM. The initial term of this Service Agreement (the
"Initial Term") shall begin as of the Service Agreement Commencement Date and
shall continue for a period of thirty-seven (37) months thereafter, unless
earlier terminated or renewed in accordance with the provisions of this Service
Agreement or the Master Agreement.
2.2 RENEWAL TERM. Wards shall have the option to renew this Service
Agreement for up to two (2) additional annual terms (each a "Renewal Term")by
delivering written notice of such renewal to Supplier at least ninety (90) days
before expiration of the final applicable Contract Year under this Service
Agreement and before expiration of each annual period thereafter as applicable.
All of the terms of this Service Agreement and the Master Agreement shall
continue to apply without change during any renewal period(s).
ARTICLE 3. TERMINATION
3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to
terminate this Service Agreement for convenience in accordance with Section
18.2(a) of the Master Agreement. The Convenience termination charges, if any,
shall be as described in Exhibit C to this Service Agreement.
ARTICLE 4. PERSONNEL MATTERS
KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier
---------
Positions that are subject to the provisions of Section 7.2 of the Master
Agreement.
2
<PAGE>
ARTICLE 5. SERVICES
5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall
provide the Services described in Exhibit B, as such Exhibit may be amended and
---------
supplemented from time to time pursuant to the Master Agreement (the "Satellite
Services"). The Satellite Services includes all of the responsibilities
(including Equipment, Software, personnel and expenses) associated with the
Satellite Environment unless specifically identified as a Wards responsibility
under Section 5.3 below. The Services include (i) functions, responsibilities
and tasks performed by the Transferred Employees prior to the Service Agreement
Effective Date; (ii) functions, responsibilities and tasks not specifically
described in this Service Agreement but which are required for their proper
performance and are an inherent part of, or a necessary sub-part included
within, the Services; and (iii) functions, responsibilities and tasks that are a
logical extension of existing Services as a result of changes in technology,
changes in Wards business practices, or changes resulting from change control
procedures. Supplier will be the exclusive provider of the Services identified
in this Service Agreement.
5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the
Service Agreement Effective Date to the Service Agreement Commencement Date,
Supplier will provide the Satellite Services under Service Agreement No. 1
(Transition and Migration Services). Following the Service Agreement
Commencement Date, the Service Level Agreement and other obligations of this
Agreement shall become effective.
5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement
Commencement Date, the Parties will appoint individuals as Project Executives
under this Service Agreement to carry out the duties described in the Master
Agreement.
5.4 RESPONSIBILITIES OF WARDS. The responsibility matrix included in
Exhibit B to this Service Agreement identifies the responsibilities of Wards
- - ---------
during the Term of this Service Agreement, as such Exhibit may be amended and
supplemented from time to time pursuant to the Master Agreement. The
responsibilities of Wards shall be limited to those items listed in the matrix.
ARTICLE 6. CHARGES
6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement
---------
sets forth the Charges for the Satellite Services that may be charged by
Supplier. All Charges and all Pass-Through Expenses are subject to the
provisions of Article 13 of the Master Agreement.
6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Satellite
Services, Supplier shall provide Wards with the information described in Exhibit
-------
C in sufficient detail in order to allow Wards to verify invoices. Invoice
- - -
submission and payment shall be in accordance with Article 14 of the Master
Agreement.
3
<PAGE>
ARTICLE 7. SERVICE LEVEL AGREEMENT
7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the
---------
Service Level Agreement Applicable for the Satellite Services (the "Service
Level Agreement"). The Service Level Agreement will become effective upon the
Service Agreement Commencement Date. All of the terms of Article 5 of the Master
Agreement shall apply to the Service Level Agreement. Supplier acknowledges
that Wards may adjust schedules for availability and other items to meet Wards'
business needs during Wards Peak Season or other events (such as extended
sales).
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Effective Date, Wards
shall assign, and Supplier shall assume, Wards' obligations under the applicable
leases for the equipment listed on Exhibit E (the "Transferred Equipment. ")
---------
The terms of Section 6.1 of the Master Agreement shall apply with respect to the
Transferred Equipment.
8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2
of the Master Agreement, Wards shall provide the Wards Facilities and Wards
Equipment described in Exhibit F to this Service Agreement.
---------
8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the
Service Agreement Commencement Date, and subject to Supplier having received any
Third Party Consents, Supplier shall assume from Wards all of the rights and
obligations of Wards under the Third Party Contracts and the Third Party
Software that are listed in Exhibit G. The terms of Section 6.3 of the Master
----------
Agreement shall apply with respect to Third Party Contracts and the Third Party
Software.
8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is
---------
proprietary to Wards and that is used in Satellite Systems (the "Wards
Software). The terms of Section 8.1 of the Master Agreement shall apply with
respect to the Wards Software.
8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by
Supplier to provide the Satellite Services is listed in Exhibit I. Use of
---------
Supplier Software in providing the Satellite Services shall be in accordance
with Section 8.2 of the Master Agreement.
ARTICLE 9. TERMINATION ANDTRANSITION SERVICES
9.1 TERMINATION. Wards may terminate this Service Agreement without
penalty at any time prior to the Service Agreement Commencement Date if Supplier
does not complete the Migration Plan described in Service Agreement No. 1.
After the Service Agreement Commencement Date. This Service Agreement may be
terminated pursuant to the Master Agreement.
4
<PAGE>
9.1 TRANSITION SERVICES In the event of a termination or expiration of
this Service Agreement, Supplier shall provide the Termination/Expiration
Assistance as provided in Section 18.7 of the Master Agreement.
IN WITNESS WHEREOF the Parties have executed this Master Agreement as of the day
and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By:/s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
----------------------- -------------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
-------------------- -----------------------------
Its: SVP,CIO Its: SVP-Outsourcing Services
--------------------- ------------------------------
5
<PAGE>
EXHIBITS TO SATELLITE SERVICE AGREEMENT
---------------------------------------
EXHIBIT A KEY SUPPLIER POSITIONS
EXHIBIT B SERVICES
EXHIBIT C CHARGES
EXHIBIT D SERVICE LEVEL AGREEMENT
EXHIBIT E TRANSFERRED EQUIPMENT
EXHIBIT F WARDS FACILITIES AND EQUIPMENT
EXHIBIT G THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
EXHIBIT H WARDS SOFTWARE
EXHIBIT I SUPPLIER SOFTWARE
6
<PAGE>
EXHIBIT A
KEY SUPPLIER POSITIONS
Senior Telecommunications Engineer/Analyst
SENIOR NETWORK PROJECT ENGINEER
7
<PAGE>
EXHIBIT B
SERVICES
OVERVIEW
- - --------
This detailed service description establishes the processes, measurement tools,
service specifications, and assumptions associated with Satellite Services for
Wards IS. The documented service descriptions are designed to give the Supplier
an understanding of Wards business objectives for Satellite Services while
allowing the Supplier latitude to define their own processes and methods for
providing the services. The business objective of this service category is to
provide Wards with stable, high availability satellite connectivity, management
and cost-effective procurement in support of all Wards' satellite locations,.
The Supplier will provide and maintain a satellite configuration, satellite
monitoring, methodologies, processes and tools to support the Wards' satellite
communications at levels as good as, or better than Wards provided prior to
outsourcing. The Supplier will be required to provide the RF and Baseband
equipment and management functions necessary to establish, install, operate, and
maintain the Wards Ku-band satellite communications network. The complete
operational system to be supported by the Supplier consists of a hub earth
station, hub Baseband equipment with redundant components, and the personal
earth stations(PES).
The Satellite management function will work in an integrated fashion with all
other service functions to provide seamless support for the Wards' business
units and remote locations. All pricing provided to Wards by the Supplier for
this service category will be considered inclusive of all charges related to the
Supplier's performance of the service within the described level of service,
including, but not limited to, escalation to hardware/software manufacturer(s)
and escalation to telecommunications service providers. The Supplier's
responsibilities for performance of this service description include, but are
not limited to, the following:
ACTIVITIES FOR SATELLITE MANAGEMENT
It is the Supplier's responsibility to provide a reliable, predictable, and
stable satellite environment for Wards' remote location connectivity and
application access.
1. The Supplier will proactively monitor Wards satellite network for
availability and performance to the extent it is provided today..
2. The Supplier will provide problem resolution for all Wards' RF and Baseband
satellite outages and Wards' satellite performance degradation.
3. The Supplier will provide the satellite pricing, upgrade and procurement
function according to Wards' requests and acceptance criteria.
4. The Supplier will provide installation, management and support for all Wards
hub and remote RF and Baseband satellite equipment, and software.
5. The Supplier will provide management and support for all Wards' hub and
remote satellite facilities.
6. The Supplier will utilize and adhere to change management procedures for
implementing changes to the Wards satellite infrastructure in accordance
with the Procedures Manual.
7. The Supplier will utilize and adhere to problem management procedures for
reporting and responding to satellite issues in accordance with the
Procedures Manual.
8
<PAGE>
8. Supplier will provide new ideas and recommendations on how the Wards
Satellite Management function can be improved or made more cost effective as
referenced in the Master Agreement.
9. The Supplier will provide satellite disaster recovery services for the
Ward's satellite configuration, including any disaster recovery terrestrial
circuits, in accordance with Wards' disaster recovery plan under the new
CDRS agreement.
SERVICE PARAMETERS FOR SATELLITE MANAGEMENT
1. The Supplier will provide the appropriate resources, reports, tools,
procedures and management methodologies to comprehensively manage,
proactively monitor and support all Wards satellite problem resolutions,
performance degradation corrective actions, new Wards satellite initiatives,
and Wards satellite growth.
2. The Supplier will be required to provide satellite management on a 24x7x365
basis.
3. The Supplier will be required to provide hub hardware and software
maintenance on a 24x7x365 basis.
4. The Supplier will be required to provide remote PES hardware and software
maintenance on a 24x7x365 basis with a required response per location..
5. The Supplier will provide proactive monitoring, performance tuning and
corrective actions for LAN segments indicating impending Satellite problems,
which utilize LAN Advantage via the satellite communications.
6. The Supplier will be required to provide installation, troubleshooting and
support for remote telecommunication supplier provided point-to-point MPE
circuits connected to satellite communications.
7. When a satellite outage or performance degradation is identified, the
Supplier will provide notification to Wards' management utilizing the
escalation procedures in accordance with the established problem management
procedures, methodologies and tools as indicated in The Procedures Manual
and in accordance with the Procedures Manual.
8. The Supplier will schedule all planned satellite modifications and outages
through the established change management process per the Procedures Manual.
9. The Supplier will provide advisement for selecting and installing new
satellite technology.
10. The Supplier will provide and maintain documentation of Ward's satellite
topology.
11. The Supplier will provide and maintain documentation of Ward's satellite
operations, help desk diagnostic procedures, escalation procedures, links,
and equipment.
12. The Supplier will act as Ward's agent for providing satellite links,
hardware, software and maintenance for Wards provided or Supplier provided
services as directed by Wards.
13. The Supplier will provide support and configuration assistance for the Wards
remote PES attached routers.
14. The Supplier will provide all satellite installation support, including but
not limited to: documentation, sizing including protocol selection, host and
remote data communications connectivity, and software customization for all
satellite hub and remote PES locations.
15. The Supplier will document and report problems with associated corrective
actions to Wards in the daily status meeting, which will address all events,
issues and activities for the previous twenty-four (24) hour period.
16. The Supplier will provide annual satellite disaster recovery testing in
accordance with the Wards disaster recovery plan.
9
<PAGE>
17. Supplier will provide and perform to the satellite measurement baselines to
maintain specified response time, performance, and availability for the
Ward's satellite network.
18. The Supplier will maintain a consistent version level of software releases
with a minimum release version of current minus one.
19. The Supplier will be required to perform monthly space segment alignment,
i.e. center-box adjustment.
20. The Supplier will adhere to Wards reporting requirements.
21. The Supplier will be responsible for the operation of the ADT/ Wells Fargo
and Broadcast International equipment.
22. The Supplier will periodically report on Wards' satellite availability,
performance, and service level attainment to Wards' management.
MEASUREMENT TOOLS FOR SATELLITE MANAGEMENT
The Supplier is free to recommend in writing to Wards additional or alternative
tools or processes for Wards review and final approval. Wards must approve use
of any new or equivalent tools and/or processes not already in place at Wards.
A list of available tools is shown below:
1) Problem Management System(Help Desk)
2) SCP(System Control Processor)
3) Ingres Database or equivalent
4) Illuminate or equivalent
5) Spectrum Analyzer
6) Voltmeter
7) Frequency Counter
8) Event Printer
10
<PAGE>
<TABLE>
<CAPTION>
SATELLITE RESPONSIBILITY MATRIX
- - -----------------------------------------------------------------------------------------------------------------------
SATELLITE MANAGEMENT
- - -----------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CAPACITY PLANNING
- - -----------------------------------------------------------------------------------------------------------------------
Monitor Satellite use and capacity, and resolve problems and performance degradation X
- - -----------------------------------------------------------------------------------------------------------------------
Forecast capacity and bandwidth requirements X
- - -----------------------------------------------------------------------------------------------------------------------
Ensure appropriate bandwidth to meet capacity projections X
- - -----------------------------------------------------------------------------------------------------------------------
Make recommendations regarding bandwidth consumption and trends X
- - -----------------------------------------------------------------------------------------------------------------------
Make recommendations regarding configuration changes X X
- - -----------------------------------------------------------------------------------------------------------------------
Implement approved configuration changes X
- - -----------------------------------------------------------------------------------------------------------------------
Report usage and bandwidth capacity to Wards on a periodic basis X
- - -----------------------------------------------------------------------------------------------------------------------
PROCUREMENT AND ADMINISTRATION
- - -----------------------------------------------------------------------------------------------------------------------
Research and price satellite devices and satellite software/firmware from
manufacturer, aggregator or reseller X
- - -----------------------------------------------------------------------------------------------------------------------
Approve procurement of satellite devices and satellite software/firmware X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain satellite devices and satellite software/firmware from manufacturer,
aggregator or reseller X
- - -----------------------------------------------------------------------------------------------------------------------
Research and price telecommunications from service provider X
- - -----------------------------------------------------------------------------------------------------------------------
Approve procurement of telecommunications from service provider X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain telecommunications from service provider X
- - -----------------------------------------------------------------------------------------------------------------------
Configure satellite devices according to pre-defined hardware, software/firmware and
performance definitions X
- - -----------------------------------------------------------------------------------------------------------------------
Monitor, control, and manage recovery from any virus invasion X
- - -----------------------------------------------------------------------------------------------------------------------
SATELLITE NETWORK DEVICES INSTALLATION
- - -----------------------------------------------------------------------------------------------------------------------
Schedule satellite devices installation activity with Wards in accordance with change
management procedures X
- - -----------------------------------------------------------------------------------------------------------------------
Install satellite devices at Wards site within mutually agreed uponed time frame X
- - -----------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
satellite devices, software/firmware X X
- - -----------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for installation X
- - -----------------------------------------------------------------------------------------------------------------------
De-install and remove displaced satellite devices, as required X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - -----------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and
asset management system to reflect changes X
- - -----------------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE PLANNING AND MANAGEMENT
- - -----------------------------------------------------------------------------------------------------------------------
Notify Wards of new releases of appropriate software/firmware per satellite device
model X
- - -----------------------------------------------------------------------------------------------------------------------
Plan and schedule major software/firmware changes such as operating system installs X
- - -----------------------------------------------------------------------------------------------------------------------
Approve major software/firmware changes such as operating system installs X
- - -----------------------------------------------------------------------------------------------------------------------
Install maintenance (i.e. patches) on Supplier supported software/firmware in
accordance with defined service levels X
- - -----------------------------------------------------------------------------------------------------------------------
Monitor, control, and manage recovery from any virus invasion X
- - -----------------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE INSTALLATION AND UPGRADES
- - -----------------------------------------------------------------------------------------------------------------------
Schedule software/firmware installation activity with Wards in accordance with change
management procedures X
- - -----------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
satellite devices, software/firmware X X
- - -----------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for installation or upgrade X
- - -----------------------------------------------------------------------------------------------------------------------
Provide initial instructions to end customers for the new software/firmware X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - -----------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and
asset management system to reflect changes X
- - -----------------------------------------------------------------------------------------------------------------------
SATELLITE NETWORK CONNECTION (AS NECESSARY)
- - -----------------------------------------------------------------------------------------------------------------------
Define logical network X
- - -----------------------------------------------------------------------------------------------------------------------
Create logical connections and assign IP address as necessary X
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
SATELLITE MANAGEMENT
- - -----------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Install cabling required for connection to network node (from wall jack to network
interface card) X
- - -----------------------------------------------------------------------------------------------------------------------
Coordinate satellite connection with Supplier help desk X
- - -----------------------------------------------------------------------------------------------------------------------
Verify satellite access and availability of authorized network resources X
- - -----------------------------------------------------------------------------------------------------------------------
Review and understand satellite performance, implications; make necessary adjustments X X
- - -----------------------------------------------------------------------------------------------------------------------
MOVES
- - -----------------------------------------------------------------------------------------------------------------------
Schedule satellite devices move with Wards X
- - -----------------------------------------------------------------------------------------------------------------------
Visit receiving WardS location to review space, electricity, and cabling requirements
if necessary X
- - -----------------------------------------------------------------------------------------------------------------------
Disconnect satellite devices from network X
- - -----------------------------------------------------------------------------------------------------------------------
Leave the service location in a clean and orderly manner X
- - -----------------------------------------------------------------------------------------------------------------------
Physically move satellite devices to new location and install X
- - -----------------------------------------------------------------------------------------------------------------------
Re-connect satellite devices to network at new location X
- - -----------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
satellite devices, software/firmware X X
- - -----------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required for reinstallation X
- - -----------------------------------------------------------------------------------------------------------------------
De-install and remove displaced satellite devices, as required X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - -----------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and
asset management system to reflect changes X
- - -----------------------------------------------------------------------------------------------------------------------
SATELLITE NETWORK DEVICES BREAK/FIX
- - -----------------------------------------------------------------------------------------------------------------------
Schedule satellite devices repair activity with Wards in accordance with change
management procedures X
- - -----------------------------------------------------------------------------------------------------------------------
Identify problems X
- - -----------------------------------------------------------------------------------------------------------------------
Install and test needed replacement parts for satellite devices X
- - -----------------------------------------------------------------------------------------------------------------------
Resolve problems X
- - -----------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
satellite devices, software/firmware X X
- - -----------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - -----------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and
asset management system to reflect changes X
- - -----------------------------------------------------------------------------------------------------------------------
Manage use of manufacturer warranty, reseller replacement/repair policies, etc. to
limit total repair costs in accordance with asset management function X
- - -----------------------------------------------------------------------------------------------------------------------
SOFTWARE/FIRMWARE SUPPORT
- - -----------------------------------------------------------------------------------------------------------------------
Identify problems X
- - -----------------------------------------------------------------------------------------------------------------------
Resolve problems X
- - -----------------------------------------------------------------------------------------------------------------------
Conduct performance and functional testing (including year 2000 compliance) on
satellite devices, software/firmware X X
- - -----------------------------------------------------------------------------------------------------------------------
Adjust configuration options as required X
- - -----------------------------------------------------------------------------------------------------------------------
Provide initial instructions to end customers X
- - -----------------------------------------------------------------------------------------------------------------------
Obtain Wards' sign-off X
- - -----------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and
asset management system to reflect changes X
- - -----------------------------------------------------------------------------------------------------------------------
PERFORMANCE TUNING
- - -----------------------------------------------------------------------------------------------------------------------
Conduct satellite performance tuning X
- - -----------------------------------------------------------------------------------------------------------------------
Conduct application performance tuning for supported applications X
- - -----------------------------------------------------------------------------------------------------------------------
Measure and analyze satellite availability and performance X
- - -----------------------------------------------------------------------------------------------------------------------
Approve use of any Supplier provided measurement and monitoring tools X
- - -----------------------------------------------------------------------------------------------------------------------
Administer measuring and monitoring tools as required X
- - -----------------------------------------------------------------------------------------------------------------------
Review network performance and make adjustments as necessary X
- - -----------------------------------------------------------------------------------------------------------------------
Provide performance reporting X
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
SATELLITE MANAGEMENT
- - -----------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DISPOSAL (DISPOSITION)
- - -----------------------------------------------------------------------------------------------------------------------
Determine final disposition of asset (e.g. lease return, scrap, return to
manufacturer for replacement, etc.) X
- - -----------------------------------------------------------------------------------------------------------------------
Verify final disposition of asset (e.g. lease return, scrap, return to manufacturer
for replacement, etc.) X
- - -----------------------------------------------------------------------------------------------------------------------
Remove all data files, custom configurations, licensed software/firmware, etc. X
- - -----------------------------------------------------------------------------------------------------------------------
Update problem ticket, change management documentation, electronic inventory and
asset management system to reflect changes X
- - -----------------------------------------------------------------------------------------------------------------------
"Warehouse" of satellite devices components for later use X
- - -----------------------------------------------------------------------------------------------------------------------
"Warehouse" of software/firmware licenses for reuse X
- - -----------------------------------------------------------------------------------------------------------------------
Reload leased machines with original configuration prior to return X
- - -----------------------------------------------------------------------------------------------------------------------
Return assets to lessor, Asset inventory or manufacturer X
- - -----------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY SUPPORT
- - -----------------------------------------------------------------------------------------------------------------------
Responsibility for expenses associated with disaster recovery hub - If not in
maintenance agreement then Pass-thru back to Wards from Supplier X
- - -----------------------------------------------------------------------------------------------------------------------
Provide disaster recovery hub - If not in maintenance agreement then Pass-thru back to
wards from Supplier X
- - -----------------------------------------------------------------------------------------------------------------------
Responsibility for expenses associated with remote PES field service and PES
alignment - If not in maintenance agreement then Pass-thru back to Wards from Supplier X
- - -----------------------------------------------------------------------------------------------------------------------
Provide remote PES field service and PES alignment - If not in maintenance agreement
then Pass-thru back to Wards from Supplier X
- - -----------------------------------------------------------------------------------------------------------------------
Responsibility for expenses associated with circuit from hot site hub location to
Wards mainframe location X
- - -----------------------------------------------------------------------------------------------------------------------
Provide circuit from hot site hub location to Wards mainframe location X
- - -----------------------------------------------------------------------------------------------------------------------
Decommission remote PES test locations. X
- - -----------------------------------------------------------------------------------------------------------------------
Commission remote PES test locations X
- - -----------------------------------------------------------------------------------------------------------------------
Connect satellite ports to Wards Tandem system X
- - -----------------------------------------------------------------------------------------------------------------------
Activate VTAM connections between Tandem and mainframe X
- - -----------------------------------------------------------------------------------------------------------------------
Activate Wards Tandem CMA application X
- - -----------------------------------------------------------------------------------------------------------------------
Develop, maintain and test satellite Disaster Recovery Plan and procedure manuals X
- - -----------------------------------------------------------------------------------------------------------------------
Coordinate satellite Disaster Recovery testing with Wards X
- - -----------------------------------------------------------------------------------------------------------------------
Participate in the satellite Disaster Recovery Test X
- - -----------------------------------------------------------------------------------------------------------------------
Perform periodic satellite Disaster Recovery testing, resolve cause of failure and
retest X
- - -----------------------------------------------------------------------------------------------------------------------
Review results of satellite Disaster Recovery testing X
- - -----------------------------------------------------------------------------------------------------------------------
Report satellite disaster recovery test results to Wards X
- - -----------------------------------------------------------------------------------------------------------------------
Declare disaster (when necessary) to initiate Supplier's recovery plan execution X
- - -----------------------------------------------------------------------------------------------------------------------
In the event of a disaster, restore satellite to pre-defined operations capability
within defined service levels in accordance with the existing Wards disaster
recovery plan X
- - -----------------------------------------------------------------------------------------------------------------------
OUT-OF-SCOPE SERVICE REQUESTS
- - -----------------------------------------------------------------------------------------------------------------------
Initiate service requests X
- - -----------------------------------------------------------------------------------------------------------------------
Receive, record, monitor and report service requests X
- - -----------------------------------------------------------------------------------------------------------------------
Create/review project plans and cost of service request X
- - -----------------------------------------------------------------------------------------------------------------------
Estimate time and costs for changes where applicable X
- - -----------------------------------------------------------------------------------------------------------------------
Write cost justification X
- - -----------------------------------------------------------------------------------------------------------------------
Identify and communicate alternatives X
- - -----------------------------------------------------------------------------------------------------------------------
Approve, prioritize, and reprioritize service requests X X
- - -----------------------------------------------------------------------------------------------------------------------
Assist in prioritization of service requests X
- - -----------------------------------------------------------------------------------------------------------------------
Maintain and communicate prioritization and schedule of service requests X
- - -----------------------------------------------------------------------------------------------------------------------
Perform approved Out-of-Scope Service Request activities within budget and schedule X
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
GLOSSARY OF TERMINOLOGY
RF: Radio frequency modulated signals that are
radiated and received by the antenna.
BASEBAND: The combined video and audio signals prior to
processing.
KU-BAND: A range of frequencies between 11.7 and 12.7
gigahertz that has been set aside for use by
communications satellites.
HUB: Central device that connects several satellite remotes
together.
PERSONAL EARTH STATION: A complete satellite receiving system.
LAN ADVANTAGE: Software that provides ethernet connection.
MPE CIRCUITS: Point to Point circuits from main store to remote
location.
SPACE SEGMENT: A communications signal that goes from the earth to a
satellite and back to earth.
CENTER BOX: Peak Utilization of Frequency.
ADT/WELLS FARGO EQUIP: Modems that provide connectivity through the satellite
system to provide security.
BROADCAST INTERNATIONAL: A provider of music and video.
FIRMWARE: Software stored in ROM or PROM. These are essential
programs that remain even when the system is turned
off.
POINT OF SALE (POS): The time and place in which a transaction is made. This
includes cash registers, scanners, magnetic card
readers and special terminals.
BANDWIDTH: The amount of data that can be sent through the network
connection.
EBNO: Energy per Bit/Noise Level Ratio
ODLC: Optimum Data Link Control
14
<PAGE>
EXHIBIT C
CHARGES
MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM: . . . . . . . . . . ..$45,000
A. PASS-THROUGH EXPENSES
The following expenses incurred by Supplier shall be invoiced to Wards as
Pass-Through Expenses at cost:
1. Satellite hub leases and maintenance.
2. Base band leases and maintenance.
3. PES leases and maintenance.
4. Satellite space segment.
5. Background music.
6. Video conference charges.
7. De-installation, movement and transition of satellite from Wards'
facility to Supplier's facility and site preparation of and installation
and testing of satellite at Supplier's facility. Satellite bandwith
required during the transition, currently scheduled to be provided by
Hughes Germantown, Maryland facility, and all associated connectivity
and telecommunications expenses shall be Pass-Through Expenses.
8. Telecommunications line charges necessary for connectivity between Wards
corporate complex, Signature and Supplier's data center.
B. DISASTER RECOVERY
Disaster recovery is included within the scope of Services as set forth in
Exhibit B.
C. TERMINATION FEES
----------------
There are no termination fees under this Service Agreement.
15
<PAGE>
EXHIBIT D
SERVICE LEVEL AGREEMENT
SERVICE LEVEL AGREEMENT
-----------------------
FOR SATELLITE SERVICES
16
<PAGE>
SERVICE LEVEL AGREEMENT
FOR SATELLITE SERVICES
I. GENERAL
A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT.
This Service Level Agreement is entered into under the Master Agreement for
Information Technology Services between Acxiom Corporation ("Supplier") and
Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and
pertains to Service Agreement No. 6: Satellite Services entered into by Wards
and Supplier. Any inconsistency between this Agreement, the Service Agreement
and the Master Agreement will be resolved pursuant to Section 2.3 of the Master
Agreement.
B. DEFINITIONS
In this Service Level Agreement ("SLA"), the terms listed below shall
have the indicated meanings. Other terms may be defined in other
sections of this SLA. Terms used in this SLA without definition have
the meanings ascribed to them in the Master Agreement or Service
Agreement.
1. Service Level Measure - For any Service identified in this SLA,
---------------------
the method specified in this SLA for quantitatively calculating
Supplier's actual performance. The results of these calculations
are compared with Service Levels to evaluate Supplier's compliance
with Service Levels.
2. Service Levels - For any Service identified in this SLA, the
--------------
required quantitative level or degree of performance by Supplier
specified in this SLA as the "Service Level." The Service Levels
are the minimally acceptable levels of service for the Services.
Any failure to meet a Service Level is unacceptable and may
constitute, based on the facts and circumstances, a material
breach of Supplier's obligations under the Service Agreement.
3. Increased Impact Level - For any Service identified in this SLA,
----------------------
the required quantitative level or degree of performance by
Supplier specified in this SLA as the "Increased Impact Level."
Any failure to meet an Increased Impact Level is unacceptable and
may constitute, based on the facts and circumstances, a material
breach of Supplier's obligations under the Service Agreement.
4. Critical Service Levels - Service Levels associated with those
-----------------------
Services that are most important to the conduct of Wards'
operations, which are the subject of this Service Agreement.
5. Service Level Credits - The amounts which Wards shall have the
---------------------
option, but not the obligation, to recover as liquidated damages,
in lieu of any other monetary remedies Wards may have, each time
Supplier fails to meet the Service Levels for any reason other
than those specified in Section III.D of this SLA. Service Level
Credits are calculated in the manner described in Section III of
this SLA.
6. Service Level Termination Event - An occurrence or series of
-------------------------------
occurrences of deficient performance by Supplier in performing the
Services specified in this
<PAGE>
SLA as a "Service Level Termination Event." The occurrence of a
Service Level Termination Event constitutes, based on the facts
and circumstances, a material breach of Supplier's performance
obligations under this Service Agreement and gives Wards the right
to terminate this Service Agreement for cause.
C. MEASUREMENT
Unless otherwise stated in this SLA, each Service Level Measure shall
be calculated on a complete calendar month basis. Performance results
shall be measured and reported based on actual results with any
exceptions for Excused Performance Problems reported separately.
D. EFFECTIVE DATE FOR SERVICE LEVELS
The Service Levels provided for in this SLA shall become effective as
provided for in Section 7.1 of the Service Agreement.
E. REVISIONS
1. From time to time during the Term, the Parties agree to negotiate
in good faith to add, delete, or modify then-existing Service
Level Measures, Service Levels, and Increased Impact Levels to
reflect changes in Wards' business requirements or objectives.
All such changes shall be adopted in the form of a signed written
amendment to this SLA.
2. In the event that any applicable system or function is replaced
during the Term by a comparable system or function, the Service
Level Measure, Service Level, and Increased Impact Level for such
replacement system or function shall, to the extent reasonably
practicable (i) be defined during the first 30 days of such
replacement, and (ii) must be at least equivalent to the then-
existing Service Level Measure, Service Level, and Increased
Impact Level for the replaced system or function (assuming the
replacement system is capable of delivering the Service Levels
previously achieved by the replaced system).
3. At all times during the Term, Supplier shall provide the Services
in a manner that meets or exceeds the then-existing Service
Levels. The remedies for failure to do so shall include the
remedies defined in this SLA, the Service Agreement, and the
Master Agreement.
F. SINGLE POINT OF CONTACT
Regardless of whether any failure by Supplier to meet a Service Level
is attributable to Supplier or an Excused Performance Problem,
Supplier shall provide a single point of contact to address resolution
of such failure and shall act promptly to address the problem causing
the failure. Unless otherwise agreed by Wards, the Supplier Project
Executive or his or her designee shall be the Supplier's single point
of contact.
19
<PAGE>
II. SERVICE LEVELS
A. DEFINITIONS
Certain technical definitions are included in the Glossary of Terminology
in Exhibit B of the Service Agreement.
B. SERVICE LEVEL MEASURES
SATELLITE Availability
----------------------
OBJECTIVE: For the Supplier to determine and maintain the availability of the
devices, software and data communications services that comprise the
Wards satellite network.
DEFINITION: Availability is determined as the percentage of uptime against the
Total Scheduled Store Satellite Usage Hours per Month. Downtime is
the elapsed time from when any satellite link, hardware or software
component prevents a user or store from connecting to a device
within or across LAN segments or host connectivity until processing
is available again, or degraded performance to a point that the
satellite link is unusable for the necessary business purpose(s).
METHOD: Data Capture: Wards, Supplier or telecommunications Vendor initiated
satellite availability problem tickets as tracked and reported
through the problem management system per the Procedures Manual or
Supplier initiated problem tickets, logs, timestamps or alerts as
proactively identified through the Supplier's satellite monitoring
and performance tools.
Calculation:
(24 hrs/day) X (Number days/month) X (Total number of stores) =
Total Scheduled Store Satellite Usage Hours per Month
Measurement Interval: Monthly
SERVICE LEVEL:
- - --------------------------------------------------------------------------------
DESCRIPTION DATA POINTS
- - --------------------------------------------------------------------------------
Service Level Wards satellite network hub will be available 99.5% of
the Total Scheduled Store Satellite Usage Hours per
Month or each PES will incur no more than two (2) days
of downtime/network performance degradation events per
measurement interval.
- - --------------------------------------------------------------------------------
Increased Impact Wards satellite network hub will be available 99.0% of
the Total Scheduled Store Satellite Usage Hours per
Month or each PES will incur no more than three (3)
days of downtime/network performance degradation
events per measurement interval.
- - --------------------------------------------------------------------------------
IMPACT: High
20
<PAGE>
AFFECTED AREAS: All Wards stores
RESPONSIBILITY: Service Performance: Supplier provides all services and
infrastructure related to satellite availability.
Compliance Management: Supplier provides calculation,
reporting and analysis for this Service Level.
REPORTING PERIOD: Monthly
HOURS OF OPERATIONS: Total Scheduled Store Satellite Usage Hours per Month
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
SATELLITE RESPONSE TIME
-----------------------
OBJECTIVE: Supplier will provide and perform to the satellite baseline to
establish acceptable response time and performance for the Wards
satellite network.
DEFINITION: Response time for the Wards satellite network is defined as the
amount of time it takes to receive a response from the destination
PES satellite device, once a Wards end user or store has initiated
any action to communicate to it from the source hub device.
Response time is represented as the hub to Pes to hub roundtrip
delay.
METHOD: Data Capture: Response time will be measured by Supplier provided
satellite network monitoring and performance tools or periodic
manual checks from end user or store satellite network attached
devices. Wards satellite response time issues will also be captured
in the Supplier provided problem management system for any Wards or
Supplier reported satellite response time problems.
Measurement Interval: Monthly
SERVICE LEVEL:
-------------------------------------------------------------------
DESCRIPTION DATA POINTS
-------------------------------------------------------------------
Service Level Average response time is 3 seconds or less
-------------------------------------------------------------------
Increased Impact Average response time is more than 3.5
seconds
-------------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards satellite network
RESPONSIBILITY: Service Performance: Supplier is responsible for all
services related to this Service Level, including but not
limited to,establishing baseline performance of Satellite
response time, as approved by Wards, determination of most
relevant measurement(s) component for each of the Satellite
mediums and protocols in use at Wards, and historical
trending of Satellite response times in comparison to
baseline data.
Compliance Management: Supplier provides calculation,
reporting and analysis
21
<PAGE>
for this Service Level.
REPORTING PERIOD: Monthly.
HOURS OF OPERATION: Total Scheduled Store Satellite Usage Hours per Month
Resource Range: This service specification will apply to all Satellite
mediums and protocols in use by Wards
Report: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-II
DISASTER RECOVERY SERVICES
--------------------------
OBJECTIVE: To ensure the Supplier has developed and documented a
comprehensive Satellite disaster recovery plan for the satellite
network under the Supplier span of control, in accordance with
the existing Wards disaster recovery plan.
DEFINITION: The goal of the Supplier's documented satellite disaster recovery
plan is to restore Wards' satellite connectivity and continuity
within forty-eight (48) hours of a declared disaster.
METHOD: The Supplier will participate and provide documented satellite
disaster recovery plans during the Wards disaster recovery
planning meetings or as requested by Wards.
SERVICE LEVEL:
---------------------------------------------------------------
VALUES METRICS
---------------------------------------------------------------
Service Level - 98 % of Wards' Satellite locations are
recovered within 48 hours which includes
Wards' critical processes.
---------------------------------------------------------------
Increased Impact - 95 % of Wards' Satellite locations are
recovered within 48 hours which includes
Wards' critical processes.
---------------------------------------------------------------
IMPACT: Low
AFFECTED AREA: Wards satellite network.
RESPONSIBILITY: Supplier as an agent of Wards for the Wards disaster
recovery contract.
PERIOD: Duration of any declared disaster
HOURS OF OPERATION: N/A
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-III
22
<PAGE>
DISASTER RECOVERY TEST
----------------------
OBJECTIVE: To ensure restoration of Wards' satellite network in the
event of a disaster, in accordance with the Wards' satellite
disaster recovery plan, which is a non-contractual document.
DEFINITION: The Supplier will define and demonstrate the accuracy of the
documented satellite disaster recovery plan, which is a non-
contractual document, by conducting semi-annually disaster
recovery testing for satellite network connectivity.
METHOD: Execute disaster recovery plan with designated test PES
locations
Measurement Interval: Semi-Annually
SERVICE LEVEL:
------------------------------------------------------------
VALUES METRICS
------------------------------------------------------------
Service Level - 90% of scheduled recovery
activities are recovered
according to the documented
plans.
------------------------------------------------------------
Increased Impact - Less than 85% of scheduled
recovery activities are recovered
according to the documented
plans.
------------------------------------------------------------
IMPACT: Low
AFFECTED AREA: Wards satellite disaster recovery plan
RESPONSIBILITY: Supplier
PERIOD: The Supplier will conduct a disaster recovery test with
selected Wards entities recovering specific operations
in accordance with the Wards disaster recovery plan.
The Supplier will report on the success of each test
within one week of the completion of a test with a
designated Wards' representative.
RESOURCE RANGE: This service level is valid as long as Wards
participates in the disaster recovery planning and
testing process as defined in the Wards disaster
recovery plan and as mutually agreed to by Supplier and
Wards
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-III
PROBLEM RESPONSE TIME
---------------------
OBJECTIVE: To ensure on-site response to satellite repairs for satellite
devices, software/firmware, and telecommunications, within the
Wards enterprise, are completed in a timely and orderly manner
such that end-users may resume their duties as quickly as
possible.
DEFINITION: Problem Response Time is defined as the maximum amount of time
the Supplier has to respond on-site to a satellite problem
regardless of the physical location of the device, based on Wards
current Satellite Response Requirements per Location. A reactive
maintenance activity required to affect repair, reroute and/or
replace satellite devices, telecommunications or
software/firmwareTime starts accumulating from the point at
23
<PAGE>
which a problem ticket is opened and a corresponding problem
ticket number has been assigned.
METHOD: Problem tracking for initial entry, arrival times and repair
times are recorded and reported using the automated problem
ticket tracking system. Measurement will be performed, for
reporting purposes, each hour from opening the problem ticket to
the resolution for both Hub and PES problem tickets.
SERVICE LEVEL
- - ------------------------------------------------------------------------------
VALUES METRICS
- - ------------------------------------------------------------------------------
Service Level - On-site response for all satellite repairs are
missed no more than once (1) per period in
accordance with the Wards Satellite Response
Requirements per Location.
- - ------------------------------------------------------------------------------
Increased Impact - On-site response for all satellite repairs are
missed no more than twice (2) per period.
- - ------------------------------------------------------------------------------
IMPACT: High
AFFECTED AREA: All Wards' stores, offices, automobile centers, POS
locations, and data center
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 24 x 7 x 365
RESOURCE RANGE: All Wards Satellite devices and cabling under Supplier
control.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-II
SOFTWARE/FIRMWARE RELEASE MANAGEMENT
------------------------------------
OBJECTIVE: To maintain the current software/firmware version and thereby the
capability for support of the Wards investment in
software/firmware within the facilities. To ensure the Supplier
implements changes to the Wards environment in the prescribed
timeframes and manner in accordance with the documented change
management processes with minimal impact on Wards' users and
processing schedules.
DEFINITION: Software release management is the process of maintaining a
consistent level of currency and compatibility across satellite
devices. Supplier will research and advise Wards on new version
releases. Prescribed timeframes require that all software
releases stay at the current minus two version level. The
Supplier and Wards personnel will have access to a
24
<PAGE>
Supplier-provided isolated satellite test environment to support
initial and quality assurance testing of changes to the Wards
Satellite prior to implementation in production.
METHOD: All software installations, maintenance implementations and
enhancements will follow the standard change management process.
SERVICE LEVEL:
------------------------------------------------------------
VALUES METRICS
------------------------------------------------------------
Service Level - Supplier will maintain all software
releases at least at the current
minus two version level or as
otherwise agreed.
------------------------------------------------------------
Increased Impact - Supplier will maintain all software
releases at least a the current
minus three version level or as
otherwise agreed.
------------------------------------------------------------
IMPACT: Medium
AFFECTED AREA: Wards satellite network
RESPONSIBILITY: Supplier
PERIOD: Monthly
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-II
C. SERVICE LEVELS
The Service Levels are identified in the following table(s). Each
Service Level is assigned a Severity Weight in the following table(s), which is
used in the calculation of the Service Level Credits. The Severity Weights are
expressed as percentages, totaling 100% for all Service Levels, and approximate
the relative severity of the impact on Wards' operations of failures to meet the
respective Service Levels. The parties acknowledge that these percentages are
approximations of probable severity and relative importance and do not limit
Wards' right to contend that one or more failures to meet one or more of the
Service Levels may constitute a material breach of the Agreement. Upon 30 days
advance notice to Supplier, Wards may adjust the Severity Weights of the
respective Service Levels as Wards deems appropriate so long as the total of
such percentages does not exceed 100%.
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------
SERVICE LEVEL DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED
STANDARD MEASUREMENT WEIGHT IMPACT LEVEL
ID
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Satellite Percentage of 85 Wards satellite Wards satellite
Availability Downtime network hub hub will be
will be available 99.0%
available 99.5% of the Total
of the Total Scheduled Store
Satelite Usage
Hours per
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Scheduled Store Month or each
Satellite Usage PES will incur
Hours per Month no more than
or each PES three (3) days of
will incur no downtime/network
more than two performance
(2) days of degradation events
downtime/network per measurement
degradation interval.
events per
measurement
interval.
- - -------------------------------------------------------------------------------------------------------------
Satellite Response Performance 15 3 seconds or More than 3.5
Time less average seconds average
response time. response time.
- - -------------------------------------------------------------------------------------------------------------
Disaster Recovery Percentage of 98% of Wards' 95% of Wards'
Services locations Satellite Satellite
locations are locations are
recovered recovered within
within 48 hours 48 hours which
which includes includes Wards'
Wards' critical critical processes
processes.
- - -------------------------------------------------------------------------------------------------------------
Disaster Recovery Test Performance 90% of Less than 85% of
Test scheduled scheduled
recovery recovery
activities are activities are
recovered recovered
according to according to the
the documented documented plans.
plans.
- - -------------------------------------------------------------------------------------------------------------
Problem Response Performance On-site On-site response
Time response for for all satellite
all satellite repairs are
repairs are missed no more
missed no more than twice (2)
than once (1) per period.
per period in
accordance with
the Wards
Satellite
Response
Requirements
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------
per Location
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Software/Firmware Version Supplier will Supplier will
Release Management Maintenance maintain all maintain all
software software releases
releases at at least at the
least at the current minus
current minus three version
two version level.
level
- - -------------------------------------------------------------------------------------------------------------
</TABLE>
The following Service Levels are designated as Critical Service Levels:
- - -----------------------------------------------------------------------------
SERVICE APPLICATION DESCRIPTION
LEVEL
STANDARD
ID
- - -----------------------------------------------------------------------------
Satellite Availability
- - -----------------------------------------------------------------------------
Satellite Response Time
- - -----------------------------------------------------------------------------
III. SERVICE LEVEL CREDITS
A. CREDITS
In each case of a failure to satisfy a Service Level Supplier will, within
five (5) days from the identification of the deviation from the applicable
Service Level, provide to Wards a plan of activities which will allow Supplier
to satisfy the applicable Service Level at the earliest date practicable. In
addition, Wards shall be entitled to recover a Service Level Credit for such
Service Level calculated in the manner described below, provided, however, that
the aggregate amount of such Service Level Credits for any given month will not
exceed ten percent (10%) of Supplier's monthly charges under this Service
Agreement for the applicable month (excluding Pass-Through Expenses, if any). If
a single event directly causes a failure to achieve more than one Service Level,
then only one Service Credit will apply. In such event, Wards will select the
Service Level that will be used for the calculation of the Service Credit.
B. METHOD OF CALCULATION
If Supplier fails to meet or exceed a Service Level, the Severity Weight
corresponding to that Service Level, expressed as a percentage, will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any). If Supplier's performance fails to meet an Increased Impact
Level for any Service Level, the Severity Weight corresponding to that Service
Level, expressed as a percentage, will be doubled and such percentage will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) (this calculation being in lieu of, and not in addition to, the
credit calculation for the corresponding Service Level failure).
27
<PAGE>
To calculate the total Service Level Credit due to Wards for the applicable
month, the amounts calculated for each Service Level or Increased Impact Level
as described above will be totaled and such amount shall be available as a
credit to Wards against Supplier's invoice for the applicable month.
C. FREQUENCY FACTOR
In any case where Supplier fails to achieve the same Service Level
(including failure to achieve the designated Increased Impact Level for that
Service Level) in two consecutive months or in any four months in any 12-month
period, the applicable Severity Weight shall be doubled and such percentage will
be multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through expenses and Special
Charges, if any), and for any subsequent months in which Supplier fails to
achieve such Service Level or Increased Impact Level; provided, however, that in
no case will Supplier be liable for total Service Credits which exceed ten
percent (10%) of the applicable monthly invoice (excluding Pass-Through expenses
and Special Charges, if any).
The Service Credits will revert to the method of calculation provided in Section
III.A. above in the following circumstances:
1. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and
the failure in the second month is caused by a root problem that is
different from the root problem that was the cause of the failure in
the first month, the calculation will revert to the method of
calculation in Section III.A. following four consecutive months of
achieving the Service Level.
2. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and
the failure in the second month is caused by a root problem that is
the same as the root problem that was the cause of the failure in the
first month, the calculation will revert to the method of calculation
in Section III.A. following ten consecutive months of achieving the
Service Level.
Nothing in the preceding two paragraphs will excuse the application of the
frequency factor in the calculation of Service Credits if a subsequent failure
to achieve a Service Level would otherwise make the frequency factor apply.
D. EXCUSED PERFORMANCE PROBLEM
Supplier shall not be liable to pay Wards Service Level Credits for
any failure to meet a Service Level to the extent that such a failure
is directly attributable to (i) a Force Majeure Event; (ii) breaches
of this Agreement by Wards, provided that Supplier has provided Wards
with reasonable notice of such breach immediately after becoming aware
of it and determining that such breach will adversely impact
Supplier's performance of Services and Supplier has used all
Commercially Reasonable Efforts to perform notwithstanding such
breach; (iii) acts or omissions of Wards (or third parties acting on
behalf of Wards under a written agreement), provided that Supplier has
provided Wards with reasonable notice of such software problem
immediately after becoming aware of it and determining that such
problem will adversely impact Supplier's performance of the Services
and Supplier has used Commercially Reasonable Efforts to perform
notwithstanding the problem;or (iv) the first manifestation of an
extraordinary latent error or defect in Equipment used by Supplier
in providing the Services (and any related repeated instances pending
the applicable Supplier's correction of the defect) if such defect was
(1) unknown to Supplier and (2) not disclosed in any information
distributed
28
<PAGE>
by the third party licensor, manufacturer, or distributor and (3) not
preventable or discoverable through normal testing or maintenance
procedures. The foregoing are referred to herein collectively as an
"Excused Performance Problem." Supplier shall be liable to grant Wards
Service Level Credits for any failure to meet a Service Level
attributable to any cause other than causes expressly included in the
categories listed above.
E. TIME LIMIT
If Supplier does not notify Wards of any Excused Performance Problem
(as described in Section III.D above) within ninety (90) days of the
date Supplier provides Performance Reports covering the time period
during which the Excused Performance Problem is alleged to have
occurred, then Supplier shall be deemed to have waived the claim of an
Excused Performance Problem.
IV. SERVICE LEVEL TERMINATION EVENT
A. DEFINITION
1. Measurement Event - For purposes of this section, a "Measurement
-----------------
Event" will be the monthly calculation of Supplier's actual
performance for each Service Level or Critical Service Level. The
total possible Measurement Events during any specific period of
time is the product of the number of months in that time period
times the number of Service Levels or Critical Service Levels, as
applicable.
2. Failure Event - For purposes of this section a "Failure Event"
-------------
shall be a specific Measurement Event for which Supplier fails to
achieve the relevant Critical Service Level(s) or Service
Level(s); provided, however, that any such failure caused by an
event described in Section III.D of this SLA shall not be counted
as a Failure Event. Any single event, act or omission that
causes multiple Service Levels to be missed will be counted as
one Failure Event.
B. REPEATED SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Service
Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
29
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE TOTAL MEASUREMENT
EVENTS (SERVICE EVENTS IN
LEVELS) MEASUREMENT PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 3 13
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve 4 26
Events Months
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 2 13
Failure Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve
Failure Events Months 3 26
- - --------------------------------------------------------------------------------------------------
</TABLE>
C. REPEATED CRITICAL SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Critical
Service Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT
MEASURE (CRITICAL SERVICE EVENTS IN
LEVELS) MEASUREMENT PERIOD
- - --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Rolling Six Months 2 12
Events
- - --------------------------------------------------------------------------------------------------
Service Level Failure Rolling Twelve Months 3 24
Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 1 12
Failure Events
- - --------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 2 24
Failure Events
- - --------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
D. CATASTROPHIC LEVEL OF SERVICE
Recovery of the Satellite Services within twenty-four hours of the
scheduled time to recover those Services under the Wards Disaster
Recovery Plan.
E. QUALIFICATION
Nothing in this Section IV is intended to imply that any lesser number
or different combination of occurrences of deficient performance by
Supplier may not also constitute a material breach of Supplier's
obligations warranting termination of the Service Agreement by Wards
for cause.
31
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. GENERAL................................................... 18
A. General.......................................... 18
B. Definitions...................................... 18
C. Measurement...................................... 19
D. Effective Date for Service Levels................ 19
E. Revisions........................................ 19
F. Single Point of Contact.......................... 19
II. SERVICE LEVELS
A. Definitions...................................... 20
B. Service Level Measures........................... 20
C. Service Levels................................... 25
III. SERVICE LEVEL CREDITS..................................... 27
A. Credits.......................................... 27
B. Method of Calculation............................ 27
C. Frequency Factor................................. 28
D. Excused Performance Problem...................... 28
E. Time Limit....................................... 29
IV. SERVICE LEVEL TERMINATION EVENTS.......................... 29
A. Definition....................................... 29
B. Repeated Service Level Failures.................. 29
C. Repeated Critical Service Level Failures......... 30
D. Catastrophic Level of Service.................... 31
E. Qualification.................................... 31
</TABLE>
<PAGE>
EXHIBIT E
TRANSFERRED EQUIPMENT
NONE
32
<PAGE>
EXHIBIT F
WARDS FACILITIES AND EQUIPMENT
Wards Facilities
The Wards facilities designated for use by Supplier at Wards corporate
headquarters as described in Exhibit F to Service Agreement No. 2 (Data Center
Services).
The following locations for Personal Earth Stations:
<TABLE>
<CAPTION>
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP
<S> <C> <C> <C> <C> <C> <C>
1002 MOUNT PROSPECT IL NORTHEAST 847-506-5000 999 ELMHURST ROAD 60056
1019 GREENWOOD IN NORTHEAST 317-885-8001 1251 US 31 SOUTH 46142
1037 GREENVILLE SC NORTHEAST 864-213-2500 WOODRUFF ROAD & I-38 29607
1040 BECKLEY WV NORTHEAST 304-252-0781 RALEIGH MALL BOX 1-A 25801
1042 JOHNSON CITY NY NORTHEAST 607-729-4961 REYNOLDS RD. & HARRY L DRIVE 13790
1047 BUTLER PA NORTHEAST 412-285-1721 300 NEW CASTLE ROAD 16001
1049 CARLISLE PA NORTHEAST 717-243-2021 N. HANOVER & ROUTE 81 17013
1050 CHARLEROI PA NORTHEAST 412-489-9555 300 CHAMBER PLAZA 15022
1055 CLEARWATER FL NORTHEAST 813-796-2357 HIGHWAYS 60 & 19 33516
1063 DOTHAN AL NORTHEAST 334-794-2611 3555 ROSS CLARK CIRCLE NW 36301
1065 DUBOIS PA NORTHEAST 814-371-6330 ROUTE 225 & SHAFFER ROAD 15801
1071 FALLS CHURCH VA NORTHEAST 703-241-8700 6100 ARLINGTON BOULEVARD 22044
1073 GAITHERSBURG MD NORTHEAST 301-921-0012 600 NORTH FREDERICK AVENUE 20877
1075 GLEN BURNIE MD NORTHEAST 410-787-3000 6721 GOVERNOR RITCHIE HWY 21061
1079 HAGERSTOWN MD NORTHEAST 301-582-3100 17318 VALLEY MALL ROAD 21740
1084 INDIANA PA NORTHEAST 412-463-9101 1550 ROUTE 286 S 15701
1090 KINGSPORT TN NORTHEAST 423-246-7188 NEASTMAN ROAD 37660
1092 KINGSTON NY NORTHEAST 914-336-5020 1165 ULSTER AVENUE 12401
1097 HYATTSVILLE MD NORTHEAST 301-322-5200 6200 ANNAPOLIS ROAD 20784
1102 WALDORF MD NORTHEAST 301-932-9321 5010 HIGHWAY 301 S 20603
1104 LOCKPORT NY NORTHEAST 716-434-6671 ROUTE 78 & SHIMER ROAD 14094
1108 MEADVILLE PA NORTHEAST 814-724-5880 1200 CONNEAUT LAKE ROAD 16335
1112 HARRISBURG PA NORTHEAST 717-540-6500 5100 JONESTOWN ROAD 17112
1113 MORGANTOWN WV NORTHEAST 304-292-6321 500 GREENBAG ROAD 26505
1116 NEW BERN NC NORTHEAST 919-638-5181 2101-13 NEUSE BOULEVARD 28560
1117 LOWER BURRELL PA NORTHEAST 412-339-5200 100 BURRELL PLAZA 15068
1120 OCALA FL NORTHEAST 352-237-0001 2701 SW COLLEGE, SUITE 400 32674
1124 PARKERSBURG WV NORTHEAST 304-422-8571 1600 GARFIELD AVENUE 26401
1136 ROCKY MOUNT NC NORTHEAST 919-443-4111 2320 SUNSET AVENUE 27801
1149 STAUNTON VA NORTHEAST 540-885-0381 1311-13 GREENVILLE AVENUE 24401
1151 SUNBURY PA NORTHEAST 717-286-7151 1125 N. FOURTH STREET 17801
1153 TOWSON MD NORTHEAST 410-337-4600 1238 PUTTY HILL AVENUE 21204
1163 WHEATON MD NORTHEAST 301-468-5300 11160 VIERS MILL ROAD 20902
1166 WINCHESTER VA NORTHEAST 540-667-1300 2280 VALLEY AVENUE 22601
1167 SALISBURY MD NORTHEAST 410-546-6500 2302 N. SALISBURY 21801
1169 CAMP HILL PA NORTHEAST 717-730-7500 3203 TRINDLE ROAD 17011
1178 EL PASO/SUNLAND TX WEST 915-585-4400 750 SUNLAND PARK DRIVE 79912
1188 BISMARCK SD NORTHEAST 701-223-0313 613 KIRKWOOD MALL 58504
1190 BLOOMINGTON MN NORTHEAST 612-885-1000 7831 SOUTHTOWN CENTER 55431
1191 BRAINERD MN NORTHEAST 218-829-4731 HIGHWAYS 210 & 25 56401
1205 CUYAHOGA FALLS OH NORTHEAST 330-929-1831 2891 STATE ROAD 44223
1207 DAVENPORT IA NORTHEAST 319-386-2831 320 W. KIMBERLY RD. 52806
1208 DEARBORN MI NORTHEAST 313-943-4300 13551 MICHIGAN AVENUE 48120
1235 GRAND RAPIDS/ SOUTH MI NORTHEAST 616-538-1000 1100 28TH STREET SW 49509
1236 GREEN BAY WI NORTHEAST 414-494-9611 101 BAY PARK SQUARE 54304
1261 TUCSON/NORTH AZ WEST 520-292-4700 4147 N. ORACLE ROAD 85705
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP
<S> <C> <C> <C> <C> <C> <C>
1471 ROANOKE VA NORTHEAST 540-265-0634 4802 VALLEY VIEW BLVD. NW 24012
1473 BAKERSFIELD CA WEST 805-328-5100 3201 F STREET 93301
1475 CANOGA PARK CA WEST 818-883-1000 6601 OWENSMOUTH 91304
1477 CHICO CA WEST 916-894-4212 801 EAST AVENUE 95926
1262 LEXINGTON KY NORTHEAST 606-278-5421 2021 HARRODSBURG PK 40504
1265 LIVONIA MI NORTHEAST 313-427-1600 29501 PLYMOUTH ROAD 48150
1266 FORT SMITH AR TEXAS 501-484-4400 4900 ROGERS AVENUE, SUITE 102 72903
1267 CORPUS CHRISTI TX TEXAS 512-994-3400 5858 SOUTH PADRE ISLAND DRIVE 78411
1272 MANSFIELD OH NORTHEAST 419-529-2111 1200 PARK AVENUE WEST 44906
1289 MOUNT CLEMENS MI NORTHEAST 810-791-2000 35151 S. GRATRIOT 48035
1308 PONTIAC/WATERFORD MI NORTHEAST 810-682-4940 409 N. TELEGRAPH ROAD 48328
1319 ROCHESTER MN NORTHEAST 507-288-8333 BLDG. 201, 1100 HWY 14 SW 55901
1338 SOUTHGATE MI NORTHEAST 313-285-4400 13665 EUREKA ROAD 48195
1341 BALTIMORE/SECURITY PARK MD NORTHEAST 410-265-9508 6901 SECURITY BOULEVARD 21207
1353 PHOENIX/ARCADIA AZ WEST 602-952-5800 4769 EAST THOMAS ROAD 85018
1355 WARREN MI NORTHEAST 810-751-7500 28800 DEQUINDRE 48092
1365 ST. PAUL/MIDWAY MN NORTHEAST 612-647-3200 1400 UNIVERSITY AVENUE 55104
1371 ABILENE TX TEXAS 915-692-1260 4601 SOUTH FIRST STREET 79605
1374 ALBUQUERQUE NM WEST 505-888-5500 2100 LOUISIANA NE #90 87110
1376 AMARILLO TX TEXAS 806-354-3400 29 WESTERN PLAZA 79109
1379 ARDMORE OK TEXAS 405-223-2442 15 ARDMORE MALL 73401
1380 SALINAS CA WEST 408-442-1400 1690 NORTH MAIN 93906
1381 RANCHO CUCAMONGA CA WEST 909-466-0600 10788 FOOT HILL BOULEVARD 91730
1382 AUSTIN/CAPITAL TX TEXAS 512-465-5800 5621 INTER-REGIONAL HIGHWAY 78723
1385 BATON ROUGE LA TEXAS 504-922-4100 7401 FLORIDA BOULEVARD 70806
1386 CHES/GREENBRIER VA NORTHEAST 757-420-8299 1412 GREENBRIER 23320
1390 BLYTHEVILLE AR TEXAS 501-763-1100 HIGHWAY 61 & MOULTRIE DRIVE 72315
1391 SCRANTON PA NORTHEAST 717-341-1980 200 THE MALL AT STEAMBOAT 18503
1393 SAVANNAH GA NORTHEAST 912-920-9080 4045 ABERCORN EXPRESSWAY 31420
1396 BRYAN TX TEXAS 409-823-5483 HIGHWAY 6 & VILLA MARIA ROAD 77805
1397 BURLINGTON IA WEST 319-754-6581 2720 MOUNT PLEASANT 52601
1400 CEDAR RAPIDS IA NORTHEAST 319-396-1200 2500 EDGEWOOD ROAD SW 52404
1403 WESTMINSTER MD NORTHEAST 410-857-8500 400 N. CENTER STREET 21157
1404 CHEYENNE WY WEST 307-634-1381 1501 EAST PERSHING 82001
1406 TOPEKA KS WEST 913-271-2200 1831 SW WANAMAKER ROAD 66604
1410 COLORADO SPRINGS CO WEST 719-630-6543 2420 EAST PIKES PEAK AVENUE 80909
1425 DENVER/LAKESIDE CO WEST 303-480-6600 5801 WEST 54TH AVENUE 80212
1426 ORANGE PARK FL NORTHEAST 904-278-4981 1919 WELLS ROAD UNIT 2 32073
1428 JACKSONVILLE/REGENCY FL NORTHEAST 904-724-0401 9501 ARLINGTON EXPRESSWAY 32225
1429 DES MOINES/MERLE HAY IA NORTHEAST 515-278-3500 1100 MERLE HAY PLAZA 50310
1430 MESA/EAST AZ WEST 602-396-8000 6230 SUPERSTITION SPRINGS BLVD. 85206
1436 BRADENTON FL NORTHEAST 941-751-5599 1205 44 AVENUE WEST 34207
1437 LAKELAND FL NORTHEAST 941-858-1745 4005 US 98 N 33809
1438 FORT MYERS FL NORTHEAST 941-278-0877 4650 SOUTH CLEVELAND 33907
1439 POUGHKEEPSIE NY NORTHEAST 914-298-0145 790 SOUTH ROAD 12601
1440 FAYETTESVILLE AR TEXAS 501-443-4591 HIGHWAYS 71 & 62 72701
1441 ST. PETERSBURG FL NORTHEAST 813-347-0001 2170 TYRONE BOULEVARD 33710
1444 FORT WORTH/7TH STREET TX TEXAS 817-336-1170 2600 W. 7TH STREET 76107
1446 TAMPA BAY/UNIVERSITY FL NORTHEAST 813-971-4300 2252 E. FOWLER AVENUE 33612
1447 FLINT MI NORTHEAST 810-230-3900 4400 MILLER ROAD 48507
1457 GREELEY CO WEST 970-356-2000 HIGHWAY 32 & 23RD AVENUE 80631
1464 HOUSTON/NORTHLINE TX TEXAS 713-691-8700 500 NORTHLINE MALL 77022
1466 HOUSTON/SHARPSTOW TX TEXAS 713-778-5900 7500 BELLAIRE BOULEVARD 77036
1471 ROANOKE VA NORTHEAST 540-265-O634 4802 VALLEY VIEW BLVD. NW 24012
1473 BAKERSFIELD CA WEST 805-328-5100 3201 F STREET 93301
1475 CANOGA PARK CA WEST 818-883-1000 6601 OWENSMOUTH 91304
1477 CHICO CA WEST 916-894-4212 801 EAST AVENUE 95926
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP
<S> <C> <C> <C> <C> <C> <C>
1478 COEUR D'ALENE ID WEST 208-667-7451 101 BEST AVENUE 83814
1481 EUGENE OR WEST 541-485-0611 500 VALLEY RIVER CENTER 97401
1483 EUREKA CA WEST 707-444-0300 2525 FOURTH STREET 95501
1486 GREAT FALLS MT WEST 406-761-5950 900 10TH AVENUE SOUTH 59401
1492 SAN DIEGO/LA MESA CA WEST 619-698-5200 5500 GROSSMONT CENTER DRIVE 92042
1494 LONGVIEW WA WEST 360-425-2930 #1 TRIANGLE SHOPPING CENTER 98632
1501 MEDFORD OR WEST 541-857-0400 1700 NORTH RIVERSIDE 97501
1502 DALLAS/REDBIRD TX TEXAS 972-296-6372 3662 WEST CAMP WISDOM ROAD 75237
1505 UTICA NY NORTHEAST 315-797-7457 710 HORATIO STREET 13502
1508 OROVILLE CA WEST 916-534-1800 2450 OROVILLE DAM BOULEVARD 95966
1509 PANORAMA CITY CA WEST 818-894-8211 14665 ROSCOE BOULEVARD 91402
1510 WESTMINSTER CO WEST 303-657-2300 5451 WEST 88TH AVENUE 80030
1511 PHOENIX/CHRISTOWN AZ WEST 602-433-5399 1751 W. BETHANY HOME ROAD 85015
1515 PLEASANT HILL CA WEST 510-674-6200 2302 MONUMENT BOULEVARD 94523
1517 PORTERVILLE CA WEST 209-782-5000 825 WEST HENDERSON AVENUE 93257
1519 ALBUQUERQUE/COTTO NM WEST 505-890-3500 10129 COORS BOULEVARD NW 87114
1520 GLENDALE/ARROWHEAD AZ WEST 602-412-4100 7780 W. ARROWHEAD TOWNE CENTER 85308
1522 REDDING CA WEST 916-244-5500 300 LOCUST AVENUE 96001
1523 PHOENIX/PARADISE AZ WEST 602-953-5800 4747 ESAT CACTUS ROAD 85032
1524 RENO NV WEST 702-355-3000 1900 SILVERADA BOULEVARD 89512
1525 RICHMOND CA WEST 510-231-9200 4300 MCDONALD AVENUE 94805
1529 SALEM OR WEST 503-363-3191 833 LANCASTER DRIVE NE 97301
1530 PHOENIX/DESERT SKY AZ WEST 602-849-7300 7611 WEST THOMAS ROAD 85033
1532 MISSION VALLEY CA WEST 619-692-5400 1288 CAMINO DEL RIO 92108
1533 SAN JOSE/EAST CA WEST 408-272-6200 444 NORTH CAPITOL AVENUE 95133
1535 SANA ANA CA WEST 714-973-6600 1351 WEST 17TH STREET 92706
1540 STOCKTON CA WEST 209-473-5300 5400 PACIFIC AVENUE 95207
1541 TUCSON/EL CON AZ WEST 520-321-3200 3601 NORTH BROADWAY 85716
1547 VISALIA CA WEST 209-734-7411 3535 WEST MINERAL KING AVENUE 93277
1556 MODESTO CA WEST 209-576-3000 2001 MCHENRY AVENUE 95350
1557 NAPA CA WEST 707-252-5000 4000 BEL AIRE PLAZA 94558
1567 CHICAGO RIDGE IL NORTHEAST 708-423-3880 9650 S. RIDGELAND AVE. 60415
1569 READING PA NORTHEAST 610-921-5700 3050 NORTH 5TH STREET HWY. 19605
1579 VENTURA CA WEST 805-642-7541 500 SOUTH MILLS ROAD 93003
1588 JUNCTION CITY KS WEST 913-238-2161 1010 WEST SIXTH STREET 66441
1591 KCM/BLUE RIDGE MO WEST 816-737-9200 4100 BLUE RIDGE BOULEVARD 64133
1592 KCM/WARD PARKWAY MO WEST 816-276-2600 8627 STATE LINE ROAD 64114
1600 LAFAYETTE LA TEXAS 318-232-5800 1700 NE EVANGLINE THRUWAY 70501
1601 NORTH LITTLE ROCK AR TEXAS 501-945-7070 4220 E. MCCAIN BOULEVARD 72117
1602 WATERTOWN NY NORTHEAST 315-786-6400 1300 ARSENAL 13601
1605 LAWTON OK TEXAS 405-581-4600 SHERIDAN ROAD & GORE BLVD. 73501
1608 LINCOLN NE WEST 402-465-7200 61 & O STREETS 68505
1611 LUBBOCK TX TEXAS 806-795-8221 5015 BOSTON AVENUE 79413
1614 ASHEVILLE NC NORTHEAST 704-298-0785 3 SOUTH TUNNEL ROAD 28805
1618 MESQUITE TX TEXAS 214-327-4100 500 EAT PIKE ROAD 75149
1621 MONROE LA TEXAS 318-324-5000 1100 OLIVER ROAD 71201
1630 OKC/PENN SQUARE OK TEXAS 405-840-6100 1901 NEW EXPRESSWAY S 1800 73118
1640 PORT CHARLOTTE FL NORTHEAST 941-255-1700 1441 TAMIAMI TRAIL, UNIT 501 33948
1647 PUEBLO CO WEST 719-546-0910 3201 DILLON DRIVE 81008
1651 ST. JOSEPH MO WEST 816-271-5700 3702 DREDERICK BOULEVARD 64506
1654 SA/MCCRELESS TX TEXAS 210-533-2426 600 MCCRELESS MALL 78223
1655 SA/CROSSROADS TX TEXAS 210-733-5600 4522 FREDERICKSBURG ROAD 78201
1663 SHERMAN TX TEXAS 903-893-7581 3201 TEXOMA PARKWAY SUITE 700 75090
1666 TEXARKANA TX TEXAS 903-838-6570 10 OAKLAWN VILLAGE 75501
1670 TYLER TX TEXAS 903-531-7000 1818 ROSELAND BOULEVARD 75701
1672 WACO TX TEXAS 817-776-1050 5201 BOSQUE BOULEVARD 76714
1675 WICHITA/EAST KS WEST 316-681-4704 3805 HARRY STREET 67218
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP
<S> <C> <C> <C> <C> <C> <C>
1723 CLARKSVILLE TN NORTHEAST 615-647-0291 PADGENT LANE & CROSSLAND AV 37040
1732 CARBONDALE IL NORTHEAST 618-549-8600 1265 E. MAIN 62901
1738 YAKIMA WA WEST 509-248-5850 2410 NOB HILL BOULEVARD 98901
1748 LAKEWOOD CO WEST 303-937-6400 7200 WEST ALAMEDA AVENUE 80226
1755 PLANO TX TEXAS 972-578-5500 900 WEST 15TH STREET 75075
1794 GREENSBURG PA NORTHEAST 412-832-6300 2370 GREENGATE MALL 15607
1797 GRANTS PASS OR WEST 541-479-2643 1101 NE D STREET 97528
1822 JEFFERSON CITY MO WEST 573-635-7271 709 MISSOURI BOULEVARD 65101
1886 TEMPLE HILLS MD NORTHEAST 301-899-3700 3745 BRANCH AVENUE 20748
1887 COVINA CA WEST 818-966-7411 848 SOUTH BARRANCA STREET 91723
1888 MARYSVILLE CA WEST 916-741-7000 915 EIGHTHH STREET 95901
1953 YORK PA NORTHEAST 717-755-2936 2801 E. MARKET STREET 17402
1959 HUNTINGTON BEACH CA WEST 714-892-6611 7777 EDINGER AVENUE 92647
1961 LITTLE ROCK AR TEXAS 501-661-7200 300 UNIVERSITY AVENUE 72205
1962 SPRINGFIELD MO WEST 417-885-1500 POST OFFICE BOX 35 65808
1965 ROSEMEAD CA WEST 818-573-3110 3600 ROSEMEAD BOULEVARD 91770
2005 PASADENA TX TEXAS 713-943-6800 2222 SPENCER HIGHWAY 77504
2018 SOUTHFIELD/TELEGRAPH MI NORTHEAST 810-358-1200 28500 TELEGRAPH ROAD 48034
2023 SANTA MARIA CA WEST 805-922-6611 1318 SOUTH BROADWAY 93454
2024 ESCONDIDO CA WEST 619-740-2200 311 NORTH ESCONDIDO BOULEVARD 92025
2045 NORWALK CA WEST 562-868-0911 12051 IMPERIAL HIGHWAY 90650
2070 CANTON OH NORTHEAST 330-477-9561 4004 W. TUSCARAWAS STREET 44708
2071 DALY CITY CA WEST 415-991-6200 133 SERRAMONTE CENTER 94015
2072 LANSING MI NORTHEAST 517-323-4550 5220 W. SAGINAW HWY. 48917
2083 LAUREL MD NORTHEAST 301-498-3100 14700 BALTIMORE AVENUE 20707
2101 SACRAMENTO/FLORIN CA WEST 916-424-7700 5601 FLORIN ROAD 95823
2129 PHARR TX TEXAS 210-781-8300 500 NORTH JACKSON ROAD 78577
2136 JOPLIN MO WEST 417-625-6500 3100 DAVIS BOULEVARD 64801
2142 MANASSAS VA NORTHEAST 703-369-9600 8234 SUDLEY ROAD 22110
2143 FAIRFAX VA NORTHEAST 703-934-7005 112840 JAMES SWART CIRCLE 0 22030
2145 GRAND RAPIDS/NORTH MI NORTHEAST 616-365-7525 4311 PLAINFIELD AVE., NE 49505
2147 NORFOLK VA NORTHEAST 757-466-2200 5803 VIRGINIA BEACH BLVD. 23502
2148 PENSACOLA FL NORTHEAST 904-477-2480 5100 N. NINTH AVENUE 32504
2153 UNIONTOWN PA NORTHEAST 412-628-0300 LAUREL MALL ROUTE 119 S 15425
2155 PORTLAND.MALL 205 OR WEST 503-251-4500 9800 SE WASHINGTON 97216
2156 LOS ANGELES WEST CA WEST 310-202-4600 1833 S. LACIENEGA BOULEVARD 90035
2157 MERCED CA WEST 209-384-5222 1111 WEST OLIVE AVENUE 95348
2161 PERU IL NORTHEAST 815-224-2040 1607 36TH STREET 61354
2162 KALAMAZOO MI NORTHEAST 616-382-5850 5030 W. MAIN STREET 49009
2164 LAS CRUCES NM WEST 505-526-3331 2300 EAST LOHMAN PLAZA 88001
2168 ALEXANDRIA LA TEXAS 318-448-3211 1804 MCARTHUR DRIVE 71301
2170 ARLINGTON TX TEXAS 817-633-1100 2700 EAST PIONEER PARKWAY 76010
2171 CHESAPEAKE/PORTSMOUTH VA NORTHEAST 757-465-4500 4200 PORTSMOUTH BOULEVARD 23321
2194 BEAUMONT TX TEXAS 409-898-2010 6175 EASTEX FREEWAY 77706
2195 TORRANCE CA WEST 310-542-6971 21405 SOUTH MADRONA AVENUE 90503
2196 AURORA CO WEST 303-696-3000 1400 HAVANA STREET 80012
2203 JACKSON MI NORTHEAST 517-787-3000 1700 W. MICHIGAN 49201
2208 KCK/INDIAN SPRINGS KS WEST 913-596-7700 4601 STATE AVENUE 66102
2211 BELAIR MD NORTHEAST 410-836-6000 658 BEL AIR ROAD 21014
2212 FREDERICK MD NORTHEAST 301-662-9100 FRED. TWN MALL PAT ST EX 21701
2213 TALLAHASSEE FL NORTHEAST 850-385-7111 US 27 & KNOX ROAD 32303
2215 FRESNO CA WEST 209-431-0410 5740 NORTH BLACKSTONE 93710
2219 SAN LEANDRO/BAYFAIR CA WEST 510-481-3200 300 BAYFAIR MALL 94578
2220 SAN BERNARDINO CA WEST 909-381-7000 144 CAROUSEL MALL 92401
2221 LA/EAGLE ROCK CA WEST 213-254-9261 2626 COLORADO BOULEVARD 90041
2233 SPRINGFIELD VA NORTHEAST 703-922-3500 6600 SPRINGFIELD MALL 22150
2237 PORTLAND/JANTZEN OR WEST 503-283-4411 1400 NORTH HAYDEN ISLAND DRIVE 97217
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP
<S> <C> <C> <C> <C> <C> <C>
2238 CITRUS HEIGHTS CA WEST 916-728-3500 6199 SUNRISE BOULEVARD 95610
2239 SAM JOSE/OAKRIDGE CA WEST 408-224-2300 879 BLOSSOM HILL ROAD 95123
2245 LAKE CHARLES LA TEXAS 318-478-4500 638 WEST PRIEN LAKE ROAD 70601
2246 DENTON TX TEXAS 940-566-6969 2201 EAST I-35 SOUTH 76201
2248 ROSEDALE MD NORTHEAST 410-780-5000 6400 ROSSVILLE BOULEVARD 21237
2251 LAS VEGAS/WEST NV WEST 702-251-7300 2120 EAST DECATUR ROAD 89102
2253 TOLEDO/SOUTH OH NORTHEAST 419-865-1311 2110 REYNOLD ROAD 43614
2254 HOUSTON/MEMORIAL TX TEXAS 713-932-3100 970 GESSNER 77024
2257 BLAINE MN NORTHEAST 612-780-7400 99 NORTHTOWN DRIVE 55434
2258 ELKHART IN NORTHEAST 219-875-6541 3701 S. MAIN 46517
2259 ODESSA TX TEXAS 915-362-7343 3909 EAST 42ND STREET 79762
2260 ANNAPOLIS MD NORTHEAST 410-224-2500 200 ANNAPOLIS MALL 21401
2278 SOUTH BEND IN NORTHEAST 219-291-7910 1390 SCOTTSDALE MALL 46612
2289 EL PASO/CIELO VISTA TX WEST 915-779-6699 8401 GATEWAY WEST 79925
2290 BROWNSVILLE TX TEXAS 210-544-3600 MEXICO STREET & PALM BLVD. 78520
2292 OKC/CROSSROADS OK TEXAS 405-636-3100 5000 CROSSROADS BOULEVARD 73149
2296 DULUTH MN NORTHEAST 218-727-6677 1600 MILLER TRUNK HWY 55811
2323 MOBILE AL NORTHEAST 334-476-5100 3250 AIRPORT BOULEVARD 36606
2326 MOLINE IL NORTHEAST 309-797-7100 4500 16TH STREET 61265
2336 SA/WINDSOR PARK TX TEXAS 210-654-2200 7900 IH 35 NORTH 78218
2337 SHREVEPORT LA TEXAS 318-687-7600 8924 JEWELLA ROAD 75081
2366 GREENSBORO NC NORTHEAST 910-375-4000 100 CAROLINA CIRCLE MALL 27405
2369 OVERLAND PARK KS WEST 913-541-6500 11201 WEST 95TH STREET 66214
2374 CHARLESTON SC NORTHEAST 803-554-4400 2401 MALL DRIVE 29418
2383 PINELLAS PARK FL NORTHEAST 813-522-5517 7200 US HIGHWAY 19 33565
2388 SPRINGFIELD IL NORTHEAST 217-787-8000 2501 W. WABASH AVENUE 62704
2393 COLUMBUS GA NORTHEAST 706-322-6761 3091 MANCHESTER EXPRESSWAY 31908
2401 SACRAMENTO/C/CLUB CA WEST 916-978-3300 3460 EL CAMINO AVENUE 95821
2406 VIRGINIA BEACH VA NORTHEAST 757-463-4560 701 LYNN HAVEN PARKWAY 23452
2411 BILLINGS MT WEST 406-656-9000 320 SOUTH 24TH STREET WEST 59102
2412 KCM/METRO NORTH MO WEST 816-468-2600 BARRY ROAD & HIGHWAY 69 64155
2425 BEAVERTON OR WEST 503-646-7212 4401 SW 110 AVENUE 97005
2426 RIVERSIDE CA WEST 909-784-3000 3530 RIVERSIDE DRIVE 92506
2438 NEWPORT NEWS VA NORTHEAST 757-874-0100 14316 WARWICK BOULEVARD 23602
2443 RICHARDSON TX TEXAS 972-680-7421 603 SOUTH PLANO ROAD 75081
2445 SAN JOSE/WESTGATE CA WEST 408-886-3200 1600 SARATOGA ROAD 95129
2448 FORT WORTH/HULEN TX TEXAS 817-294-9930 4900 SOUTH HULEN 76132
2488 AUGUSTA GA NORTHEAST 706-771-3200 1700 GORDON HIGHWAY 30904
2489 FRIENDSWOOD/BAYBR TX TEXAS 281-486-8989 100 BAYBROOK MALL 77546
2490 HOUSTON/GREENSPOINT TX TEXAS 281-873-1600 600 GREENSPOINT MALL 77022
2495 LAREDO TX TEXAS 956-721-2000 5300 NORTH SAN DARIO 78041
2509 HURST TX TEXAS 817-284-4700 6000 NORTHEAST MALL 76053
2526 SUNNYVALE CA WEST 408-746-0200 211 WEST IOWA STREET 94086
2559 WICHITA/WEST KS WEST 316-946-8141 4600 WEST KELLOGG 67209
2560 MIDWEST CITY OK TEXAS 405-733-1260 6777 E. RENO AVENUE 73110
2561 DES MOINES/SOUTHRIDGE IA NORTHEAST 515-287-8700 1111 SE ARMY POST ROAD 50315
2565 TAMPA BAY FL NORTHEAST 813-877-6161 3202 W. DR. MILK JR. BOULEVARD 33607
2571 DUBLIN CA WEST 510-833-3227 6900 AMADOR PLAZA ROAD 94568
2572 MESA/WEST AZ WEST 602-890-5599 1625 WEST SOUTHERN AVENUE 85202
2573 PICO RIVERA CA WEST 562-948-3631 8800 WHITTIER ROAD 90660
2576 AUSTIN/BARTON CREEK TX TEXAS 512-479-1000 2901 CAPITAL OF TEXAS HIGHWAY 78746
2579 BRIDGEPORT WV NORTHEAST 304-842-7700 MEADOWBROOK ROAD & I-79 26330
2580 PORT RICHEY FL NORTHEAST 813-849-8438 9409 US HIGHWAY 19 N 34668
2604 ROSEVILLE MN NORTHEAST 612-631-6800 600 ROSEDALE CENTER 55113
2608 LEWISVILLE TX TEXAS 972-315-1411 2428 SOUTH STEMMONS FREEWAY 75067
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
LOC # LOCATION STATE TERRITORY TEL. # STREET ADDRESS ZIP
<S> <C> <C> <C> <C> <C> <C>
2611 BAYTOWN TX TEXAS 281-421-3100 3000 SAN JACINTO 77521
2612 SPOKANE WA WEST 509-482-5100 5830 NORTH DIVISION STREET 99207
2632 PORTLAND/CLACKAMAS OR WEST 503-652-3800 8800 SE MONTEREY BOULEVARD 97266
2635 HOUSTON/WILLOWBROOK TX TEXAS 281-955-4100 7925 FM 1960 WEST 77070
2707 FREDERICKSBURG VA NORTHEAST 540-786-7060 I-95 & ROUTE 3 22401
2710 HAMPTON VA NORTHEAST 757-838-3000 1800 W. MERCURY BOULEVARD 23666
2713 TOLEDO/NORTH OH NORTHEAST 419-478-4120 343 NEW TOWN SQUARE DRIVE 43612
2744 LITTLETON CO WEST 303-972-5250 8501 WEST BOWLES AVENUE 80123
2753 SAN DIEGO/BONITA CA WEST 619-470-2100 3050 PLAZA BONITA 92050
2755 CHARLESTON WV NORTHEAST 304-343-7665 P.O. BOX 75059 25301
2757 SA/MERCADO TX EAST 210-670-1200 1401 SW LOOP 410 78227
2816 TEMPLE TX TEXAS 817-778-4871 3002-A 31ST STREET 76502
</TABLE>
SUMMARY OF SATELLITE DEVICES
- - -----------------------------
HUB
NETWORK CONTROL CLUSTERS
1 - Primary NCC
1 - bkup NCC
BURST CHANNEL DEMODULATOR
9 - Inroutes at 128k
1 - Inroute bkup
1 - Outroute at 512k
DATA PORT CLUSTERS
(7) remote sites at 19.2 with 8 remotes per port
(1) mpe locations/diagnostics
(1) ADT/WELLS FARGO
(3) backups
SYSTEM INTERFACE CLUSTER
Ethernet Connection
VAX
4000/500
bkup 4000/60
7D software
REMOTE'S
DISH SIZE
1.0 meter = 134
38
<PAGE>
1.2 meter = 122
1.8 meter = 130
2.4 meter = 5
PERSONAL EARTH STATIONS
PES 6000 = 286
PES 8000 = 21
PES in storage 6000 = 63
JUNCTION BOX
183 remotes have no ports available
209 remotes have 1 or more ports available
VIDEO CONFERENCE
71 - LOCATIONS
39
<PAGE>
EXHIBIT G
THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
NONE
40
<PAGE>
EXHIBIT H
WARDS SOFTWARE
NONE
41
<PAGE>
EXHIBIT I
SUPPLIER SOFTWARE
None
42
<PAGE>
10.(i)(R)
SERVICE AGREEMENT BETWEEN MONTGOMERY WARD
& CO., INCORPORATED AND
ACXIOM CORPORATION
SERVICE AGREEMENT NO. 7: TANDEM SERVICES
----------------------------------------
THIS SERVICE AGREEMENT NO. 7: TANDEM SERVICES (the "Service Agreement") is
made and entered into as of the 6th_ day of November, 1998 between Montgomery
Ward & Co., Incorporated a Delaware corporation ("Wards"), and Acxiom
Corporation, a Delaware corporation ("Supplier").
This Service Agreement is entered into between Wards and Supplier pursuant
to the Master Agreement (defined below). Wards and Supplier agree that: (i)
except to the extent expressly provided otherwise in the Service Agreement, all
the terms and definitions of the Master Agreement are incorporated by reference
into the Service Agreement, and (ii) in the event of any inconsistent or
contradictory terms between the Master Agreement and the Service Agreement, the
terms of Section 2.3 of the Master Agreement shall control.
The Parties hereby agree as follows:
ARTICLE 1. DEFINITION
All defined terms that are used in the Master Agreement will have the same
meaning in this Service Agreement. In addition, for purposes of this Service
Agreement, the following terms shall have the indicated meanings:
"INITIAL TERM" has the meaning given in Section 2.1.
"MASTER AGREEMENT" means the Master Service Agreement for Information
Technology Services Between Montgomery Ward & Co., Incorporated and Acxiom
Corporation dated November 6, 1998, and all amendments thereto.
"RENEWAL TERM" has the meaning given in Section 2.2.
"SERVICE AGREEMENT COMMENCEMENT DATE" means the date on which the Migration
Plan for Tandem Services has been implemented under Service Agreement No. 1.
"SERVICE AGREEMENT EFFECTIVE DATE" means November 6, 1998.
"SERVICE AGREEMENT TERM" means the Initial Term of this Agreement and any
Renewal Term.
<PAGE>
"SERVICE LEVEL AGREEMENT" when used in this Service Agreement has the
meaning given in Section 7.1 of this Service Agreement.
"TANDEM ENVIRONMENT" means the Tandem processing environment that is
operated by Wards as of the Service Agreement Effective Date.
"Tandem Services" has the meaning given in Section 5.1.
"TRANSFERRED EQUIPMENT" when used in this Service Agreement has the meaning
given in Section 8.1 of this Service Agreement.
"WARDS PEAK SEASON" means the period in any year during the Service
Agreement Term from November 20 through December 31, and as such dates may be
adjusted by Wards from time to time.
ARTICLE 2. TERM
2.1 INITIAL TERM. The initial term of this Service Agreement (the
"Initial Term") shall begin as of the Service Agreement Commencement Date and
shall continue for a period of thirty-seven (37) months thereafter, unless
earlier terminated or renewed in accordance with the provisions of this Service
Agreement or the Master Agreement.
2.2 RENEWAL TERM. Wards shall have the option to renew this Service
Agreement for up to two (2) additional annual terms (each a "Renewal Term")by
delivering written notice of such renewal to Supplier at least ninety (90) days
before expiration of the final applicable Contract Year under this Service
Agreement and before expiration of each annual period thereafter as applicable.
All of the terms of this Service Agreement and the Master Agreement shall
continue to apply without change during any renewal period(s).
ARTICLE 3. TERMINATION
3.1 CONVENIENCE TERMINATION FEE. Wards shall have the option to terminate
this Service Agreement for Convenience in accordance with Section 18.2(a) of the
Master Agreement. The Convenience termination charges, if any, shall be as
described in Exhibit C of this Service Agreement.
ARTICLE 4. PERSONNEL MATTERS
4.1 KEY SUPPLIER POSITIONS. Exhibit A identifies the Key Supplier
---------
Positions that are subject to the provisions of Section 7.2 of the Master
Agreement.
2
<PAGE>
ARTICLE 5. SERVICES
5.1 GENERAL. Throughout the Service Agreement Term, Supplier shall
provide the Services described in Exhibit B, as such Exhibit may be amended and
---------
supplemented from time to time pursuant to the Master Agreement (the "Tandem
Services"). The Tandem Services includes all of the responsibilities (including
Equipment, Software, personnel and expenses) associated with the Tandem
Environment, unless specifically identified as a Wards responsibility under
Section 5.3 below. The Services include (i) functions, responsibilities and
tasks performed by the Transferred Employees prior to the Service Agreement
Effective Date; (ii) functions, responsibilities and tasks not specifically
described in this Service Agreement but which are required for their proper
performance and are an inherent part of, or a necessary sub-part included
within, the Services; and (iii) functions, responsibilities and tasks that are a
logical extension of existing Services as a result of changes in technology,
changes in Wards business practices, or changes resulting from change control
procedures. Supplier will be the exclusive provider of the Services identified
in this Service Agreement.
5.2 TRANSITION MANAGEMENT AND SERVICE LEVELS. During the period from the
Service Agreement Effective Date to the Service Agreement Commencement Date,
Supplier will provide Tandem Services under Service Agreement No. 1 (Transition
and Migration Services). Following the Service Agreement Commencement Date, the
Service Level Agreement and other obligations of this Service Agreement shall
become effective.
5.3 APPOINTMENT OF PROJECT EXECUTIVES. Prior to the Service Agreement
Commencement Date, the Parties appoint individuals as Project Executives under
this Service Agreement to carry out the duties described in the Master
Agreement.
5.4 RESPONSIBILITIES OF WARDS The responsibility matrix included in
Exhibit B to this Service Agreement identifies the responsibilities of Wards
- - ---------
during the Term of this Service Agreement, as such Exhibit may be amended and
supplemented from time to time pursuant to the Master Agreement. The
responsibilities of Wards shall be limited to those items listed in the matrix.
ARTICLE 6. CHARGES
6.1 CHARGES FOR NETWORK SERVICES. Exhibit C to this Service Agreement
---------
sets forth the Charges for the Tandem Services that may be charged by Supplier.
All Charges and all Pass-Through Expenses are subject to the provisions of
Article 13 of the Master Agreement.
6.2 INVOICES FOR CHARGES AND EXPENSES. In all invoices for Tandem
Services, Supplier shall provide Wards with the information that is described in
Exhibit C in sufficient detail in order to verify invoices provided by Supplier.
- - ---------
Invoice submission and payment shall be in accordance with Article 14 of the
Master Agreement.
3
<PAGE>
ARTICLE 7. SERVICE LEVEL AGREEMENT
7.1 SERVICE LEVEL AGREEMENT. Exhibit D to this Service Agreement is the
---------
Service Level Agreement applicable to quantitative Service Levels for the Tandem
Services (the "Service Level Agreement"). The Service Level Agreement will
become effective upon the Service Agreement Commencement Date. All of the terms
of Article 5 of the Master Agreement shall apply to the Service Level Agreement.
Supplier acknowledges that Wards may adjust schedules for availability and other
items to meet Wards need during Wards Peak Season or other events (such as
extended sales).
ARTICLE 8. FACILITIES, EQUIPMENT AND SOFTWARE TERMS
8.1 TRANSFER OF EQUIPMENT. On the Service Agreement Commencement Date,
Wards shall assign, and Supplier shall assume, Wards' obligations under the
applicable leases for the equipment listed on Exhibit E (the "Transferred
---------
Equipment"). The terms of Section 6.1 of the Master Agreement shall apply
with respect to the Transferred Equipment.
8.2 USE OF WARDS FACILITIES AND EQUIPMENT. In accordance with Section 6.2
of the Master Agreement, Wards shall provide the Wards Facilities and Wards
Equipment described in Exhibit F to this Service Agreement.
---------
8.3 TRANSFER OF THIRD PARTY CONTRACTS AND THIRD PARTY SOFTWARE. On the
Service Agreement Commencement Date, and subject to Supplier having received any
Third Party Consents,Wards shall retain the rights to the license of the Third
Party Software listed in Exhibit G, and Supplier shall obtain rights to access
--------------
and use such Third Party Software. In the event that the licensor does not
consent to such terms, then subject to Supplier having received any Third Party
consents, Supplier shall assume from Wards all of the rights and
obligations(other than financial responsibilities) of Wards under the Third
Party Contracts and the Third Party Software that are listed in Exhibit G, and
--------------
in such event, the terms of 6.3 of the Master Agreement shall apply with respect
- - ----------------
to Third Party Contracts and Third Party Software.
8.4 WARDS SOFTWARE. Listed in Exhibit H is the Software that is
---------
proprietary to Wards and that is used in Tandem Systems (the "Wards Software").
The terms of Section of the Master Agreement shall apply with respect to the
Wards Software.
8.5 SUPPLIER SOFTWARE. The Supplier Software that is to be used by
Supplier to provide the Tandem Services is listed in Exhibit I. Use of Supplier
---------
Software in providing the Tandem Services shall be in accordance with Section
8.2 of the Master Agreement.
ARTICLE 9. TERMINATION AND TRANSITION SERVICES
9.1 TERMINATION. Wards may terminate this Service Agreement without
penalty at any time prior to the Service Agreement Commencement Date if Supplier
does not complete the Migration Plan described in Service Agreement No. 1.
After the Service Agreement
4
<PAGE>
Commencement Date, Wards may terminate this Service Agreement in accordance with
the terms of the Master Agreement.
9.2 TERMINATION. In the event of a termination or expiration of this
Service Agreement, Supplier shall provide the Termination/Expiration Assistance
as provided in Section 18.7 of the Master Agreement.
IN WITNESS WHEREOF the Parties have executed this Master Agreement as of
the day and year first above written.
MONTGOMERY WARD & CO.,
INCORPORATED ACXIOM CORPORATION
By: /s/ Don Bernheisel By: /s/ Joseph C. Grossestreuer
--------------------------- ----------------------------------
Name: Don Bernheisel Name: Joseph C. Grossestreuer
------------------------- --------------------------------
Its: SVP, CIO Its: SVP- Outsourcing Services
-------------------------- ---------------------------------
5
<PAGE>
EXHIBITS TO TANDEM SERVICE AGREEMENT
------------------------------------
EXHIBIT A KEY SUPPLIER POSITIONS
EXHIBIT B SERVICES
EXHIBIT C CHARGES
EXHIBIT D SERVICE LEVEL AGREEMENT
EXHIBIT E TRANSFERRED EQUIPMENT
EXHIBIT F WARDS FACILITIES AND EQUIPMENT
EXHIBIT G THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
EXHIBIT H WARDS SOFTWARE
EXHIBIT I SUPPLIER SOFTWARE
6
<PAGE>
EXHIBIT A
KEY SUPPLIER POSITIONS
SENIOR TECH SPECIALIST
TECH SPECIALIST
7
<PAGE>
EXHIBIT B
SERVICES
OVERVIEW
- - --------
The business objective of this service category is to provide the operational,
system, and Application Support for the dependable, consistent and reliable
operation of the Wards stores credit approval, data collection and NSF check
collection related applications which reside in the Wards Tandem environment.
Wards has a support contract in place with Primary Resource, Inc. (PRI) to
maintain the current Tandem application source code through June 30, 1999. This
maintenance contract includes necessary adjustments to correctly handle Year
2000 issues. Wards pays a monthly fee to PRI for the support contract. In
December 1996 an amendment was signed to the original contract that increased
the covered scope of software to include the newly purchased Banctec Payment
Systems software. It is anticipated that PRI will maintain the service contract
with Wards and in turn will interact with the Supplier in the same fashion as
with the in-house Tandem support group (ADCU).
PRI, in addition to supporting the Wards Tandem system, also performs system and
program development for Wards, usually on a fixed-bid basis. It is considered
that this work will continue to be contracted with Wards and that Wards will
coordinate testing and implementation of new/enhanced systems with the Supplier
and PRI.
As a part of the PRI relationship, Wards has purchased a small Tandem
configuration which has been installed in the PRI facility for development and
testing as it may pertain to the Wards Tandem environment. The Supplier will be
required to remotely perform the same systems and Applications Support services
as is currently provided in the Tandem production environment, in addition to
the creation of test environments including providing a quality assurance
environment for new application code as provided by PRI.
The supplier of Tandem operations management services has full
responsibility for the comprehensive operational support of the Wards Tandem
environment as described in Exhibit B of this document. These responsibilities
include the day-to-day operations and management of the operating environment
including, but not limited to, data backup and restore processes, infrastructure
change management, production control, systems monitoring and reporting, data
center facility monitoring, maintenance and reporting, and media management.
Additionally, the Supplier will provide disaster recovery hot site services in
support of Ward's formal Disaster Recovery Plan for this operating environment,
and test the Supplier's documented operational hot site activation plan as
agreed upon with, and scheduled as requested by Wards management on a business
unit basis as outlined for these Tandem systems.
The supplier of Tandem systems management services is to provide Wards with
a consistently high level of Tandem environment reliability, availability, and
performance. System Management includes the responsibility for the management of
the existing infrastructure as well as implementation of new Tandem systems and
new technologies to support the changing business needs of Wards. The Supplier's
System Management will provide for the overall
8
<PAGE>
management and performance of Ward's Tandem processing environment as indicated
in Exhibit B. Systems Management will work in an integrated fashion with all
other service functions to provide seamless support for the Wards business
units.
The cost-effective implementation of consistent Tandem operations management,
systems management, and applications support will allow Wards business units to
rapidly respond to changing business needs. The intent of this service
description is to establish Ward's expectations and criteria for providing the
described service.
The intent of this service description is to establish Ward's
expectations and criteria for providing the described services.
OPERATIONS MANAGEMENT
- - ---------------------
ACTIVITIES FOR OPERATIONS MANAGEMENT
The supplier will be responsible for all operational aspects of the
Wards Tandem System computer environment defined as "in scope" in Exhibit B. The
supplier is expected to manage the development, and production-processing
environments utilizing the Procedures Manual.
1. Supplier will provide console management functions to monitor, report,
operate and IPL/reboot the Tandem system, associated peripherals, and
production job streams.
2. Supplier will provide production control function for the Ward's Tandem
environments.
3. Supplier will provide media management and media storage for all the Tandem
System processing environments.
4. Supplier will maintain a working relationship with Primary Resource, Inc.
(PRI) for the purpose of resolving production problems, planning new system
installations, and status of the development Tandem system.
5. Supplier will provide new ideas and recommendations quarterly on how the
Wards Tandem Operations Management function can be improved or made more
cost effective.
SERVICE PARAMETERS FOR OPERATIONS MANAGEMENT
- - --------------------------------------------
1. Supplier will provide operations management services for Wards Tandem
System processing environments as listed in Exhibit B, on a 24x7x365 basis.
2. Supplier will schedule all operational and environmental events in
accordance with the documented change management procedures, as defined in
the Procedures Manual.
3. Supplier will provide and maintain the Procedures Manual.
4. Supplier will provide expertise for operational problem resolution in
conjunction with: Store Support, Network Operations, credit authorizers and
vender support.
5. Supplier will maintain a management interface with the following Wards
areas/departments: Loss Prevention, Store Support, and SmartStore.
6. Supplier will capture and retain sufficient detail data to provide all
required technical and managerial reports as specified within this
document.
7. Supplier will maintain documentation and run books for production job
streams as described in the Procedures Manual.
9
<PAGE>
8. Supplier will provide monitoring function, utilizing automated tools
wherever possible.
MEASUREMENT TOOLS FOR OPERATIONS MANAGEMENT
- - -------------------------------------------
The Supplier will make every effort to utilize tools and processes provided by
Wards and already in place in Wards' Tandem environments. The Supplier is free
to recommend in writing to Wards, additional or alternative tools for review and
final approval. Wards must approve use of any new or equivalent tools not
already in place at Wards. Wards approval will not be unreasonably witheld.
TANDEM SYSTEM
. MEASURE/GPA
. EMSA
. VIEWPT
. DSAP
. DCOM
. VIEWPROC
. NMS
. TACL: HCHECK
. TACL: AMCHKMM
. CMACOM (CMCOMO)
. SCF
. CMI
. FUP
. PUP
. PRIINFO
10
<PAGE>
. NETBATCH
. ADCUINST
SYSTEM MANAGEMENT
- - -----------------
ACTIVITIES FOR SYSTEM MANAGEMENT:
The Supplier has responsibility for management and performance of the Wards
Tandem systems, systems software, and Tandem system peripherals as indicated in
the Appendices. It is the Supplier's responsibility to provide reliable,
predictable, and consistent operating environments for Ward's applications
systems.
1. The Supplier will provide the management methodologies, resources and tools
to support the Wards Tandem environments at performance, capacity, and
availability levels as good as, or better than currently provided.
2. The Supplier will provide proactive Tandem system and peripheral
performance monitoring and tuning.
3. The Supplier will provide proactive Tandem system and peripheral capacity
analysis, planning and resource adjustment.
4. Supplier will provide applications support functions as defined in the
glossary in Exhibit B, and as delineated in the Responsibility Matrix under
"Application Support".
Service Parameters for System Management:
- - -----------------------------------------
1. The Supplier will maintain System Management support for Wards Monday thru
Friday 8am - 5pm, reachable by pager at all other times. On-site weekend
support will be required during Ward's Peak Season.
2. The Supplier will utilize and adhere to all Supplier provided change
management processes, and procedures.
3. The Supplier will utilize and adhere to all Supplier provided problem
management processes, procedures and escalation guidelines.
4. The Supplier will provide total problem solutions with the appropriate
technical resources, knowledge, procedures, and management methodologies to
maintain the availability and performance of the Wards development, test,
and production Tandem system environments to documented service levels.
11
<PAGE>
5. Escalation to hardware or software vendors required to resolve Tandem
system problems remain within the scope of the Supplier's responsibility
and are considered to be included in the overall support cost.
6. The Supplier will provide hardware and software tools, and related
maintenance that is necessary to accomplish or help them accomplish the
Systems Management service levels as indicated in this document.
7. The Supplier will provide sufficient detail to the help desk, within the
text of each problem ticket, to include the background and history of each
problem for later root cause analysis and/or support resolution or
engineering corrective action.
8. The Supplier will monitor, alarm, and apply corrective action to pre-
defined events and situations for the Tandem systems included in this
agreement.
9. The Supplier will gather, store, and report statistics on process variables
for the Wards Tandem systems included in this agreement in a format that is
readily accessible.
10. The Supplier will provide strategies and suggestions on how to maximize
Tandem system performance by optimizing process variables and implement
them upon Ward's approval.
11. The Supplier will research, configure, and activate Wards Tandem
components, including, but not limited to operating system generation, and
dynamic environment generation for new and replacement hardware components.
12. The Supplier will provide hardware maintenance and system software
maintenance for the Wards Tandem systems.
13. The Supplier will recommend, evaluate, and perform all tasks that mandate
advanced privileges for each system managed within strict guidelines of
change control.
14. The Supplier will work with Wards and, if necessary PRI, to identify and
correct problems within the Tandem system environments.
15. The Supplier will generate Ad-Hoc reports for Tandem systems and Pathway
support in Enform, Cobol, TACL and ACCESS as required.
16. The Supplier will assist in providing project planning and quality
assurance/testing for new or enhancement program implementation on Wards
Tandem systems.
TRACKING AND MEASUREMENT TOOLS FOR SYSTEMS MANAGEMENT
- - -----------------------------------------------------
The Supplier is responsible for supplying all tools necessary to satisfy the
specifications contained herein. The Supplier will make every effort to utilize
tools and processes owned by Wards and already in place within the Wards
facilities. The Supplier is free to recommend in writing to Wards additional or
alternative tools or processes for Wards review and final approval. Wards must
approve use of any new or equivalent tools and/or processes not already in place
at Wards.
TANDEM GUARDIAN
. VIEWPT
. VIEWPROC
. EMSA
. MEASURE
. GPA
. SCF
. FUP
12
<PAGE>
. PUP
. CTTW
. NMS
. DSAP
. DCOM
. CMACOM(CMCOMO)
. CMA
. MS/ACCESS
. AMCHKMM
. MONITOR
. REPORTVIEW
<TABLE>
<CAPTION>
TANDEM MANAGEMENT RESPONSIBILITY MATRIX
- - ------------------------------------------------------------------------------
TANDEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CHANGE MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Participate in the change management system used by Wards among all IS X
operatives.
- - -------------------------------------------------------------------------------------------------------------------
Review, provide and approve Change management system for implementation to X
Wards system, environmental, and application environments.
- - -------------------------------------------------------------------------------------------------------------------
Implement changes within the Wards environments using Wards standard and X
documented process or processes
- - -------------------------------------------------------------------------------------------------------------------
Disseminate information on scheduled or planned changes to Wards user community X
- - -------------------------------------------------------------------------------------------------------------------
Provide Wards with regular reporting, by environment, of planned changes to X
occur and the anticipated impact of the change
- - -------------------------------------------------------------------------------------------------------------------
Provide a means to properly test all proposed changes to the environments X X
prior to the implementation of the proposed change
- - -------------------------------------------------------------------------------------------------------------------
Post all approved, planned changes on the Wards change Management system X
- - -------------------------------------------------------------------------------------------------------------------
Provide methods and processes for accommodating regular, minor, major, and X
emergency changes within the Wards environments
- - -------------------------------------------------------------------------------------------------------------------
Support WARDS activities including hardware maintenance, X
installation/de-installation, and facility changes in the Tandem processing
facilities, as well as, software, systems, and applications installation,
upgrades, and support
- - -------------------------------------------------------------------------------------------------------------------
Provide WARDS with a weekly summary meeting and reporting of all proposed X
changes to the environment on a rolling thirty (30), sixty (60), and ninety
(90) day basis
- - -------------------------------------------------------------------------------------------------------------------
Provide WARDS with risk assessments and anticipated impact of all proposed X
changes to the operational and data center environments
- - -------------------------------------------------------------------------------------------------------------------
Implement changes in accordance with established standards in the Procedures X
Manual
- - -------------------------------------------------------------------------------------------------------------------
Supplier will provide support for both testing and production support of all X
changes implemented within the environments
- - -------------------------------------------------------------------------------------------------------------------
Conduct post-implementation review meetings with Wards to review changes
process X X
- - -------------------------------------------------------------------------------------------------------------------
Provide emergency change management procedures in support of the Wards Tandem X
environment where production issues involve product quality, personal safety,
and Wards profitability.
- - -------------------------------------------------------------------------------------------------------------------
PROBLEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Supplier will support new Wards initiatives X
- - -------------------------------------------------------------------------------------------------------------------
Supplier will report progress to Wards based on the Wards assigned level of X
severity
- - -------------------------------------------------------------------------------------------------------------------
Supplier will develop and enhance procedures for problem escalation X
- - -------------------------------------------------------------------------------------------------------------------
Conduct root cause analysis and review high-impact problems to identify X
preventative measures, assess risk, and bring to closure, jointly with Wards,
if appropriate
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
TANDEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utilize Supplier help desk to notify Supplier staff, Wards and other vendors X
of hardware, software, and environmental failures according to the severity
definitions and reporting/escalation guidelines in the procedures manual.
- - -------------------------------------------------------------------------------------------------------------------
Initiating user verification of problem resolution. X
- - -------------------------------------------------------------------------------------------------------------------
Work to reduce the overall resolution time for problem tickets regardless of X X
where the root problem resides.
- - -------------------------------------------------------------------------------------------------------------------
Escalate unresolved problem tickets that exceed agreed upon time frames by X
severity to Wards as required.
- - -------------------------------------------------------------------------------------------------------------------
Accept and resolve problems from the Supplier's Help Desk as determined to be X
in the area of support of System Management by the Help Desk within time
frames as specified by severity.
- - -------------------------------------------------------------------------------------------------------------------
Re-route problems back to the Supplier's Help Desk as they are determined to X
be outside of area of support of System Management.
- - -------------------------------------------------------------------------------------------------------------------
Document problem resolution activities as they are completed or re-routed. X
- - -------------------------------------------------------------------------------------------------------------------
COMPUTER OPERATIONS
- - -------------------------------------------------------------------------------------------------------------------
Perform all manual and automated console operations and operate computer X
equipment
- - -------------------------------------------------------------------------------------------------------------------
Monitor performance of operating system and sub-systems and resolve
problems/exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Identify and resolve systems and sub-systems problems X
- - -------------------------------------------------------------------------------------------------------------------
Complete work, turnover and status logs X
- - -------------------------------------------------------------------------------------------------------------------
Monitor and report Computer Room environmental variances and resolve X
problems/exceptions
- - -------------------------------------------------------------------------------------------------------------------
Provide all office and operations supplies including, but not limited to: X
media, media storage units, printing consumables, PCs, workstations,
monitoring tools etc. for Supplier's operations management staff.
- - -------------------------------------------------------------------------------------------------------------------
Adhere to all Wards standards, methods, processes, and procedures X
- - -------------------------------------------------------------------------------------------------------------------
PRODUCTION MONITORING AND SCHEDULING X
- - -------------------------------------------------------------------------------------------------------------------
Establish and maintain centralized responsibility over production systems and X
processes.
- - -------------------------------------------------------------------------------------------------------------------
Provide resources for monitoring, reporting, and tracking of systems and X
processes.
- - -------------------------------------------------------------------------------------------------------------------
Report, document, and track failures within the production systems. X
- - -------------------------------------------------------------------------------------------------------------------
Provide and maintain a method for proper escalation of failures. X
- - -------------------------------------------------------------------------------------------------------------------
Ensure overnight processing is completed as scheduled. X
- - -------------------------------------------------------------------------------------------------------------------
Provide reporting on production systems, daily on critical systems. X
- - -------------------------------------------------------------------------------------------------------------------
Provide a master-scheduling function across environments. X
- - -------------------------------------------------------------------------------------------------------------------
Provide a process for change requests in the scheduling of processes and X
systems.
- - -------------------------------------------------------------------------------------------------------------------
Develop, document, and enhance procedures for ensuring reliable monitoring and X
scheduling of critical processes.
- - -------------------------------------------------------------------------------------------------------------------
Conduct root cause analysis and review high-impact failures to identify X
preventative measures, assess risk, and bring to closure.
- - -------------------------------------------------------------------------------------------------------------------
Coordinate and integrate production schedules with applications groups. X
- - -------------------------------------------------------------------------------------------------------------------
Modify and verify batch production schedules. X
- - -------------------------------------------------------------------------------------------------------------------
Monitor, control and update the Tandem Netbatch processing systems. X
- - -------------------------------------------------------------------------------------------------------------------
Generate required Ad-Hoc reports as required X
- - -------------------------------------------------------------------------------------------------------------------
TAPE MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Complete all tape mount requests X
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
TANDEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Monitor tape hardware for malfunction and resolve exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Perform daily tape hardware maintenance X
- - -------------------------------------------------------------------------------------------------------------------
Specify tape retention periods X
- - -------------------------------------------------------------------------------------------------------------------
Request changes to tape retention periods X
- - -------------------------------------------------------------------------------------------------------------------
Implement requested changes to tape retention periods X
- - -------------------------------------------------------------------------------------------------------------------
TAPE LIBRARY
- - -------------------------------------------------------------------------------------------------------------------
Maintain integrity of tape library system X
- - -------------------------------------------------------------------------------------------------------------------
Monitor tape usage and resolve problems/exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Maintain and monitor "foreign" tape library and resolve exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Initialize new tapes X
- - -------------------------------------------------------------------------------------------------------------------
Establish off-site storage requirements X
- - -------------------------------------------------------------------------------------------------------------------
Coordinate offsite storage functions including logging, tracking labeling, X
ordering, receiving and sending tapes
- - -------------------------------------------------------------------------------------------------------------------
Approve third party suppliers and facility X
- - -------------------------------------------------------------------------------------------------------------------
Manage third party contract X
- - -------------------------------------------------------------------------------------------------------------------
Audit third party supplier annually X
- - -------------------------------------------------------------------------------------------------------------------
Inspect/audit third party supplier facility as deemed necessary X
- - -------------------------------------------------------------------------------------------------------------------
BACKUPS
- - -------------------------------------------------------------------------------------------------------------------
Determination of what data is backed up and how much X
- - -------------------------------------------------------------------------------------------------------------------
Determination of how long data is kept X
- - -------------------------------------------------------------------------------------------------------------------
Perform backup as scheduled X
- - -------------------------------------------------------------------------------------------------------------------
Maintain library of backups X
- - -------------------------------------------------------------------------------------------------------------------
Management of off-site storage X
- - -------------------------------------------------------------------------------------------------------------------
Restore system data as required X
- - -------------------------------------------------------------------------------------------------------------------
Restore user data as required X
- - -------------------------------------------------------------------------------------------------------------------
FACILITIES MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Plan & manage installation of computer & environmental equipment in data X
center.
- - -------------------------------------------------------------------------------------------------------------------
Oversee equipment moves/ensures operation to specifications post-move X
- - -------------------------------------------------------------------------------------------------------------------
Maintain physical inventory and blueprint of all hardware and accurate cabling X
diagrams.
- - -------------------------------------------------------------------------------------------------------------------
Administer contract services and other third party agreements (Environmental, X
security and other companies)
- - -------------------------------------------------------------------------------------------------------------------
Monitor and maintain all data center facilities located at Supplier's site(s) X
to assure availability, including: HVAC, Power distribution units,
uninterruptable power switch (UPS), and backup power systems.
- - -------------------------------------------------------------------------------------------------------------------
PHYSICAL SECURITY ADMINISTRATION
- - -------------------------------------------------------------------------------------------------------------------
Implement mutually agreed security audit recommendations X
- - -------------------------------------------------------------------------------------------------------------------
Provide administrative and technical support for physical security X
- - -------------------------------------------------------------------------------------------------------------------
Monitor and respond to Supplier alarm system X
- - -------------------------------------------------------------------------------------------------------------------
Provide emergency response and notification (Fire etc.) X
- - -------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY SUPPORT
- - -------------------------------------------------------------------------------------------------------------------
Develop, maintain and test disaster recovery plan and procedure manuals
including third X
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
TANDEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
party hot and cold site recovery plans for all Tandem
services provided to Wards
- - -------------------------------------------------------------------------------------------------------------------
Maintain capacity plan for disaster recovery for all services provided to Supplier X
- - -------------------------------------------------------------------------------------------------------------------
Maintain an on-line document listing which platforms and applications are covered X
- - -------------------------------------------------------------------------------------------------------------------
Maintain third party contracts X
- - -------------------------------------------------------------------------------------------------------------------
Coordinate disaster recovery testing. X X
- - -------------------------------------------------------------------------------------------------------------------
Participate in disaster recovery testing with Supplier and perform recover X
tests for all services provided to Supplier
- - -------------------------------------------------------------------------------------------------------------------
Perform disaster recovery testing, resolve cause of failure and re-test until X
successful for all services provided to Supplier
- - -------------------------------------------------------------------------------------------------------------------
Report disaster recovery test results to Supplier X
- - -------------------------------------------------------------------------------------------------------------------
Confirm test results X
- - -------------------------------------------------------------------------------------------------------------------
Implement recovery plan at hot site/cold site for all services provided to X
Supplier
- - -------------------------------------------------------------------------------------------------------------------
Prioritize recovery of data when disaster occurs X
- - -------------------------------------------------------------------------------------------------------------------
Restore to normal operations in the event of a disaster within defined service X
levels
- - -------------------------------------------------------------------------------------------------------------------
Assure TOS version/module update matches production system X
- - -------------------------------------------------------------------------------------------------------------------
Maintain D/R site sys procs synchronous to production X
- - -------------------------------------------------------------------------------------------------------------------
Supplier will maintain disaster recovery Tandem systems to match production X
system TOS release and system installation configuration to assure
CMA/Network/Pathway environment synchronicity.
- - -------------------------------------------------------------------------------------------------------------------
STRATEGY AND PLANNING
- - -------------------------------------------------------------------------------------------------------------------
Understand & document Ward's business requirements X X
- - -------------------------------------------------------------------------------------------------------------------
Assist with direction setting and updating of standards X
- - -------------------------------------------------------------------------------------------------------------------
Research emerging technology and propose effective solutions X X
- - -------------------------------------------------------------------------------------------------------------------
Advise on use of emerging technology and proposed solutions X
- - -------------------------------------------------------------------------------------------------------------------
Assist in developing Standard Operating Procedures (SOPs) X
- - -------------------------------------------------------------------------------------------------------------------
CONTRACTS MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Ensure compliance with maintenance and warranty agreements X
- - -------------------------------------------------------------------------------------------------------------------
Negotiate new and/or renew agreements X
- - -------------------------------------------------------------------------------------------------------------------
Manage contract terms and conditions (e.g. expiration date) X
- - -------------------------------------------------------------------------------------------------------------------
Communicate contract provisions internally and to Wards, as needed X
- - -------------------------------------------------------------------------------------------------------------------
The Supplier will act as third party maintenance provider interface for all X
services under control of the Supplier as described in this document, whether
Wards or the Supplier provides the maintenance service.
- - -------------------------------------------------------------------------------------------------------------------
STATUS REPORTING AND MEETINGS
- - -------------------------------------------------------------------------------------------------------------------
Prepare weekly status report X
- - -------------------------------------------------------------------------------------------------------------------
Conduct weekly status meetings X
- - -------------------------------------------------------------------------------------------------------------------
Review and edit weekly status report and attend weekly meeting X
- - -------------------------------------------------------------------------------------------------------------------
Prepare monthly service level / performance reports X
- - -------------------------------------------------------------------------------------------------------------------
Analyze results of monthly reports and historical trends X X
- - -------------------------------------------------------------------------------------------------------------------
Identify areas for improvement X X
- - -------------------------------------------------------------------------------------------------------------------
Prepare management briefing for service level results X X
- - -------------------------------------------------------------------------------------------------------------------
Conduct Wards monthly management review meeting X
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
TANDEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Attend monthly management review X X
- - -------------------------------------------------------------------------------------------------------------------
Plan the implementation of action items resulting from, & agreed to during, X
mgmt review meeting
- - -------------------------------------------------------------------------------------------------------------------
Implement action items resulting from, & agreed to during, mgmt review meeting. X
- - -------------------------------------------------------------------------------------------------------------------
Audit/request service level/performance and activity reports as needed X
- - -------------------------------------------------------------------------------------------------------------------
Approve new or changes to service level/performance reports as needed. X
- - -------------------------------------------------------------------------------------------------------------------
Participate in a Ward's daily operational status meeting to report on X X
operational, environmental and batch job completion.
- - -------------------------------------------------------------------------------------------------------------------
HUMAN RESOURCES
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
Ensure adequate training & review of all personnel performing Supplier X
activities.
- - -------------------------------------------------------------------------------------------------------------------
Implement corrective actions as needed X
- - -------------------------------------------------------------------------------------------------------------------
SYSTEM SOFTWARE MAINTENANCE
- - -------------------------------------------------------------------------------------------------------------------
Install and maintain the system software environment. X
- - -------------------------------------------------------------------------------------------------------------------
CAPACITY PLANNING
- - -------------------------------------------------------------------------------------------------------------------
Monitor system use and capacity, and resolve problems/exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Forecast resource requirements X X
- - -------------------------------------------------------------------------------------------------------------------
Ensure appropriate capacity to meet resource projections X
- - -------------------------------------------------------------------------------------------------------------------
Analyze workload capacity X
- - -------------------------------------------------------------------------------------------------------------------
Prepare and produce resource planning reports X
- - -------------------------------------------------------------------------------------------------------------------
Analyze and report resource trends X
- - -------------------------------------------------------------------------------------------------------------------
Make recommendations regarding resource consumption and trends X
- - -------------------------------------------------------------------------------------------------------------------
Report usage and resource capacity to Supplier on a periodic basis X
- - -------------------------------------------------------------------------------------------------------------------
PERFORMANCE TUNING
- - -------------------------------------------------------------------------------------------------------------------
Conduct system performance tuning X
- - -------------------------------------------------------------------------------------------------------------------
Conduct application performance tuning X
- - -------------------------------------------------------------------------------------------------------------------
Provide performance reporting X
- - -------------------------------------------------------------------------------------------------------------------
Provide technical support for applications tuning efforts X
- - -------------------------------------------------------------------------------------------------------------------
Conduct application and hardware benchmarks, if required X
- - -------------------------------------------------------------------------------------------------------------------
Conduct system performance reviews X
- - -------------------------------------------------------------------------------------------------------------------
Measure and analyze system performance X
- - -------------------------------------------------------------------------------------------------------------------
Review system performance and request adjustments where deemed necessary X
- - -------------------------------------------------------------------------------------------------------------------
DISK MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
Monitor and control storage performance and resolve exceptions X
- - -------------------------------------------------------------------------------------------------------------------
Assign and initialize volumes X
- - -------------------------------------------------------------------------------------------------------------------
Provide disk utilization forecasts X
- - -------------------------------------------------------------------------------------------------------------------
Determine file and volume placement X X
- - -------------------------------------------------------------------------------------------------------------------
Set and maintain storage resource efficiency X
- - -------------------------------------------------------------------------------------------------------------------
Maintain established storage standards X
- - -------------------------------------------------------------------------------------------------------------------
Maintain space requirements according to Wards demand X
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------
TANDEM MANAGEMENT
- - -------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Initiate requests for storage resource increases and decreases X
- - -------------------------------------------------------------------------------------------------------------------
Perform data migration management X
- - -------------------------------------------------------------------------------------------------------------------
PHYSICAL SECURITY ADMINISTRATION
- - -------------------------------------------------------------------------------------------------------------------
Implement security audit recommendations X
- - -------------------------------------------------------------------------------------------------------------------
Provide administrative and technical support for physical security X
- - -------------------------------------------------------------------------------------------------------------------
Monitor and respond to alarm system X
- - -------------------------------------------------------------------------------------------------------------------
Provide emergency response and notification (Fire etc.) X
- - -------------------------------------------------------------------------------------------------------------------
DATA SECURITY ADMINISTRATION
- - -------------------------------------------------------------------------------------------------------------------
Define security policies X
- - -------------------------------------------------------------------------------------------------------------------
Define security standards and guidelines X
- - -------------------------------------------------------------------------------------------------------------------
Provide passwords and logon ids to security officer X
- - -------------------------------------------------------------------------------------------------------------------
Administer security databases (user privileges) X
- - -------------------------------------------------------------------------------------------------------------------
Implement security audit recommendations X
- - -------------------------------------------------------------------------------------------------------------------
Enforce security standards X
- - -------------------------------------------------------------------------------------------------------------------
The Supplier will create, document and maintain security schemas, profiles and X
procedures for all Tandem system resources as directed by Wards security
policy.
- - -------------------------------------------------------------------------------------------------------------------
SECURITY SOFTWARE MAINTENANCE
- - -------------------------------------------------------------------------------------------------------------------
Software update and implementation X
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
Participate and approve results of changes to security software X X
- - -------------------------------------------------------------------------------------------------------------------
Administer login Ids and reset passwords for data access
- - -------------------------------------------------------------------------------------------------------------------
Classify Information security level X
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------------------------------------
CMA SYSTEM NETWORK MAINTENANCE
- - -------------------------------------------------------------------------------------------------------------------
Provide network configuration change requirements X
- - -------------------------------------------------------------------------------------------------------------------
Verify change coordination with other platforms X X
- - -------------------------------------------------------------------------------------------------------------------
Complete CMA network generation process X
- - -------------------------------------------------------------------------------------------------------------------
Install network modifications for Tandem and VTAM defines X
- - -------------------------------------------------------------------------------------------------------------------
Implement updated Pathway environments for new network X
- - -------------------------------------------------------------------------------------------------------------------
PATHWAY TABLES MAINTENANCE
- - -------------------------------------------------------------------------------------------------------------------
Provide Pathway table change requirements X
- - -------------------------------------------------------------------------------------------------------------------
Verify change coordination with other parties X X
- - -------------------------------------------------------------------------------------------------------------------
Apply/verify required table changes via screen or programmatic entry X
- - -------------------------------------------------------------------------------------------------------------------
APPLICATION SUPPORT
- - -------------------------------------------------------------------------------------------------------------------
Provide Network Database creation, update, and install functions as required X
to implement full Tandem system network control for production.
- - -------------------------------------------------------------------------------------------------------------------
Create and maintain upgrades for automation procedures used for network X
control, CMA database management, pathway environment database management and
statistics gathering, as are currently implemented by Wards.
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
TANDEM MANAGEMENT
- - -----------------------------------------------------------------------------------------------------------------------
RESPONSIBILITY DESCRIPTION WARDS SUPPLIER
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Act as assisting party in activities required for testing and management of
development systems for Wards Test Tandem system. [X]
- - ------------------------------------------------------------------------------------------------------------------------
Research, advise, and manipulate flat files in support of Wards database
administration and applications development groups as directed by Wards. [X]
- - ------------------------------------------------------------------------------------------------------------------------
Provide assistance required to complete code testing, program management,
system integration and production implementation for Tandem system Year 2000
project support. [X]
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
GLOSSARY OF TERMINOLOGY
APPLICATION SUPPORT Describes all tasks associated with the operations
and systems support of Wards Developed Software.
See Configuration Management Application(CMA)
definition as example.
WARDS DEVELOPED SOFTWARE Describes any software application developed by
Wards personnel, or third party as a stand alone
application, client or server application, system
device driver, adjunct or peripheral device
driver, or application enhancement capable of
operating in the Wards Tandem computing
environment.
WARDS PURCHASED SOFTWARE Describes any software application not developed
by Wards personnel capable of operating in the
Wards network computing environment.
WARDS SUPPORTED SOFTWARE Combination of both Wards Developed Software and
Wards Purchased Software.
WARDS USER COMMUNITY All users of Wards IT services including but not
limited to Wards employees, subcontractors, and
Wards stores.
CONSOLE MANAGEMENT The act of entering Operating System or sub-system
commands at a system terminal, including any
switch, key, dial or button located on a system
unit.
CONFIGURATION MANAGEMENT Utility used to configure and maintain a virtual
APPLICATION(CMA) application port to a physical machine port in
DE-INSTALLATION support of PRI applications. Removal of a device
from the Wards computing environment. This
includes returning the device to the Lessor.
HARDWARE Describes any stand-alone or network attached
Computing Platform, Printer, Plotter, Peripheral,
Adjunct device in the Wards network computing
environment.
LESSOR The hardware supplier of choice for Wards leased
Computing Platform devices.
MEDIA Any removable and transportable data storage
medium used to backup, retain, and restore data,
including but not limited to: reel tape, cartridge
tape(3490,TK50,TK70,DAT,4mm,8mm), or Compact Disc.
NETBATCH Tandem batch utility.
NETWORK DATABASE Database used by Configuration Management
Application(CMA).
PEAK RETAIL PERIOD Wards largest revenue period defined as November
20 - December 31 of any same year.
PERIPHERAL Describes any accessory device used in conjunction
with other hardware or software devices.
19
<PAGE>
PLOTTER Describes both individual and networked (shared)
plotters in the Wards computing environment.
PRINTER Describes both individual and networked (shared)
printers in the Wards computing environment.
PROBLEM Problem, deficiency, or delay as reported by a
member of the Wards user community.
RESOLVED PROBLEM CALL Supplier has taken action to correct a problem or
deficiency to the satisfaction of the Wards user
who reported the problem.
SUPPLIER The company providing the contracted services as
defined in this document.
BATCH REPORTS
[_] Check System Secondary Placements
[_] Check Collections Graphic Report
[_] Check Activity Report
[_] Daily Flash Sales Report
[_] Quarterly Purge/Reload of Check/Account Files w/functional report
[_] Monthly Management Status Report
[_] ORRM(Original Receipted Refund Match) Dups Report
[_] ORRM Delete Function/Report
[_] ORRM Over Limit Report
[_] ORRM Audit Report
[_] ORRM Exception Report
20
<PAGE>
EXHIBIT C
CHARGES
MONTHLY SERVICE CHARGE (MSC) FOR 37 MONTH TERM:....................... $60,000
A. SCOPE:
1. Tandem support , disaster recovery and account management services as
set forth in Exhibit B.
---------
2. Current Tandem hardware configuration as set forth on attached
schedule.
B. PASS-THROUGH EXPENSES
- Tandem Third Party Software licenses and maintenance costs incurred by
Supplier should be invoiced to Wards as Pass-Through Expenses at cost.
- All telecommunications lines charges necessary for connectivity between
Wards corporate complex, Signature and Supplier's data center.
C. OUT-OF-SCOPE
During the Service Agreement Term, services requested by Wards that are not
within the scope of the Tandem Services as set forth in Exhibit B should be
---------
invoiced to Wards at cost plus 20%.
D. TERMINATION CHARGES
- In the event of termination for any reason, Wards shall repurchase the
Tandem equipment acquired by Supplier at the unamortized principal
balance set forth in the attached schedule.
21
<PAGE>
TANDEM ONE-TIME AMORTIZATION
----------------------------
SCHEDULE
--------
<TABLE>
<CAPTION>
Beginning Unamortized
Principal Monthly Interest Principal Principal
Month Balance Payment Expense Reduction Balance
- - ------------ ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1 $350,000.00 $10,967.73 $2,333.33 $ 8,634.39 $341,365.61
2 $341,365.61 $10,967.73 $2,275.77 $ 8,691.96 $332,673.65
3 $332,673.65 $10,967.73 $2,217.82 $ 8,749.90 $323,923.74
4 $323,923.74 $10,967.73 $2,159.49 $ 8,808.24 $315,115.51
5 $315,115.51 $10,967.73 $2,100.77 $ 8,866.96 $306,248.55
6 $306,248.55 $10,967.73 $2,041.66 $ 8,926.07 $297,322.48
7 $297,322.48 $10,967.73 $1,982.15 $ 8,985.58 $288,336.90
8 $288,336.90 $10,967.73 $1,922.25 $ 9,045.48 $279,291.42
9 $279,291.42 $10,967.73 $1,861.94 $ 9,105.79 $270,185.63
10 $270,185.63 $10,967.73 $1,801.24 $ 9,166.49 $261,019.14
11 $261,019.14 $10,967.73 $1,740.13 $ 9,227.60 $251,791.54
12 $251,791.54 $10,967.73 $1,678.61 $ 9,289.12 $242,502.43
13 $242,502.43 $10,967.73 $1,616.68 $ 9,351.05 $233,151.38
14 $233,151.38 $10,967.73 $1,554.34 $ 9,413.39 $223,738.00
15 $223,738.00 $10,967.73 $1,491.59 $ 9,476.14 $214,261.85
16 $214,261.85 $10,967.73 $1,428.41 $ 9,539.32 $204,722.54
17 $204,722.54 $10,967.73 $1,364.82 $ 9,602.91 $195,119.63
18 $195,119.63 $10,967.73 $1,300.80 $ 9,666.93 $185,452.70
19 $185,452.70 $10,967.73 $1,236.35 $ 9,731.38 $175,721.32
20 $175,721.32 $10,967.73 $1,171.48 $ 9,796.25 $165,925.07
21 $165,925.07 $10,967.73 $1,106.17 $ 9,861.56 $156,063.51
22 $156,063.51 $10,967.73 $1,040.42 $ 9,927.30 $146,136.20
23 $146,136.20 $10,967.73 $ 974.24 $ 9,993.49 $136,142.72
24 $136,142.72 $10,967.73 $ 907.62 $10,060.11 $126,082.61
25 $126,082.61 $10,967.73 $ 840.55 $10,127.18 $115,955.43
26 $115,955.43 $10,967.73 $ 773.04 $10,194.69 $105,760.74
27 $105,760.74 $10,967.73 $ 705.07 $10,262.66 $ 95,498.08
28 $ 95,498.08 $10,967.73 $ 636.65 $10,331.07 $ 85,167.01
29 $ 85,167.01 $10,967.73 $ 567.78 $10,399.95 $ 74,767.06
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
30 $ 74,767.06 $10,967.73 $ 498.45 $10,469.28 $ 64,297.78
31 $ 64,297.78 $10,967.73 $ 428.65 $10,539.08 $ 53,758.70
32 $ 53,758.70 $10,967.73 $ 358.39 $10,609.34 $ 43,149.37
33 $ 43,149.37 $10,967.73 $ 287.66 $10,680.07 $ 32,469.30
34 $ 32,469.30 $10,967.73 $ 216.46 $10,751.27 $ 21,718.03
35 $ 21,718.03 $10,967.73 $ 144.79 $10,822.94 $ 10,895.09
36 $ 10,895.09 $10,967.73 $ 72.63 $10,895.09 ($0.00)
</TABLE>
TANDEM CONFIGURATION
CPU
- - ---
1 K2006 Tandem Himalaya
w/6 Processors
w/256 MB Memory each
Guardian D43 or greater
(3 CPU cabinets - 3 I/O cabinets)
I/O CONTROLLERS
- - ---------------
12 MFC (MULTI FUNCTION CONTROLLERS 3681)
(Multi Function controllers used for Disk,
Terminals and additional 5515 desk top printer
DISK DRIVES
- - -----------
16 4260 8 mirrored drives - 4.0 GB each.
CARTRIDGE DRIVES
1 5196 Cartridge Drive
PRINTER
1 3601 To support a 600 LPM 5516 Printer
COMMUNICATION CONTROLLERS
- - -------------------------
14 3604 Bit Sync Controller (4 RS232 Ports)
1 3605 Bit/Byte/Async Controller (4 RS232
Ports)
1 3606 Async Controller (16 ports each)
23
<PAGE>
3 3615 Ethernet Adapter
4 3616 Token Ring Controller
24
<PAGE>
EXHIBIT D
SERVICE LEVEL AGREEMENT
SERVICE LEVEL AGREEMENT
-----------------------
FOR TANDEM SERVICES
25
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. GENERAL......................................................................... 27
A. General................................................................... 27
B. Definitions............................................................... 27
C. Measurement............................................................... 28
D. Effective Date for Service Levels......................................... 28
E. Revisions................................................................. 28
F. Single Point of Contact................................................... 38
II. SERVICE LEVELS
A. Definitions............................................................... 29
B. Service Level Measures.................................................... 29
C. Service Levels............................................................ 35
III. SERVICE LEVEL CREDITS........................................................... 38
A. Credits................................................................... 38
B. Method of Calculation..................................................... 38
C. Frequency Factor.......................................................... 38
D. Excused Performance Problem............................................... 39
E. Time Limit................................................................ 39
IV. SERVICE LEVEL TERMINATION EVENTS................................................ 40
A. Definition................................................................ 40
B. Repeated Service Level Failures........................................... 40
C. Repeated Critical Service Level Failures.................................. 41
D. Catastrophic Level of Service............................................. 41
E. Qualification............................................................. 41
</TABLE>
<PAGE>
SERVICE LEVEL AGREEMENT
FOR TANDEM SERVICES
I. GENERAL
A. RELATIONSHIP TO SERVICE AGREEMENT AND MASTER AGREEMENT.
This Service Level Agreement is entered into under the Master Agreement for
Information Technology Services between Acxiom Corporation ("Supplier") and
Montgomery Ward & Co., Incorporated ("Wards") dated November 6, 1998, and
pertains to Service Agreement No. 7: Tandem Services entered into by Wards and
Supplier. Any inconsistency between this Agreement, the Service Agreement and
the Master Agreement will be resolved pursuant to Section 2.3 of the Master
Agreement.
B. DEFINITIONS
In this Service Level Agreement ("SLA"), the terms listed below shall
have the indicated meanings. Other terms may be defined in other
sections of this SLA. Terms used in this SLA without definition have
the meanings ascribed to them in the Master Agreement or Service
Agreement.
1. Service Level Measure - For any Service identified in this SLA,
---------------------
the method specified in this SLA for quantitatively calculating
Supplier's actual performance. The results of these calculations
are compared with Service Levels to evaluate Supplier's
compliance with Service Levels.
2. Service Levels - For any Service identified in this SLA, the
--------------
required quantitative level or degree of performance by Supplier
specified in this SLA as the "Service Level." The Service Levels
are the minimally acceptable levels of service for the Services.
Any failure to meet a Service Level is unacceptable and may
constitute, based upon the facts and circumstances, a material
breach of Supplier's obligations under the Service Agreement.
3. Increased Impact Level - For any Service identified in this SLA,
----------------------
the required quantitative level or degree of performance by
Supplier specified in this SLA as the "Increased Impact Level."
Any failure to meet an Increased Impact Level is unacceptable and
may constitute, based upon the facts and circumstances, a
material breach of Supplier's obligations under the Service
Agreement.
4. Critical Service Levels - Service Levels associated with those
-----------------------
Services that are most important to the conduct of Wards'
operations, which are the subject of this Service Agreement.
5. Service Level Credits - The amounts which Wards shall have the
---------------------
option, but not the obligation, to recover as liquidated damages,
in lieu of any other monetary remedies Wards may have, each time
Supplier fails to meet the Service Levels for any reason other
than those specified in Section III.D of this SLA. Service Level
Credits are calculated in the
<PAGE>
manner described in Section III of this SLA.
6. Service Level Termination Event - An occurrence or series of
-------------------------------
occurrences of deficient performance by Supplier in performing
the Services specified in this SLA as a "Service Level
Termination Event." The occurrence of a Service Level Termination
Event constitutes, based upon the facts and circumstances, a
material breach of Supplier's performance obligations under this
Service Agreement and gives Wards the right to terminate this
Service Agreement for cause.
C. MEASUREMENT
Unless otherwise stated in this SLA, each Service Level Measure shall
be calculated on a complete calendar month basis. Performance results
shall be measured and reported based on actual results with any
exceptions for Excused Performance Problems reported separately.
D. EFFECTIVE DATE FOR SERVICE LEVELS
The Service Levels provided for in this SLA shall be applicable
beginning effective on the Service Level Agreement Commencement Date.
E. REVISIONS
1. From time to time during the Term, the Parties agree to negotiate
in good faith to add, delete, or modify then-existing Service
Level Measures, Service Levels, and Increased Impact Levels to
reflect changes in Wards' business requirements or objectives.
All such changes shall be adopted in the form of a signed written
amendment to this SLA.
2. In the event that any applicable system or function is replaced
during the Term by a comparable system or function, the Service
Level Measure, Service Level, and Increased Impact Level for such
replacement system or function shall, to the extent reasonably
practicable (i) be defined during the first 30 days of such
replacement, and (ii) must be at least equivalent to the then-
existing Service Level Measure, Service Level, and Increased
Impact Level for the replaced system or function (assuming the
replacement system is capable of delivering the same Service
Levels as the replaced system).
3. At all times during the Term, Supplier shall provide the Services
in a manner that meets or exceeds the then-existing Service
Levels. The remedies for failure to do so shall include the
remedies defined in this SLA, the Service Agreement, and the
Master Agreement.
F. SINGLE POINT OF CONTACT
Regardless of whether any failure by Supplier to meet a Service Level
is attributable to Supplier or an Excused Performance Problem,
Supplier shall provide a single point of contact to address resolution
of such failure and shall act promptly to address the problem causing
the failure. Unless otherwise agreed by
28
<PAGE>
Wards, the Supplier Project Executive or his or her designee shall be
the Supplier's single point of contact.
II. SERVICE LEVELS
A. DEFINITIONS
Certain technical definitions are included in the Glossary of Terminology
that is part of Exhibit B of the Service Agreement.
B. SERVICE LEVEL MEASURES
SERVICE SPECIFICATIONS FOR OPERATIONS MANAGEMENT
DATA BACKUP, ARCHIVING, AND RESTORATION
---------------------------------------
Objective: To ensure proper safeguards are being taken by the Supplier to
protect critical Wards data with consistent, reliable, and
documented process(es) for management of data backups, data
archives, and off-site data rotation across the Wards environments
under the Supplier's span of control.
DEFINITION: The Suppliers processes for Data Backup and Archiving of critical
data as designated by Wards within the Wards Tandem environment.
Ensuring the Suppliers processes have identified and are backing
up or archiving these critical files.
METHOD: The Supplier will document and maintain the location of critical
Wards data and the process used to backup and restore this data if
required. The Supplier will provide appropriate tools and
processes for managing and measuring compliance with established
Data Backup and Archiving guidelines within their control.
SERVICE LEVEL:
<TABLE>
<CAPTION>
Values Metrics
-------------------------------------------------------------------------------------
<S> <C>
Service Level - 99.9% of all designated critical data is
being backed up and stored as required as per
the procedures manual.
-------------------------------------------------------------------------------------
Increased Impact - Less than 99.2% of all designated critical
data is being backed up and stored as
required as per the procedures manual.
-------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards User Community, Wards Disaster Recovery Plan
RESPONSIBILITY: Supplier
PERIOD: Monthly
REPORT: See Master Agreement Schedule D, Reporting
29
<PAGE>
ACTION: See Master Agreement Schedule D II, Action Type-I
DISASTER RECOVERY PLAN
----------------------
OBJECTIVE: To provide Tandem disaster recovery services for the Wards
Disaster Recovery Plan, which is a non-contractual document. The
target is to provide on-going Tandem system services to Wards
within 48 hours of a declared disaster, including system
processes as well as all Wards critical Tandem applications
DEFINITION: Supplier declares a disaster when Supplier services to Wards are
interrupted due to significant equipment, computer or network
related failure as specified in the Wards Disaster Recovery Plan.
METHOD: A declared disaster will be announced by the Supplier Contract
Manager as provided in the Wards Disaster Recovery Plan.
SERVICE LEVEL:
<TABLE>
<CAPTION>
Values Metrics
------------------------------------------------------------------------------------------------
<S> <C>
Service Level Complete restoration of Tandem system and applications
to Wards in compliance with the Wards Disaster
Recovery Plan
------------------------------------------------------------------------------------------------
Increased Impact Complete restoration of Tandem system and applications
to Wards not more than 12 hours of the time period
specified by the Wards Disaster Recovery Plan
------------------------------------------------------------------------------------------------
</TABLE>
IMPACT: High
AFFECTED AREA: Wards
RESPONSIBILITY: Supplier
PERIOD: monthly
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D II, Action Type-I
DISASTER RECOVERY TEST
----------------------
OBJECTIVE: Supplier will demonstrate its ability to restore Ward's Tandem
systems and applications in accordance with the Wards Disaster
Recovery Plan in the event of a disaster. Supplier will be
responsible for the
30
<PAGE>
successful execution of the Supplier provided disaster
recovery plan for Ward's Tandem system and applications
processing.
DEFINITION: Disaster recovery testing is the process by which Supplier
ensures that the services being provided to Wards can be
restored in a swift and accurate manner following a disaster
situation in accordance with the Wards Disaster Recovery plan,
which is a non-contractual document. This service level is
valid as long as Wards participates in the disaster recovery
planning, and testing process as defined in the Procedures
Manual and as mutually agreed to by Supplier and Wards.
METHOD: Supplier will test the Tandem platform once a year. Supplier
will provide a full report of the success of each test to a
designated Wards representative within one week of the
completion of a test.
SERVICE LEVEL:
Values Metric
--------------------------------------------------------------
Service Level For each scheduled test,
critical services specified by
Wards are tested according to
Wards requirements
--------------------------------------------------------------
Increased Impact For each scheduled test,
critical services specified by
Wards are not tested according
to requirements
--------------------------------------------------------------
IMPACT: Medium
AFFECTED AREA: Disaster Recovery Plan
RESPONSIBILITY: Supplier
PERIOD: Full disaster recovery tests will be conducted by Supplier at
Wards' request with selected Wards entities recovering their
operations in accordance with the Wards Disaster Recovery
Plan. A full report of the success of each test will be
submitted to a designated Wards representative within one week
of the completion of a test.
RESOURCE RANGE:
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D- II, Action Type-II
31
<PAGE>
ONLINE AVAILABILITY
-------------------
OBJECTIVE: Monitoring availability and performance according to defined
targets. Starting and stopping defined online services
according to specified service availability schedules.
Initiating Problem Management procedures to rectify any
performance or availability failures.
DEFINITION: Check collection authorization, data collect and check
collection applications are scheduled to be available from
06:00 to 23:59, except for Thanksgiving Day, Christmas Day and
Easter Day.
METHOD: Monitoring all online services to ensure their performance and
availability remains within stated service levels. The
Supplier will provide console or other appropriate management
processes to control the Wards Tandem environments within
their control.
SERVICE LEVEL:
Values Metric
--------------------------------------------------------------
Service Level - 99.9% of all Online Services have
been maintained to Wards
schedules.
--------------------------------------------------------------
Increased Impact - Less than 99.4% of all Online
Services have been maintained to
Wards schedules.
--------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Employees, applications, distribution and stores.
RESPONSIBILITY: Supplier
PERIOD: Monthly
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D, Corrective Action for
Service Level Metrics, Action Type-I
32
<PAGE>
SERVICE SPECIFICATIONS FOR SYSTEM MANAGEMENT
- - --------------------------------------------
SOFTWARE UPGRADES
-----------------
OBJECTIVE: To maintain Wards Tandem system software at a current release,
unless otherwise stipulated by Wards.
DEFINITION: Installing or upgrading versions of the Tandem system software
as listed in Exhibit G.
METHOD: Supplier will be required to provide software inventory
reports indicating each product's release level per Tandem
system at Wards request.
SERVICE LEVEL:
------------------------------------------------------------
Values Metric
------------------------------------------------------------
Service Level - All Tandem system software
maintained within 4 months of
most current release, or as
mutually agreed upon by Wards and
Supplier. PTFs to correct a known
problem will be installed within
48 hours, or as mutually agreed
upon by Wards and Supplier.
------------------------------------------------------------
Increased Impact - All Tandem system software
maintained at more than 6 months
of most current release, or as
mutually agreed upon by Wards and
Supplier.
------------------------------------------------------------
IMPACT: Medium
AFFECTED AREA: Wards User Community
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 7x24x365.
RESOURCE RANGE: For all Wards Tandem systems, present and future, which are
under the Supplier's management.
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D- II, Action Type - II
REQUEST TIME TO COMPLETE
------------------------
OBJECTIVE: To insure that pre-defined Tandem system environment
modification requests are completed in an acceptable amount of
time.
DEFINITION: Tandem system environment modification requests are those
Tandem system management functions performed by the Supplier
in comprehensive support of the Tandem system processing
environment.
33
<PAGE>
METHOD: The Supplier provided change management system or Supplier
provided help desk problem tracking system will be used to
calculate time to complete.
SERVICE LEVEL:
-----------------------------------------------------------
Values Metric
-----------------------------------------------------------
Service Level - 95% of requests completed by
agreed upon target dates.
-----------------------------------------------------------
Increased Impact - Less than 90% of requests
completed by agreed upon
target dates.
-----------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards User Community
RESPONSIBILITY: Supplier
PERIOD: Monthly
HOURS OF OPERATION: 06:00 - 23:59
RESOURCE RANGE: For all Wards Tandem systems, present and future, which
are under the Supplier's management.
REPORT: See Master Agreement Schedule D, ReportingACTION:
See Master Agreement Schedule D- II, Action Type - I
RESPONSE TIME
-------------
OBJECTIVE: Supplier will provide acceptable response times for end users.
DEFINITION: Measured as internal port-to-port response time.
Application Service Level Increased Impact
- - --------------------------------------------------------------------------------
LU- Big Ticket Sub- seconds More than 1.5 seconds
- - --------------------------------------------------------------------------------
Credit and Check on Sub seconds Greater than 1.5 seconds
Authorization
- - --------------------------------------------------------------------------------
METHOD: Data Capture: The Supplier will use Supplier provided manual
records, job logs, systems logs, and any other tools available
to determine the response time
Measurement Interval: At least once per period or by
exception (i.e. missing a threshold). Supplier will provide
monthly summary reports to Wards Management for review.
34
<PAGE>
SERVICE LEVEL:
----------------------------------------------------------------
Description Data Point
----------------------------------------------------------------
Service Level 98% of Tandem system
transactions are completed in less
than service level response time.
----------------------------------------------------------------
Increased Impact Less than 97% of Tandem system
transactions are completed in less
than the increased impact response
time.
----------------------------------------------------------------
IMPACT: High
AFFECTED AREA: Wards Offices and Employees
RESPONSIBILITY: Service Performance: Supplier provides all services
related to this Service Level.
Compliance Management: Supplier provides calculation,
reporting and analysis for this Service Level
PERIOD: Monthly
HOURS OF OPERATION: 06:00 - 23:59
RESOURCE RANGE: This service level is valid, provided the transaction
rates do not exceed benchmarked transactions per day:
REPORT: See Master Agreement Schedule D, Reporting
ACTION: See Master Agreement Schedule D - II, Type-I
C. SERVICE LEVELS
-------------------
The Service Levels are identified in the following table(s). Each
Service Level is assigned a Severity Weight in the following table(s), which is
used in the calculation of the Service Level Credits. The Severity Weights are
expressed as percentages, totaling 100% for all Service Levels, and approximate
the relative severity of the impact on Wards operations of failures to meet the
respective Service Levels. The parties acknowledge that these percentages are
approximations of probable severity and relative importance and do not limit
Wards' right to contend that one or more failures to meet one or more of the
Service Levels may constitute a material breach of the Agreement. Upon 30 days
advance notice to Supplier, Wards may adjust the Severity Weights of the
respective Service Levels as Wards deems appropriate so long as the total of
such percentages does not exceed 100%.
35
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------
SERVICE DESCRIPTION SERVICE LEVEL SEVERITY SERVICE LEVEL INCREASED
LEVEL MEASUREMENT WEIGHT IMPACT LEVEL
STANDARD ID
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DATA BACKUP, 5 99.9% of all Less than 99.2% of
ARCHIVING AND designated all designated
RESTORATION critical data critical data is
is being being backed up
backed up and stored as
and stored as required as per
required as the procedures
per the manual.
procedures
manual.
- - ----------------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY Complete Complete
PLAN restoration of restoration of
Tandem Tandem system and
system and applications to
applications Wards not more
to Wards in than 12 hours of
compliance with the time period
the Wards specified by the
Disaster Wards Disaster
Recovery Plan Recovery Plan
- - ----------------------------------------------------------------------------------------------------------------------------
DISASTER RECOVERY For each For each scheduled
TEST scheduled test, test, critical
critical services specified
services by Wards are not
specified by tested according
Wards are to requirements
tested
according to
Wards
requirements
- - ----------------------------------------------------------------------------------------------------------------------------
ONLINE AVAILABILITY 80 99.9% of all Less than 99.4% of
Online Services all Online
have been Services have been
maintained to maintained to
Wards schedules. Wards
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
- - ----------------------------------------------------------------------------------------------------------------------------
schedules.
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SOFTWARE UPGRADES All Tandem All Tandem system
system software software
maintained maintained at more
within 4 months than 6 months of
of most current most current
release, or as release, or as
mutually agreed mutually agreed
upon by Wards upon by Wards and
and Supplier. Supplier.
PTFs to correct
a known problem
will be
installed
within 48
hours, or as
mutually agreed
upon by Wards
and Supplier.
- - ----------------------------------------------------------------------------------------------------------------------------
REQUEST TIME TO 95% COMPLETE BY LESS THAN 90%
COMPLETE TARGET DATE COMPLETE BY TARGET
DATE
- - ----------------------------------------------------------------------------------------------------------------------------
RESPONSE TIME 15 98% of Tandem Less than 97% of
system Tandem system
transactions transactions are
are completed completed in less
in less than than the increased
service level impact response
response time. time.
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following Service Levels are designated as Critical Service Levels:
-----------------------------------------------------------------------
SERVICE APPLICATION DESCRIPTION
LEVEL
STANDARD
-----------------------------------------------------------------------
37
<PAGE>
--------------------------------------------------------------------------
ID
--------------------------------------------------------------------------
ONLINE AVAILABILITY
--------------------------------------------------------------------------
RESPONSE TIME
--------------------------------------------------------------------------
III. SERVICE LEVEL CREDITS
A. CREDITS
In each case of a failure to satisfy a Service Level Supplier will,
within five (5) days from the identification of the deviation from the
applicable Service Level, provide to Wards a plan of activities which will allow
Supplier to satisfy the applicable Service Level at the earliest date
practicable. In addition, Wards shall be entitled to recover a Service Level
Credit for such Service Level calculated in the manner described below,
provided, however, that the aggregate amount of such Service Level Credits for
any given month will not exceed twenty percent (20%) of Supplier's monthly
charges under this Service Agreement for the applicable month (excluding
Pass-Through Expenses, if any). If a single event directly causes the failure to
achieve more than one Service Level, then only one Service Credit will apply. In
such event, Wards will select the Service Level that will be used for the
calculation of the Service Credit.
B. METHOD OF CALCULATION
If Supplier fails to meet or exceed a Service Level, the Severity
Weight corresponding to that Service Level, expressed as a percentage, will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any). If Supplier's performance fails to meet an Increased Impact
Level for any Service Level, the Severity Weight corresponding to that Service
Level, expressed as a percentage, will be doubled and such percentage will be
multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) (this calculation being in lieu of, and not in addition to, the
credit calculation for the corresponding Service Level failure). To calculate
the total Service Level Credit due to Wards for the applicable month, the
amounts calculated for each Service Level or Increased Impact Level as described
above will be totaled and such amount shall be available as a credit to Wards
against Supplier's invoice for the applicable month.
C. FREQUENCY FACTOR
In any case where Supplier fails to achieve the same Service Level
(including failure to achieve the designated Increased Impact Level for that
Service Level) in two consecutive months or in any four months in any 12-month
period, the applicable Severity Weight shall be doubled and such percentage will
be multiplied times an amount equal to ten percent (10%) of Supplier's total
charges for the applicable month (excluding Pass-Through Expenses and Special
Charges, if any) and for any subsequent months in which Supplier fails to
achieve such Service Level or Increased Impact Level; provided, however, that in
no case will Supplier be liable for total Service Credits which exceed ten
percent (10%) of the applicable monthly invoice month (excluding Pass-Through
Expenses and Special Charges, if any).
38
<PAGE>
The Service Credits will revert to the method of calculation provided in Section
III.A. above in the following circumstances:
1. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and
the failure in the second month is caused by a root problem that is
different from the root problem that was the cause of the failure in
the first month, the calculation will revert to the method of
calculation provided in Section III.A. following four consecutive
months of meeting or exceeding the Service Level.
2. In the instance where the frequency factor has been triggered by
consecutive months of failing to achieve the same Service Level and
the failure in the second month is caused by a root problem that is
the same as the root problem that was the cause of the failure in
the first month, the calculation will revert to the method of
calculation provided in Section III.A. following ten consecutive
months of meeting or exceeding the Service Level.
D. EXCUSED PERFORMANCE PROBLEM
Supplier shall not be liable to pay Wards Service Level Credits for
any failure to meet a Service Level to the extent that such a
failure is directly attributable to (i) a Force Majeure Event; (ii)
breaches of this Agreement by Wards, provided that Supplier has
provided Wards with reasonable notice of such breach immediately
after becoming aware of it and determining that such breach will
adversely impact Supplier's performance of Services and Supplier has
used all Commercially Reasonable Efforts to perform notwithstanding
such breach; (iii) acts or omissions of Wards (or third parties
acting on behalf of Wards under a written agreement, provided that
Supplier has provided Wards with reasonable notice of such act or
omission immediately after becoming aware of it and determining that
such breach will adversely impact Supplier's performance of Services
and Supplier has used all Commercially Reasonable Efforts to perform
notwithstanding such act or omission; (iv) the first manifestation
of an extraordinary latent error or defect in Equipment used by
Supplier in providing the Services (and any related repeated
instances pending the applicable Supplier's correction of the
defect) if such defect was (1) unknown to Supplier and (2) not
disclosed in any information distributed by the third party
licensor, manufacturer, or distributor and (3) not preventable or
discoverable through normal testing or maintenance procedures. The
foregoing are referred to herein collectively as an "Excused
Performance Problem." Supplier shall be liable to grant Wards
Service Level Credits for any failure to meet a Service Level
attributable to any cause other than causes expressly included in
the categories listed above.
E. TIME LIMIT
If Supplier does not notify Wards of any Excused Performance Problem
(as described in Section III.D above) within ninety (90) days of the
date Supplier provides Performance Reports covering the time period
during which the Excused Performance Problem is alleged to have
occurred, then Supplier shall be deemed to have waived the claim of
an Excused Performance Problem.
39
<PAGE>
IV. SERVICE LEVEL TERMINATION EVENT
A. DEFINITION
1. Measurement Event - For purposes of this section, a "Measurement
-----------------
Event" will be the monthly calculation of Supplier's actual
performance for each Service Level or Critical Service Level.
The total possible Measurement Events during any specific period
of time is the product of the number of months in that time
period times the number of Service Levels or Critical Service
Levels, as applicable.
2. Failure Event - For purposes of this section a "Failure Event"
-------------
shall be a specific Measurement Event for which Supplier fails
to achieve the relevant Critical Service Level(s) or Service
Level(s); provided, however, that any such failure caused by an
event described in Section III.D of this SLA shall not be
counted as a Failure Event. Any single event, act or omission
that causes multiple Service Levels to be missed will be counted
as one Failure Event.
B. REPEATED SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required Service
Levels will constitute a Service Level Termination Event.
The Service Level Measure for determining when such a Service Level
Termination Event has occurred will be the number of Failure Events
occurring during the relevant Measurement Period. A Service Level
Termination Event will have occurred if Supplier exceeds the Maximum
-------
Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT EVENTS
(SERVICE LEVELS) IN MEASUREMENT PERIOD
SERVICE LEVEL MEASUREMENT PERIOD
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Event Rolling Six Months 8 19
- - ----------------------------------------------------------------------------------------------------------------------
Service Level Failure Events Rolling Twelve Months 12 38
- - ----------------------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 6 19
failure
- - ----------------------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 8 38
Failure Events
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
C. REPEATED CRITICAL SERVICE LEVEL FAILURES
Certain repeated failures by Supplier to achieve the required
Critical Service Levels will constitute a Service Level
Termination Event.
The Service Level Measure for determining when such a Service
Level Termination Event has occurred will be the number of Failure
Events occurring during the relevant Measurement Period. A Service
Level Termination Event will have occurred if Supplier exceeds the
-------
Maximum Failure Events specified in the following table:
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------
SERVICE LEVEL MEASURE MEASUREMENT PERIOD MAXIMUM FAILURE EVENTS TOTAL MEASUREMENT EVENTS
(CRITICAL SERVICE LEVELS) IN MEASUREMENT PERIOD
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service Level Failure Events Rolling Six Months 3 12
- - --------------------------------------------------------------------------------------------------------------------
Service Level Failure Events Rolling Twelve Months 6 24
- - --------------------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Six Months 2 12
Failure Events
- - --------------------------------------------------------------------------------------------------------------------
Increased Impact Level Rolling Twelve Months 4 24
Failure Events
- - --------------------------------------------------------------------------------------------------------------------
</TABLE>
D. CATASTROPHIC LEVEL OF SERVICE
Recovery of the Tandem Service beyond twenty-four hours of the
scheduled time to recover those Services under the Wards Disaster
Recovery Plan.
E. QUALIFICATION
Nothing in this Section IV is intended to imply that any lesser
number or different combination of occurrences of deficient
performance by Supplier may not also constitute a material breach
of Supplier's obligations warranting termination of the Service
Agreement by Wards for cause.
41
<PAGE>
EXHIBIT E
TRANSFERRED EQUIPMENT
NONE
42
<PAGE>
EXHIBIT F
WARDS FACILITIES AND EQUIPMENT
WARDS FACILITIES DESIGNATED FOR USE BY SUPPLIER AT WARDS CORPORATE HEADQUARTERS
AS DESCRIBED IN EXHIBIT F TO SERVICE AGREEMENT NO. 2 (DATA CENTER SERVICES).
43
<PAGE>
EXHIBIT G
THIRD PARTY CONTRACTS AND
THIRD PARTY SOFTWARE
PROD: Tandem Himalaya K2000 Guardian System Software as defined for System
#034398:
1 R0179D46 C++ RTL V2
1 R0246D45 SQL/MP COMP AGENT
1 R0248D45 XDR STREAMS
1 R0281D44 NMCOBOL DUMMY RTL
1 R1002D40 LDST - LABELLED DUMP SUPPORT TEMPLATES
1 R1013D45 SERPENT (SOURCE ITAR)
1 R1041D20 SNMP TRAP MULTIPLEXOR
1 R1064D40 NFS SUBSYSTEM PTRACE FORMATTING MODULE
1 R1070D45 OSS ENCRYPTION ROUTINES (STUBS FOR EXPORT)
1 R2076D46 TMF-3 UTILITY PROGRAMS
1 R2079D40 FINDER - LOOKS FOR ASCII STRINGS IN EDIT FILES
1 R5800D46 NONSTOP C BASE - MULTITHREADED NONSTOP C LIBRARY
1 R5810D42 TSQLRUN - SQL LICENSE
1 R5812D42 TS/MP LICENSE - LICENSING SW FOR NONSTOP TS/MP
1 R5813D42 PATHWAY/TS LICENSE - LICENSING SW FOR PATHWAY/TS
1 R5816D44 MIGSCF - MIGRATE PUP AND COUP COMMAND FILES TO SCF
1 R5819D45 OSS PTHREADS
1 R5838D45 NSKCOM - INTERFACE TO USER-CONFIG. NSK FUNCTION
1 R5895D46 C++ STANDARD LIBRARY
1 R6017D44 NMLINKER - NATIVE MODE LINKER
1 R6030C32 DSM/SCM - HOST/PLANNER COMPONENTS
1 R6031C32 DSM/SCM - TARGET COMPONENTS
1 R6037D45 MEASURE STUBS
1 R6166D20 XLLINK - AXCEL LINKER
1 R6533D45 STDSEC - STANDARD SECURITY PRODUCT (SOURCE ITAR)
1 R6543D40 XLTRACE
1 R6553D45 FUP - FILE UTILITY PROGRAM
1 R6570D30 NLCP - NATIONAL LANGUAGE CHARACTER PROCESSING
1 R6572D40 ICONV TABLE - ICONV CHARACTER MAPPING TABLES
1 R6954D20 SNAX/CREATOR PROCESS
1 R6957D30 CONSOLES - RMI & MIOP
1 R6965D40 SEEVIEW
1 R7861D42 TSQLPRL - SQL PARALLEL LICENSE
1 R7862D20 SNMP MIB-II SUBAGENT
1 R7898D45 SRL MANAGEMENT
1 R7923D40 STD FUNCTIONS RTL
1 R7928D40 TS/MP SERVERCLASS PROCS
1 R7932D40 SOCKET LIBRARY STUB
1 R7934D44 TS/MP ROUTMON
44
<PAGE>
1 R7956D40 OSSFSLIB II - OSS FILE SYSTEM LIBRARY #2
1 R8121D31 M3681 MFC SOFTWARE
1 R8160D42 OSS SUBJECT API
1 R8163D40 TSQLDEV - SQL DEVELOPMENT ENVIRONMENT
1 R8302D46 TMF-3 STUB - TMF-3 LIBRARY STUB
1 R8304D45 NMCGEN - NATIVE MODE CODE GENERATOR
1 R8343D42 PATHWAY/TS - (TCP SCUP AND SCOBOL)
1 R8344D44 TS/MP PATHMON - PATHMON/PATHCOM
1 R8345D44 TS/MP PATHSEND
1 R8363D41 CONGRUENCY MANAGER
1 R8374D30 NSK XIO
1 R8375D42 QIOLIB - QIO LIBRARY
1 R8405D31 K2K CPU MDP FW - HIMALAYA K2000 CPU MDP FIRMWARE
1 R8431D45 NATIVE CRE/RTL - COMMON RUNTIME ENVIRONMENT (*SI)
1 R8432D44 NATIVE C RTL (SOURCE ITAR)
1 R8449D20 FASTPLW - SPOOLER PRINT PROCESS FOR LASERWRITERS
1 R8468D44 SMSYSLIB
1 R8473D46 TOOLS.H++ LIBRARY
1 R8488D40 SSG - SEEVIEW SERVER GATEWAY
1 R8496D40 HOST ROSOURCES SA - SNMP HOST RESOURCES MIB SUBAGT
1 R8497D40 IMMU-API
1 R8606D46 TMF-3 LIB
1 R8607D46 TMF-3 MAIN
1 R8608D46 TMF-3 TMP
1 R8609D46 TMF-3 RC
1 R8629D43 OSS L&T UTILS - OSS LANGUAGES & TOOLS UTILITIES
1 R8651D30 HIMALAYA LOBUG - LOW-LEVEL DEBUGGER FOR HIM SYS
1 R8652D46 TMF-3 COM
1 R8669D46 AUDIT FIXUP
1 R8671D42 QIOMON - QIO MANAGER PROCESS
1 R8672D40 SMEMSCF - SCF PRODUCT MODULE FORM SMEM
1 R8694D46 TMF-3 SERVE
1 R8695D46 TMF-3 DR
1 R8696D46 TMF-3 CAT
1 R8697D46 TMF-3 AR-ROUTINE
1 R8698D46 TMF-3 MON2
1 R8949D46 SECURITY EVENT EXIT
1 R8952D40 TRACE - TRACING FUNCTIONS FOR SUBSYSTEMS
1 R8995D40 OPENSCSI IOP
1 R9003D45 EXTDECS (EXTERNAL DECLARATIONS)
1 R9023D42 SCUTIL - SYSTEM CONFIGURATION UTILITY
1 R9050D45 NONSTOP KERNEL (SOURCE ITAR PRE D30)
1 R9051D10 ENVOY
1 R9053D46 DP2 - ENHANCED DISC PROCESS
1 R9055D46 FILSYS - FILE SYSTEM
1 R9057D40 EXPAND
45
<PAGE>
1 R9058D10 AXCESS - CHARON/CHARINT/CUP
1 R9060D11 X25AM - X.25 AXCESS METHOD
1 R9064D41 SNAX/XF - TANDEM SNA PROTOCOL
1 R9074D46 UTIL - OPERATING SYSTEM UTILITIES
1 R9086D45 MEASURE - EXAMINING SYSTEM PERFORMANCE STATISTICS
1 R9088D20 ENVOYACP/XF - ENVOYACP/XF
1 R9095D44 TSQL - TSQL COMPILER
1 R9101D41 SPOOL - SPOOLER
1 R9113D30 MBCS STUBS
1 R9117D40 EXPAND MGR
1 R9152D30 ENFORM
1 R9157D30 GUARDIAN I/O - I/O SUBSYSTEM FOR GUARDIAN 90
1 R9159D30 T16 XIO INTERFACE - FOR NEW I/O SUB SYSTEM
1 R9175D20 MLSRV-SMB FILE SERVER FOR MULTILAN
1 R9189D40 NETBATCH PLUS
1 R9191D46 TSQLCI - TSQL USER CONVERSATIONAL INTERFACE
1 R9193D44 TSQLEXE - TSQL EXECUTOR
1 R9194D46 TSQLCAT - TSQL CATALOG MANAGER
1 R9195D46 TSQLUTIL - TSQL UTILITIES
1 R9196D45 TSQLFIL - TSQL FILE SYSTEM
1 R9197D46 TSQLMSG - TSQL MISCELLANEOUS
1 R9198D44 SQLCI2 - TSQL CONVERSATIONAL INTERFACE 2
1 R9205D46 TACL - TANDEM ADVANCED COMMAND LANGUAGE
1 R9216D30 DSMS/DSNM - DISTRIB SYS NETWORK MGMT CORE & SUBSYS
1 R9219D40 IOPRM - I/O PROCESS REQUEST MANAGER
1 R9227D45 C++ RUN-TIME LIBRARY
1 R9228D40 FILSYS LIBRARIES
1 R9229D44 NATIVE RT KERNEL - KERNEL-LEVEL RUNTIME FUNCTIONS
1 R9248D44 PTAL - PORTABLE TAL COMPILER
1 R9250D40 TAL - TANDEM APPLICATION LANGUAGE
1 R9267D46 COBOL85 RTL - TANDEM COBOL85 RUN TIME LIBRARY ONLY
1 R9268D37 XTRAVER - RELEASE IDENTIFIER
1 R9276D30 AXCEL - THE ACCELERATOR
1 R9280D40 LANGRTL - TANDEM LANG. COMMON RUN TIME LIBRARY
1 R9289D40 TMDS SCSI SUBSYSTEM
1 R9292D30 APE - ACCELERATED PROGRAM EXAMINER
1 R9298D40 SWID - SOFTWAY FILE IDENTIFICATION UTILITY
1 R9337D40 ATP6100 - 6100 ASYNCHRONOUS TERMINAL PROTOCOL
1 R9338D30 CP6100 - 6100 COMMUNICATIONS PROTOCOL
1 R9339D20 CSSCSM
1 R9347D22 TMDSCDSL - COMM DIAGNOSTIC SERVER LIBRARY
1 R9375D40 TLAM I/O PROCESS
1 R9388D20 CHARON I/O DIAGNOSTIC LIBRARY
1 R9394D10 CMI/CMP
1 R9497D31 TMDS TAPE SUBSYSTEM
1 R9498D30 TMDS DISK SUBSYSTEM
46
<PAGE>
1 R9499D31 TMDS - TANDEM MAINT & DIAGNOSTIC SYSTEM
1 R9500D40 CRUNCHD
1 R9543D45 DSAP/DCOM - DISK MAINTENANCE UTILITIES
1 R9549D30 C RTL - C RUN-TIME LIBRARY (SOURCE ITAR)
1 R9550D40 SOCKET LIBRARY
1 R9551D40 TCPIP PROCESS
1 R9552D46 FTP CLIENT AND SERVER
1 R9553D40 TELSERV
1 R9558D40 TELNET CLIENT-T16
1 R9561D40 I18NLIB -I18N METHODS LIBRARY (SOURCE ITAR)
1 R9566D40 ONC RPC
1 R9576D23 SNMP AGENT
1 R9600D40 GPLIB - GENERAL PURPOSE LIBRARY
1 R9606D20 TEDIT - TANDEM BLOCK MODE EDITOR
1 R9617D42 VPROC - TANDEM VERSION PROC. LIST TOOL
1 R9620D46 FASTSORT - SORT FOR NONSTOP SYSTEM
1 R9621D30 BINDER - TANDEM OBJECT MODULE LINKAGE EDITOR
1 R9622D30 CROSSREF - TANDEM SOFTWARE CROSSREFERENCE TOOL
1 R9624D40 IOEDIT - GPLIB
1 R9626D42 NOFT
1 R9627D40 OSSFSLIB-OSS FILE SYSTEM LIBC.A OBJECTS (*SI)
1 R9631D40 EMS - EMS BASE
1 R9632D31 EMS - EMS DISTRIBUTION SUPPORT
1 R9633D40 DSM TEMPLATE SERVICES
1 R9635D20 DNS - DISTRIBUTED NAME SERVICE
1 R9640D30 VIEWPOINT
1 R9661D40 MC RUN TIME LIBRARY (SOURCE ITAR)
1 R9663D31 DISK/TAPE BOOT (WAS PART OF T9023)
1 R9664D40 FMTR - FORMATTER
1 R9665D21 SWARC - SOFTWAY ADV RECOVERABLE COMPRESSION
1 R9673D40 INSPECT
1 R9752D40 SPI - SUBSYSTEMS PROGRAMMATIC INTERFACE
1 R9753D40 I/O DRIVERS
1 R9756D40 VISUAL INSPECT SERVER (NSK)
1 R9766D31 TMDS CPU COMMON
1 R9770D31 TMDS MDS COMMON
1 R9789D40 HYA STD MILLICODE-HIMALAYA STANDARD MILLICODE
1 R9793D30 HYA IOS MICROCODE - HIMALAYA IOS MICROCODE
1 Y0238D40 PTR/SNMP FORMAT MOD
1 Y1015D40 TNT SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1016D40 AMT SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1017D40 ATP SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1018D40 CDF SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1019D40 CP6 SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1020D40 CSM SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1021D40 ENV SUBSYSTEM PTRACE FORMATTING MODULE
47
<PAGE>
1 Y1022D40 EXF SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1023D40 EXP SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1024D40 GDS SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1025D40 IPX SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1026D40 LAM SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1027D40 MHS SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1028D40 NNM SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1029D40 OAS SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1030D40 OS4 SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1031D40 OSA SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1032D40 OSF SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1033D40 PRM SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1034D40 QIO SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1035D40 SCP SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1036D40 SCS SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1037D41 SNAX/XF PTRACE PRD MOD 971201
1 Y1038D40 TCI SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1039D40 TLK SUBSYSTEM PTRACE FORMATTING MODULE
1 Y1040D40 X25 SUBSYSTEM PTRACE FORMATTING MODULE
1 Y6015D41 INSTALLATION AIDS
1 Y6021D20 DNS - DOMAIN NAME SERVER
1 Y6022D10 TFTP - TRIVIAL FILE TRANSFER PROTOCOL
1 Y6024D30 SMTP - T/MAIL GATEWAY
1 Y6027D30 MEDIA CATALOG MANAGER
1 Y6028D30 MEDIACOM/MEDIASRV
1 Y6029C31 DSM/SCM - CNFGINFO TOOL
1 Y6041C30 M3126 - DISK CONTROLLER DOWNLOADABLE MICROCODE
1 Y6046C30 P3126 - PROMCODE FOR V90 (CYC)
1 Y6047C20 TCP/IP CONFIG - CONFIGURATION FILES
1 Y6243D40 TCP/IP - SCF MODULE
1 Y6245D30 TELNET SCF PRODUCT MODULE
1 Y6264D40 SNAX/APC - SCF MODULE
1 Y6523D41 TFDS - TANDEM FAILURE DATA SYSTEM
1 Y6539D40 PUP - PERIPHERAL UTILITY PROGRAM
1 Y6556C30 M3218/P3218-PROM/DWNLOAD 5200/NFF CONTROLLER
1 Y6578C30 P3128 - BOOTSTRAP CODE
1 Y6579C30 M3128 - DOWNLOAD CODE
1 Y6587C31 P3602 - PROM CODE FOR 3602 CONTROLLERS
1 Y6588C30 P3603 - PROM CODE FOR 3603 CONTROLLERS
1 Y6591D40 GDSX - SCF PRODUCT MODULE
1 Y6916D41 SNAX/XF - SCF PRODUCT MODULE
1 Y6939D40 SNAX/CRE-2 SCF PRD MOD
1 Y6942D40 GPA - GUARDIAN PERFORMANCE ANALYZER
1 Y6944D40 SNAX/CDF - SCF PRODUCT MODULE
1 Y6946D42 OSI/MHS - SCF PRODUCT MODULE
1 Y6950C20 M3214/P3214 - MICROCODE FOR MUIR/SHASTA TAPE DRIVE
1 Y6956D10 DM-IOPS
48
<PAGE>
1 Y6958D30 LABELED TAPE
1 Y6983D41 TANDEM OSI/APLMGR SCF PRD MOD
1 Y6984D41 TANDEM OSI/FTAM SCF PRD MOD
1 Y8103D40 ONS - OPEN NOTIFICATION SERVICES
1 Y8122C20 CLXSCP - CLX SCP MDP FIRMWARE
1 Y8123C20 PMM MDP - CLX PSMON MDP FIRMWARE
1 Y8127D30 SWCI - SWITCH COMMAND INTERFACE
1 Y8135D30 MFC FIRMWARE - CLX FIRMWARE
1 Y8136D20 TMDSDMFC - TMDS DIAG FOR CLX MFC DATA COMM
1 Y8137D31 PWR - CLX AUTO POWER ON
1 Y8303D31 FIR FIXIT - FIXES BAD FIRS
1 Y8312D40 M3223 - OPEN SCSI PHASE 1
1 Y8368D30 DEFAULT DSM/TC MGR - DEFAULT MEDIA CATALOG MGR
1 Y8370D34 TMDS INVNTRY DIALOUT - SYSHEALTH DIALOUT FOR INV
1 Y8384D40 OCM - OPERATIONS CONSOLE PROCESS
1 Y8416D21 CAM/DFA - CAM DEVELOPMENT FACILITY
1 Y8448D20 CSSSNAX - CSS SNAX ADCCP LINE HOLDER
1 Y8474D20 MULTI EVENT VIEWER (MEV) HOST
1 Y8481D44 CSG - CLIENT SERVER GATEWAY
1 Y8602D31 TCP/IP UTILITIES
1 Y8603D20 SNMP AGENT SCF PRODUCT MODULE
1 Y8623D40 OSSDSM - OSS DSM MODULES
1 Y8644D40 EDDB - EVENT DETAIL DATABASE
1 Y8647D20 P3220/M3320 - 3220 CNTRLR FIRMWRE CODE
1 Y8654D21 IMG MDP - IMAGE CLX CPU MDP USED IN FRMWRD-UPDATE
1 Y8682D30 IPX-SCF SCF PRODUCT MODULE
1 Y8685D30 TAPECOM
1 Y8923D30 NONSTOP TM/MP TIFSERVE
1 Y8929D20 M3216 - TAPE CONTROLLER FIRMWARE
1 Y8975D43 OMF - OBJECT MONITORING FACILITY
1 Y8976D21 TANDEMTALK SCF PRODUCT MODULE
1 Y8980D40 DNI/DDL - DSM NMVT INTERFACE DDL
1 Y9033D30 IXF - INFORMATION EXCHANGE FACILITY - HOST
1 Y9071D20 VIEWSYS - SYSTEM RESOURCE MONITORING UTILITY
1 Y9082D40 SCF - SUBSYSTEM CONTROL FACILITY
1 Y9100D40 DDL - TANDEM DATA DICTIONARY LANGUAGE
1 Y9112D40 COMMON KERNEL DEFS - COMMON KERNEL DEFINITIONS
1 Y9138D20 SRVBYTE - H/W SERVER FOR 3602/3603 CONTROLLERS
1 Y9144D30 TMDSCOMM - DIAG FOR H/W RUNNING ENVOY
1 Y9147D30 CSL - COMM SUBSYSTEM LIBRARY
1 Y9190D30 NETBATCH
1 Y9208D46 DISK UTIL - DISK UTILITIES
1 Y9226D40 INSPECT SUBSYSTEM
1 Y9230D46 RLSEDOC - TANDEM RELEASE DOCUMENTATION
1 Y9264C10 INFOWAY - INFO EXCHANGE BETWEEN TANDEM AND CUST
49
<PAGE>
1 Y9265C32 SYSWAY - COMMUNICATION COMPONENT OF INFOWAY
1 Y9266C31 TRANSWAY - INFOWAY TRANSFER TO GATEWAY
1 Y9279C20 CHARMAPS - COMMON KERNEL CHARACTER MAPS
1 Y9296D31 NOS - SCF MODULE
1 Y9299D10 IC - INVENTORY COLLECTOR
1 Y9301D21 CSSTOOL - CSS PROGRAMMER'S DEVELOPMENT TOOLS
1 Y9302B20 CSSTOOL - COMMUNICATIONS SUBSYSTEMS TOOLS
1 Y9304C20 CSSCIU
1 Y9307C20 CSSASYNC - CSS ASYNCHRONOUS DRIVER
1 Y9311C20 CSSLAPB - EXPAND PROTOCOL
1 Y9312D20 CSSADCCP - ADVANCED DATACOMM CONTROL PROCEDURES
1 Y9317D10 X25LAPB - X.25 PROTOCOL
1 Y9322C30 CSSPRINT - SAGE PRINTER CLIP MODULE
1 Y9323D10 X25AM - SCF PRODUCT MODULE
1 Y9324D40 MLMAN - SCF PRODUCT MODULE
1 Y9325D10 AM3270 - SCF PRODUCT MODULE
1 Y9326D10 TR3271 - SCF PRODUCT MODULE
1 Y9327D30 OSI/AS - SCF PRODUCT MODULE
1 Y9328D30 OSI/TS - SCF PRODUCT MODULE
1 Y9329D40 SNAX/CM - SNAX CONNECTION MANAGEMENT
1 Y9353D20 ZCDGDDL
1 Y9358D20 TMDSCSS - TMDS DIAG FOR 6100/6105/6106 CONTROLLERS
1 Y9360D30 DIAG6204 - 6204 CONTROLLER DIAGNOSTIC
1 Y9362D31 TMDSLAN - LANS ON-LINE DIAGNOSTIC
1 Y9376D40 MLMUX - DOWNLOADABLE CONTROLLER CODE
1 Y9377D30 MLAD - PC BUS BOX CODE (GATEWAY CODE)
1 Y9378D11 LANBOOT - CONTROLLER BOOT CODE
1 Y9379D40 TLAM MANAGER
1 Y9380D30 MLRES - LAN DYNAMIC RESOURCE MANAGEMENT
1 Y9385D40 PTRACE - GENERIC TRACE PROG FOR SEVERAL COMM PROD.
1 Y9395D45 SCP - SUBSYSTEM CONTROL PROCESS FOR NSM
1 Y9396D40 COMMON SPI DEFINITIONS
1 Y9487D20 TMDSTPI-TMDS TANDEM PARALLEL INTERFACE FOR CYCLONE
1 Y9494D31 TMDSIPB - TANDEM MAINT/DIAG. SYSTEM FOR IPB STATUS
1 Y9495D31 TMDS GUARDIAN I/O SUBSYSTEM
1 Y9496D21 TMDS OPTICAL DISK SUBSYSTEM
1 Y9517D43 VHS - VIRTUAL HOMETERM SYSTEM
1 Y9519D20 ARCHUTIL - ARCHIVE UTILITIES
1 Y9545C30 M3219/P3219 - MICROCODE
1 Y9568D30 TMDS LIBRARY
1 Y9569D31 TMDS AUTO
1 Y9578D40 FILE SYSTEM ERRORS
1 Y9586C20 CMDP - I/O REGULATOR FIRMWARE
1 Y9594D30 TABLEPM - SCF TABLE-DRIVEN PM
1 Y9598C20 M3211/P3211 (CYCLONE/TURBO MICROCODE (TNGSING))
50
<PAGE>
1 Y9599C31 CMITOOL - CMI-TO-SCF COMMAND FILE CONVERSION TOOL
1 Y9601D20 EDIT
1 Y9605D10 TFORM - TANDEM FORMATTER
1 Y9607D20 TGAL
1 Y9612C30 INSTALL - TANDEM SOFTWARE INSTALLATION PROGRAM
1 Y9634D30 EMS - FILTERING SUPPORT
1 Y9657D20 M3129 DISK CONTROLLER DOWNLOAD CODE
1 Y9658D20 P3129 - DISK CONTROLLER BOOTSTRAP CODE
1 Y9666C30 SWEDS - ELECTRONIC SW DOWNLOAD
1 Y9671D20 EMS ANALYZER-EVENT MANAGEMENT SERVICE ANALYZER
1 Y9674D30 PDTSHARE - PDT COMMON CODE
1 Y9679D10 ZENVSCF - ENVOY BINARY TABLE FOR SCF
1 Y9683D43 NSX-HOST - NETWORK STATISTICS EXTENDED
1 Y9701D32 SYSHEALTH CODE
1 Y9702D32 SYSHEALTH DATA
1 Y9703D31 SYSUI
1 Y9768D31 TMDS CPU TYPES 4 & 6
1 Y9776D31 TMDS MDS TYPES 4 & 6
1 Y9785D31 HYA CPU DIAG - HIMALAYA CPU DIAGNOSTICS
1 Y9820C20 3125 PROM CODE
1 Y9821C30 M3125 - DOWNLOADABLE MICROCODE
1 Y9849D20 B3129 - B3129 BACK-END CODE
1 Y9884C30 M3215 - NAPA CONTROLLER MICROCODE
1 Y9893D30 AUTOREALLOCATE - AUTO DISK SECTOR REALLOCATION FA
1 Y9896C30 PROFILE - GUARDIAN RLSE MIGRATION PERF. EST. TOOL
1 Y9978D21 HYA I/O MDP FW - HIMALAYA I/O MDP FIRMWARE
1 Y9996D31 REMCP - STD. REMOTE CONSOLE PROCESS FOR VLX/CLX
51
<PAGE>
EXHIBIT H
WARDS SOFTWARE
. Disaster Recovery: Tandem Himalaya K20000 Guardian System Software as
defined for System #034398.
. Development: Tandem Himalaya K2000 Guardian System Software as defined for
System #031697.
. Appl: Wards Check Collection system software as in use on system \MWH,
designed by Banctec Payment Systems, and maintained by Primary Resource,
Inc.
. Appl: Wards Data Collect system software as in use on system \MWH, designed
and maintained by Primary Resource, Inc.
. Appl: Wards POS Credit Authorization system software as in use on system
\MWH, designed by Banctec Payment Systems and Primary Resource, Inc. and
maintained by Primary Resource, Inc.
. Appl: Wards Verifone/ZON terminal software as in use on MW/Thrifty POS ZON
devices utilizing \MWH POS credit authorization via dial-in; designed and
maintained by Banctec Payment Systems.
. Tool-Appl: Primary Resource, Inc. `CMCOMO' communications management
network control process as implemented on Wards \MWH Tandem system for full
network systems functionality.
. Tool-Appl: Primary Resource, Inc. `CMA' network definition generation
process as implemented on Wards ADCU PCs for full network implementation.
. Tool-Appl: Primary Resource, Inc. `PRIINFO' high-speed file detail
statistic report process as used on Wards \MWH Tandem system for file
management.
. Tool-Appl: Primary Resource, Inc. `VIEWPROC' cpu/process utilization
display monitor, as implemented on Wards VIEWPT and ADCU PCs.
. Tool-Appl: Primary Resource, Inc. `REPORTVIEW' Tandem spooler perusal
process, as implemented on Wards ADCU PCs and DEV PCs.
. Tool-Appl: Cail/TCG, Inc. CTT/W32 Tandem 6530 terminal emulator as
implemented on ADCU PCs at Wards offices and remote support locations,
including file transfer and async multi-terminal operation.
. Tool-Appl: Lotus Development Corp. Lotus Notes as in use for Wards E-mail
and scheduling operations.
. Appl: Microsoft Corp. MS/Windows95 PC Operating System.
. Tool-Appl: Microsoft Corp. MS/Office97Pro.
. Tool-Appl: Connect Direct Network Data Mover.
52
<PAGE>
EXHIBIT I
SUPPLIER SOFTWARE
NONE
53
<PAGE>
10.(iv)(D)(6)
MONTGOMERY WARD & CO., INCORPORATED
RETIREMENT SECURITY PLAN
(AS AMENDED AND RESTATED EFFECTIVE
AS OF JANUARY 1, 1998)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PREAMBLES...................................................................................................... 1
ARTICLE I Background Information............................................................................... 4
1.1 Purpose of Plan.......................................................................... 4
1.2 Application of Restatement and Determination of Retirement Benefits...................... 4
1.3 Other Effective Dates.................................................................... 5
ARTICLE II Definitions......................................................................................... 6
2.1 "Accrued Benefit"........................................................................ 6
2.2 "Actuarial Equivalent" or "Equivalent Actuarial Value"................................... 7
2.3 "Actuary"................................................................................ 10
2.4 "Administrative Director"................................................................ 10
2.5 "Affiliate".............................................................................. 10
2.6 "Average Weekly Hours"................................................................... 10
2.7 "Beneficiary"............................................................................ 10
2.8 "Board".................................................................................. 10
2.9 "Break in Service"....................................................................... 10
2.10 "Cash Balance Account"................................................................... 11
2.11 "Code"................................................................................... 11
2.12 "Committee".............................................................................. 11
2.13 "Company"................................................................................ 11
2.14 "Continuous Service"..................................................................... 11
2.15 "Credited Service"....................................................................... 11
2.16 "Daily Pay Rate"......................................................................... 13
2.17 "Direct Rollover"........................................................................ 13
2.18 "Disability Participant"................................................................. 13
2.19 "Disability Plan"........................................................................ 13
2.20 "Disability Retirement Benefit".......................................................... 13
2.21 "Distributee"............................................................................ 13
2.22 "Effective Date"......................................................................... 13
2.23 "Eligible Location Shutdown Participant"................................................. 13
2.24 "Eligible Retirement Plan"............................................................... 14
2.25 "Eligible Rollover Distribution"......................................................... 14
2.26 "Employee" or "Associate"................................................................ 14
2.27 "ERISA".................................................................................. 15
2.28 "Highly Compensated Associate"........................................................... 15
2.29 "Hours of Service"....................................................................... 15
2.30 "Immediate Cash Balance Account Annuity"................................................. 15
2.31 "Interest Credit(s)"..................................................................... 15
2.32 "Investment Manager"..................................................................... 15
2.33 "IRS".................................................................................... 15
2.34 "Jefferson Stores Plan".................................................................. 16
2.35 "Labor Department"....................................................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
2.36 "Lechmere".............................................................................. 16
2.37 "Lechmere Cash Balance Account"......................................................... 16
2.38 "Lechmere Immediate Cash Balance Account Annuity"....................................... 16
2.39 "Lechmere Interest Credits"............................................................. 16
2.40 "Lechmere Plan"......................................................................... 16
2.41 "Optional Retirement Benefit"........................................................... 16
2.42 "Participant"........................................................................... 16
2.43 "Participating Company"................................................................. 16
2.44 "PBGC".................................................................................. 17
2.45 "Plan".................................................................................. 17
2.46 "Prior Plans"........................................................................... 17
2.47 "Regulations"........................................................................... 17
2.48 "Required Contributions"................................................................ 17
2.49 "Retirement" or "Retire"................................................................ 17
2.50 "Retirement Benefit".................................................................... 17
2.51 "Retirement Security Plan".............................................................. 17
2.52 "Savings Plan".......................................................................... 18
2.53 "Signature"............................................................................. 18
2.54 "Service"............................................................................... 18
2.55 "Surviving Spouse"...................................................................... 19
2.56 "Total Earnings"........................................................................ 19
2.57 "Transferred Contribution Account"...................................................... 20
2.58 "Trust"................................................................................. 20
2.59 "Trust Agreement"....................................................................... 20
2.60 "Trust Fund"............................................................................ 20
2.61 "Trustees".............................................................................. 20
2.62 "Vest", "Vested" or "Vesting"........................................................... 20
2.63 "Ward".................................................................................. 21
2.64 "Weekly Pay Rate"....................................................................... 21
2.65 "Year".................................................................................. 21
2.66 "Year of Credited Service".............................................................. 21
2.67 "Year of Service"....................................................................... 22
ARTICLE III Effective Date.................................................................................... 22
ARTICLE IV Eligibility........................................................................................ 22
ARTICLE V Participation....................................................................................... 24
5.1 Enrollment.............................................................................. 24
5.2 Suspension of Participation............................................................. 24
5.3 Break in Service........................................................................ 25
5.4 Qualified Military Service.............................................................. 25
ARTICLE VI Contributions...................................................................................... 25
6.1 Cessation of a Participant's Contributions.............................................. 25
6.2 Company Contributions................................................................... 25
6.3 Actuarial Assumptions................................................................... 26
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII Cash Balance Account and Lechmere Cash Balance Account............................................ 26
7.1 Cash Balance Account - In General....................................................... 26
7.2 Annual Cash Balance Contribution........................................................ 27
7.3 Location Shutdown Contribution.......................................................... 28
7.4 Interest Credits........................................................................ 28
7.5 Immediate Cash Balance Account Annuity.................................................. 29
7.6 Lechmere Cash Balance Account - In General.............................................. 30
7.7 Lechmere Interest Credits............................................................... 30
7.8 Lechmere Immediate Cash Balance Account Annuity......................................... 30
ARTICLE VIII Retirement Dates................................................................................. 31
8.1 Normal Retirement Date.................................................................. 31
8.2 Early Retirement Date................................................................... 31
8.3 Postponed Retirement Date............................................................... 32
8.4 Disability Retirement Date.............................................................. 32
ARTICLE IX Amount of Retirement Benefit or Disability Retirement Benefit...................................... 32
9.1 Retirement Benefit Payable upon Retirement at Normal Retirement Date.................... 32
9.2 Retirement Benefit Payable upon Retirement at Early Retirement Date..................... 33
9.3 Retirement Benefit Payable upon Retirement at Postponed Retirement Date................. 33
9.4 Disability Retirement Benefit Payable at Disability Retirement Date..................... 34
9.5 Offset of Retirement Benefit............................................................ 35
9.6 Cessation of Benefit Payments Following Reemployment After Retirement................... 36
9.7 Retirement Benefit Payable upon Retirement Following Reemployment after
Termination of Service................................................................ 36
9.8 Maximum Amount of Retirement Benefit.................................................... 37
ARTICLE X Eligibility for Retirement Benefit.................................................................. 39
10.1 Eligibility for Retirement Benefit at Normal Retirement Date............................ 39
10.2 Eligibility for Retirement Benefit at Early Retirement Date............................. 39
10.3 Eligibility for Retirement Benefit at Postponed Retirement Date......................... 40
10.4 Disability Plan Benefits................................................................ 40
ARTICLE XI Methods of Payment................................................................................. 40
11.1 Qualified Joint and Survivor Benefit.................................................... 40
11.2 Optional Methods of Payment............................................................. 41
11.3 Election of Optional Method of Payment.................................................. 43
11.4 Rules Regarding Distribution of Benefits................................................ 44
11.5 Written Explanations of Survivor Benefit................................................ 46
11.6 Cash Out................................................................................ 48
11.7 Direct Rollover......................................................................... 49
11.8 Disability Retirement Benefit........................................................... 49
ARTICLE XII Death Benefits.................................................................................... 49
12.1 Pre-Retirement Death Benefit............................................................ 50
12.2 Death Benefits Attributable to Cash Balance Account and Lechmere Cash Balance Account... 50
12.3 Designation of Beneficiary.............................................................. 52
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XIII Termination of Service........................................................................... 53
13.1 Termination of Service by Non-Vested Participant........................................ 53
13.2 Termination of Service by Vested Participant............................................ 53
13.3 Termination of Service without a Break in Service....................................... 54
13.4 Termination of Service Following Reemployment........................................... 54
ARTICLE XIV Alienation of Benefits............................................................................ 54
14.1 Non-Assignability....................................................................... 54
14.2 Judgment Offset......................................................................... 56
ARTICLE XV Administration..................................................................................... 57
15.1 In General.............................................................................. 57
15.2 Appointment of Trustees................................................................. 57
15.3 Appointment of Administrative Director.................................................. 57
15.4 Specific Responsibilities and Authority of the Committee................................ 58
15.5 Rules of Procedure...................................................................... 59
15.6 Trust Fund.............................................................................. 59
15.7 Claims Procedure........................................................................ 61
15.8 Payment of Expenses..................................................................... 62
15.9 Notices, etc............................................................................ 62
15.10 Filing of Information................................................................... 63
15.11 Claims Against Trust Fund............................................................... 63
15.12 Agent for Service of Process............................................................ 64
ARTICLE XVI Termination of Participating Company's Participation.............................................. 64
16.1 Right to Terminate...................................................................... 64
16.2 Effect of Termination and Payment of Distributable Reserve.............................. 65
16.3 Transfer of Assets to Successor Plan.................................................... 65
ARTICLE XVII Amendment and Termination........................................................................ 66
17.1 Power to Amend.......................................................................... 66
17.2 Retroactive Amendments.................................................................. 67
17.3 Notices of Amendments................................................................... 67
17.4 Effect of Termination................................................................... 67
17.5 Distribution of Assets If No ERISA Termination.......................................... 67
17.6 Distribution of Assets Upon Termination................................................. 68
17.7 Distribution of Assets Upon Termination Where Assets Not Sufficient..................... 69
17.8 Effect of Partial Termination........................................................... 69
ARTICLE XVIII Limitations in the Event of Early Discontinuance................................................ 70
18.1 Application............................................................................. 70
18.2 Restriction of Benefits................................................................. 70
18.3 Payment of Benefits..................................................................... 71
18.4 Additional Reserves..................................................................... 71
ARTICLE XIX Miscellaneous..................................................................................... 72
19.1 In General.............................................................................. 72
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
19.2 Coordination of Payment of Benefits with Other Plans.................................... 72
19.3 Incapacity.............................................................................. 72
19.4 Inability to Locate Benefit Recipient................................................... 73
19.5 Benefit Provided by Insurance........................................................... 73
19.6 Credit for Prior Employment............................................................. 73
19.7 Construction............................................................................ 73
ARTICLE XX Top Heavy Provisions............................................................................... 73
20.1 In General.............................................................................. 74
20.2 Definitions............................................................................. 74
20.3 Vesting................................................................................. 74
20.4 Distributions to Participants........................................................... 75
20.5 Top Heavy Plan Years.................................................................... 76
20.6 Duplication of Benefits................................................................. 76
ARTICLE XXI Transfer of Amounts Attributable to Contributions Under the Jefferson Stores Plan................. 77
21.1 Transfer of Accrued Benefit............................................................. 77
21.2 Transfer Held in Trust.................................................................. 77
21.3 Payment of Benefits..................................................................... 77
ARTICLE XXII Transfer of Amounts Attributable to Contributions Under the Lechmere Plan........................ 78
22.1 Transfer of Accrued Benefit............................................................. 78
22.2 Transfer Held in Trust.................................................................. 78
22.3 Payment of Benefits..................................................................... 78
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Addendum A.................................................................................................... 79
Addendum B.................................................................................................... 81
</TABLE>
vi
<PAGE>
PREAMBLES
---------
WHEREAS, the Retirement Security Plan first became effective on
February 1, 1957, and was thereafter from time to time amended; and
WHEREAS, effective January 1, 1975, Ward amended and restated the
Retirement Security Plan to provide greater retirement security for eligible
associates of Ward and Participating Companies; and
WHEREAS, the Profit-Sharing Plan was merged into the Retirement
Security Plan effective as of January 1, 1975; and WHEREAS, effective as of
January 1, 1976, Ward amended the Retirement Security Plan to satisfy the
requirements of ERISA; and
WHEREAS, effective January 1, 1979, the Retirement Security Plan was
amended and restated to reflect certain corporate reorganization changes, assure
continued compliance with ERISA and the final regulations issued thereunder,
satisfy the requirements of the 1978 amendments to the Age Discrimination in
Employment Act of 1967 and include administrative and clarifying amendments; and
WHEREAS, Ward further amended and restated the Retirement Security Plan
for service on or after January 1, 1981, as a separate and distinct retirement
benefit plan for management, administrative and supervisory associates, and to
establish distinct and separately funded retirement benefit plans for timecard
associates and for represented associates, with three separate trust accounts
commingled for investment purposes; and
WHEREAS, Ward amended and restated the Plan, effective April 1, 1983,
so that amounts attributable to associate contributions made to the Plan after
December 31, 1980, and the Profit-Sharing Plan Balances hereunder shall be
transferred to the Savings Plan, adopted by Ward effective April 1, 1983, for
the benefit of eligible associates, to eliminate associate contributions under
the Plan, to require eligible associates to authorize salary reduction or
payroll deduction contributions to the Savings Plan in order to be eligible for
continued benefit accruals under the Plan, and to offset and reduce the benefits
provided under the Plan by the
<PAGE>
benefits, if any, that are or could be provided by the Savings Plan funds
attributable to the transferred associate contributions and the required salary
reduction or payroll reduction contributions authorized by associates under the
Savings Plan; and
WHEREAS, Ward further amended the Plan, effective January 1, 1984, to
provide a guaranteed minimum pension benefit for associates, to satisfy the
requirements of the Tax Equity and Fiscal Responsibility Act of 1982, to comply
with certain requirements regarding actuarial computations, and to make other
technical changes; and
WHEREAS, Ward further amended the Plan effective January 1, 1985, to
merge the Retirement Plan for Employees of Jefferson Stores, Inc., into the
Plan, to transfer amounts attributable to contributions under the Jefferson
Stores Plan to the Plan for the benefit of eligible associates, to satisfy the
requirements of the Deficit Reduction Act of 1984 and the Retirement Equity Act
of 1984, and to make other technical changes; and
WHEREAS, Ward amended and restated the Plan, effective January 1, 1989,
to merge the: (a) Montgomery Ward & Co., Incorporated Management Retirement
Security Plan; (b) Montgomery Ward & Co., Incorporated Timecard Retirement
Security Plan and (c) Montgomery Ward & Co., Incorporated Represented Retirement
Security Plan, to satisfy the requirements of the Tax Reform Act of 1986 and to
make other technical changes; and
WHEREAS, Ward amended and restated the Plan, effective January 1, 1994,
to merge the Lechmere Plan into the Plan, effective as of August 1, 1994, to
transfer amounts attributable to contributions under the Lechmere Plan to the
Plan for the benefit of eligible associates, to satisfy the requirements of
recent changes to the Code, and to make other technical changes; and
WHEREAS, Ward amended the Plan, effective October 1, 1995, to provide
for participation in the Plan by eligible employees of Montgomery Ward (Hong
Kong) Limited, as described in Addendum A; and
2
<PAGE>
WHEREAS, Ward amended the Plan, effective January 1, 1996, to provide
for a Disability Retirement Benefit, to provide for participation in the Plan
and service credit for certain employees of Signature who were previously
employed with Amoco Oil Company, its affiliates or Emanacom Data Services, Inc.,
and to make other technical changes as requested by the Internal Revenue
Service; and
WHEREAS, Ward amended the Plan, effective April 1, 1997, to provide for
participation in the Plan by eligible employees of Montgomery Ward & Co.,
Incorporated - Japan Branch, as described in Addendum B; and
WHEREAS, Ward amended the Plan effective July 1, 1997, to: (a) freeze
benefit accruals under the career average pay formula under the Plan as of July
1, 1997 (other than for Participants employed by Signature or Lechmere); (b)
replace the career average pay formula with a Cash Balance Account to be
credited with matching contributions based on a Participant's Basic
Contributions to the Savings Plan (other than for Participants employed by
Signature or Lechmere); and (c) provide for lump sum distribution of Cash
Balance Accounts upon termination of employment; and
WHEREAS, Ward amended the Plan effective September 17, 1997, to provide
for a Location Shutdown Contribution for certain eligible Associates; and
WHEREAS, Ward amended the Plan generally effective January 1, 1998, to
modify certain provisions with respect to the Disability Retirement Benefit, to
address the eligibility of certain Associates employed at the Romeoville,
Illinois Distribution Center and to increase the cash out amount to $5,000
pursuant to the Taxpayer Relief Act of 1997; and
WHEREAS, Ward desires to amend and restate the Plan generally effective
January 1, 1998, to incorporate the amendments to the Plan since the last
restatement, to make certain changes necessary or desirable as a result of the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Small
Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997 and to
make such other changes as the Committee shall deem necessary or desirable.
3
<PAGE>
NOW, THEREFORE, the Plan is hereby amended and restated to read as
follows:
ARTICLE I
Background Information
----------------------
I.1 Purpose of Plan. The purpose of this Plan is to provide
---------------
retirement benefits for eligible Associates of the Company and to thereby
encourage such Associates to make and continue careers with the Company. The
Plan, as amended and restated herein, and the Trust are intended to qualify as a
plan and trust which continue to meet the requirements of Sections 401(a) and
501(a) of the Code.
I.2 Application of Restatement and Determination of Retirement
----------------------------------------------------------
Benefits. This restatement applies to Associates who are in the Service of the
- - --------
Company on any date after the Effective Date. Any benefits payable to a
Participant who retired or terminated service prior to January 1, 1981, without
resuming service thereafter, or whose normal retirement date occurred on or
before January 1, 1981, and the benefits payable to any Associate who was in the
Service of the Company on December 31, 1980, but who has not enrolled in the
Plan thereafter, will be paid from the Trust, but will be governed solely by the
terms of the Retirement Security Plan. The total benefits payable from the Trust
for any Participant enrolled in the Plan on any date after December 31, 1980,
will be calculated in three parts or such lesser number of parts as may be
applicable to the Participant: (a) the Participant's benefits determined as of
December 31, 1980, under the Retirement Security Plan; provided that, in making
such determination, Service after December 31, 1980, shall apply only for
purposes of Vesting under the Retirement Security Plan, (b) the Participant's
Supplemental Retirement Benefit determined as of the date of the Participant's
Retirement or termination of Service under the Retirement Security Plan, and (c)
the Participant's benefits determined under the Plan with respect to
participation after December 31, 1980. Notwithstanding the foregoing, in the
event of the death of any Participant who was enrolled in the Retirement
Security Plan on December 31, 1980, and who became a Participant in the Plan on
January 1, 1981, (a) if such Participant's Surviving Spouse is eligible to
receive a Pre-Retirement Death Benefit, such Surviving Spouse shall be entitled
to elect, in accordance with procedures
4
<PAGE>
established by the Committee, to receive in one lump sum the amounts
attributable to associate contributions made prior to January 1, 1981, to the
Retirement Security Plan, plus interest (determined in accordance with the Code
and Regulations), and the amount of the Pre-Retirement Death Benefit payable to
such Surviving Spouse shall be reduced by the Equivalent Actuarial Value of the
lump sum payment if such election is made, and (b) the Retirement Benefit, and
form in which benefits, if any, will be paid, shall be determined solely under
the terms of the Plan as in effect on the date of the Participant's termination
of employment or retirement, unless such person is thereafter reemployed and
again becomes a Participant. Benefits for all other Participants shall be
determined under the terms of the Plan as in effect on the date of the
Participant's termination of employment or retirement, unless such person is
thereafter reemployed and again becomes a Participant.
I.3 Other Effective Dates. The Plan, as set forth herein, constitutes a
---------------------
restatement of the Plan and although this restatement is generally effective
January 1, 1998, prior amendments to conform with applicable laws, as well as
the inclusion of certain amendments since the last restatement, necessitates
different effective dates for certain Plan provisions. Accordingly,
notwithstanding the general effective date of this restatement, certain Plan
sections herein have special effective dates as described therein, including,
but not limited to, the following Plan sections which have special effective
dates as indicated below:
Sections Effective Date
-------- --------------
January 1, 1984 and October 1,
Designated portions of 9.5 1984
Designated portions of 2.15 January 1, 1989
8.1 and 9.7 January 1, 1987
2.14, 2.15, 2.17,
2.18 and 11.7 January 1, 1993
Sections 7.6 - 7.8 July 1, 1994
Designated portions of 2.2 August 1, 1994
5.4 December 12, 1994
2.2(b) January 1, 1995
Addendum A October 1, 1995
5
<PAGE>
Designated portions of 2.2, the
third and fourth sentences and
the last paragraph of 2.14, 2.16-2.18,
the last paragraph of 2.64, the last three
sentences of Article IV, the last sentence
of 5.1, 8.4, 9.4, the last sentence of 9.7,
the last sentence of 10.4, 11.5 and 11.8 January 1, 1996
2.58 (elimination of the
family aggregation rules) and 2.29 January 1, 1997
Addendum B April 1, 1997
2.2(f), 2.9, 2.13, 2.26, 2.28, 2.29, 2.60,
7.2, 7.4, 9.1, 9.3, the first sentence of 9.5,
9.7, the first paragraph of 11.2, 11.2(e),
11.5(c), 12.1, 12.2, the last two sentences
of 12.3, 13.2-13.4, 15.4(c), 17.1(a) July 1, 1997
2.5, 2.16, 2.23, 2.64, 2.66, 7.1 and 7.3 September 17, 1997
Designated portions of 2.2 January 1, 1998
Designated portions of 9.5 June 1, 1998
Designated portions of 9.4(b) August 1, 1998
9.8 (elimination of the
combined plan limit rules) January 1, 2000
ARTICLE II
Definitions
-----------
The following terms shall have the following meanings:
II.1 "Accrued Benefit" means the amount of annual Retirement Benefit
determined under Articles IX and X payable as a straight life annuity beginning
at a Participant's Normal Retirement Date or, if applicable, the Participant's
Postponed Retirement Date as determined in accordance with Article IX. The
Accrued Benefit payable at Normal Retirement Date shall not be less than the
Accrued Benefit of such
6
<PAGE>
Participant determined on the date preceding the Effective Date under the terms
of the Plan or the terms of the Lechmere Plan determined on June 30, 1994.
II.2 "Actuarial Equivalent" or "Equivalent Actuarial Value" means,
unless otherwise specified in the Plan, a benefit of equivalent value when
computed on the basis of the actuarial tables and interest rates as set forth
below; provided, however, that the interest rate used to determine whether the
Equivalent Actuarial Value of a Retirement Benefit exceeds $3,500 (or, for
periods beginning on or after January 1, 1998, $5,000) for purposes of the Plan
or to determine the Equivalent Actuarial Value of a lump sum option provided
under Section 11.6 shall not be greater than:
(a) Effective January 1, 1996, for distributions during a Plan
Year the annual interest rate on 30-Year Treasury securities specified
by the Commissioner of the IRS for the September preceding the first
day of such Plan Year ("30-Year Treasury Rate").
(b) The rate set forth in subparagraphs (i) and (ii) below may
be referred to as the PBGC Rate.
(i) the applicable interest rate if the accrued benefit
(using such rate) is not in excess of $25,000; or
(ii) 120% of the applicable interest rate if the accrued
benefit exceeds $25,000 (as determined under subparagraph (i)
above). In no event shall the present value determined under
subparagraph (ii) be less than $25,000.
For purposes of subparagraphs (i) and (ii) above and Subsection
(c) below, the applicable interest rate shall mean the interest rate or
rates which would be used as of the first day of the calendar year in
which the distribution commences by the PBGC for purposes of
determining the present value of the Participant's benefits under the
Plan if the Plan had terminated on the date distribution commences with
insufficient assets to provide benefits guaranteed by the PBGC on that
date ("PBGC Rate").
7
<PAGE>
(c) Subject to the other provisions of this Section 2.2, for
purposes of distributions prior to January 1, 1995 of the Retirement
Benefit other than that portion attributable to the Lechmere Frozen
Benefit, as defined in Section 9.1(d), and the Lechmere Immediate Cash
Balance Annuity, "Actuarial Equivalent" or "Equivalent Actuarial Value"
means the sex-neutral option factors listed below:
Annuity Form Mortality Interest Rate
------------ --------- -------------
Qualified Joint 1971 GAT 7.5%
and Survivor (60% male/40% female)
Annuity
100%, 75% or 50% 1971 GAT 7.5%
Contingent Annuity (60% male/40% female)
10 Year Certain 1971 GAT 7.5%
and Life Annuity (60% male/40% female)
Level Income 1971 GAT 7.5%
Annuity (60% male/40% female)
Lump Sum Option 1983 GAM Applicable
(males) Interest
Rate
(d) Subject to the other provisions of this Section 2.2, for
purposes of distributions prior to January 1, 1995 of the Lechmere
Frozen Benefit, as defined in Section 9.1(d), and the Lechmere
Immediate Cash Balance Annuity, "Actuarial Equivalent" or "Equivalent
Actuarial Value" means the sex-neutral option factors listed below:
<TABLE>
<CAPTION>
Annuity Form Mortality Interest Rate
------------ --------- -------------
<S> <C> <C>
100%, 75% or 50% 1983 GAM 7.5%
Contingent Annuity (males)
10 Year Certain 1983 GAM 7.5%
and Life Annuity (males)
Level Income 1983 GAM 7.5%
Annuity (males)
</TABLE>
8
<PAGE>
Lump Sum Option 1983 GAM PBGC Rate
(males)
(e) Subject to the other provisions of this Section 2.2, for
distributions after December 31, 1995, "Actuarial Equivalent" of
"Equivalent Actuarial Value" means the sex-neutral option factors
listed below:
Annuity Form Mortality Interest Rate
------------ --------- -------------
100%, 75% or 50% 1983 GAM 7.5%
Contingent Annuity (50% male/50% female)
10 Year Certain 1983 GAM 7.5%
and Life Annuity (50% male/50% female)
Level Income 1983 GAM 7.5%
Annuity (50% male/50% female)
Lump Sum Option 1983 GAM 30-Year Treasury
(50% male/50% female) Rate
(f) The lump sum value of a Participant's Cash Balance Account
(as defined in Section 2.10 of the Plan) as of a determination date
shall be an amount equal to the greater of: (i) the accumulated balance
in such Cash Balance Account as of such determination date, and (ii)
the present value of that portion of a Participant's Accrued Benefit
attributable to the Participant's Cash Balance Account calculated using
the 1983 GAM (50% male/50% female) and the 30-Year Treasury Rate as set
forth in Subsection (a). The lump sum value of the Lechmere Cash
Balance Account (as defined in Section 2.38 of the Plan) as of a
determination date shall be an amount equal to the greater of: (i) the
accumulated balance in such Lechmere Cash Balance Account as of such
determination date, and (ii) the present value of the portion of a
Participant's Accrued Benefit attributable to the Lechmere Cash Balance
Account calculated using the 1983 GAM (50% male/50% female) and the
30-Year Treasury Rate as set forth in Subsection (a). For purposes of
converting the Cash Balance Account and the Lechmere Cash Balance
Account, if any, to an annuity form of payment, the 1983
9
<PAGE>
GAM (50% male/50% female) mortality table and the 30-Year Treasury Rate
as set forth in Subsection (a) shall be used.
(g) In no event shall the amount of any benefit or annuity
determined hereunder exceed the maximum benefit under Section 415 of
the Code.
II.3 "Actuary" means the enrolled actuary, within the meaning of
ERISA, engaged by the Committee.
II.4 "Administrative Director" means the Administrative Director of
the Plan appointed by the Committee in accordance with Section 15.3 hereof.
II.5 "Affiliate" means any corporation controlling, controlled by, or
under common control with (within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the applicable Regulations), the Company or such successor,
directly or indirectly through one or more intermediaries.
II.6 "Average Weekly Hours" means the most recent 12 months actual
hours paid divided by 52 weeks, or, if the Eligible Location Shutdown
Participant has less than one year of Continuous Service, the Eligible Location
Shutdown Participant's actual hours paid since the start of the period of
Continuous Service divided by the number of weeks paid.
II.7 "Beneficiary" means the person or persons designated by a
Participant or the Beneficiary of a Participant to receive the amount, if any,
payable under the Plan in the event of the death of such Participant or
Beneficiary, as the case may be.
II.8 "Board" means the Board of Directors of Ward.
II.9 "Break in Service" means the Year during which or immediately
after which an Associate terminates Service and does not perform Service during
at least 12 weeks. Notwithstanding the preceding sentence, any Associate who
actually performs at least 500 Hours of Service during any Year shall not be
considered as having incurred a Break in Service. Solely for purposes of
determining whether a Break in Service has occurred, an individual shall be
credited with the Hours of Service which such individual would
10
<PAGE>
have completed but for a maternity or paternity absence, as determined by the
Committee in accordance with the Code and Regulations; provided, however, that
the total Hours of Service so credited shall not exceed 501 hours and that the
individual timely provide the Committee with such information as it shall
require. Hours of Service credited for a maternity or paternity absence shall be
credited entirely (a) in the Plan Year in which the absence began if such Hours
of Service are necessary to prevent a Break in Service in such year, or (b) in
the following Plan Year. For purposes of this Section 2.9, maternity or
paternity absence shall mean an absence from work by reason of the individual's
pregnancy, the birth of the individual's child or the placement of a child with
the individual in connection with adoption of the child by such individual, or
for purposes of caring for a child for the period immediately following such
birth or placement.
II.10 "Cash Balance Account" means the notional amount described in
Section 7.1.
II.11 "Code" means the Internal Revenue Code of 1986, as amended, and
any successor provisions thereto.
II.12 "Committee" means the Benefit Plans
Committee of Ward.
II.13 "Company" means Ward and any Participating Company or any of
them.
II.14 "Continuous Service" means a Participant's consecutive months and
years of service with the Company, as shown on his personnel records, in
accordance with the Company policy relating to continuous service. Service with
a Participating Company prior to its designation as a Participating Company
shall be included in Continuous Service if, but only if, and to the extent
determined by the Board at the time of such designation. In case of reemployment
of a former Employee, or the return to work of an Employee whose Continuous
Service was broken, Continuous Service shall be computed from the date of
reemployment or return to work, or as otherwise determined by the Committee.
II.15 "Credited Service" means an Associate's Service as a Participant,
excluding any authorized leave of absence, military leave, layoff or suspension
in accordance with Subsections 2.56(a)-(d) hereof. Credited Service shall not
include any period of Service during which a Participant fails to make any
11
<PAGE>
contributions required prior to the Effective Date for participation in the Plan
or fails to authorize Required Contributions to be made under the Savings Plan
on or after the Effective Date. Effective January 1, 1989, Credited Service
shall include any period of disability leave of absence provided that the
Associate was a Participant immediately prior to such leave or became eligible
while on such leave, and further provided that (a) the Participant is receiving
long term disability benefits from a plan sponsored by the Company, or a
Disability Retirement Benefit from this Plan and (b) the number of years of
Credited Service credited pursuant to this Section 2.15 does not exceed the
number of years of Credited Service prior to the disability. Effective January
1, 1994, credit under the Plan for the period of disability leave of absence
during which the Participant is receiving long term disability benefits from a
plan sponsored by the Company shall be limited to (a) the duration of the
disability leave of absence; (b) the period prior to the Participant's Normal
Retirement Date; (c) one year if the Participant has less than 10 years of
Continuous Service, or (d) two years if the Participant has 10 or more years of
Continuous Service prior to such disability leave of absence, whichever is less.
Associates who were in Service of the Company as of January 1, 1988, and
completed at least one Hour of Service in 1988, and made investable basic
contributions as defined in the Savings Plan other than Associates employed by
Signature, accrued benefits for those contributions retroactive to their
enrollment date in the Savings Plan.
With respect to each Participant who was an associate of Jefferson
Stores, Inc., Credited Service shall not include any period of Service prior to
July 1, 1983.
For purposes of determining the Associate's eligibility under the Plan
under Article IV, for purposes of determining the Associate's eligibility for a
Retirement Benefit under Article X or for purposes of determining both the
Associate's eligibility under the Plan and eligibility for a Retirement Benefit,
Credited Service shall include any service an Associate was credited with as an
employee of any organization which operated any trade or business, or any
separate unit of a trade or business substantially acquired by the Company, but
only to the extent so provided by appropriate action of the Committee.
12
<PAGE>
II.16 "Daily Pay Rate" means the Weekly Pay Rate divided by five.
II.17 "Direct Rollover" shall mean a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
II.18 "Disability Participant" means each Associate or former Associate
who is entitled to receive Disability Retirement Benefit payments hereunder in
accordance with an election made pursuant to Section 5.1 hereof .
II.19 "Disability Plan" means the Montgomery Ward & Co., Incorporated
Long Term Disability Plan, as amended (except as otherwise stated herein),
through the date of the Disability Participant's election to receive a
Disability Retirement Benefit under this Plan pursuant to Section 5.1 hereof.
II.20 "Disability Retirement Benefit" means a Disability Participant's
monthly annuity benefit determined in accordance with Sections 9.4(a) and (b)
hereof upon the Disability Participant's election pursuant to Section 5.1 hereof
and payable in accordance with Section 11.8 hereof.
II.21 "Distributee" shall mean an Associate or former Associate. In
addition, the Associate's or former Associate's surviving Spouse and the
Associate's or former Associate's Spouse or former Spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are Distributees with regard to the interest of the Spouse or
former Spouse.
II.22 "Effective Date" means the date of effectiveness of this
amendment and restatement, as provided in Article III hereof.
II.23 "Eligible Location Shutdown Participant" means each Associate
(other than each part-time or temporary Associate who is neither eligible to
participate in the Plan nor has two years of Continuous Service) who (a) was not
employed by Signature; (b) was not covered by a collective bargaining agreement;
(c) was not bonus eligible (not a grade 15 or higher); (d) terminated employment
with the Company on or after September 17, 1997, as a result of a closure of a
facility announced on or after September 1, 1997, as determined by the Committee
and (e) entered into any release and waiver agreement as requested by the
13
<PAGE>
Company. Notwithstanding anything herein to the contrary, to be an Eligible
Location Shutdown Participant an Associate must also remain employed with the
Company until the date of the Associate's permanent lay-off by the Company
because of the closure of the facility.
II.24 "Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code or a qualified trust described in Section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution. However, in the
case of an Eligible Rollover Distribution to the surviving Spouse, an Eligible
Retirement Plan is an individual retirement account or individual retirement
annuity.
II.25 "Eligible Rollover Distribution" shall mean any distribution of
all or any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of 10 years or more; any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
II.26 "Employee" or "Associate" means any individual who is employed by
the Company, as determined by the Committee, excluding (a) any associate who is
included in a unit of associates covered by a negotiated collective bargaining
agreement which does not provide for the associate's membership in the Plan, (b)
any associate of Electric Ave. & More or any division of the Company which the
Committee has determined to treat as though it is an Affiliate which is not a
Participating Company and (c) any non-resident alien.
14
<PAGE>
II.27 "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
II.28 "Highly Compensated Associate" means, effective January 1, 1997,
an Associate who, (a) was a five percent owner at any time during the Plan Year
or the preceding Plan Year, or (b) for the preceding Plan Year (i) had
compensation (as defined under Section 415(c)(3) of the Code) from the Company
in excess of $80,000 (as adjusted for increases in the cost of living in
accordance with Section 414(q)(1) of the Code), or (ii) if the Committee in its
sole discretion elects the application of this Subsection (ii) for the preceding
Plan Year, was in the group consisting of the top 20% of employees when ranked
on the basis of compensation (as defined in Section 415(c)(3) of the Code) paid
during such Plan Year.
II.29 "Hours of Service" means each hour during which an Associate
performs Service (or is treated as performing Service under Section 2.54) and
for which he is paid, or entitled to payment for the performance of duties for
the Company (including back pay irrespective of mitigation of damages). In
addition, Hours of Service shall also include up to 501 hours of non-working
time during any single continuous period of absence which does not otherwise
constitute Service, but for which an Associate is directly or indirectly paid or
entitled to payment. The determination of Hours of Service to be credited
hereunder shall be made by the Committee in accordance with the Regulations,
including Section 2530.200b-2(b) and (c) of the Labor Department Regulations.
II.30 "Immediate Cash Balance Account Annuity" means an annuity as
described in Section 7.5.
II.31 "Interest Credit(s)" means the interest amount credited to the
Cash Balance Account of a Participant pursuant to the provisions of Section 7.4.
II.32 "Investment Manager" means an Investment Manager, as that term is
defined in ERISA, appointed by the Trustees.
II.33 "IRS" means the United States Internal Revenue Service.
15
<PAGE>
II.34 "Jefferson Stores Plan" means the Retirement Plan for Employees
of Jefferson Stores, Inc., amended effective as of January 1, 1984.
II.35 "Labor Department" means the United States Department of Labor.
II.36 "Lechmere" means Lechmere, Inc.
II.37 "Lechmere Cash Balance Account" means the notational amount
described in Section 7.6 and maintained for Participants who previously
participated in the Lechmere Plan.
II.38 "Lechmere Immediate Cash Balance Account Annuity" means an
annuity as described in Section 7.8 with respect to a Participant who was a
participant in the Lechmere Plan.
II.39 "Lechmere Interest Credits" means the interest amount credited to
the Lechmere Cash Balance Account of a Participant pursuant to the provisions of
Section 7.7 with respect to each Participant who was a participant in the
Lechmere Plan.
II.40 "Lechmere Plan" means the Lechmere, Inc. Personal Retirement
Account Plan, amended and restated effective January 1, 1992.
II.41 "Optional Retirement Benefit" means an alternative form of
Retirement Benefit provided for in Section 11.2 hereof, which a Participant may
elect to receive upon Retirement and which is the Actuarial Equivalent of a
Retirement Benefit.
II.42 "Participant" means each Associate or former Associate who is
enrolled for participation in the Plan or is entitled to receive or receiving
benefit payments hereunder.
II.43 "Participating Company" means any company which is an Affiliate,
designated by the Board as such, the board of directors or equivalent governing
body of which shall adopt the Plan by appropriate action and the Associates of
which shall be eligible to participate in the Plan in the manner and to the
extent determined by the Board so long as that company remains so designated.
Any such company so designated and which adopts the Plan shall be deemed thereby
to appoint Ward, the Committee, the Administrative Director and the Trustees its
exclusive agents to exercise on its behalf all of the powers conferred hereby
or
16
<PAGE>
by the Trust Agreement upon the Company, the Committee, the Administrative
Director and the Trustees, respectively, and shall make its allocable
contributions to the Plan. The authority of the Company, the Committee, the
Administrative Director and the Trustees, respectively, to act as such agent
shall continue until the Plan has terminated as to such company and the relevant
Trust Fund assets have been distributed by the Trustees as provided in Article
XVI hereof.
II.44 "PBGC" means the Pension Benefit Guaranty Corporation.
II.45 "Plan" means the Montgomery Ward & Co., Incorporated Retirement
Security Plan, as herein set forth, and as from time to time in effect.
II.46 "Prior Plans" means the Management Retirement Security Plan, the
Timecard Retirement Security Plan and the Represented Retirement Security Plan,
each as in effect on December 31, 1988.
II.47 "Regulations" means the applicable proposed, temporary or final
regulations issued under the Code or ERISA by the IRS, the PBGC, the Labor
Department or any other governmental authority and any temporary rulings and
questions and answers promulgated by such authorities pending the issuance of
such regulations.
II.48 "Required Contributions" means contributions authorized by
Participants to be made to the Savings Plan pursuant to Section 4.1 thereof.
II.49 "Retirement" or "Retire" means or refers to such time as a
Participant is eligible to receive currently and elects to receive currently a
Retirement Benefit or an Optional Retirement Benefit upon or after the
Participant's termination of Service.
II.50 "Retirement Benefit" means a single life annuity determined upon
a Participant's Retirement in accordance with the relevant Section of Article IX
hereof, payable in accordance with the relevant Section of Article XI hereof.
II.51 "Retirement Security Plan" means the Montgomery Ward & Co.,
Incorporated Retirement Security Plan, as amended through December 31, 1980.
17
<PAGE>
II.52 "Savings Plan" means the Montgomery Ward & Co., Incorporated
Savings Plan and for periods prior to July 1, 1997, the Montgomery Ward & Co.,
Incorporated Savings and Profit Sharing Plan, as amended from time to time.
II.53 "Signature" means Signature Financial/Marketing, Inc.
II.54 "Service" means employment with the Company or with any
Affiliate, excluding service performed by an individual prior to January 1,
1976, if such periods would have been disregarded under the break in service
rules then in effect under the Retirement Security Plan or prior to January 1,
1985, if such periods would have been disregarded under the break in service
rules then in effect under the Plan, and excluding Service which is disregarded
under the Break in Service rules of the Plan, the Prior Plans, the Jefferson
Stores Plan or the Lechmere Plan. Service shall include the following:
(a) any authorized leave of absence under rules determined by
the Committee, which are uniformly applicable to all Associates
similarly situated and in accordance with the Regulations (including
Sections 2530.200b-2(b) and (c) of the Labor Department Regulations and
Sections 825.214 through 825.216 of the Family and Medical Leave Act of
1993 ("FMLA") Regulations); provided the Associate returns to active
Service within the period authorized for such leave;
(b) service in any of the United States Armed Forces, if and
to the extent required by the Military Selective Service Act, as
amended, the FMLA, the Uniformed Services Employment and Reemployment
Rights Act of 1994 or any other federal law or as otherwise recognized
by the Committee;
(c) any period of layoff not in excess of 12 months during
which the Associate retains reemployment rights and provided that the
Associate reports to work within three working days after recall; and
(d) any period of suspension of participation, as provided for
in Section 5.2 hereof.
18
<PAGE>
II.55 "Surviving Spouse" means the survivor of a deceased Participant
to whom such deceased Participant was legally married, as determined by the
Committee on the earlier of, (a) the date of the Participant's Retirement, or
(b) for at least one year on the date of such Participant's death.
II.56 "Total Earnings" means the total of an Associate's compensation,
including salary, wages, overtime premium, commissions, holiday pay, vacation
pay, bonuses, cash incentives other than from contests and salary continuance
paid or payable by the Company and any Affiliates for Service during a calendar
year prior to the earlier of the Associate's date of termination of Service or
the Associate's Normal Retirement Date or, if applicable, Early Retirement Date,
but excluding (a) amounts paid under the 1970 Marcor Stock Price Plan, under any
stock option plan or stock award plan and under any other plans maintained
exclusively for management Associates of Ward or of Ward and Affiliates which
the Committee determines to exclude from Total Earnings, (b) amounts contributed
by the Associate's employer to the Trust pursuant to the provisions of the Plan
or paid or contributed to any group insurance plan or other employee benefit
plan established or maintained by the Associate's employer or in which the
Associate's employer participates, other than amounts contributed on behalf of a
Participant under Section 4.1 of the Savings Plan, (c) amounts paid to the
Associate from Jefferson Stores, Inc. while he was a participant under the
Jefferson Stores Plan and (d) amounts paid during any period during which a
Participant fails to make any contributions required prior to the Effective Date
for participation in the Plan or fails to authorize Required Contributions to be
made under the Savings Plan. Total Earnings shall exclude amounts paid in a
calendar year in excess of $150,000 (adjusted for cost of living in accordance
with Section 401(a)(17) of the Code). In the case of a Participant for whom long
term disability benefits are being paid under the Disability Plan pursuant to
the provisions of said plan, the Participant's Total Earnings for the period
during which such benefits are being accrued by this Plan shall be deemed to
continue at the same rate as the Participant's Total Earnings immediately prior
to such disability.
19
<PAGE>
II.57 "Transferred Contribution Account" means the account,
established and maintained as part of a Participant's account under the Savings
Plan to reflect amounts transferred with respect to a Member's Benefit derived
from Associate Contributions, pursuant to Section 6.2 of the Savings Plan.
II.58 "Trust" means the Trust established by Ward as a part of the
Plan.
II.59 "Trust Agreement" means the agreement with the Trustees
establishing the Trust.
II.60 "Trust Fund" means all the assets held by the Trustees pursuant
to the Trust Agreement.
II.61 "Trustees" means the trustees under the Trust Agreement
appointed by the Committee in accordance with Section 15.2 hereof.
II.62 "Vest", "Vested" or "Vesting" means the acquisition by a
Participant, an Eligible Location Shutdown Participant or the Participant's or
the Eligible Location Shutdown Participant's Beneficiary of a nonforfeitable
right to a Retirement Benefit, except in the event of the Participant's death
prior to the time prescribed for payment of such Retirement Benefit. For
purposes of the Plan, Vesting occurs after five Years of Service (three Years of
Service for benefits accrued pursuant to Section 7.2 and any interest accrued on
such Cash Balance Contribution under Section 7.4, and immediately for benefits
accrued pursuant to Section 7.3 and any interest accrued on such Location
Shutdown Contribution under Section 7.4 ) with the fifth year (third year for
benefits accrued pursuant to Section 7.2) being the completion of five months of
service or upon Normal Retirement Date pursuant to the provisions hereof,
whichever occurs first. In determining whether a Participant is Vested, the
Years of Service prior to any Break in Service shall be disregarded if he was
not then Vested and the number of consecutive years in which he incurred a Break
in Service equals or exceeds the greater of five or the aggregate number of the
Participant's Years of Service prior to such Break in Service (excluding any
Years of Service prior to January 1, 1976, which were disregarded under the
break in service rules then in effect under the Retirement Security Plan, and
excluding any Years of Service which are disregarded under the Break in Service
rules of the Plan, the Prior Plans, the Jefferson Stores Plan or the Lechmere
Plan).
20
<PAGE>
II.63 "Ward" means the present Illinois corporation by the name of
Montgomery Ward & Co., Incorporated and any successor to all or substantially
all of its business and assets.
II.64 "Weekly Pay Rate" means (a) for management and
administrative/supervisory Eligible Location Shutdown Participants, the Eligible
Location Shutdown Participant's annual base salary on the date of the
announcement of the closure of the applicable facility (or for Eligible Location
Shutdown Participants who are on an authorized leave of absence as approved by
the Committee on the date of the announcement of the closure of the applicable
facility, the Eligible Location Shutdown Participant's annual base salary on the
date immediately preceding the first day of such leave of absence) divided by 52
and (b) for wage Eligible Location Shutdown Participants, the Eligible Location
Shutdown Participant's hourly base rate of pay/draw rate on the date of the
announcement of the closure of the applicable facility (or for Eligible Location
Shutdown Participants who are on an authorized leave of absence as approved by
the Committee on the date of the announcement of the closure of the applicable
facility, the Eligible Location Shutdown Participant's hourly base rate of
pay/draw rate on the date immediately preceding the first day of such leave of
absence) multiplied by Average Weekly Hours. II.65 "Year" means the 12
consecutive month period beginning on the date an Associate's Service commenced
or recommenced after a Break in Service (determined under the rules of the Plan,
the Prior Plans, the Jefferson Stores Plan or the Lechmere Plan), as determined
by the Committee, or an anniversary date thereof. Effective January 1, 1994, if
the Associate does not complete 1,000 Hours of Service during the first 12
consecutive month period, the determining period shall be any 12 consecutive
month period beginning with the first day of the calendar year beginning on or
after the date of employment.
II.66 "Year of Credited Service" means a Year of Service for which an
Associate receives Credited Service. Partial Years of Credited Service shall be
taken into account on the basis of 1/12 Year's credit for each month of Service.
21
<PAGE>
II.67 "Year of Service" means a Year in which an Associate performs
Service and completes 1,000 Hours of Service. Any Associate who actually
performs 1,000 Hours of Service during any Year shall be considered as having
performed a Year of Service. For purposes of determining Years of Service under
Article IV and under Section 2.62 regarding Vesting of benefits, each
Participant who was employed by Amoco Oil Company or its affiliates on December
31, 1995, and who became an Associate of Signature, on January 1, 1996, in
connection with the Stock Purchase Agreement by and between Amoco Oil Company,
Amoco Oil Holding Company, Montgomery Ward & Co., Incorporated and Signature
Financial/Marketing, Inc., dated December 29, 1995, shall have all years of
service with Amoco Oil Company or its affiliates treated as Years of Service
with the Company. Also, for purposes of determining Years of Service under
Article IV and under Section 2.62 regarding Vesting of benefits, each
Participant who was an employee of Emanacom Data Services, Inc. on July 16,
1996, and who became an Associate of Signature on July 16, 1996, shall have all
years of service with Emanacom Data Services, Inc. treated as Years of Service
with the Company.
ARTICLE III
Effective Date
--------------
The Effective Date of this amendment and restatement shall be January
1, 1998.
ARTICLE IV
Eligibility
-----------
22
<PAGE>
Each Associate who, immediately prior to the Effective Date, was a
Participant shall continue to be a Participant on and after the Effective Date.
Each other Associate who was in Service immediately prior to the Effective Date,
but who was not then a Participant of the Plan shall be eligible for
participation in the Plan on the later of the Effective Date or the first day of
the month following the date on which he satisfies the requirements for
participation in the Plan as in effect on December 31, 1993; provided, however,
that any such Associate who does not submit an enrollment form on the earliest
date prescribed by the Committee must satisfy the requirements for participation
under this amendment and restatement before again being eligible for
participation in the Plan. Each other Associate who was or is employed by the
Company shall become eligible to participate in the Plan on the first day of the
month following the later of (a) the date on which he attains age 21; or (b) the
date on which he completes one Year of Service. Notwithstanding the foregoing,
each participant of the Lechmere Plan on June 30, 1994 shall become a
Participant on July 1, 1994. Each Associate or former Associate who became
"Totally Disabled" (as such term was defined by the Disability Plan as in effect
at such time) on or before October 1, 1990, is entitled to receive the full
Disability Benefit (as that term is defined in the Disability Plan); and elects
to receive a Disability Retirement Benefit under this Plan shall be eligible to
participate in this Plan as a Disability Participant. Notwithstanding the
foregoing, each participant in the Amoco Employee Savings Plan ("Amoco Plan") on
December 31, 1995, and each participant in the Amoco Oil Company Retirement Plan
("Amoco Oil Plan") on December 31, 1995, who became an Associate of Signature on
January 1, 1996 (or, with respect to a participant in the Amoco Plan or the
Amoco Oil Plan on December 31, 1995, who on January 1, 1996, was on medical,
military, personal, educational or family leave status from Amoco Oil Company or
its affiliates, who became an Associate of Signature on any date prior to
January 1,1997), shall become a Participant in the Plan as of the first day of
the first month following the date he becomes an Associate of Signature even if
such Associate shall have had less than one Year of Service, in which case such
Associate shall be granted one Year of Service credit for purposes of
eligibility and shall be deemed to be age 21 for eligibility purposes, unless
such
23
<PAGE>
Associate is a Highly Compensated Associate. Notwithstanding the foregoing, each
employee of Emanacom Data Services, Inc. on July 16, 1996, who became an
Associate of Signature on July 16, 1996, shall become a Participant in the Plan
as of the first day of the first month following July 16, 1996. Notwithstanding
the foregoing, each Associate who is employed by the Company at the Montgomery
Ward & Co., Incorporated Romeoville Distribution Center on September 2, 1997,
shall be eligible to participate in the Plan as of such date.
ARTICLE V
Participation
-------------
V.1 Enrollment. Each Associate who becomes eligible to become a
----------
Participant under the Savings Plan shall become a Participant on the first day
of the month following the Associate's submission of an enrollment form
prescribed by the Committee. The Committee shall take any necessary or
appropriate action to enroll each Associate who becomes eligible to become a
Participant pursuant to this Section 5.1 and, if it is determined that an
eligible Associate has not been enrolled in the Plan due to error, such
Associate may be retroactively enrolled if the Committee receives notice of the
error within a reasonable period of time following such error. Each Associate or
former Associate who is eligible to become a Disability Participant under the
Plan and elects to receive a Disability Retirement Benefit shall become a
Disability Participant on a date determined by the Administrative Director, but
no later than 90 days following the Associate's or former Associate's submission
of an election, in such form as may be prescribed by the Committee, to receive a
Disability Retirement Benefit under this Plan.
V.2 Suspension of Participation. No Participant may continue
---------------------------
participation in the Plan in the event the Participant ceases to be an Associate
or is transferred from the Company to an Affiliate which is not designated a
Participating Company or who is on a leave of absence, except, to the extent
provided in this Plan, for those Associates receiving long term disability
benefits from a plan sponsored by the Company. A Participant who becomes
ineligible to participate in the Plan because of the application of the
preceding
24
<PAGE>
sentence shall be suspended from further participation during the period of such
ineligibility without forfeiting any benefits accrued prior to the date such
Participant became ineligible to participate, unless the Committee shall
determine, in accordance with rules established by the Committee which are
uniformly applicable to all Associates similarly situated, that such Participant
shall be deemed to have terminated the Participant's employment for purposes of
participation in the Plan pursuant to Article XIII hereof. Such action shall not
be applicable to any Participant who is transferred to an Affiliate. Credited
Service shall exclude any such period of suspension, as provided in Section 2.15
hereof, but Service for purposes of Vesting and eligibility shall include such
period. Notwithstanding any of the provisions of the Plan to the contrary, each
Participant shall be entitled to the benefits provided under Sections 21.3 and
22.3, if applicable.
V.3 Break in Service. If a Participant's employment terminates and he
----------------
is later rehired, he shall again be eligible to participate in the Plan as of
the date of rehire.
V.4 Qualified Military Service. Notwithstanding any provision of the
--------------------------
Plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Code.
ARTICLE VI
Contributions
-------------
VI.1 Cessation of a Participant's Contributions. No Participant shall
------------------------------------------
be required or permitted to contribute to the Plan on or after April 1, 1983.
VI.2 Company Contributions. Subject to the provisions of Articles XVI
---------------------
and XVII hereof, Ward and each Participating Company shall contribute to the
Trust, not less frequently than quarterly during each Plan Year, the amounts
recommended by the Actuary to the Committee as necessary to maintain the Plan on
a sound actuarial basis, consistent with the requirements of ERISA and the Code.
The Committee shall arrange
25
<PAGE>
for such funding standard accounts as are required by ERISA in accordance with
the recommendations of the Actuary.
VI.3 Actuarial Assumptions. The Committee shall adopt and may change
---------------------
from time to time, in accordance with the provisions of ERISA and the Code, such
actuarial assumptions and methods as are recommended by the Actuary for the
purpose of actuarial valuations of the Plan. The Actuary shall make an annual
actuarial valuation of the Plan and shall estimate the contributions required
under Section 6.2 hereof on the basis thereof. At least once a year, the Actuary
shall make an actuarial study of the mortality and other actuarial assumptions,
service and compensation experience of the Participants in the Plan, the
investment experience and any other relevant experience gains and losses under
the Plan, including such calculations as may be necessary to determine whether
the Plan is adequately funded, and shall report the results of its study to the
Committee. Prior to termination of the Plan, forfeitures of benefits arising
from termination of Service, death or any other reason under the Plan shall not
be applied to increase the benefits that any Participants would otherwise be
entitled to receive under the Plan, but may be anticipated in estimating costs
under the Plan and shall be applied to reduce the Company's contributions under
the Plan.
ARTICLE VII
Cash Balance Account and Lechmere Cash Balance Account
------------------------------------------------------
VII.1 Cash Balance Account - In General. A notional account
---------------------------------
(hereinafter referred to as the "Cash Balance Account") shall be established and
maintained for each Associate who is a Participant in the Plan on or after July
1, 1997. Such Participant's Cash Balance Account shall be credited with an
Annual Cash Balance Contribution in accordance with Section 7.2 and Interest
Credits in accordance with Section 7.4. On or after July 1, 1997, a Cash Balance
Account shall also be established and maintained for each Eligible Location
Shutdown Participant who is not otherwise a Participant in the Plan. An Eligible
Location
26
<PAGE>
Shutdown Participant's Cash Balance Account may be credited with a one-time
Location Shutdown Contribution in accordance with Section 7.3 and Interest
Credits in accordance with Section 7.4.
VII.2 Annual Cash Balance Contribution.
--------------------------------
(a) For the period from July 1, 1997, through December 31,
1997, and for each calendar year commencing thereafter, an Annual Cash
Balance Contribution shall be credited to the Cash Balance Account of
each Participant who is not employed by either Signature or Lechmere
equal to a percentage of the Participant's Required Contributions for
such period determined in accordance with the following schedule:
Participant's Age Percent of Required
As of each January 1 Contributions
-------------------- -------------
Under age 40 70%
40-44 80%
45-49 90%
50-54 105%
55-59 120%
60 and over 135%
For purposes of this Section 7.2, a Participant's age on January 1
will be his age on his next birthday if such birthday is on or before
June 30, or the Participant's age on his last birthday if his next
birthday is on or after July 1.
(b) Notwithstanding anything herein to the contrary, during the
period of a disability leave of absence, a Participant shall receive
the maximum contribution provided under Subsection (a) above based on
the Participant's Age, as defined in Subsection (a) above, and Total
Earnings even if the Participant fails to make any Required
Contributions; provided that the Associate: (i) was a Participant for
at least one year prior to such leave, (ii) became eligible while on
such leave or (iii) first became eligible and became a Participant
within one year prior to such leave and participated in the Plan from
the date first eligible to the date of such leave; and further
provided that the Participant
27
<PAGE>
is receiving long term disability benefits from a plan sponsored by
the Company. Contributions under the Plan for the period of disability
leave of absence during which the Participant is receiving long term
disability benefits from a plan sponsored by the Company shall be
limited to the lesser of: (i) the duration of the disability leave of
absence, (ii) the period prior to the Participant's Normal Retirement
Date, (iii) one year if the Participant has less than 10 years of
Continuous Service or (iv) two years if the Participant has 10 or more
years of Continuous Service prior to such disability leave of absence.
(c) Notwithstanding anything herein to the contrary, if
necessary to satisfy Section 410(b) of the Code, the Annual Cash
Balance Contribution of any Highly Compensated Associate may be
reduced to the extent required to satisfy Section 410(b) of the Code.
In making this reduction, the Annual Cash Balance Contribution of the
Highly Compensated Associates with the highest most valuable accrual
rates as defined in Section 1.401(a)(4)-3(d) of the Regulations shall
be reduced to a point where Section 410(b) of the Code is satisfied.
VII.3 Location Shutdown Contribution.
------------------------------
(a) Each Eligible Location Shutdown Participant shall be
credited with a one-time Location Shutdown Contribution in an amount
equal to the amount described in Subsection (b) below, but in no event
less than the amount described in Subsection (c) below. The one-time
Location Shutdown Contribution shall be credited to the Cash Balance
Account of each Eligible Location Shutdown Participant in the month in
which the individual becomes an Eligible Location Shutdown
Participant. Partial years of Continuous Service will not be counted
for purposes of this Location Shutdown Contribution and Continuous
Service only through the date of the closure of the Eligible Location
Shutdown Participant's facility which closure is announced on or after
September 1, 1997, as determined by the Committee shall be counted for
purposes of Subsection (b).
28
<PAGE>
(b) The Cash Balance Account of each Eligible Location Shutdown
Participant shall be credited with an amount equal to the Eligible
Location Shutdown Participant's Daily Pay Rate multiplied by the
number of years of Continuous Service multiplied by the number set
forth in the following chart:
Type of Associate Applicable Number
----------------- -----------------
Management and
Administrative/Supervisory 5.0
Wage 2.5
(c) Notwithstanding anything herein to the contrary, in no
event shall any Eligible Location Shutdown Participant be credited
with a Location Shutdown Contribution which is less than the Eligible
Location Shutdown Participant's Daily Pay Rate multiplied by 10.
VII.4 Interest Credits. Interest Credits equal to the rate of
----------------
interest specified in this Section 7.4 multiplied by the amount of the
Participant's Cash Balance Account as of the first day of each month shall be
added to each Participant's Cash Balance Account as of the last day of each
month. The rate of interest used to determine the Interest Credits for a
calendar year shall be the 30-Year Treasury Rate as set forth in Section 2.2(a).
A former Participant who terminated employment prior to July 1, 1997,
or who otherwise has no Cash Balance Account is not eligible for Interest
Credits hereunder. However, if such a Participant returns to work as an
Associate eligible to participate in the Plan under Article IV, a Cash Balance
Account will be established pursuant to Section 7.1. Such account will be
eligible for the Interest Credits as provided herein.
VII.5 Immediate Cash Balance Account Annuity. The amount of annual
--------------------------------------
retirement income payable with respect to the Cash Balance Account of a
Participant is equal to the Immediate Cash Balance Account Annuity. The
Immediate Cash Balance Account Annuity is the annual amount of retirement income
29
<PAGE>
payable as a Single Life Benefit as defined in Section 11.2(a). The annual
amount of retirement income is determined as:
(a) the Participant's Cash Balance Account divided by;
(b) the immediate annuity factor for one dollar of annual
benefit under the Single Life Benefit form of payment defined in
Section 11.2(a), based on the Participant's age as of the Retirement
Date. The immediate annuity factor shall be based on the actuarial
assumptions described in Section 2.2.
VII.6 Lechmere Cash Balance Account - In General. A notional account
------------------------------------------
(hereinafter referred to as the "Lechmere Cash Balance Account") shall be
established and maintained for each Participant who was a participant in the
Lechmere Plan. The initial Lechmere Cash Balance Account for each Participant
shall equal such Participant's Lechmere Cash Balance Account under the Lechmere
Plan as of June 30, 1994. Such Participant's Lechmere Cash Balance Account shall
be credited with Lechmere Interest Credits in accordance with Section 7.7.
VII.7 Lechmere Interest Credits. Lechmere Interest Credits equal to
-------------------------
the rate of interest specified in this Section 7.7 multiplied by the amount of
the Participant's Lechmere Cash Balance Account as of the first day of each
calendar year shall be added to each Participant's Lechmere Cash Balance Account
as of the last day of the calendar year. For any calendar year in which a
distribution is made from the Plan on behalf of a Participant, interest shall be
credited on the amount of the Participant's Lechmere Cash Balance Account as of
the first day of such year for the period from the first day of such year to the
date of benefit distribution. The rate of interest used to determine the
Lechmere Interest Credit for a calendar year, shall be the 12-month average rate
for six month Treasury Bills as of December 31 of the prior calendar year. In no
event will the annual Lechmere Interest Credit be less than 5.75% or more than
10%.
VII.8 Lechmere Immediate Cash Balance Account Annuity. The amount of
-----------------------------------------------
annual retirement income payable with respect to the Lechmere Cash Balance
Account of a Participant is equal to the Lechmere
30
<PAGE>
Immediate Cash Balance Account Annuity. The Lechmere Immediate Cash Balance
Account Annuity is the annual amount of retirement income payable as a Single
Life Benefit as defined in Section 11.2(a). The annual amount of retirement
income is determined as:
(a) The Participant's Lechmere Cash Balance Account divided
by;
(b) The immediate annuity factor for one dollar of annual
benefit under the Single Life Benefit form of payment defined in
Section 11.2(a), based on the Participant's age as of the Retirement
Date. The immediate annuity factor shall be based on the actuarial
assumptions described in Section 2.2.
ARTICLE VIII
Retirement Dates
----------------
VIII.1 Normal Retirement Date. A Participant's Normal Retirement Date
----------------------
shall be the first day of any month following the Participant's 65th birthday.
Benefits accrued to a Participant under the Plan shall be nonforfeitable upon
the attainment of age 65.
Any Participant who, for at least two years before the Participant's
Normal Retirement Date, is employed in an executive or other policy-making
position and who, as of the Participant's Normal Retirement Date, is entitled to
an aggregate anticipated annual retirement benefit, including benefits not
provided under the Plan, of $44,000 or more, when expressed as a Single Life
Benefit as defined in Subsection 11.2(a) hereof, all as determined by the
Committee under uniform rules and in accordance with applicable law and
Regulations, shall retire on the Participant's Normal Retirement Date, unless
the Participant's employment thereafter has been approved by the Board or unless
a state or federal law requires that such Participant be permitted to continue
employment beyond his Normal Retirement Date.
VIII.2 Early Retirement Date. A Participant's Early Retirement Date may
---------------------
be the first day of any month following the Participant's termination of Service
prior to the Participant's Normal Retirement Date, provided such Participant (a)
has attained age 55, (b) has completed five Years of Service (except that this
31
<PAGE>
requirement shall not apply to an Associate of the Company or an Affiliate on
December 31, 1968), and (c) has prior to such date elected to Retire on such
date pursuant to rules adopted by the Committee in accordance with the
Regulations.
VIII.3 Postponed Retirement Date. A Participant's Postponed Retirement
-------------------------
Date shall be the first day of any month following termination of Service after
Normal Retirement Date, pursuant to Section 8.1 hereof.
VIII.4 Disability Retirement Date. A Disability Participant's
--------------------------
Disability Retirement Date shall be the date on which the Disability Participant
became a Disability Participant pursuant to Section 5.1 hereof.
ARTICLE IX
Amount of Retirement Benefit or Disability Retirement Benefit
-------------------------------------------------------------
IX.1 Retirement Benefit Payable upon Retirement at Normal Retirement
---------------------------------------------------------------
Date. Subject to the provisions of this Article IX, in the event of the
Retirement of a Participant on his Normal Retirement Date, the amount of the
Retirement Benefit shall be the sum of (a), (b), (c), (d), (e) and (f) below:
(a) the Participant's Retirement Benefit determined as of
December 31, 1993; and
(b) 1.5% of the Participant's Total Earnings while a
Participant during each year of Credited Service after January 1, 1994,
and prior to July 1, 1997; and
(c) 1.5% of the Participant's Total Earnings while a
Participant during each year of Credited Service after July 1, 1997,
during which the Participant was employed by either Signature or
Lechmere; and
(d) the Participant's Lechmere Plan frozen benefit as of June
30, 1994, excluding the benefit attributable to the Participant's
Lechmere Immediate Cash Balance Annuity ("Lechmere Frozen Benefit");
and
(e) the Participant's Immediate Cash Balance Annuity; and
(f) the Participant's Lechmere Immediate Cash Balance Account
Annuity, if any.
32
<PAGE>
The Retirement Benefit will be accrued each calendar year on the basis
of any accrual provided under Article VII and, if applicable, the Participant's
Credited Service and Total Earnings during such calendar year. In no event shall
a Participant's Retirement Benefit decrease after any date which could have been
the Participant's Early Retirement Date. The minimum Retirement Benefit payable
upon Retirement at Normal Retirement Date, including any benefit payable with
respect to a Participant's credited service under the Retirement Security Plan
prior to January 1, 1981, and any benefit payable under the Plan on or after
such date, shall be $1,200 after an aggregate of 20 Years of Service during
which the Participant received either Credited Service or credited service under
the Retirement Security Plan, the Prior Plans or the Plan, with an additional
$60 for each of the first five such Years of Service in excess of 20 and an
additional $125 for each such Year of Service in excess of 25, but in no event
shall such minimum benefit exceed $2,125, ending with Credited Service as of
December 31, 1988.
IX.2 Retirement Benefit Payable upon Retirement at Early Retirement
--------------------------------------------------------------
Date. In the event of a Participant's Retirement on an Early Retirement Date,
- - ----
the amount of the Retirement Benefit payable, including the annual minimum,
shall be the amount provided for in Section 9.1 hereof, provided that, in the
event the Participant's Early Retirement Date occurs prior to the first day of
the month following the Participant's 63rd birthday, the portion of the
Retirement Benefit derived from Sections 9.1(a) and 9.1(b) shall be reduced by
5/12 of one percent for each month by which the Participant's Early Retirement
Date precedes such first day and provided that in the event the Participant's
Early Retirement Date occurs prior to the first day of the month following the
Participant's 65th birthday, the portion of the Retirement Benefit derived from
Section 9.1(c) hereof shall be reduced by 5/9 of one percent for each of the
first 60 months by which the Participant's Early Retirement precedes such first
day and 5/18 of one percent for each of the next 60 months.
IX.3 Retirement Benefit Payable upon Retirement at Postponed Retirement
------------------------------------------------------------------
Date. In the event of a Participant's Retirement on a Postponed Retirement Date,
- - ----
the amount of the Retirement Benefit payable,
33
<PAGE>
including the annual minimum, shall be the same amount which the Participant was
entitled to receive on the Participant's Normal Retirement Date, as provided in
Section 9.1 hereof, with additional credit for Service and any accrual provided
under Article VII after such date.
IX.4 Disability Retirement Benefit Payable at Disability Retirement
--------------------------------------------------------------
Date.
- - ----
(a) A Disability Participant who makes an election to receive
the Disability Retirement Benefit under this Plan shall receive a
monthly annuity in an amount, determined as of the Disability
Participant's Disability Retirement Date, equal to 60% of the
Disability Participant's Covered Earnings (as defined by the Disability
Plan as in effect on the Disability Participant's Retirement Date);
provided that such amount shall not exceed $6,000 prior to reduction
for any other benefits payable as described in Subsection (b) below.
(b) The monthly amount of the Disability Retirement Benefit
shall be reduced by the amount payable from the following sources
determined as of the Disability Participant's Disability Retirement
Date:
(i) any applicable worker's compensation or occupational
diseases law;
(ii) the Social Security Act (including any portion
attributable to dependents); and
(iii) any state disability benefit law or no-fault insurance
in lieu thereof; provided that the amount of any benefit referred to in
clause (ii) above shall not be taken into account to the extent it is
attributable to any cost-of-living increase two years or more after
commencement of the benefits to the Disability Participant under the
Disability Plan; and effective August 1, 1998, provided further that
the monthly amount of the Disability Retirement Benefit shall be
increased after the Disability Participant's Disability Retirement Date
by the amount of any decrease in the amount payable pursuant to the
Social Security Act. Reduction shall be made whether or not a
Disability Participant applied for and actually received any such other
benefit to which he is or may be entitled. The amount of the benefits
payable referred to in paragraphs (i), (ii) and (iii) of this
Subsection (b) and such reduction shall be determined by the Committee,
in its sole discretion.
(c) An Associate who becomes a Disability Participant on or
before September 30, 1998, shall be entitled to the lump sum benefit
described in this Subsection (c). The amount of the
34
<PAGE>
lump sum benefit shall be equal to the present value, determined as of
July 1, 1996, of the Disability Retirement Benefit payable to the
Disability Participant under this Plan, multiplied by 12-1/2%. For the
purpose of determining the amount of the lump sum benefit under this
Subsection (c), the present value of the Disability Participant's
Disability Retirement Benefit shall be determined using the interest
rate and mortality assumptions used under the Plan to determine
Actuarial Equivalent and by assuming that the Disability Participant
will continue to receive such monthly annuity benefit until the earlier
of the Disability Participant's death or attainment of age 65.
IX.5 Offset of Retirement Benefit. Notwithstanding any other provisions
----------------------------
of the Plan, the amount of the Retirement Benefit payable, including the minimum
Retirement Benefit, to any Participant shall be reduced by the current annuity
rate of a legal reserve life insurance company chosen by the Committee of that
portion of the annuity which could be purchased on June 30, 1997 (or for
Participants employed by Lechmere after June 30, 1997, the last date of such
Participant's employment with Lechmere; and effective June 1, 1998, the later of
the last day of such Participant's employment with Lechmere and June 1, 1998),
for the Participant under the Savings Plan with (a) the amount, if any, in the
Participant's Transferred Contribution Account on June 30, 1997, plus the
amount, if any, which accrues to the Participant's Transferred Contribution
Account after June 30, 1997, and on or before June 1, 1998, while such
Participant is employed by Lechmere; and (b) the amount, if any, in the
Participant's Account on June 30, 1997, attributable to Required Contributions,
as determined by the Committee, plus the amount, if any, in the Participant's
Account attributable to Required Contributions, as determined by the Committee
made after June 30, 1997, and on or before June 1, 1998, while such Participant
is employed by Lechmere. Notwithstanding anything provided herein, effective
January 1, 1984, the Retirement Benefit of Associates of Montgomery Ward
Insurance Company and its subsidiaries shall not be offset by benefits provided
under the Savings Plan and effective October 1, 1984, the Retirement Benefit of
Associates of Signature and its subsidiaries shall not be offset by the benefits
provided under the Savings Plan except as set forth herein. In addition,
effective as of
35
<PAGE>
such dates, Associates of the aforesaid companies will accrue benefits under the
Plan although they have not authorized payroll deduction contributions under the
Savings Plan. The Retirement Benefit payable to Associates of Montgomery Ward
Insurance Company and its subsidiaries (or Associates of Signature) shall be
reduced by the current annuity rate of a legal reserve life insurance company
chosen by the Committee of that portion of the annuity that could be purchased
with the Transferred Contributions and their Required Contributions made prior
to January 1, 1984 (or October 1, 1984), under the Savings Plan. Notwithstanding
anything provided herein to the contrary, the reduction described in this
Section 9.5 with respect to the amount, if any, of Participant's Transferred
Contribution Account and the amount, if any, of the Participant's Account
attributable to Required Contributions shall be determined by the Committee if
not determined sooner pursuant to this Section 9.5 as of June 1, 1998.
IX.6 Cessation of Benefit Payments Following Reemployment After
----------------------------------------------------------
Retirement. Upon reemployment of a former Associate who previously Retired
- - ----------
hereunder, all benefit payments being made to the Associate which are permitted
to be suspended under Regulations shall cease.
IX.7 Retirement Benefit Payable upon Retirement Following Reemployment
-----------------------------------------------------------------
after Termination of Service. If a Participant who incurs a Break in Service is
- - ----------------------------
for any reason reemployed by the Company, then to the extent that the
Participant's Cash Balance Account, and/or Lechmere Cash Balance Account, if
any, has been converted to an annuity, the Participant's Cash Balance Account
and/or Lechmere Cash Balance Account, if any, will be restored and Interest
Credits or Lechmere Interest Credits shall accrue from the date of the
Participant's original termination of employment through the date of the
Participant's subsequent Retirement. Upon the Participant's subsequent
Retirement, the Participant's Retirement Benefit shall be based on any accrual
provided under Article VII credited to the Participant's Account and, if
applicable, the Participant's Credited Service after the Participant's
reemployment plus the Retirement Benefit (after applying the offset of the
actuarial equivalent of any Retirement Benefit paid to the Participant)
previously accrued as of the Participant's separation from Service.
36
<PAGE>
IX.8 Maximum Amount of Retirement Benefit.
------------------------------------
(a) The provisions of this Section shall govern the benefits
to which it is applicable notwithstanding any other provision of the
Plan to the contrary. The benefits to which this Section is applicable
are: (i) any annuity payable to a Participant for life as a part of a
Qualified Joint and Survivor Benefit or as a part of an Optional
Retirement Benefit elected by the Participant under Section 11.2 hereof
and having the effect of a qualified joint and survivor annuity within
the meaning of Section 417(b) of the Code (excluding in either case any
post-Retirement Surviving Spouse benefit); (ii) any Single Life Benefit
elected by a Participant under Subsection 11.2(a) hereof; and (iii) any
other Optional Retirement Benefit elected by a Participant under
Section 11.2 hereof (including both the annuity payable to the
Participant and any other annuity or benefit payable thereunder). This
Section shall not limit the amount of any Supplemental Retirement
Benefit, if any, which is payable by reason of the prior maintenance of
the Profit-Sharing Plan, which benefit represents benefits under a
"defined contribution plan", as that term is defined in ERISA.
(b) The benefits to which this Section is applicable may not
exceed the limitations set forth in Section 415 of the Code, which are
incorporated by reference herein. For these purposes, the "limitation
year" means the Plan Year. For periods beginning before January 1,
2000, if a Participant also participates in any defined contribution
plan (as defined in Sections 414(i) and 415(k) of the Code) maintained
by the Company or any Affiliate, in the event that in any Plan Year
prior to January 1, 2000, the sum of the Participant's defined benefit
fraction (as defined in Section 415(e)(2) of the Code) and the
Participant's defined contribution fraction (as defined in Section
415(e)(3) of the Code) would otherwise exceed one, then the benefit
payable under this Plan shall be reduced so that the sum of such
fractions in respect of that Member will not exceed one. If the above
reduction does not ensure that the limitation set forth in this Section
is not exceeded, then the annual additions (as defined in Section
415(c)(2) of the Code) to any defined contribution plan maintained by
the
37
<PAGE>
Company or any Affiliate in which the Participant participates, shall
be reduced in accordance with the provisions of that plan, but only to
the extent necessary to ensure that such limitation is not exceeded. If
a Participant also participates in another defined benefit plan (as
defined in Sections 414(j) and 415(k) of the Code) maintained by the
Company or any Affiliate, in the event that in any Plan Year such
Participant's aggregated accrued benefit under such plans exceeds the
applicable limits under Section 415 of the Code, the benefit payable
under such other plan shall be reduced to the extent necessary to
comply with such limits.
(c) For purposes of this Section, the benefits to which this
Section is applicable shall be determined without regard to any amounts
transferred from the Jefferson Stores Plan and the Lechmere Plan
pursuant to Sections 21.1 and 22.2, respectively.
(d) In the case of any Associate who was a Participant under
the Retirement Security Plan prior to October 3, 1973, the benefits to
which this Section is applicable may not exceed the greater of (i) the
limitations contained in Subsection 9.8(b) hereof, adjusted as
described therein, or (ii) either (A) the Actuarial Equivalent of a
Single Life Benefit, as described in Section 11.2 hereof, equal to 100%
of the Participant's Total Earnings on October 2, 1973, or, if earlier,
the date of his termination of Service, or (B) the Actuarial Equivalent
of the benefits which would have been provided under the Retirement
Security Plan as in effect on October 2, 1973, without taking into
account any increases in the Associate's Total Earnings after such
date.
(e) The Committee shall, to the extent required by ERISA and
in accordance with Regulations, apply the limitations contained in this
Section, after giving due consideration to the wishes of the
Participant, by taking into account the Supplemental Retirement
Benefit, if any, and the benefits payable and the contributions made
under any other plans maintained by Ward or any Affiliate which are
qualified under Section 401(a) of the Code. For periods beginning
before January 1, 2000, if such other plan is a defined contribution
plan, then the sum of the defined benefit plan
38
<PAGE>
fraction and the defined contribution plan fraction (each as described
in Section 415(e) of the Code) shall not exceed one.
(f) Notwithstanding the foregoing provisions of this Section,
the maximum limitation on Retirement Benefits, with respect to any
person who was a Participant prior to December 31, 1982, and whose
Retirement Benefit (determined without regard to any changes in the
Plan after July 1, 1982, and without regard to cost-of-living
adjustments, if any, occurring after July 1, 1982) as of December 31,
1982, exceeds the limitations set forth in Section 9.8(b), shall be
such Participant's Retirement Benefit as of December 31, 1982; provided
that, such Participant's Retirement Benefit did not exceed the maximum
limitation thereon as of December 31, 1982.
(g) Notwithstanding the foregoing provisions of this Section,
the maximum limitation on Retirement Benefits, with respect to any
person who was a Participant on or prior to December 31, 1994, and
whose Retirement Benefit as of December 31, 1994, exceeds the
limitations set forth in Section 9.8(b), shall not be less than such
Participant's Retirement Benefit as of December 31, 1994; provided
that, such Participant's Retirement Benefit did not exceed the maximum
limitation thereon as of December 31, 1994.
ARTICLE X
Eligibility for Retirement Benefit
----------------------------------
X.1 Eligibility for Retirement Benefit at Normal Retirement Date.
------------------------------------------------------------
Except as otherwise provided in Article IX hereof and Section 11.4, a
Participant who Retires on the Participant's Normal Retirement Date shall be
eligible for the Retirement Benefit provided for in Section 9.1 hereof or a
benefit of Equivalent Actuarial Value thereto as provided for herein payable
from and after the Participant's Normal Retirement Date.
X.2 Eligibility for Retirement Benefit at Early Retirement Date. Except
-----------------------------------------------------------
as otherwise provided in Article IX hereof, a Participant who Retires on an
Early Retirement Date shall be eligible for the Retirement
39
<PAGE>
Benefit provided for in Section 9.2 hereof or a benefit of Equivalent Actuarial
Value thereto as provided for herein payable from and after the Participant's
Early Retirement Date. A Participant who has attained age 55 and terminates
Service prior to the Participant's Normal Retirement Date with five Years of
Service shall be eligible for the Retirement Benefit provided for in Section
9.1(c) or a benefit of Equivalent Actuarial Value.
Notwithstanding any other provisions of the Plan, no distribution of
any amounts attributable to contributions paid on behalf of a Participant while
he was a five percent owner shall be made to a Participant who is or has been a
five percent owner prior to such Participant's attaining age 59 1/2, for any
reason other than such Participant's death or disability. For purposes of this
Section 10.2, a five percent owner shall mean a five percent owner of such
Participant's employer as defined in Section 416(i)(1)(B)(i) of the Code.
X.3 Eligibility for Retirement Benefit at Postponed Retirement Date.
---------------------------------------------------------------
Except as otherwise provided in Article IX hereof and Section 11.4, a
Participant who Retires on a Postponed Retirement Date shall be eligible for the
Retirement Benefit provided for in Section 9.3 hereof or a benefit of Equivalent
Actuarial Value thereto as provided for herein payable from and after the
Participant's Postponed Retirement Date.
X.4 Disability Plan Benefits. During any period when benefits would
------------------------
otherwise be payable under the Disability Plan, no benefits shall be paid under
this plan unless a Participant ceases to receive benefits under the Disability
Plan. During a period that a Disability Retirement Benefit would otherwise be
payable under this Plan, no Retirement Benefit will be payable under this Plan
unless the Participant ceases to receive the Disability Retirement Benefit under
this Plan.
ARTICLE XI
Methods of Payment
------------------
XI.1 Qualified Joint and Survivor Benefit. If a Participant is legally
------------------------------------
married, as determined by the Committee, on the date of the Participant's
Retirement, the Equivalent Actuarial Value of any Retirement Benefit, to which
such Participant is entitled under the Plan shall, except as otherwise provided
in this Section
40
<PAGE>
or in Section 11.2 hereof, be payable in the form of a Qualified Joint and
Survivor Benefit. The term "Qualified Joint and Survivor Benefit" means a
benefit providing an annuity for the life of the Participant, ending with the
payment due on the first day of the month in which the Participant's death
occurs, and, if the Participant dies leaving a Surviving Spouse, a survivor
annuity for the life of such Surviving Spouse, commencing on the first day of
the month following the date of the Participant's death and ending with the
payment due on the first day of the month in which such Surviving Spouse's death
occurs. The survivor annuity payable to the Surviving Spouse shall be in an
amount equal to one-half of the annuity payable for the life of the Participant
under the Participant's Qualified Joint and Survivor Benefit. If a Participant
is not legally married, as determined by the Committee, on the date of the
Participant's Retirement, the Participant's Retirement Benefit shall, except as
otherwise provided in Section 11.2 hereof, be payable to the Participant in the
form provided for in Subsection 11.2(a) hereof.
XI.2 Optional Methods of Payment. In lieu of the Qualified Joint and
---------------------------
Survivor Benefit, a Participant may elect, subject to Sections 11.3 and 11.4
hereof, to receive the Actuarial Equivalent of the Retirement Benefit to which
the Participant is entitled under the Plan in accordance with any one of the
following options; provided, however, that a Participant who elects to receive a
distribution from the Plan prior to his Normal or Early Retirement Date may
elect only the optional method of payment described in Section 11.2(e):
(a) Single Life Benefit. An annuity for the Participant's life,
ending with the payment due on the first day of the month in which the
Participant's death occurs, with no monthly annuity payable to a
beneficiary.
(b) Contingent Annuitant Benefit. An annuity for life and an
annuity for 100%, 75% or 50% of such amount after the Participant's
death on or after the Participant's Normal Retirement Date or Early
Retirement Date, if applicable, to the Participant's Beneficiary for
the life of the Beneficiary (the "Contingent Annuitant Benefit" or
"Joint and Survivor Benefit"). In no event shall
41
<PAGE>
the effect of the selection of a Contingent Annuitant Benefit in which the
Beneficiary is not the Participant's spouse cause the benefit payable to
the Participant to be reduced to a level less than 50% of the benefit to
which the Participant would have been entitled if the Participant had not
elected the Contingent Annuitant Benefit. The conditions governing the
Contingent Annuitant Benefit shall be:
(i) the effective date of the Contingent Annuitant Benefit
(the "Option Effective Date") shall be the Participant's Retirement
Date.
(ii) the election shall be made in writing, dated the day the
election is made, on the prescribed form and shall specify the 100%,
75% or 50% Contingent Annuitant Benefit and the name, social security
number, sex and date of birth of the Participant's Beneficiary.
(iii) retirement income under the Contingent Annuitant Benefit
shall commence effective the first day of the month following
Retirement.
(iv) the Contingent Annuitant Benefit shall become inoperative
in the event the Participant cancels the benefit prior to the Option
Effective Date or if either the Participant or the Beneficiary should
die prior to the Option Effective Date. On the Option Effective Date,
the Contingent Annuitant Benefit shall become noncancellable and the
Beneficiary selection binding, and, if either the Participant or the
Beneficiary should die after the Option Effective Date, the benefit
shall nevertheless continue to be operative.
(c) Level Income Benefit. Benefit from the Plan up to the earliest
--------------------
date age 62 that the Participant will be entitled to receive a
retirement benefit from social security and a smaller benefit, or no
benefit if so actuarially determined, from the Plan commencing after
such date (the "Level Income Benefit"). If the Participant dies prior
to age 62 or if benefits continue after age 62, the Annuity ceases with
the payment due on the first date of the month in which the
Participant's death occurs. The Plan benefits payable both before and
after the retirement benefit from social security as estimated for age
62 commencement becomes payable, in combination, are to have the
Equivalent Actuarial Value of the reduced amount of Retirement Benefit
provided for in Section 9.2 hereof commencing on the Early Retirement
Date.
42
<PAGE>
(d 10 Years Certain and Continuous Benefit. An annuity for
---------------------------------------
life with the provision that, if the Participant should die before
having received 120 monthly payments, the Participant's Beneficiary
shall receive the balance of such payments (the "10 Years Certain and
Continuous Benefit"). The conditions governing the 10 Years Certain and
Continuous Benefit shall be the same as those governing the Contingent
Annuitant Benefit, except that the election form need not specify the
social security number, sex and date of birth of the Participant's
Beneficiary and the Participant may change the Participant's
Beneficiary at any time before or after the Option Effective Date upon
written notice to the Committee.
(e Lump Sum Benefit. For Participants who were participating
----------------
in the Lechmere Plan as of June 30, 1994, to the extent that the
Equivalent Actuarial Value of a Participant's Accrued Benefit from the
Lechmere Plan determined as of June 30, 1994, is less than or equal to
$7,000, the Participant or the Participant's Surviving Spouse may elect
to receive such Accrued Benefit in one lump sum payment; or to the
extent that a Participants' Accrued Benefit age 55 or older is $50.00
or less, the Participant may elect to receive the Equivalent Actuarial
Value of such Accrued Benefit in one lump sum payment. In addition, a
Participant to the extent of the Equivalent Actuarial Value of the
Participant's Accrued Benefit accrued pursuant to the provisions of
Sections 9.1(e) and (f), may elect to receive that portion of such
Accrued Benefit, in one lump sum payment. In addition, for periods
beginning on or after January 1, 1998, to the extent that the
Equivalent Actuarial Value of a Participant's Accrued Benefit accrued
pursuant to the provisions of Section 9.1(a), (b) and (c) is less than
or equal to $5,000, the Participant's or the Participant's Surviving
Spouse may elect to receive such Accrued Benefit in one lump sum
payment.
XI.3 Election of Optional Method of Payment. Except as otherwise
--------------------------------------
provided in Sections 11.2 and 11.5 hereof, any election or revocation of an
election under this Article shall be made by the Participant at any time prior
to the date that benefit payments to the Participant commence pursuant to the
provisions of the
43
<PAGE>
Plan. If a Participant has elected a Contingent Annuitant Benefit or 10 Years
Certain and Continuous Benefit in accordance with Section 11.2 and dies prior to
the date payment of the Participant's Retirement Benefit commences without
leaving a surviving Spouse, then such form of benefit shall become payable to
the Participant's Beneficiary in the same amount, if any, that would have been
payable to such Beneficiary if the payments thereunder had commenced to the
Participant on the last day of the month coincident with or preceding the date
of the Participant's death. If such a Participant dies prior to the date payment
of the Participant's Retirement Benefit commences, leaving a Surviving Spouse
and without having made a valid election under Section 12.2(b), then the
election under Section 11.2, if any, shall be null and void, and the Surviving
Spouse shall receive the Pre-Retirement Death Benefit in accordance with Section
12.1(a).
XI.4 Rules Regarding Distribution of Benefits.
----------------------------------------
(a Notwithstanding any other provision of the Plan, for
periods beginning before January 1, 1999, unless otherwise provided by
law, any benefit payable to a Participant shall commence no later than
the April 1st of the calendar year following the calendar year in which
such Participant attains age 70 1/2; provided, however, if a
Participant attained age 70 1/2 prior to January 1, 1988, except as
otherwise provided in Subsection 11.4(e), any benefit payable to such
Participant shall commence no later than the April 1st of the calendar
year following the later of (i) the calendar year in which the
Participant attains age 70 1/2 or (ii) the calendar year in which the
Participant retires. Such benefit shall be paid, in accordance with the
Regulations, over a period not extending beyond the life expectancy of
such Participant and the Participant's Beneficiary. Life expectancy for
purposes of this Section shall not be recalculated annually in
accordance with the Regulations. Any additional Retirement Benefit
accrued beyond the Retirement Benefit commencement date shall be paid
in a lump sum. Notwithstanding the preceding provisions, for periods
beginning on or after January 1, 1999, with respect to Participants who
are not five percent owners as defined in Section 416(i) of the Code at
any time during the Plan Year ending with or
44
<PAGE>
within the calendar year in which such owner attains age 70 1/2,
commencement of distributions shall be made after the Participant
retires. Once distributions have begun to a five percent owner pursuant
to this Subsection (a), they must continue even if the Member ceases to
be a five percent owner in a subsequent year.
To the extent required under the Code, the Participant's Accrued
Benefit shall be actuarially increased to take into account any period
after age 70 1/2 in which the Participant does not receive benefits
under the Plan pursuant to this Subsection (a). The period for which an
actuarial increase may be necessary begins on the April 1 following the
calendar year in which the Participant attains age 70 1/2 (January 1,
1997 in the case of a Participant who attained age 70 1/2 prior to
1996), and ends on the date on which benefits commence in an amount
sufficient to satisfy Section 401(a)(9) of the Code ("Actuarial
Period"). An actuarial increase to the Participant's Accrued Benefit
pursuant to this Subsection (a) shall be provided to the extent
required under the Code only if, and to the extent, that the
Participant's Accrued Benefit has not increased during the Actuarial
Period in an amount equivalent to the actuarial increase required under
the Code. The calculation of any actuarial increase required under this
Subsection (a) shall reflect a reduction in the Accrued Benefit to take
into account the actuarial equivalent of any distributions on or after
the beginning of the Actuarial Period. Any actuarial increase required
pursuant to the preceding provisions is not in addition to any
actuarial increase required for that same period under Section 411 of
the Code.
(b) If distribution of a Participant's benefit has commenced
prior to a Participant's death, and such Participant dies before the
Participant's entire benefit is distributed to the Participant,
distribution of the remaining portion of the Participant's benefit to
the Participant's Beneficiary shall be made at least as rapidly as
under the method of distribution in effect on the date of the
Participant's death.
45
<PAGE>
(c) If a Participant dies before distribution of the
Participant's benefit has commenced, distributions to any Beneficiary
shall be made on or before the December 31st of the calendar year which
contains the fifth anniversary of the date of such Participant's death;
provided, however, that any distribution to a Beneficiary designated
under Section 12.2 may be made over the life of such Beneficiary or a
period not extending beyond the life expectancy of such Beneficiary.
Such distribution shall commence not later than the December 31st of
the calendar year immediately following the calendar year in which the
Participant died, or, in the event such Beneficiary is the
Participant's Surviving Spouse, not later than the date of which such
Participant would have attained age 70 1/2, if later (or, in either
case, on any later date prescribed by Regulations). If such
Participant's Surviving Spouse dies after such Participant's death but
before distributions to such Surviving Spouse commence, this Section
11.4(c) shall be applied to require payment of any further benefits as
if such Surviving Spouse were the Participant.
(d) Pursuant to Regulations, any benefits paid to a child shall
be treated as if paid to a Participant's Surviving Spouse if such
amount will become payable to such Surviving Spouse on the child's
attaining majority, or other designated event permitted by Regulations.
(e) If a Participant who is five percent owner attained age 70
1/2 before January 1, 1988, any benefit payable to such Participant
shall commence no later than the April 1st of the calendar year
following the later of (i) the calendar year in which the Participant
attained age 70 1/2 or (ii) the earlier of (A) the calendar year within
which the Participant becomes a five percent owner or (B) the calendar
year in which the Participant retires. For purposes of this Subsection
(e), a five percent owner shall mean a five percent owner of such
Participant's employer as defined in Section 416(i) of the Code at any
time during the Plan Year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
XI.5 Written Explanations of Survivor Benefit.
----------------------------------------
46
<PAGE>
(a) The Committee shall furnish or cause to be furnished to each
married Participant explanations of the Qualified Joint and Survivor
Benefit and Pre-Retirement Death Benefit in Section 12.1(a) under
procedures developed by the Committee in accordance with the Code and
Regulations. Specifically, with respect to the election to waive a
Qualified Joint and Survivor Benefit, the Committee shall furnish or
cause to be furnished to the Participant the written explanation of the
Qualified Joint and Survivor Benefit, as described in Subsection (b)
below. If the Participant, after having received the written
explanation described in Subsection (b) below, affirmatively elects in
writing to receive the Participant's Retirement Benefit in one of the
option forms described in Section 11.2 in lieu of a Qualified Joint and
Survivor Benefit with the consent of the Participant's spouse, if
necessary, such optional form of distribution may commence no less than
seven days after the written explanation described in Subsection (b)
below is provided to the Participant. A Participant is permitted to
revoke an affirmative distribution election up until the date payment
of the Participant's Retirement Benefit commences, or, if later, at any
time prior to the expiration of the seven day period that begins the
date after the explanation in Subsection (b) below is provided to the
Participant.
(b) Other than as described in Subsection (a) above, with regard
to the election to waive a Qualified Joint and Survivor Benefit, the
Committee shall furnish or cause to be furnished to the Participant no
less than 30 days and no more than 90 days prior to the date payment of
the Participant's Retirement Benefit commences written explanation of:
(i) the terms and conditions of the Qualified Joint and
Survivor Benefit;
(ii) the Participant's right to make, and the effect of, an
election to waive the Qualified Joint and Survivor Benefit;
(iii) the right of the Participant's spouse to consent to
any election to waive the Qualified Joint and Survivor Benefit;
(iv) the right of the Participant to revoke such election,
and the effect of such revocation; and
47
<PAGE>
(v) the right of the Participant to consider whether to
waive the Qualified Joint and Survivor Benefit for at least 30
days prior to the date payment of the Participant's Retirement
Benefit commences.
(c) A married Participant may elect in writing to waive the
Qualified Joint and Survivor Benefit or for purposes of Section 12.2,
designate a beneficiary other than the Participant's spouse. Such
election or designation must be consented to by the Participant's
spouse. If the Participant elects a 10 Years Certain and Continuous
Benefit, the election or designation, and the spouse's consent thereto,
must designate specific beneficiary(ies), including any class of
beneficiaries or alternate beneficiaries, and, with respect to a
Qualified Joint and Survivor Benefit, the form of benefits that the
designated beneficiary(ies) shall receive, which designations may not
be changed without spousal consent unless the spouse expressly permits
designations by the Participant, without any further spousal consent.
Such spouse's consent must acknowledge the effect of such election and
be witnessed by a Plan representative or a notary public. Such consent
shall not be required if it is established to the satisfaction of the
Committee that the required consent cannot be obtained because there is
no spouse, the spouse cannot be located, or other circumstances that
may be prescribed by the Regulations. The election or designation made
by the Participant and consented to by the Participant's spouse may be
revoked by the Participant in writing without the consent of the spouse
at any time prior to the distribution of the Participant's Retirement
Benefit. Any election or designation must comply with the requirements
of this Subsection (c). A former spouse's waiver shall not be binding
on a new spouse.
XI.6 Cash Out. Payments of any Retirement Benefit with an Equivalent
--------
Actuarial Value of $3,500 or less (or for periods beginning on or after January
1, 1998, $5,000 or less) will be made in a lump cash sum in full settlement of
the Plan's liability therefor, provided, however, that in the case of a married
48
<PAGE>
Participant, no such lump-sum payment shall be made after benefits have
commenced without the consent of the Participant and the Participant's spouse
or, if the Participant has died, the Participant's Surviving Spouse.
XI.7 Direct Rollover. Notwithstanding any provision of the Plan to the
---------------
contrary, a Distributee may elect, at the time and in the manner prescribed by
the Committee, to have any portion of an Eligible Rollover Distribution paid
directly to an Eligible Retirement Plan specified by the Distributee in a Direct
Rollover.
XI.8 Disability Retirement Benefit. A Participant's Disability
-----------------------------
Retirement Benefit shall only be paid in the form of a monthly annuity benefit
the amount of which is determined in accordance with Sections 9.4(a) and (b)
payable commencing with the Participant's Disability Retirement Date and ending
on the first day of the month in which the Disability Participant attains age
65, dies, begins to receive a Retirement Benefit under the terms of this Plan,
whichever is the first to occur. The lump sum benefit, if any, to which a
Disability Participant is entitled pursuant to Section 9.4(c) shall be paid
within a reasonable period of time following the month in which the Associate or
former Associate first became a Disability Participant.
ARTICLE XII
Death Benefits
--------------
49
<PAGE>
XII.1 Pre-Retirement Death Benefit. A Vested Participant who is in
----------------------------
Service or who terminated Service but whose effective date of payment of
Retirement Benefits has not yet occurred is entitled to a Pre-Retirement Death
Benefit. The term "Pre-Retirement Death Benefit" means a benefit providing that,
in the event of the Participant's death before the effective date of payment of
the Participant's Vested Retirement Benefit, the Participant's Surviving Spouse,
if any, shall be entitled to receive a survivor annuity equal to one-half of the
annuity which would have been payable for the life of the Participant under a
Qualified Joint and Survivor Benefit, if payments thereunder had commenced on
the first day of the month following the later of (i) the Participant's death,
or (ii) the Participant's attainment of age 55, determined under Section 9.1,
excluding any immediate Cash Balance Account Annuity, and any Lechmere Immediate
Cash Balance Account Annuity provided in Sections 9.1(e) and (f). Such
Pre-Retirement Death Benefit shall become payable to the Surviving Spouse on the
first day of the month coincident with or following the later of (i) the date of
the Participant's death, or (ii) the day on which the Participant would have
attained age 55 had he lived, but no later than the day the Participant would
have attained age 70 1/2 had he lived.
XII.2 Death Benefits Attributable to Cash Balance Account and Lechmere
----------------------------------------------------------------
Cash Balance Account.
- - --------------------
(a) Except as otherwise provided in Subsections (b) and (c)
below, the Beneficiary of a Participant who is either in Service or
terminated Service but whose effective date of payment of Retirement
Benefits has not yet occurred and who has not elected a lump sum amount
pursuant to the provisions of Section 13.2(c)(ii) and has not received
a lump sum distribution pursuant to Section 11.6 and dies shall receive
an immediate distribution of a lump sum amount equal to the
Participant's Vested Cash Balance Account and Lechmere Cash Balance
Account in lieu of all of the benefits due such Beneficiary under the
Plan, except for any benefit that may be payable to a Surviving Spouse
in accordance with Section 12.1.
(b) In lieu of the benefit provided in Subsection (a) above,
unless the Beneficiary elects a lump sum amount as provided in
Subsection (a) above pursuant to such rules as are adopted by the
50
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Committee in accordance with Regulations, or unless the Beneficiary
receives a lump sum distribution pursuant to Section 11.6, if the
Participant's Surviving Spouse is the beneficiary and the Participant
is either in Service or terminated Service but whose effective date of
payment of Retirement Benefits has not yet occurred and has not elected
a lump sum amount pursuant to the provisions of Section 13.2(c)(ii) and
has not received a lump sum distribution pursuant to Section 11.6 and
dies, the Beneficiary is entitled to a monthly Retirement Benefit based
on the Actuarial Equivalent of the Participant's Lechmere Cash Balance
Account and the Participant's Vested Cash Balance Account. The life
annuity shall be payable to the Beneficiary for life beginning at any
time after the Participant's death as elected in writing by the
Beneficiary in accordance with the provisions of Section 11.4(c). The
life annuity benefit hereunder shall be equal to either (i) or (ii)
below, as applicable:
(i) If the Beneficiary elects to commence payment of
the life annuity immediately, the Beneficiary's death benefit
shall be 100% of the Vested Immediate Cash Balance Account
Annuity described in Section 7.4, and the Lechmere Immediate
Cash Balance Account Annuity described in Section 7.7
determined as of such date, substituting the Beneficiary's age
at such time for the Participant's age under Section 7.4(b)
and 7.7(b), respectively.
(ii) If the Beneficiary elects to defer payment of the
life annuity, the Beneficiary will receive annual Interest
Credits and Lechmere Interest Credits until the date the
payments commence. The Beneficiary's death benefit shall be
100% of the Vested Immediate Cash Balance Account Annuity
described in Section 7.4 and the Lechmere Cash Balance Account
Annuity described in Section 7.7 determined as of the date
elected by the Beneficiary substituting the Beneficiary's age
at such time for the Participant's age under Section 7.4(b),
and 7.3(b), respectively.
(c) In lieu of the benefit provided in Subsection (a)
above, the Beneficiary of a Participant who is either in Service or
terminated Service but whose effective date of payment of Retirement
Benefits has not yet occurred and who has not elected a lump sum amount
pursuant to the provisions of Section 13.2(c)(ii) and has not received
a lump sum distribution in accordance with Section 11.6 and dies may
elect, pursuant to such rules as are adopted by the Committee in
51
<PAGE>
accordance with Regulations, to receive a monthly Retirement Benefit
based on the Actuarial Equivalent of the Participant's Lechmere Cash
Balance Account in lieu of all of the benefits due such Beneficiary
under the Plan with respect to the Lechmere Cash Balance Account. The
life annuity benefit hereunder shall be calculated pursuant to either
(b) (i) or (ii) above, as applicable, considering only the Lechmere
Immediate Cash Balance Account Annuity.
If the involuntary cash-out provisions of Section 11.6 are
operative, a monthly death benefit which becomes due under this Section
shall be paid in one lump sum amount to the Beneficiary in lieu of all
other benefits due such Beneficiary under the Plan except for any
benefit that may be payable to a surviving Spouse in accordance with
Section 12.1.
XII.3 Designation of Beneficiary. Each Participant shall file with the
--------------------------
Committee a written designation of one or more persons as the Beneficiary who,
subject to Section 11.5, shall be entitled to receive the amount, if any,
payable to the Participant's Beneficiary upon the death of the Participant. The
designation of a Beneficiary for purposes of the Contingent Annuitant Benefit or
10 Years Certain and Continuous Benefit shall be deemed to be a Beneficiary
designation for all purposes under the Plan unless otherwise specified by the
Participant. Each Beneficiary of a Participant may file with the Committee a
written designation of one or more persons as the Beneficiary who shall be
entitled to receive the amount, if any, payable to such Beneficiary of the
Beneficiary of the Participant upon the death of the Participant's Beneficiary.
A Participant or the Beneficiary of a Participant may from time to time revoke
or change his Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Committee. The last Beneficiary
designation received by the Committee shall be controlling; provided that, no
designation, or change or revocation thereof, shall be effective unless received
by the Committee prior to the death of the Participant or the Beneficiary of the
Participant, as the case may be, or be effective as of the date prior to the
date of such receipt. If no Beneficiary designation is in effect at the time of
a Participant's death or if no Beneficiary survives the Participant, payment of
the amount, if any, payable upon the death of
52
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the Participant shall be made to the Participant's estate. If no Beneficiary
designation is in effect at the time of the death of the Beneficiary of a
Participant or if no Beneficiary survives the Beneficiary of a Participant,
payment of the amount, if any, payable upon the death of the Beneficiary of the
Participant shall be made to the estate of the Beneficiary of the Participant.
If the Committee is in doubt as to the right of any person to receive an amount
payable pursuant to this Section, the Committee may direct the Trustees to
retain such amount, without liability for any interest thereon, until the rights
thereto are determined, or the Committee may direct the Trustees to pay such
amount to any court of competent jurisdiction, which payment shall be a complete
discharge of the liability under the Plan and of the Trust therefor.
Notwithstanding anything herein to the contrary, for purposes of Section 12.3,
if a Participant is married, the Participant's spouse shall automatically be the
Participant's Beneficiary, unless the spouse has consented to another
designation as provided in Section 11.5. Such consent must be made in accordance
with procedures developed by the Committee in accordance with the Code and
Regulations.
ARTICLE XIII
Termination of Service
----------------------
XIII.1 Termination of Service by Non-Vested Participant. If the Service
------------------------------------------------
of a Participant who is not and does not at the time thereof become Vested
terminates, no Retirement Benefit shall be payable to the Participant under the
Plan.
XIII.2 Termination of Service by Vested Participant. If the Service of
--------------------------------------------
a Participant who is Vested terminates prior to Retirement, such Participant may
elect, subject to Sections 10.2 and 11.4, any of the following:
(a) to receive the Participant's Vested Retirement Benefit
commencing upon the Participant's Normal Retirement Date, including the
annual minimum if the Service requirement therefor is satisfied, based
on the Participant's Years of Credited Service, any accrual provided
under
53
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Article VII prior to the Participant's termination of Service and
determined in accordance with Section 9.1 hereof; or
(b) if such Participant is ineligible for benefits under the
Disability Plan (or has voluntarily elected to forego receipt of
benefits otherwise payable thereunder), such Participant may elect to
receive the benefits provided for in Section 9.2 hereof, including the
annual minimum if the Service requirement therefor is satisfied, based
on the Participant's Years of Credited Service any accrual provided
under Article VII prior to the Participant's termination of Service,
commencing on the first day of the month following attainment of age 55
or the first day of any subsequent month prior to the Participant's
Normal Retirement Date, where such Participant has prior to such date
elected to receive such benefits on such date pursuant to rules adopted
by the Committee in accordance with the Regulations; or
(c) to receive on such date as the Participant shall elect
pursuant to rules adopted by the Committee in accordance with
Regulations, in lieu of all of the benefits due such Participant under
the Plan:
(i) the Equivalent Actuarial Value of that portion of the
Participant's Retirement Benefit accrued pursuant to the
provisions of Section 9.1(e) and (f), payable in the form of a
Qualified Joint and Survivor Benefit if the Participant is
legally married, as determined by the Committee, on the date of
the Participant elects to receive a benefit pursuant to this
Subsection; or
(ii) an immediate lump sum amount equal to the Participant's
Vested Cash Balance Account and Lechmere Cash Balance Account if
the Participant is not legally married as determined by the
Committee on the date the Participant elects to receive a benefit
pursuant to this Subsection, or, if the Participant is legally
married on the date the Participant elects to receive a benefit
pursuant to the Subsection, with the written consent of the
Participant's spouse within the 90-day period ending on the date
payment pursuant to this provision is made in accordance with
provisions developed by the Committee in accordance with the Code
and Regulations (unless the Committee makes a written
determination in accordance with the Code and Regulations that no
such consent is required); and
54
<PAGE>
(iii) a Retirement Benefit, attributable only to the
Participant's Retirement Benefit accrued pursuant to the
provisions of Sections 9.1(a), (b), (c) and (d), as provided
under Subsection (a) or (b) above, as the Participant may elect.
XIII.3 Termination of Service without a Break in Service. In the event
-------------------------------------------------
the Service of a Participant terminates and he is reemployed, such Participant's
enrollment in the Plan shall be reinstated as of the effective date of the
Participant's re-enrollment.
XIII.4 Termination of Service Following Reemployment. Notwithstanding
---------------------------------------------
anything herein to the contrary, if the Service of a Participant who was
reemployed following a termination of Service shall subsequently be terminated
for any reason, the benefits payable to the Participant pursuant to the
provisions of the Plan shall be reduced by the Equivalent Actuarial Value of all
amounts theretofore paid to the Participant pursuant to the Plan.
ARTICLE XIV
Alienation of Benefits
----------------------
XIV.1 Non-Assignability. Except insofar as applicable law may
-----------------
otherwise require or pursuant to the terms of a Qualified Domestic Relations
Order, no amount payable at any time under the Plan and Trust shall be subject
in any manner to alienation by anticipation, sale, transfer, assignment,
bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any
attempt to alienate, sell, transfer, assign, pledge, attach, charge or otherwise
encumber any such amount, whether presently or hereafter payable, shall be void.
The Plan and Trust shall not be liable for or subject to the debts or
liabilities of any person entitled to any amounts payable under the Plan. If any
person shall attempt to, or shall, alienate, sell, transfer, assign, pledge or
otherwise encumber any amount payable under the Plan and Trust, or any part
thereof, or if by reason of the Participant's bankruptcy or other event
happening at such time such amount would not be enjoyed by the Participant, then
the Committee, if it so elects, may direct that such amount be withheld and
shall hold or apply it to or for the benefit of such person, the Participant's
spouse, children or other dependents, or any of them, in such manner and
proportion as the Committee may deem proper. For
55
<PAGE>
purposes of the Plan, a Qualified Domestic Relations Order means any judgment,
decree, or order (including approval of a property settlement agreement) which
has been determined by the Committee in accordance with procedures established
under the Plan, to constitute a qualified domestic relations order within the
meaning of Section 414(p)(1) of the Code.
XIV.2 Judgment Offset. Notwithstanding Section 14.1, effective with
---------------
respect to judgments, orders and decrees issued, and settlement agreements
entered into, on or after August 5, 1997, the Plan shall not be treated as
failing to meet the requirements of the Section 14.1 solely by reason of any
offset of a Participant's benefits against an amount that the Participant is
ordered or required to pay to the Plan as a result of the Participant's breach
of fiduciary duty to the Plan or commission of a criminal act against the Plan
to the extent permitted under Section 401(a)(13)(C)-(D) of the Code.
56
<PAGE>
ARTICLE XV
Administration
--------------
XV.1 In General. The Committee shall have authority and responsibility
----------
for the administration and interpretation of the Plan, and, for purposes of
ERISA, shall be the "administrator" of the Plan and its "named fiduciary" with
respect to matters for which it is responsible; provided that the Board shall
have the sole authority to amend, suspend or terminate the Plan, except as
otherwise provided in Subsection 15.4(c) hereof. The Committee shall consist of
not less than three persons, who need not be directors of Ward, as from time to
time appointed by the Board. Any Committee member may resign and the Board may
remove any Committee member, with or without cause, at any time. To the maximum
extent permitted by ERISA, every action and determination of the Committee in
accordance with this Section shall be final and binding upon each Participant,
Beneficiary, other Associate and every other person entitled to or claiming
participation in the Plan or benefits from the Plan. No member of the Committee
shall be entitled to act on or decide any matter relating solely to the
Participant or to any of the Participant's rights or benefits under the Plan.
XV.2 Appointment of Trustees. The Committee shall appoint the Trustees,
-----------------------
and may remove any Trustees in accordance with the Trust Agreement. Upon
acceptance of their appointments, the Trustees shall have exclusive authority to
manage and control the Trust Fund, subject to the provisions of the Plan and the
Trust Agreement and, for purposes of ERISA, shall be the "named fiduciary" of
the Plan with respect to matters for which they are responsible; provided that,
as provided in the Trust Agreement, the Trustees may appoint one or more
Investment Managers and may delegate authority to the Investment Managers so
appointed as provided therein and permitted by ERISA.
XV.3 Appointment of Administrative Director. The Committee shall
--------------------------------------
appoint an Administrative Director and may from time to time allocate or
delegate to any subcommittee or member of the Committee, the Administrative
Director and others, not necessarily Associates, such duties relative to
compliance with the
57
<PAGE>
reporting and disclosure obligations of ERISA and the administration and
interpretation of the Plan as it deems necessary or appropriate including
matters involving the exercise of discretion. The Administrative Director may
from time to time delegate to others, not necessarily Associates, such of the
Administrative Director's duties as the Administrative Director deems necessary
or appropriate. The Committee may remove, with or without cause, at any time the
Administrative Director and any person to whom duties are delegated by the
Committee or the Administrative Director in accordance with this Section.
XV.4 Specific Responsibilities and Authority of the Committee. In
--------------------------------------------------------
furtherance of, and not by way of limitation on, the responsibilities and
authority conferred on the Committee in Section 15.1 hereof, the Committee shall
administer the Plan in accordance with its terms and provisions and shall have
the following specific responsibilities and authorities:
(a) to construe and interpret the Plan and determine all questions
arising in its operation;
(b) to develop and from time to time review a policy for funding
the Plan recommended by the Actuary, which shall be consistent with the
objectives of the Plan and the actuarial tables and interest rate
assumptions from time to time recommended by the Actuary for the Plan in
accordance with the Regulations and to advise the Trustees of such policy
and of any changes therein from time to time;
(c) to make such amendments in the Plan and the Trust Agreement as
it deems necessary or appropriate;
(d) to receive reports from the Trustees and from the
Administrative Director on the discharge of their duties and authority with
respect to the Plan, including in the case of the Administrative Director
the preparation, distribution and maintenance of all documents necessary or
appropriate for compliance with the reporting, disclosure and recordkeeping
requirements contained
58
<PAGE>
in ERISA, as well as such other records or data as may be necessary or
appropriate for the proper administration of the Plan;
(e) to employ the Actuary and such certified public accountants,
legal counsel and other persons as may be required by ERISA or as it shall
otherwise deem necessary or appropriate in connection with the operation of
the Plan;
(f) to adopt such rules and procedures as the Committee deems
necessary or appropriate in order to fulfill its responsibilities with
respect to the Plan; provided that such rules and procedures are uniformly
and consistently applied to persons in similar circumstances;
(g) to hold regular meetings designed to insure the discharge of
its responsibilities hereunder, and to maintain an accurate written record
of all such meetings; and
(h) to furnish the Board with reports, including subjects reported
upon to it by the Trustees and the Administrative Director.
XV.5 Rules of Procedure. Subject to the by-laws of the Company and the
------------------
resolutions of the Board, the Committee shall establish its own rules of
procedure and the time and place of its meetings. A majority of the members of
the Committee shall constitute a quorum for the transaction of business, and the
act of a majority of the Committee members at a meeting at which a quorum is
present shall be the act of the Committee. Any action which may be taken at a
meeting of the Committee may be taken without a meeting if a consent, in
writing, setting forth the action so taken, shall be signed by all of the
members of the Committee.
XV.6 Trust Fund. The Company has entered into the Trust Agreement with
----------
the Trustees providing for the administration and management of the Trust Fund.
All benefits and other amounts payable hereunder shall be paid exclusively from
the Trust Fund, and neither the Company, the Committee, any Trustee, the
Administrative Director, nor any director, officer, Associate or agent of the
Company assumes any responsibility or liability therefor. The Trust Fund may be
commingled for investment purposes with like
59
<PAGE>
separate trust funds of any other plans and trusts of Ward or any Affiliate
which meet the requirements of Sections 401(a) and 501(a) of the Code. Each
Participant, each Beneficiary or each other person who shall claim the right to
any payment under the Plan shall look exclusively to the Trust Fund therefor and
shall not have any right or claim therefor against the Company, the Committee,
any Trustee, the Administrative Director or any director, officer, Associate or
agent of the Company. Except as otherwise required by ERISA, neither the
Company, the Committee, the Administrative Director, nor any director, officer,
Associate or agent of the Company shall be required to inquire into or be
responsible for any act or failure to act of any Trustee or any Participant. To
the maximum extent permitted by ERISA and applicable state law, each member of
the Committee, each Trustee, the Administrative Director and each director and
officer of the Company, and each Associate who performs services on behalf of
the Plan or the Trust, shall be indemnified and saved harmless by the Company
out of its own assets (including the proceeds of any insurance policy the
premiums of which are paid by the Company) from and against any and all losses,
costs and expenses (including any amounts paid in settlement of a claim with the
Committee's approval) to which any of them may be subjected by reason of any act
done or omitted to be done in good faith in their official capacities with
respect to the Plan or the Trust Agreement, including all expenses reasonably
incurred in their defense.
60
<PAGE>
XV.7 Claims Procedure.
----------------
(a) Any claim for benefits shall be submitted on a prescribed
claim form to the claimant's local personnel department. If the claim is
wholly or partially denied, written notice of the denial shall be furnished
within 90 days after receipt of the claim; provided that, if special
circumstances require an extension of time for processing the claim, an
additional 90 days from the end of the initial period shall be allowed for
processing the claim, in which event the claimant shall be furnished with a
written notice of the extension prior to the termination of the initial 90-
day period indicating the special circumstances requiring an extension. The
written notice denying the claim shall set forth the reasons for the
denial, including specific reference to pertinent provisions of the Plan on
which the denial is based, a description of any additional information
necessary to perfect the claim and information regarding review of the
claim and its denial.
(b) All disputed claims for benefits shall be submitted within 60
days after receipt by the claimant of the written notice of denial to, and
decided within a reasonable period of time by, the Administrative Director
or one member of the Committee designated by its Chairman. Written notice
of the decision on each such claim shall be furnished to the claimant
within 60 days after receipt by the Administrative Director of a request
for review, unless special circumstances require an extension of time for
processing, in which event an additional 60 days shall be allowed for
review and the claimant shall be so notified in writing. If the claim is
wholly or partially denied, such written notice shall set forth an
explanation of the specific findings and conclusions on which such denial
is based. A claimant may review all pertinent documents and may request a
review by the Committee of such a decision denying the claim. Such a
request shall be made in writing and filed with the Committee within 60
days after delivery to the claimant of written notice of the decision. Such
written request for review shall contain all additional information which
the claimant wishes the Committee to consider. The Committee may hold a
hearing or conduct an independent investigation,
61
<PAGE>
and the decision on review shall be made as soon as possible after the
Committee's receipt of the request for review, but in no event later than
the third regularly scheduled meeting of the Committee after the
Committee's receipt of the request for review. Written notice of the
decision on review shall be promptly furnished to the claimant and shall
include specific reasons for the decision. For all purposes under the Plan,
such decision on claims (where no review is requested) and decision on
review (where review is requested) shall be final, binding and conclusive
on all interested persons as to participation and benefits eligibility, the
amount of benefits and as to any other matter of fact or interpretation
relating to the Plan. In the case of a Participant covered by a collective
bargaining agreement, a disputed claim for benefits shall be governed by
the grievance and arbitration procedures established under such agreement;
provided, however, that, if such agreement permits, the Committee will
review such a claim before it is referred to formal grievance procedures.
XV.8 Payment of Expenses. Except as otherwise provided in the Plan or the
-------------------
Trust Agreement, all expenses and charges incurred in the administration and
operation of the Plan and the Trust Agreement shall be paid out of the Trust
Fund. No compensation shall be paid by the Plan to any member of the Committee,
any Trustee or the Administrative Director if employed by the Company or any
Affiliate, but said persons may be reimbursed for their reasonable expenses
incurred in carrying out their duties, responsibilities and authority hereunder,
and the compensation, or a properly allocable portion thereof, paid to other
Associates who are involved in the administration of the Plan and all other
properly allowable expenses shall, to the extent not paid by the Company, be
treated as administrative expenses. No bond shall be required of the members of
the Committee, the Trustees or the Administrative Director, except as otherwise
required by law.
XV.9 Notices, etc. Any notice, election, application, instruction,
------------
designation or other form of communication required to be given or submitted by
any Participant, other Associate or Beneficiary shall be in such form as is
prescribed from time to time by the Committee, sent by first class mail or
delivered in person to the Administrative Director of the Plan, 8-3, Montgomery
Ward & Co., Incorporated, Montgomery
62
<PAGE>
Ward Plaza, Chicago, Illinois 60671, and shall be deemed to be duly given only
upon actual receipt thereof by the Administrative Director. Any notice,
statement, report and other communication from the Company, the Committee or the
Administrative Director to any Participant, other Associate or Beneficiary
required or permitted by the Plan shall be deemed to have been duly given when
delivered to such person or mailed by first class mail to such person at the
person's address last appearing on the records of the Company. Each person
entitled to receive a payment under the Plan shall file in accordance herewith
the person's complete mailing address and each change therein. A check or
communication mailed to any person at such person's address on file with the
Administrative Director shall be deemed to have been received by such person for
all purposes of the Plan, and neither the Committee, the Administrative Director
nor any Associate or agent of the Company shall be obliged to search for or
ascertain the location of any such person except as required by ERISA. If the
Administrative Director shall be in doubt as to whether payments are being
received by the person entitled thereto, it may, by registered mail addressed to
such person at the person's address last known to the Administrative Director,
notify such person that all future payments will be withheld until such person
submits to the Administrative Director the person's proper mailing address and
such other information as the Administrative Director may reasonably request.
XV.10 Filing of Information. Each Participant shall file with the
---------------------
Committee such pertinent information concerning the Participant and the
Participant's Beneficiary, and each Beneficiary shall file with the Committee
such information concerning the Beneficiary, as the Committee or the
Administrative Director may specify, and in such manner and form as the
Committee or Administrative Director may specify or provide, and no Participant
or Beneficiary shall have any right or be entitled to any benefits or further
benefits under the Plan unless such information is filed by the Participant or
Beneficiary or on behalf of the Participant or Beneficiary.
XV.11 Claims Against Trust Fund. If the Committee receives notification
-------------------------
from the Trustees of any trust fund established by the Company as a part of an
employee benefit plan other than the Trust Fund that
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such Trustees have a claim against the Trust Fund by reason of overpayment or
otherwise, then the Committee may direct the Trustees to withhold further
payments under the Plan, pay the amount of such claim to any court of competent
jurisdiction or take any other action which the Committee shall deem
appropriate.
XV.12 Agent for Service of Process. The agent for the service of legal
----------------------------
process of the Plan shall be the Secretary of Ward.
ARTICLE XVI
Termination of Participating Company's Participation
----------------------------------------------------
XVI.1 Right to Terminate. Any Participating Company may terminate its
------------------
participation in the Plan by giving the Committee prior written notice
specifying a termination date which shall be the last day of the month at least
60 days subsequent to the date such notice is received by the Committee. The
Committee may terminate any Participating Company's participation in the Plan,
as of any termination date specified by the Committee, for the failure of the
Participating Company to make proper contributions or to comply with any other
provision of the Plan.
64
<PAGE>
XVI.2 Effect of Termination and Payment of Distributable Reserve. To the
----------------------------------------------------------
maximum extent permitted by ERISA, any rights of Participants no longer employed
by the Participating Company, former Participants and their Beneficiaries,
Surviving Spouses and other eligible survivors under the Plan shall be
unaffected by a termination of the Plan as to any Participating Company. Subject
to the provisions of Section 16.8, the benefits provided under the Plan with
respect to each Participant in Service with such Participating Company as of the
termination date will be paid or forfeited in accordance with the Plan as if
such termination had not occurred except that the Committee may direct the
Trustees to segregate such portion of the assets of the Trust (the
"Distributable Reserve") as the Actuary shall determine to be properly allocable
in accordance with ERISA to the active Associates of such Participating Company
and direct the Trustees to apply the Distributable Reserve for the benefit of
the Participants employed by the Participating Company as of the termination
date in such manner as the Committee shall determine including, without
limitation, payment to such Participants in lump cash sums, cash installments,
or the purchase of immediate or deferred annuities, a transfer to a successor
employee benefit plan which is qualified under Section 401(a) of the Code, or
any combination thereof; provided, however, that in the event of any transfer of
assets to a successor employee benefit plan the provisions of Section 16.3 will
apply. Any such payments or transfers of the Distributable Reserve shall
constitute a complete discharge of all liabilities under the Plan with respect
to such Participating Company's participation in the Plan and any Participant
then employed by such Participating Company. To the maximum extent permitted by
ERISA, the termination of the Plan as to any Participating Company shall not in
any way affect any other Participating Company's participation in the Plan.
XVI.3 Transfer of Assets to Successor Plan. No transfer of the Plan's
------------------------------------
assets and liabilities to a successor employee benefit plan (whether by merger
or consolidation with such successor plan or otherwise) shall be made unless
each Participant would, if either the Plan or such successor plan then
terminated, receive a benefit immediately after such transfer which (after
taking account of any distributions or payments to them
65
<PAGE>
as part of the same transaction) is equal to or greater than the benefit he
would have been entitled to receive immediately before such transfer if the Plan
had then been terminated. The Committee may also request appropriate
indemnification from the employer or employers maintaining such successor plan
before making such a transfer.
ARTICLE XVII
Amendment and Termination
-------------------------
XVII.1 Power to Amend.
--------------
(a) Subject to the provisions of Subsection 15.4(c) hereof, the
Board reserves the right at any time to amend, suspend, discontinue or
terminate the Plan, any accrual thereunder, the Trust or any contract
issued by an insurance carrier forming a part of the Plan, in whole or in
part and for any or no reason and without the consent of any Participating
Company, Participant or Beneficiary; and the Committee may make such
amendments in the Plan and the Trust as it deems necessary or appropriate.
Each Participating Company by its adoption of the Plan shall be deemed to
have delegated this authority to the Board and the Committee, respectively.
(b) No amendment or modification shall be made which would (i)
retroactively impair any right to any benefit under the Plan which any
Participant or Beneficiary would otherwise have had at the date of such
amendment by reason of the contributions theretofore made, except to such
extent as may be necessary or appropriate to qualify or maintain the Plan,
the Trust and any contract with an insurance carrier which may form a part
of the Plan as a plan and trust meeting the requirements of Sections 401(a)
and 501(a) of the Code or any other applicable section of law, including
ERISA, as now in effect or hereafter amended or adopted and the Regulations
or (ii) make it possible for any part of the funds of the Plan (other than
such part as is required to pay taxes, if any, and administrative expenses
as provided in Section 15.8 hereof) to be used for or diverted to any
66
<PAGE>
purposes other than for the exclusive benefit of Participants and their
Beneficiaries prior to the satisfaction of all liabilities with respect
thereto.
XVII.2 Retroactive Amendments. Subject to the provisions of Section 17.1
----------------------
hereof, any amendment, modification, suspension or termination of any provisions
of the Plan may be made retroactively if necessary or appropriate to qualify or
maintain the Plan, the Trust and any contract with an insurance company which
may form a part of the Plan as a plan and trust meeting the requirements of
Sections 401(a) and 501(a) of the Code or any other applicable section of law,
including ERISA, as now in effect or hereafter amended or adopted and the
Regulations.
XVII.3 Notices of Amendments. Notice of any amendment, modification,
---------------------
suspension or termination of the Plan shall be given by the Board or the
Committee, whichever adopts the amendment, to the other and to the Trustees and
all Participating Companies and, where and to the extent required by law, to
Participants and other interested parties.
XVII.4 Effect of Termination. Upon termination of the Plan, no amount
---------------------
shall thereafter be payable under the Plan to or in respect of any Participant
except as provided in this Article, and, to the maximum extent permitted by
ERISA, transfers or distributions of the assets of the Plan as provided in this
Article shall constitute a complete discharge of all liabilities under the Plan.
The Committee shall remain in existence, and all of the provisions of the Plan
which in the opinion of the Committee are necessary for the execution of the
Plan and the distribution or transfer of the assets of the Plan shall remain in
force. All distributions and notifications referred to in this Article shall be
in form and substance satisfactory to counsel for the Plan.
XVII.5 Distribution of Assets If No ERISA Termination. If the Committee
----------------------------------------------
receives a determination from the PBGC that the termination of the Plan does not
constitute a plan termination for purposes of Title IV of ERISA, then, upon
receipt by the Committee of IRS approval of such termination, the assets of the
Plan shall be applied for the benefit of Participants and Beneficiaries in such
manner as the Committee shall
67
<PAGE>
determine, provided that, in the event of any transfer of assets to a successor
employee benefit plan, the provisions of Section 16.3 hereof will apply.
XVII.6 Distribution of Assets Upon Termination.
---------------------------------------
(a) If the termination of the Plan does not constitute a plan
termination for purposes of Title IV of ERISA, then the rights of all
Participants (including any person or persons whose benefits are paid from
the Trust regardless of the plan under which the benefits are calculated)
to their Retirement Benefits accrued to the date of such termination shall
thereupon be nonforfeitable, but only to the extent that such Retirement
Benefits have then been funded by contributions made prior to such
termination and that funds are available to provide such Retirement
Benefits upon the allocations hereinafter provided in this Section.
(b) Upon receipt by the Committee of (i) all necessary PBGC
regulatory approvals that the assets of the Plan are sufficient to
discharge when due all obligations thereunder with respect to benefits
which are guaranteed by the PBGC under Title IV of ERISA and (ii) IRS
approval of such termination, the assets of the Plan which remain after
reservation of an amount sufficient to apply all expenses of final
administration shall be allocated, to the extent sufficient, in the
following order of priority:
(i) to provide for the benefits which are payable to or
in respect of Participants who Retired or died, who could have
Retired, or who, having terminated Service, either began receiving
payments of such benefits or could have begun receiving such
payments at least three years prior to the termination date,
determined in each case on the basis of the provisions of the Plan
at any time during the five-year period ending on the termination
date when such benefits were or would have been the lowest and
without regard to any increases in such benefits which accrued
less than three years prior to the termination date; then
(ii) to provide all other benefits under the Plan which
are guaranteed by the PBGC under Title IV of ERISA or which would
be guaranteed if Sections 4022(b)(5) and 4022(b)(6) were not
applicable, but which have not been allocated under Clause (i) of
this Section; then
68
<PAGE>
(iii) to provide all other benefits which had become
nonforfeitable under the Plan prior to the termination date but
which have not been allocated under Clause (i) or (ii) of this
Section; then
(iv) to provide all other benefits which had accrued under
the Plan prior to the termination date but which have not been
allocated under Clause (i), (ii) or (iii) of this Section; then
(v) any surplus assets of the Plan remaining after the
payment of all expenses of final administration and after the
satisfaction of all liabilities accrued to the termination date
with respect to Participants and their Beneficiaries shall, upon
receipt of the IRS approval therefor, revert ratably to each
Participating Company in such manner and in such proportion as the
Committee, upon the advice of the Actuary, shall determine. The
foregoing allocations shall be made by the Committee in accordance
with the determinations of the Actuary pursuant to the
Regulations. If the balance remaining for allocation under any of
the foregoing Clauses is insufficient to provide in full the
allocations under such Clause, individual allocations shall be
reduced pro rata (except that, under Clause (iii) only, such
balance shall first be allocated to provide the benefits described
therein determined on the basis of the provisions of the Plan
which were in effect at the beginning of the five-year period
ending on the termination date and then, if the balance remaining
for allocation is sufficient, to provide the benefits described
therein which result from each successive amendment to the Plan
during such five-year period under the first such amendment as to
which such balance is insufficient before reducing such allocation
pro rata), and no allocations shall be made under subsequent
clauses. The assets of the Plan allocated in accordance with
Clauses (i), (ii), (iii) and (iv) of this Section shall be
distributed in such manner as the Committee shall determine,
including without limitation, lump-sum payments, cash
installments, the purchase of immediate or deferred annuities or
any combination of the foregoing.
XVII.7 Distribution of Assets Upon Termination Where Assets Not
--------------------------------------------------------
Sufficient. Notwithstanding the provisions of Section 17.6 hereof, if the PBGC
- - ----------
notifies the Committee that it is unable to determine whether the assets of the
Plan are sufficient or that such assets are insufficient to discharge when due
all obligations thereunder with respect to benefits which are guaranteed by the
PBGC under Title IV of ERISA, then the assets of the Plan shall be allocated and
distributed only as a court having competent jurisdiction of the Plan or Trust
or a trustee appointed by such court shall direct or permit or as otherwise
provided in an agreement satisfactory to the Committee.
XVII.8 Effect of Partial Termination. In the event that any governmental
-----------------------------
authority, including without limitation the IRS and PBGC, determines that a
partial termination, within the meaning of ERISA, of
69
<PAGE>
the Plan has occurred as to any Participating Company, then (i) the rights of
all Participants affected thereby to their Retirement Benefits accrued to the
date of such partial termination shall thereupon be nonforfeitable, but only to
the extent that such Retirement Benefits have then been funded by such portion
of the assets of the Trust as are determined to be properly allocable to such
Participants and that such portion of assets is available to provide such
Retirement Benefits upon the allocations provided in Section 17.6 hereof, and
(ii) the provisions of Sections 17.2, 17.3, 17.4, 17.6, and 17.7 hereof and
Section 16.3 hereof which in the opinion of the Committee are necessary for the
execution of the Plan and the allocation and distribution of the assets of the
Plan shall apply. To the maximum extent permitted by ERISA, if any liability
arises as a result of such partial termination, only the Participating Company
as to which the partial termination of the Plan has occurred shall be liable to
the PBGC for any insufficiency of assets.
ARTICLE XVIII
Limitations in the Event of Early Discontinuance
------------------------------------------------
XVIII.1 Application. In order to qualify the Plan and the Trust as a
-----------
qualified plan and trust under the Code, the benefits to be provided to certain
Participants will be subject to the limitations set forth in this Article XVIII.
XVIII.2 Restriction of Benefits.
-----------------------
(a) In the event the Plan is terminated, the benefit of any active
or former Participant who was a Highly Compensated Associate (as defined in
Section 414(q) of the Code) shall be limited to that benefit that is
nondiscriminatory under Section 401(a)(4) of the Code.
(b) The annual payments to a Participant described in (c) below
are restricted to an amount equal to the payments that would be made on
behalf of that Participant under a straight life annuity that is the
Actuarial Equivalent of the Participant's Accrued Benefit under the Plan.
The restrictions in this Section 18.2 do not apply, however, if:
70
<PAGE>
(i) after payment to a Participant described in (c)
below of all benefits described in (d) below, the value of Plan
assets equals or exceeds 110% of the value of current liabilities
(as defined in Section 412(1)(7) of the Code), or
(ii) the value of the benefits described in (d) below for
a Participant described in (c) below is less than one percent of
the value of current liabilities, or
(iii) the value of benefits described in (d) below for a
Participant described in (c) below does not exceed the amount
described in Section 411(a)(11)(A) of the Code.
(c) The Participants whose benefits are restricted pursuant to
this Article XVIII on distribution are the 25 Highly Compensated Associates
and former Highly Compensated Associates (as defined in Section 414(q) of
the Code) with the greatest compensation in the current or any prior year.
Plan provisions defining or altering the group of Participants whose
benefits are restricted under this Section 18.2 may be amended at any time
without violating the requirements of Section 411(d)(6) of the Code.
(d) For purposes of this Section 18.2, the term "benefit"
includes loans in excess of the amounts set forth in Section 72(p)(2)(A) of
the Code, any periodic income, any withdrawal values payable to a living
Participant and any death benefits not provided for by insurance on the
Participant's life.
XVIII.3 Payment of Benefits. The limitations established under this
-------------------
Article XVIII shall not restrict either the payment of any monthly benefit due
prior to the termination of the Plan or the payment of benefits to a
Participant's Beneficiary or Surviving Spouse under the Plan at any time, if
such payment commenced prior to the date of such termination. If the foregoing
limitations would otherwise become applicable the Committee may, if it so
elects, nevertheless pay full benefits to or in respect of any Participant who
executes an agreement with the Trustees, in form and in substance satisfactory
to the Committee, which is adequately secured and which guarantees the repayment
of any payment subject to such limitations.
XVIII.4 Additional Reserves. Any additional reserves arising by the
-------------------
application of the foregoing limitations shall be used and applied for the
benefit of the other Participants and their Beneficiaries and
71
<PAGE>
Surviving Spouses under the Plan; provided, however, that if sufficient funds
are available to provide in full for the benefits accrued for all such other
Participants and their Beneficiaries and Surviving Spouses under the Plan, then
such additional reserves shall be used, to the extent available, to provide the
benefits under the Plan of the Participants whose benefits would otherwise have
been restricted by operation of this Article XVIII.
ARTICLE XIX
Miscellaneous
-------------
XIX.1 In General. Any and all rights or benefits accruing to any person
----------
under the Plan shall be subject to all terms and conditions of the Plan and the
Trust Agreement. The adoption and maintenance of the Plan shall not constitute a
contract between the Company and any associate or be a consideration for, or an
inducement or condition of, employment of any associate. Neither participation
nor anything contained in the Plan shall give any associate the right to be
retained in the employ of the Company, nor shall it interfere with the right of
the Company to discharge any associate at any time.
XIX.2 Coordination of Payment of Benefits with Other Plans.
----------------------------------------------------
Notwithstanding any other provision of this Plan, the payment of benefits to
Participants and their Beneficiaries, Surviving Spouses and other eligible
survivors under the Plan shall be paid as a part of and concomitantly with any
benefits to which he is entitled in accordance with the terms of the Prior
Plans.
XIX.3 Incapacity. If the Committee shall find that any person to whom
----------
any amount is payable under the Plan is unable to care for such person's affairs
because of illness or accident, is a minor or has died, then any payment due to
the person or the person's estate (unless a prior claim therefor has been made
by a duly appointed legal representative) may be paid to the spouse, a child, a
relative, an institution maintaining or having custody of such person or any
other person deemed by the Committee to be a proper recipient on behalf of such
person otherwise entitled to payment. Any such payment shall be a complete
discharge of the liabilities of the Plan and Trust Fund.
72
<PAGE>
XIX.4 Inability to Locate Benefit Recipient. If the Committee cannot
-------------------------------------
ascertain the whereabouts of any person to whom an amount is payable under the
Plan, and if, after five years from the date such payment is due, a notice of
such payment due is mailed to the last known address of such person as shown on
the records of the Company and within three months after such mailing such
person has not made a written claim therefor, the Committee, if it so elects and
after receiving advice from counsel to the Plan, may assume that such person is
deceased and direct that such payment be made in accordance with the applicable
provisions of Article XI hereof.
XIX.5 Benefit Provided by Insurance. If the payment of any benefit
-----------------------------
under the Plan is provided as an annuity benefit under a contract with an
insurance company, the payment of such benefit shall be subject to all the
provisions of such contract.
XIX.6 Credit for Prior Employment. Upon such terms and conditions as
---------------------------
the Committee and the Internal Revenue Service may approve, credit may be given
for service and benefits provided under the Plan to a Participant with respect
to any period of the Participant's prior employment by an organization, and such
credit and benefits may be provided for in whole or in part by funds
transferred, directly or indirectly (including a rollover from an individual
retirement account, or an individual retirement annuity as described in Section
408 of the Code), to the Trust Fund from an employee benefit plan of such
organization which qualifies under Section 401(a) of the Code.
XIX.7 Construction. To the maximum extent permitted by ERISA, the Plan
------------
shall be construed in accordance with the laws of the State of Illinois. As used
herein, the masculine form shall, where appropriate, include the feminine and
neuter genders. All Article and Section headings herein have been inserted for
convenience only and shall not affect the meaning of the language contained
herein.
ARTICLE XX
Top Heavy Provisions
--------------------
73
<PAGE>
XX.1 In General. The Plan will be considered a Top Heavy Plan for any
----------
Plan Year if it is determined to be a Top Heavy Plan as of the last day of the
preceding Plan Year. For purposes of determining whether the Plan is a Top Heavy
Plan, uniform actuarial assumptions which reflect interest rate, as prescribed
in Section 2.1, shall be used. The present value of a Participant's Retirement
Benefit shall be determined as of the last valuation date used for computing
Plan costs for minimum funding purposes which occurs within the Plan Year in
which the determination is being made, and shall include amounts distributed to
or on behalf of the Participants within the four preceding Plan Years.
Notwithstanding any other provisions in the Plan, the provisions of this Article
XX shall apply and supersede all other provisions of the Plan with respect to a
Plan Year with respect to which the Plan is determined to be a Top Heavy Plan.
XX.2 Definitions. For purposes of this Article XX and as otherwise used
-----------
in this Plan, the following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean any entity affiliated with the
Company within the meaning of Section 414(b), 414(c) or 414(m) of the Code,
except that for purposes of applying the provisions hereof with respect to
the limitation on benefits, Section 415(h) of the Code shall apply.
(b) "Aggregation Group" shall mean the group composed of each
qualified retirement plan of the company or an Affiliate in which a Key
Associate is a participant and each other qualified retirement plan of the
Company or an Affiliate which enables a plan of the Company or an Affiliate
in which a Key Associate is a participant to satisfy Sections 401(a)(4) and
410 of the Code with such plan being taken into account.
(c) "Key Associate" shall mean a "Key Employee" as defined in
Section 416(i)(1) and (5) of the Code and Regulations promulgated
thereunder.
(d) "Top Heavy Plan" shall mean a "Top Heavy Plan" as defined
in Sections 416(g) of the Code and Regulations promulgated thereunder.
XX.3 Vesting.
-------
74
<PAGE>
(a) If a Plan is a Top Heavy Plan with respect to any Plan Year,
a Participant's nonforfeitable right to the Participant's Retirement
Benefit derived from the Company's contributions shall not be less than the
amount determined in accordance with the following vesting schedule:
Years of Service Percentage
---------------- ----------
Less than 3 0%
3 or more 100%
(b) In the event the vesting schedule provided in Section 2.51
is amended, or changed on account of the Plan becoming or ceasing to be a
Top Heavy Plan, any Participant who has completed at least five Years of
Service for purposes of determining a Participant's nonforfeitable right to
the Participant's Retirement Benefit derived from the Company's
contributions under Sections 2.51 and 20.3 may elect to have the
Participant's nonforfeitable percentage determined under the Plan without
regard to such amendment or change by notifying the Committee in writing
within the election period hereinafter described. The election period shall
begin on the date such amendment is adopted or the date such change is
effective, as the case may be, and shall end no earlier than the latest of
the following dates:
(i) the date which is 60 days after the day such amendment
is adopted;
(ii) the date which is 60 days after the day such amendment
or change becomes effective; or
(iii) the date which is 60 days after the day the
Participant is given written notice of such amendment or change by
the Committee. Any election made pursuant to this Section 20.3(b)
shall be irrevocable.
XX.4 Distributions to Participants.
-----------------------------
(a) Subject to Section 20.5, for each Plan Year that the Plan is
a Top Heavy Plan, the Retirement Benefit for each Participant who has
completed a Year of Service and who is not a Key Associate shall not be
less than such Participant's Average Compensation, multiplied by the lesser
of
75
<PAGE>
(i) two percent multiplied by the number of Years of Service with the
Company or (ii) 20%. For purposes of the preceding sentence, Years of
Service shall not include any Year of Service completed prior to the Plan
Year beginning prior to January 1, 1984, or any Year of Service if the Plan
was not a Top Heavy Plan for any Plan Year ending during such Year of
Service.
(b) For purposes of this Section 20.4, "Average Compensation"
shall mean the average of a Participant's compensation (as described in
Section 415 of the Code) for the period of 5 consecutive years (or, if the
Participant does not have five consecutive years, the Participant's actual
number of consecutive years) during which the Participant had the greatest
aggregate compensation. Compensation earned during a Plan Year beginning
before January 1, 1984, or during a Plan Year which begins after the last
Plan Year in which the Plan was not a Top Heavy Plan shall be disregarded
for purposes of determining Average Compensation.
XX.5 Top Heavy Plan Years.
--------------------
(a) For each Plan Year that the Plan is a Top Heavy Plan, 1.0
shall be substituted for 1.25 as the multiplicand of the dollar limitation
in determining the denominator of the defined benefit plan fraction and of
the defined contribution plan fraction for purposes of Section 415(e) of
the Code.
(b) If, after substituting 90% for 60% wherever the latter
appears in Section 416(g) of the Code, the Plan is not determined to be a
Top Heavy Plan, the provisions of paragraph (a) shall not be applicable if
the Retirement Benefit for each Participant who is not a Key Associate is
determined in accordance with Section 20.4(a), substituting "three percent"
for "two percent" in Section 20.4(a) and increasing "20%" in Section
20.4(a) by 1 for each Plan Year described in the last sentence of Section
20.4(a), but not beyond "30%."
XX.6 Duplication of Benefits. The Committee shall, to the extent
-----------------------
permitted by the Code and in accordance with Regulations, apply the provisions
of this Article XX by taking into account the benefits
76
<PAGE>
payable and the contributions made under any other plans maintained by the
Company or any of its subsidiaries or affiliated or associated entities which
are qualified under Section 401(a) of the Code to prevent inappropriate
omissions or duplication of minimum benefits or contributions.
ARTICLE XXI
Transfer of Amounts Attributable
to Contributions Under
the Jefferson Stores Plan
-------------------------
XXI.1 Transfer of Accrued Benefit. Each Participant who was a
---------------------------
participant of the Jefferson Stores Plan on December 31, 1984, had an amount
equal to the Participant's accrued retirement benefit under the Jefferson Stores
Plan, if any, transferred from the trust established as part of the Jefferson
Stores Plan to the Trust.
XXI.2 Transfer Held in Trust. The Committee shall establish and
----------------------
maintain or cause to be established and maintained, as part of the Trust, such
accrued benefits which are allocable to the amounts transferred pursuant to
Section 21.1, if any, and all relevant data pertaining thereto. All such
transferred amounts shall be held by the Trustee for the exclusive benefit of
such Participants in accordance with the terms of the Plan, to be commingled,
managed, invested and reinvested with the other assets of the Plan. Upon such
transfer, and except as otherwise provided in the Jefferson Stores Plan, the
Trustees of the Jefferson Stores Plan shall have no further liability whatsoever
with respect to such transferred amounts or the benefits which had been based
thereon, and the Participant shall look solely to the Plan for any payment or
other benefit in respect of the amount so transferred.
XXI.3 Payment of Benefits. The accrued benefit attributable to any
-------------------
amounts transferred from the Jefferson Stores Plan, if any, shall be
nonforfeitable and shall be paid from the Trust Fund to the Participant or the
Participant's Beneficiary or Surviving Spouse at the same time and in the same
manner as any payment made in accordance with Articles XI, XII or XIII.
77
<PAGE>
ARTICLE XXII
Transfer of Amounts Attributable to
Contributions Under the Lechmere Plan
-------------------------------------
XXII.1 Transfer of Accrued Benefit. Each Participant who was a
---------------------------
participant of the Lechmere Plan on June 30, 1994, had an amount equal to the
Participant's accrued retirement benefit under the Lechmere Plan, if any,
transferred from the trust established as part of the Lechmere Plan to the
Trust.
XXII.2 Transfer Held in Trust. The Committee shall establish and
----------------------
maintain or cause to be established and maintained, as part of the Trust, such
accrued benefits which are allocable to the amounts transferred pursuant to
Section 22.1, if any, and all relevant data pertaining thereto. All such
transferred amounts shall be held by the Trustees for the exclusive benefit of
such Participants in accordance with the terms of the Plan, to be commingled,
managed, invested and reinvested with the other assets of the Plan. Upon such
transfer, and except as otherwise provided in the Lechmere Plan, the Participant
shall look solely to the Plan for any payment or other benefit in respect of the
amount so transferred.
XXII.3 Payment of Benefits. The accrued benefit attributable to any
-------------------
amounts transferred from the Lechmere Plan, if any, shall be nonforfeitable and
shall be paid from the Trust Fund to the Participant or the Participant's
Beneficiary or Surviving Spouse at the same time and in the same manner as any
payment made in accordance with Articles XI, XII or XIII.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
------------------------------------
Its: VP Comp, Benefits and HR Strategy
------------------------------------
ATTEST:
By: /s/ Jill M. Chapman
----------------------------------
Its: Benefits Director
----------------------------------
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<PAGE>
Addendum A
----------
Montgomery Ward & Co., Incorporated
-----------------------------------
Retirement Security Plan
------------------------
A-1 Purpose. The purpose of this Addendum A is to provide for
-------
participation in the Plan by eligible employees of Montgomery Ward (Hong Kong)
Limited.
A-2 Use of Terms. Except where the context of this Addendum A expressly
------------
indicates to the contrary, terms used and defined in the Plan shall have the
same meanings for purposes of this Addendum A. As used in this Addendum A, the
term this "Addendum A", shall include only this Addendum A, and the references
to the "Plan" shall include all provisions of the Plan but shall not include
this Addendum A.
A-3 Conflicts Between Plan and This Addendum A. This Addendum A,
------------------------------------------
together with the Plan, comprises the Plan with respect to Participants under
this Addendum A. In case of any conflict between the provisions of the Plan and
this Addendum A, the terms and the provisions of this Addendum A shall govern to
the extent necessary to eliminate such conflict.
A-4 Participants. Nonresident aliens employed by Montgomery Ward (Hong
------------
Kong) Limited shall be considered "Employees", "Associates", and "Hong Kong
Associates" for purposes of the Plan and this Addendum A. Hong Kong Associates
employed by Montgomery Ward (Hong Kong) Limited on October 1, 1995, who have
completed one Year of Service by October 1, 1995, participate in the Plan as of
October 1, 1995. Each other Hong Kong Associate who both attains age 21 and
completes one Year of Service shall become a Participant under the Plan on the
first day of the month following the month in which the Hong Kong Associate
meets the eligibility requirements.
A-5 Vesting. If a Hong Kong Associate completes five Years of Service,
-------
such Hong Kong Associate shall be Vested (have a nonforfeitable right to a
Retirement Benefit) in the Hong Kong Associate's Retirement Benefit. Each Hong
Kong Associate employed by Montgomery Ward (Hong Kong) Limited on October 31,
1995, who has completed two years of service with Montgomery Ward (Hong Kong)
Limited but has not yet completed five Years of Service shall be Vested (have a
nonforfeitable right to a Retirement Benefit) in the Retirement Benefit to which
the Associate would have been entitled if the Associate terminated employment
with Montgomery Ward (Hong Kong) Limited on October 31, 1995.
A-6 Final Monthly Salary. For purposes of this Addendum A, "Final
--------------------
Monthly Salary" means annual base salary or pay preceding the date of
termination of Service by a Hong Kong Associate, calculated in Hong Kong
Dollars, divided by 14.
A-7 Retirement Benefit. If a Participant who is a Hong Kong Associate
------------------
Retires on the Participant's Normal Retirement Date, the amount of the
Retirement Benefit shall be the Actuarial Equivalent of a lump sum expressed in
Hong Kong Dollars determined by multiplying the participant's Final Monthly
Salary by the Participant's years of Service (calculated to the nearest month).
Sections 9.1, 9.2, 9.3, 10.1, 10.2 and 10.3 of the Plan do not apply to
Participants who are Hong Kong Associates. Except as otherwise provided in
Article IX and Section 11.4 of the Plan, a Participant who is a Hong Kong
Associate who Retires on the Participant's Normal Retirement Date shall be
eligible for the Retirement Benefit defined in this paragraph A-7 or an
Actuarial Equivalent benefit thereto as provided for herein.
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<PAGE>
A-8 Optional Methods of Payment. In lieu of the Qualified Joint and
---------------------------
Survivor Benefit payable to a married Participant or the single life annuity
payable to an unmarried Participant, a Participant who is a Hong Kong Associate
may elect, subject to Sections 11.3 and 11.4 of the Plan, to receive the
Actuarial Equivalent of the Retirement Benefit to which the Participant is
entitled under the Plan in one lump sum payment in Hong Kong Dollars or in
installments over five quarterly payments in Hong Kong Dollars. Any such
election shall comply with the spousal consent requirements of Section 11.5 of
the Plan. Section 11.2 of the Plan does not apply to Participants who are Hong
Kong Associates.
A-9 Termination of Service by a Vested Participant. If the Service of a
----------------------------------------------
Participant who is a Hong Kong Associate and who is Vested terminates prior to
Retirement, such Participant may elect, subject to the spousal consent
requirements of Section 11.5 of the Plan, a Retirement Benefit commencing on the
first day of any month within nine months after the Participant's termination of
Service and prior to the Participant's Normal Retirement Date or on the
Participant's Normal Retirement Date. Section 13.2 of the Plan does not apply to
Participants who are Hong Kong Associates.
A-10 Death Benefits. In lieu of the Pre-Retirement Death Benefit
--------------
described in Section 12.1, the spouse of a Participant who died while employed
as a Hong Kong Associate or within the first nine months after the Participant's
termination of Service may elect to receive (i) a lump sum amount equal to the
lump sum amount which would have been payable to the Participant if the
Participant had terminated Service on the earlier of the date of the
Participant's death or the Participant's prior termination of Service or (ii)
five quarterly installments equal to the quarterly installment amount which
would have been payable to the Participant if the Participant had terminated
Service on the earlier of the date of the Participant's death or the
Participant's prior termination of Service.
A-11 Actuarial Equivalent. For purposes of this Addendum, "Actuarial
--------------------
Equivalent" shall mean the lesser of (i) Actuarial Equivalent as otherwise
defined in the Plan and (ii) Actuarial Equivalent computed as otherwise defined
in the Plan but using a five percent interest rate.
80
<PAGE>
Addendum B
----------
Montgomery Ward & Co., Incorporated
-----------------------------------
Retirement Security Plan
------------------------
B-1 Purpose. The purpose of this Addendum B is to provide for
-------
participation in the Plan by eligible employees of Montgomery Ward & Co.,
Incorporated-Japan Branch
B-2 Use of Terms. Except where the context of this Addendum B expressly
------------
indicates to the contrary, terms used and defined in the Plan shall have the
same meanings for purposes of this Addendum B. As used in this Addendum B, the
term this "Addendum B" shall include only this Addendum B, and the references to
the "Plan" shall include all provisions of the Plan but shall not include this
Addendum B.
B-3 Conflicts Between Plan and This Addendum B. This Addendum B, together
------------------------------------------
with the Plan, comprises the Plan with respect to Participants under this
Addendum B. In case of any conflict between the provisions of the Plan and this
Addendum B, the terms and the provisions of this Addendum B shall govern to the
extent necessary to eliminate such conflict.
B-4 Participants. Nonresident aliens employed by Montgomery Ward & Co.,
------------
Incorporated-Japan Branch shall be considered "Employees", "Associates", and
"Japan Associates" for purposes of the Plan and this Addendum B. Japan
Associates employed by Montgomery Ward & Co., Incorporated-Japan Branch on April
1, 1997, who have completed one Year of Service by April 1, 1997, participate in
the Plan as of April 1, 1997. Each other Associate who both attains age 21 and
completes one Year of Service shall become a Participant under the Plan on the
first day of the month following the month in which such Associate meets the
eligibility requirements.
B-5 Vesting. If a Japan Associate completes two Years of Service, such
-------
Associate shall be Vested (have a nonforfeitable right to a Retirement Benefit)
in such Associate's Retirement Benefit.
B-6 Final Monthly Salary. For purposes of this Addendum B, "Final Monthly
--------------------
Salary" means annual base salary or pay preceding the date of termination of
Service by a Japan Associate, divided by 15.
B-7 Retirement Benefit. If a Participant who is a Japan Associate Retires
------------------
on the Participant's Normal Retirement Date, the amount of the Retirement
Benefit shall be the Actuarial Equivalent of a lump sum expressed in the
currency of Japan determined by multiplying the participant's Final Monthly
Salary by the Participant's years of Service (calculated to the nearest month).
Sections 9.1, 9.2, 9.3, 10.1, 10.2 and 10.3 of the Plan do not apply to
Participants who are Japan Associates. Except as otherwise provided in Article
IX and Section 11.4 of the Plan, a Participant who is a Japan Associate who
Retires on the Participant's Normal Retirement Date shall be eligible for the
Retirement Benefit defined in this paragraph B-7 or an Actuarial Equivalent
benefit thereto as provided for herein.
B-8 Optional Methods of Payment. In lieu of the Qualified Joint and
---------------------------
Survivor Benefit payable to a married Participant or the single life annuity
payable to an unmarried Participant, a Participant who is a Japan Associate may
elect, subject to Sections 11.3 and 11.4 of the Plan, to receive the Actuarial
Equivalent of the Retirement Benefit to which the Participant is entitled under
the Plan in one lump sum payment in the currency of Japan, or in installments
over five quarterly payments in the currency of Japan. Any such election shall
comply with the spousal consent requirements of Section 11.5 of the Plan.
Section 11.2 of the Plan does not apply to Participants who are Japan
Associates.
81
<PAGE>
B-9 Termination of Service by a Vested Participant. If the Service of a
----------------------------------------------
Participant who is a Japan Associate and who is Vested terminates prior to
Retirement, such Participant may elect, subject to the spousal consent
requirements of Section 11.5 of the Plan, a Retirement Benefit commencing on the
first day of any month within nine months after the Participant's termination of
Service and prior to the Participant's Normal Retirement Date or on the
Participant's Normal Retirement Date. Section 13.2 of the Plan does not apply to
Participants who are Japan Associates.
B-10 Death Benefits. In lieu of the Pre-Retirement Death Benefit
--------------
described in Section 12.1, the spouse of a Participant who died while employed
as Japan Associate or within the first nine months after the Participant's
termination of Service may elect to receive (i) a lump sum amount equal to the
lump sum amount which would have been payable to the Participant if the
Participant had terminated Service on the earlier of the date of the
Participant's death or the Participant's prior termination of Service or (ii)
five quarterly installments equal to the quarterly installment amount which
would have been payable to the Participant if the Participant had terminated
Service on the earlier of the date of the Participant's death or the
Participant's prior termination of Service.
B-11 Actuarial Equivalent. For purposes of this Addendum B, "Actuarial
--------------------
Equivalent" shall mean the lesser of (i) Actuarial Equivalent as otherwise
defined in the Plan and (ii) Actuarial Equivalent computed as otherwise defined
in the Plan but using a five percent interest rate.
82
<PAGE>
EXHIBIT 10.(iv)(D)(7)
MONTGOMERY WARD & CO., INCORPORATED
First Amendment
to the
Montgomery Ward & Co., Incorporated
Retirement Security Plan
WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation
("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security
Plan ("Plan"); and
WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans
--------------
Committee of Ward ("Committee") has reserved the power to amend the Plan; and
WHEREAS, the Committee desires to amend the Plan.
NOW, THEREFORE, the Plan is amended effective November 25, 1998 in the
following manner:
1. Section 11.2 Optional Methods of Payment is hereby amended by adding
---------------------------
the following phrase to the end of the first paragraph thereof immediately
following the phrase "only the optional method of payment described in Section
11.2(e)":
"or Section 11.2(f)".
2. Section 11.2 Optional Methods of Payment is hereby amended by adding a
---------------------------
new Subsection (f) Lump Sum Window Benefit to the end thereof to read in its
-----------------------
entirety as follows:
"(f) Lump Sum Window Benefit. A Participant who, on or prior to
-----------------------
November 30, 1998, Retires or terminates Service after becoming fully
Vested and who is not in Service on November 30, 1998 (or, if in Service on
November 30, 1998 after Retirement, who has not had a cessation of benefit
payments under Section 9.6 Cessation of Benefit Payments Following
---------------------------------------
Reemployment After Retirement), may elect, on or prior to January 31, 1999,
-----------------------------
to receive commencing in February, 1999, or as soon as practicable
thereafter:
(i) the Actuarial Equivalent of the Participant's Retirement
Benefit payable in the form of an immediate Qualified Joint and
Survivor Benefit, or, if the Participant is not legally married, as
determined by the Committee, the Single Life Benefit described in
Subsection 11.2(a) Single Life Benefit hereof; or
-------------------
(ii) with the consent of the Participant's spouse at the time of
Retirement, if any, to the extent required by and in accordance with
Section 11.5 Written Explanations of Survivor Benefit hereof and
----------------------------------------
procedures established by the Committee, the Actuarial Equivalent of
the Participant's Retirement Benefit (and any Disability Retirement
Benefit) payable in the form of one lump sum."
<PAGE>
3. Article XI Methods of Payment is hereby amended by adding a new
------------------
Section 11.9 Election to Change Method of Payment to the end thereof to read in
------------------------------------
its entirety as follows:
"11.9 Election to Change Method of Payment. In lieu of receiving
------------------------------------
the Participant's Retirement Benefit (and any Disability Retirement
Benefit) pursuant to the method of payment as previously elected (or as
provided in Section 9.4), a Participant who on or prior to November 30,
1998 began receiving a Retirement Benefit (or Disability Retirement
Benefit) and who is not in Service on November 30, 1998 (or, if in Service
on November 30, 1998 after Retirement, who has not had a cessation of
benefit payments under Section 9.6 Cessation of Benefit Payments Following
---------------------------------------
Reemployment After Retirement), may elect, on or prior to January 31, 1999,
-----------------------------
with the consent of the Participant's spouse at the time of Retirement, if
any, to the extent required by and in accordance with Section 11.5 Written
-------
Explanations of Survivor Benefit hereof and procedures established by the
--------------------------------
Committee, to receive the Actuarial Equivalent of the Participant's
remaining Retirement Benefit (and any remaining Disability Retirement
Benefit) in one lump sum payable in February, 1999, or as soon as
practicable thereafter."
4. Article XII Death Benefits is hereby amended by adding a new Section
--------------
12.4 Election to Change Method of Payment to the end thereof to read in its
------------------------------------
entirety as follows:
"12.4 Election to Change Method of Payment. In lieu of receiving the
------------------------------------
Death Benefit to which a Surviving Spouse or Beneficiary is entitled, a
Surviving Spouse or Beneficiary of a Participant who died on or prior to
November 30, 1998 may elect, on or prior to January 31, 1999, to receive
the Actuarial Equivalent of the remaining Death Benefit in one lump sum
payable in February, 1999, or as soon as practicable thereafter."
5. Section 13.2 Termination of Service by Vested Participant is hereby
--------------------------------------------
amended by adding a new Subsection (d) to the end thereof to read in its
entirety as follows:
"(d) if such Participant terminates Service on or prior to November
30, 1998, is not in Service on November 30, 1998 and has not begun
receiving the Participant's Retirement Benefit by November 30, 1998, such
Participant may, in accordance with the terms of Subsection 11.2(f), elect
to receive the benefit provided under Subsection 11.2(f) Lump Sum Window
---------------
Benefit."
-------
2
<PAGE>
6. In all other respects, the Plan, as amended, shall continue in full
force and effect.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
-------------------------------------
Its: VP Comp, Benefits and HR Strategy
------------------------------------
ATTEST:
By: /s/ Jill M. Chapman
------------------------------
Its: Benefits Director
-----------------------------
3
<PAGE>
10.(iv)(D)(8)
MONTGOMERY WARD & CO., INCORPORATED
Second Amendment
to the
Montgomery Ward & Co., Incorporated
Retirement Security Plan
WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation
("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security
Plan ("Plan"); and
WHEREAS, pursuant to Section 17.1 Power to Amend, the Board of Directors of
--------------
Ward ("Board") has reserved the right to amend, suspend, discontinue or
terminate the Plan; and
WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans
--------------
Committee of Ward ("Committee") has reserved the power to amend the Plan; and
WHEREAS, on December 10, 1998 the Board amended the Plan to freeze the
accrued benefits for all Plan participants as of January 2, 1999 ("Freeze
Amendment") contingent upon the bankruptcy court's approval of the Plan
restructuring involving a freeze of benefits under the Plan as of January 2,
1999 and directed the Committee to document the Freeze Amendment;
WHEREAS, the Committee desires to amend the Plan and to document the Freeze
Amendment.
NOW, THEREFORE, the Plan is amended contingent upon the bankruptcy court's
approval of the Plan restructuring involving a termination of the Plan in
February, 1999 and the Freeze Amendment is hereby documented in the following
manner:
1. Contingent upon the bankruptcy court's approval of the Plan
restructuring involving a termination of the Plan in February, 1999, Section 2.2
"Actuarial Equivalent" or "Equivalent Actuarial Value" is hereby amended by
deleting the text of Subsection (a) thereof in its entirety and inserting the
following in lieu thereof:
"Effective April 1, 1999, the "30-Year Treasury Rate" is the annual
interest rate on 30-Year Treasury securities specified by the Commissioner
of the IRS for the month immediately preceding the month for which such
rate is being determined. Notwithstanding the preceding sentence, for
distributions occurring between April 1, 1999 and March 31, 2000, the 30-
Year Treasury Rate shall be the rate as provided in the first sentence of
this Subsection (a) unless the annual interest rate on 30-Year Treasury
securities specified by the Commissioner of the IRS for the September
preceding the first day of the Plan Year in which a distribution occurs
("September Rate") would produce a larger distribution, in which case the
September Rate shall be the 30-Year Treasury Rate. For distributions
occurring on or after January 1, 1996 and before March 31, 1999, the 30-
Year Treasury Rate shall be the annual interest rate on 30-Year Treasury
securities specified by the Commissioner of the IRS for the September
preceding the first day of the Plan Year in which such distribution
occurs."
<PAGE>
2. Contingent upon the bankruptcy court's approval of the Plan
restructuring involving a freeze of benefits under the Plan as of January 2,
1999, Addendum C is hereby added to the Plan to read in its entirety as follows:
"Addendum C
----------
Montgomery Ward & Co., Incorporated
-----------------------------------
Retirement Security Plan
------------------------
Frozen Benefit Accrual. Notwithstanding anything contained in the Plan
----------------------
to the contrary, (i) no further benefits shall accrue for any Participant
in the Plan after January 2, 1999, except as may be required to satisfy the
top heavy requirements of Section 416 of the Code; (ii) each Participant
who is actively employed with the Company on January 2, 1999 is fully
Vested as of January 2, 1999 and (iii) no person shall become a Participant
in the Plan after January 2, 1999. Subject to the foregoing, any
Participant in the Plan on January 2, 1999 shall remain a Participant under
the terms and conditions of the Plan as it may be amended from time to
time."
3. In all other respects, the Plan, as amended, shall continue in full
force and effect.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
----------------------------------------
Its: VP Comp, Benefits and HR Strategy
---------------------------------------
ATTEST:
By: /s/ Jill M. Chapman
-----------------------------
Its: Benefits Director
----------------------------
2
<PAGE>
EXHIBIT 10.(iv)(D)(9)
MONTGOMERY WARD & CO., INCORPORATED
Third Amendment
to the
Montgomery Ward & Co., Incorporated
Retirement Security Plan
WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation
("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security
Plan ("Plan"); and
WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans
--------------
Committee of Ward ("Committee") has reserved the power to amend the Plan; and
WHEREAS, the Committee desires to amend the Plan.
NOW, THEREFORE, the Plan is amended effective January 1, 1999 in the
following manner:
1. Section 11.2 Optional Methods of Payment is hereby amended by adding a
---------------------------
new sentence to the end of Subsection (e) Lump Sum Benefit to read as follows:
----------------
"In addition, a Participant who is in Service on or after December 1, 1998
(other than a Participant who was in Service on November 30, 1998 after
Retirement and who did not have a cessation of benefit payments under
Section 9.6 Cessation of Benefit Payments Following Reemployment After
----------------------------------------------------------
Retirement) may elect to receive:
----------
(i) the Actuarial Equivalent of the Participant's Retirement Benefit
payable in the form of an immediate Qualified Joint and Survivor Benefit,
or, if the Participant is not legally married, as determined by the
Committee, the Single Life Benefit described in Subsection 11.2(a) Single
------
Life Benefit hereof; or
------------
(ii) with the consent of the Participant's spouse at the time of
Retirement, if any, to the extent required by and in accordance with
Section 11.5 Written Explanations of Survivor Benefit hereof and procedures
----------------------------------------
established by the Committee, the Actuarial Equivalent of the Participant's
Retirement Benefit (and any Disability Retirement Benefit) payable in the
form of one lump sum."
<PAGE>
2. In all other respects, the Plan, as amended, shall continue in full
force and effect.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
----------------------------------------
Its: VP Comp, Benefits and HR Strategy
---------------------------------------
ATTEST:
By: /s/ Jill M. Chapman
---------------------------
Its: Benefits Director
--------------------------
<PAGE>
EXHIBIT 10.(iv)(D)(10)
MONTGOMERY WARD & CO., INCORPORATED
Fourth Amendment
to the
Montgomery Ward & Co., Incorporated
Retirement Security Plan
WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation
("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security
Plan ("Plan"); and
WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans
--------------
Committee of Ward ("Committee") has reserved the power to amend the Plan; and
WHEREAS, the Committee desires to amend the Plan.
NOW, THEREFORE, the Plan is amended effective January 29, 1999 in the
following manner:
1. Subsection 11.2 (f) Lump Sum Window Benefit, Section 11.9 Election to
----------------------- -----------
Change Method of Payment and Section 12.4 Election to Change Method of Payment
- - ------------------------ ------------------------------------
are amended by deleting the reference to "January 31, 1999" wherever it appears
in said sections and by substituting therefor "February 20, 1999."
2. In all other respects, the Plan, as amended, shall continue in full
force and effect.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
--------------------------------------
Its: VP Comp, Benefits and HR Strategy
-------------------------------------
ATTEST:
By: /s/ Jill M. Chapman
--------------------------
Its: Benefits Director
-------------------------
<PAGE>
10.(iv)(D)(11)
MONTGOMERY WARD & CO., INCORPORATED
Fifth Amendment
to the
Montgomery Ward & Co., Incorporated
Retirement Security Plan
WHEREAS, Montgomery Ward & Co., Incorporated, an Illinois corporation
("Ward"), maintains the Montgomery Ward & Co., Incorporated Retirement Security
Plan ("Plan");
WHEREAS, pursuant to Section 17.1 Power to Amend, the Benefit Plans
--------------
Committee of Ward ("Committee") has reserved the power to amend the Plan;
WHEREAS, on December 10, 1998 the Board amended the Plan to freeze the
accrued benefits for all Plan participants as of January 2, 1999 ("Freeze
Amendment") contingent upon the bankruptcy court's approval of the Plan
restructuring involving a freeze of benefits under the Plan as of January 2,
1999 and the Committee documented the Freeze Amendment by execution of the
Second Amendment, which was also contingent on such bankruptcy court approval;
and
WHEREAS, the bankruptcy court has not approved the Plan restructuring and
freeze of benefits as of January 2, 1999 and it is now anticipated that the
bankruptcy court will be requested to approve a Plan restructuring involving a
freeze of benefits under the Plan as of March 6, 1999.
NOW, THEREFORE, the Second Amendment is hereby rescinded and the Plan is
hereby amended, contingent upon the bankruptcy court's approval of a Plan
restructuring involving a freeze of benefits under the Plan as of March 6, 1999,
in the following manner:
1. Section 2.2 "Actuarial Equivalent" or "Equivalent Actuarial Value" is
hereby amended by deleting the text of Subsection (a) thereof in its entirety
and inserting the following in lieu thereof:
"Effective April 1, 1999, the "30-Year Treasury Rate" is the annual
interest rate on 30-Year Treasury securities specified by the Commissioner
of the IRS for the month immediately preceding the month for which such
rate is being determined. Notwithstanding the preceding sentence, for
distributions occurring between April 1, 1999 and March 31, 2000, the 30-
Year Treasury Rate shall be the rate as provided in the first sentence of
this Subsection (a) unless the annual interest rate on 30-Year Treasury
securities specified by the Commissioner of the IRS for the September
preceding the first day of the Plan Year in which a distribution occurs
("September Rate") would produce a larger distribution, in which case the
September Rate shall be the 30-Year Treasury Rate. For distributions
occurring on or after January 1, 1996 and before March 31, 1999, the 30-
Year Treasury Rate shall be the annual interest rate on 30-Year Treasury
securities specified by the Commissioner of the IRS for the September
preceding the first day of the Plan Year in which such distribution
occurs."
<PAGE>
2. Addendum C is hereby added to the Plan to read in its entirety as
follows:
"Addendum C
----------
Montgomery Ward & Co., Incorporated
-----------------------------------
Retirement Security Plan
------------------------
Frozen Benefit Accrual. Notwithstanding anything contained in the Plan
----------------------
to the contrary, (i) no further benefits shall accrue for any Participant
in the Plan after March 6, 1999, except benefits that accrue to a
Participant as an Eligible Location Shutdown Participant as a result of a
closure of a facility announced on or before March 6, 1999 and except as
may be required to satisfy the top heavy requirements of Section 416 of the
Code; (ii) each Participant who is actively employed with the Company on
March 6, 1999 is fully Vested as of March 6, 1999 and (iii) no person shall
become a Participant in the Plan after March 6, 1999, except as an Eligible
Location Shutdown Participant as a result of a closure of a facility
announced on or before March 6, 1999. Subject to the foregoing, any
Participant in the Plan on March 6, 1999 shall remain a Participant under
the terms and conditions of the Plan as it may be amended from time to
time."
3. In all other respects, the Plan, as amended, shall continue in full
force and effect.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
--------------------------------------
Its: VP Comp, Benefits and HR Strategy
-------------------------------------
ATTEST:
By: /s/ Jill M. Chapman
------------------------------
Its: Benefits Director
-----------------------------
2
<PAGE>
10. (iv)(H)(3)
MONTGOMERY WARD & CO., INCORPORATED
SAVINGS PLAN
(AMENDED AND RESTATED EFFECTIVE
AS OF JANUARY 1, 1998)
<PAGE>
Montgomery Ward & Co., Incorporated Savings Plan
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- - ------- ----
<S> <C>
1 Purpose............................................................. 1
2 Definitions......................................................... 3
3 Membership.......................................................... 13
4 Required Basic Contributions........................................ 17
5 Pre-Tax Supplemental Contributions
and After-Tax Supplemental Contributions............................ 18
6 Company Contributions............................................... 23
7 Transfer of Amounts Attributable to Members'
Contributions and Profit-Sharing Plan Balances
Under the Retirement Security Plan.................................. 32
8 Transfer of Amounts Attributable to Members'
Account Balance Under the Lechmere Plan............................. 34
9 Investment of Contributions......................................... 36
10 Valuations and Maintenance of Members' Accounts..................... 38
11 Eligibility for Benefits............................................ 41
12 Method of Payment of Benefits....................................... 49
13 Maximum Amount of Allocation........................................ 54
14 Designation of Beneficiaries........................................ 55
15 Loans to Members.................................................... 56
16 Administration of the Plan.......................................... 59
17 Termination of Employer Participation............................... 66
18 Amendment or Termination of the Plan and Trust...................... 68
19 General Limitations and Provisions.................................. 70
20 Top Heavy Provisions................................................ 74
</TABLE>
<PAGE>
SECTION 1 PURPOSE
1.1 The purpose of the Plan is to encourage Associates to make and
continue careers with the Company by providing Eligible Associates with a
convenient way to save on a regular and long-term basis, all as set forth
herein, and in the Trust adopted as a part of this Plan. This Plan is an
amendment and restatement of the Montgomery Ward & Co., Incorporated Savings
Plan, as amended.
The benefits provided under this Plan are supplemented by the transfer
to the Trust of amounts attributable to Associate contributions under this Plan
made after December 31, 1980 and before April 1, 1983, by amounts attributable
to the Profit-Sharing Plan Balances under certain defined benefit pension plans
maintained by the Company for the benefit of eligible Associates, and by the
transfer to the Trust of account balances under the Lechmere Plan. This Plan,
and the Trust established thereunder, are intended to qualify as a plan and
trust which meet the requirements of Sections 401(a), 401(k), 401(m) and 501(a),
respectively, of the Internal Revenue Code of 1986, as now in effect or
hereafter amended, or any other applicable provisions of law including, without
limitation, the Employee Retirement Income Security Act of 1974, as now in
effect or hereafter amended. The rights of any person who terminated employment
or who retired on or before the effective date of a particular amendment,
including his eligibility for benefits and the time and form in which benefits,
if any, will be paid, shall be determined solely under the terms of the Plan as
in effect on the date of his termination of employment or retirement, unless
such person is thereafter reemployed and again becomes a Member.
1.2 Although this restatement is generally effective January 1, 1998, the
inclusion of amendments to conform with applicable laws and other changes to the
Plan necessitates different effective dates for certain Plan provisions.
Accordingly, notwithstanding the general effective date of this restatement,
certain Plan sections herein have special effective dates as described therein,
including, but not limited to, the following Plan sections which have special
effective dates:
<PAGE>
<TABLE>
<CAPTION>
Sections Effective Date
-------- --------------
<S> <C>
2.22 July 1, 1997
2.23 January 1, 1997
2.24(last sentence only) January 1, 1996
2.36 July 1, 1997
2.37 July 1, 1997
2.45 January 1, 1996
2.50 July 1, 1997
2.52 July 1, 1997
2.60(last two sentence only) January 1, 1996
3.1(b)(second sentence only) July 1, 1997
3.1(d) January 1, 1996
3.1(e) July 1, 1997
4.1(last sentence only) July 1, 1997
5.1(a)(second sentence only) July 1, 1997
5.1(b)(i) and (v) January 1, 1997
5.1(b)(iv) July 1, 1997
6.1(a) and (b) July 1, 1997
6.3(a) and (c) January 1, 1997
6.3(b) July 1, 1997
6.4(last sentence only) February 3, 1997
7 June 30, 1994
9.2 July 1, 1997
9.3 July 1, 1997
10.6 January 1, 1996
11.2 July 1, 1997
11.2(last ten sentences only) July 1, 1994
11.6(c) July 1, 1997
11.6(e) July 1, 1997
11.6(g) July 1, 1997
12.1(d) January 1, 1993
12.3(second sentence only) January 1, 1996
15.6(second sentence only) December 12, 1994
18.1(first sentence only) July 1, 1997
19.6(b) August 5, 1997
19.10 December 12, 1994
</TABLE>
-2-
<PAGE>
SECTION 2 DEFINITIONS
When used herein the following terms shall have the following meanings:
2.1 "Account" means the account established and maintained in respect
of a Member pursuant to Section 3.7.
2.2 "Administrative Director" means the Administrative Director of
the Plan appointed by the Committee in accordance with Section 16.3 hereof.
2.3 "Affiliate" means any corporation which is a member of a
controlled group of corporations, as determined in accordance with Section
414(b) of the Code, which includes the Company; any trade or business (whether
or not incorporated) which, as defined in Section 414(c) of the Code is under
common control with the Company, any organization (whether or not incorporated)
which is a member of an affiliated service group as defined in Section 414(m) of
the Code, which includes the Company, and any other entity required to be
aggregated with the Company pursuant to Regulations under Section 414(o) of the
Code. For purposes of Section 13, Section 414(b) and (c) of the Code shall be
applied as modified by Section 415(h) of the Code.
2.4 "After-Tax Supplemental Contribution" and "After-Tax Supplemental
Contribution Account" mean those Member contributions made on or before June 30,
1994 pursuant to Section 5.1(c) and that portion of the Member's Account to
which such contributions are credited.
2.5 "Basic Contribution" and "Basic Contribution Account" mean those
Member contributions made pursuant to Section 4.1 and that portion of the
Member's Account to which such contributions are credited. For purposes of
Sections 9.2, 9.3, 9.4, 9.5, 11.6(c) and 12, the Basic Contributions made while
an Associate of Signature shall be treated as either After-Tax Supplemental
Contributions or Pre-Tax Supplemental Contributions, as appropriate.
2.6 "Beneficiary" means the beneficiary or beneficiaries designated
by a Member pursuant to Section 14 to receive the amount, if any, payable under
the Plan upon the death of such Member.
-3-
<PAGE>
2.7 "Benefit Derived from Associate Contributions" means the Benefit
Derived from Associate Contributions as determined by enrolled actuaries under
the Retirement Security Plan as of March 31, 1983.
2.8 "Board of Directors" means the Board of Directors of Ward.
2.9 "Break in Service" means the year during which or immediately
after which an Associate terminates Service and does not perform Service during
at least 12 weeks. Notwithstanding the preceding sentence, any Associate who
actually performs at least 500 Hours of Service during any Plan Year, as
determined by the Committee in accordance with the Regulations, shall not be
considered as having incurred a Break in Service. Solely for purposes of
determining whether a Break in Service has occurred, an individual shall be
credited with the Hours of Service which such individual would have completed
but for a maternity or paternity absence, as determined by the Committee in
accordance with this Section 2.10 and the Code and Regulations, provided,
however, that the total Hours of Service so credited shall not exceed 501 hours
and that the individual timely provide the Committee with such information as it
shall require. Hours of Service credited for a maternity or paternity absence
shall be credited entirely (a) in the Plan Year in which the absence began if
such Hours of Service are necessary to prevent a Break in Service in such year,
or (b) in the following Plan Year. For purposes of this Section 2.9, maternity
or paternity absence shall mean an absence from work by reason of the
individual's pregnancy, the birth of the individual's child or the placement of
a child with the individual in connection with adoption of the child by such
individual, or for purposes of caring for a child for the period immediately
following such birth or placement.
2.10 "Code" means the Internal Revenue Code of 1986, as now in effect
or as hereafter amended. All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.
2.11 "Committee" means the Benefit Plans Committee provided for in
Section 16. For purposes of ERISA, the members of the Benefit Plans Committee
shall be the named fiduciaries (with respect to the
-4-
<PAGE>
matters for which they are hereby made responsible under the Plan) of the Plan,
and shall be the administrator of the Plan.
2.12 "Company" means Montgomery Ward & Co., Incorporated and each
other Participating Company, or any of them.
2.13 "Compensation" means for each Plan Year, an Associate's first
$150,000 (adjusted for cost of living to the extent permitted by the Code and
Regulations) of compensation, including salary, wages, overtime premium,
commissions, holiday pay, vacation pay, bonuses, cash incentives other than from
contests, and salary continuance, paid or payable to or on behalf of, or
otherwise includable in the gross income of an Associate for Service while an
Associate and a Member during that Plan Year, as determined by the Committee.
Compensation shall not include amounts contributed to the Trust Fund pursuant to
the Plan or paid or contributed to any group insurance plan or other employee
benefit plan, if any, established or maintained by the employer of an
individual, and excludable from his or her gross income, other than amounts
contributed on behalf of a Member under Section 5.1 of the Plan.
2.14 "Direct Rollover" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
2.15 "Distributee" means an Associate or former Associate. In
addition, the Associate's or former Associate's surviving Spouse or former
Spouse who is the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are Distributees with regard to the
interest of the Spouse or former Spouse.
2.16 "Effective Date" means January 1, 1998, the general effective
date of this amendment and restatement.
2.17 "Electric Ave." means Electric Ave. and More.
2.18 "Eligible Retirement Plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement annuity
described in Section 408(b) of the Code, an annuity plan
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described in Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover Distribution to the
surviving Spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
2.19 "Eligible Rollover Distribution" means any distribution of all or
any portion of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of 10 years or more; any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
2.20 "Employee", "Associate", "Eligible Employee" or "Eligible
Associate" means any individual who is employed by the Company, as determined by
the Committee, excluding (a) any associate who is included in a unit of
associates covered by a negotiated collective bargaining agreement which does
not provide for his membership in the Plan, (b) any associate who actively
participates in any other tax-qualified pension or profit-sharing plan
maintained by the Company (other than the Jefferson Stores Plan and the
Retirement Security Plan), (c) any associate of a division of the Company which
the Committee has determined to treat as though it is an Affiliate which is not
a Participating Company and (d) any nonresident alien. Notwithstanding the
foregoing, associates who are on the Company payroll and who work at Montgomery
Ward (Hong Kong) Limited shall be eligible to become a Member. A director of the
Company is not eligible to become a Member unless he is also an Associate.
2.21 "ERISA" means the Employee Retirement Income Security Act of
1974, as now in effect or as hereafter amended.
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2.22 "Full-Time" means an Associate who is classified as working 30
hours or more per week on a continuing basis.
2.23 "Highly Compensated Associate" means effective January 1, 1997 an
Associate or Member who (a) was a five percent owner at any time during the Plan
Year or the preceding Plan Year, or (b) for the preceding Plan Year (i) had
compensation (as defined under Section 415(c)(3) of the Code) from the Company
in excess of $80,000 (as adjusted for increases in the cost of living in
accordance with Section 414(q)(1) of the Code), or (ii) if the Committee in its
sole discretion elects the application of this Subsection (ii) for the preceding
Plan Year, was in the group consisting of the top 20% of employees when ranked
on the basis of compensation (as defined under Section 415(c)(3) of the Code)
paid in the preceding Plan Year.
2.24 "Hours of Service" means any hour during which an Associate
performs Service (or is treated as performing Service under Section 2.47) and
for which he is paid, or entitled to payment for the performance of duties for
the Company (including back pay irrespective of mitigation of damages). In
addition, Hours of Service shall also include up to 501 hours of non-working
time during any single continuous period of absence which does not otherwise
constitute Service, but for which an Associate is directly or indirectly paid or
entitled to payment. The determination of Hours of Service to be credited
hereunder shall be made by the Committee in accordance with the Regulations,
including Sections 2530.200b-2(b) and (c) of the Labor Department Regulations
and Sections 825.214 through 825.216 of the Family and Medical Leave Act
("FMLA") Regulations. For purposes of determining the Associate's membership
under Section 3, for purposes of determining the Associate's nonforfeitable
interest in amounts under Section 11 or for purposes of determining both the
Associate's eligibility for membership and nonforfeitable interest in amounts,
an Associate shall be entitled to be credited with Hours of Service to which the
Associate was credited as an employee of any organization which operated any
trade or business, or any separate unit of a trade or business, substantially
acquired by the Company, but only to the extent so provided by appropriate
action of the Committee.
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2.25 "Investment Fund" means the Funds provided for in Section 9 or any
of them.
2.26 "Investment Manager" means an Investment Manager, as that term is
defined in ERISA, appointed by the Trustees in accordance with Section 16.2
hereof.
2.27 "IRS" means the United States Internal Revenue Service.
2.28 "Jefferson Stores Plan" means the Retirement Plan for Employees of
Jefferson Stores, Inc., as amended effective January 1, 1984.
2.29 "Labor Department" means the United States Department of Labor.
2.30 "Lechmere" means Lechmere, Inc.
2.31 "Lechmere Plan" means the Lechmere, Inc. Supplemental Retirement
and Savings Plan, as amended and restated as of February 28, 1994.
2.32 "Lechmere Account" means the account, if any, established and
maintained as part of a Member's Account to reflect amounts transferred with
respect to a Member's Account Balance under the Lechmere Plan pursuant to
Section 8.2.
2.33 "Matching Contribution" and "Matching Contribution Account" mean
those contributions made pursuant to Section 6.1 and that portion of a Member's
Account to which such contributions are credited.
2.34 "Member" means any Associate who is enrolled in the membership of
the Plan as provided in Section 3.
2.35 "Participating Company" means any company which is an Affiliate,
designated by the Board of Directors as such, the board of directors or
equivalent governing body of which shall adopt the Plan by appropriate action
and the Associates of which shall be eligible to participate in the Plan in the
manner and to the extent determined by the Board of Directors so long as that
company remains so designated. Any such company so designated and which adopts
the Plan shall be deemed thereby to appoint Ward, the Committee, the
Administrative Director and the Trustees its exclusive agents to exercise on its
behalf all of the powers
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conferred hereby or by the Trust upon the Company, the Committee, the
Administrative Director and the Trustees, respectively, and shall make its
allocable contributions to the Plan. The authority of Ward, the Committee, the
Administrative Director and the Trustees, respectively, to act as such agent
shall continue until the Plan has terminated as to such company and the relevant
Trust Fund assets have been distributed by the Trustees as provided in Section
18.4 hereof.
2.36 "Part-Time" means an Associate who is classified as working less
than 30 hours per week on a continuing basis.
2.37 "Plan" means the Montgomery Ward & Co., Incorporated Savings Plan,
as the same may be amended from time to time.
2.38 "Plan Year" means the calendar year.
2.39 "Pre-Tax Supplemental Contribution" and "Pre-Tax Supplemental
Contribution Account" mean those Member contributions made pursuant to Section
5.1(a) and that portion of the Member's Account to which such contributions are
credited.
2.40 "Profit Sharing Contribution" and "Profit Sharing Contribution
Account" mean those contributions made pursuant to Section 6.2 and that portion
of the Member's Account to which such contributions are credited.
2.41 "Profit-Sharing Plan Balance" means the fair market value of the
amounts credited to a Member's account under the Retirement Security Plan which
were transferred to the Retirement Security Plan and attributable to a Member's
service under the Montgomery Ward & Co., Incorporated Profit-Sharing Plan as of
December 31, 1974, reduced by any portion thereof withdrawn prior to the
Effective Date, plus interest on such net amount compounded annually at the rate
of six percent per annum from December 31, 1974 to the date such amount was
transferred to the Trust from the Retirement Security Plan pursuant to Section
7.
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2.42 "Profit-Sharing Plan Balance Account" means the account, if any,
established and maintained as a part of a Member's Account to reflect amounts
transferred with respect to a Member's Profit-Sharing Plan Balance pursuant to
Section 7.
2.43 "Regulations" means the applicable regulations issued under the
Code, ERISA or other applicable law, by the IRS, the Labor Department or any
other governmental authority and any proposed or temporary regulations or rules
promulgated by such authorities pending the issuance of such regulations.
2.44 "Retirement Security Plan" means the Montgomery Ward & Co.,
Incorporated Retirement Security Plan, effective January 1, 1998, and as amended
from time to time.
2.45 "Rollover Contribution" and "Rollover Contribution Account" means
those contributions made pursuant to Section 10.6 and that portion of the
Member's Account to which such contributions are credited.
2.46 "Salary Reduction Account" means the salary reduction account, if
any, established and maintained as part of a Member's Account to reflect salary
reduction contributions contributed to the Plan prior to January 1, 1989.
2.47 "Service" means employment with the Company or with any
Affiliate. Service shall also include the following:
(a) Any authorized leave of absence under rules determined by the
Committee, which are uniformly applicable to all associates similarly
situated and in accordance with the Regulations (including Sections
2530.200b-2(b) and (c) of the Labor Department Regulations and Sections
825.214 through 825.216 of the FMLA Regulations; provided the associate
returns to active Service within the period authorized for such leave;
(b) Service in any of the United States Armed Forces, if and to
the extent required
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by the Military Selective Service Act, as amended, the FMLA, the
Uniformed Services Employment and Reemployment Rights Act of 1994
or any other federal law, or as otherwise recognized by the
Committee;
(c) Any period of layoff not in excess of 90 days during which
the associate retains reemployment rights and provided that the
associate reports to work after recall and within the 90 day period;
(d) Any period of suspension of participation, as provided for
in Section 5.2 hereof; and
(e) Any period of a Member's prior employment by any organization
upon such terms and conditions as the Committee may approve and subject
to any required IRS approval.
2.48 "Signature" means Signature Financial/Marketing, Inc., the
subsidiaries of Signature Financial/Marketing, Inc. which are Participating
Employers, and the subsidiaries of the subsidiaries of Signature
Financial/Marketing, Inc. which are Participating Employers.
2.49 "Spouse" means the legal spouse of a Member as determined in
accordance with applicable state law.
2.50 "Supplemental Matching Contribution" and "Supplemental Matching
Contribution Account" mean those contributions made for periods beginning on or
after July 1, 1997, pursuant to Section 6.1, if any, and that portion of a
Member's Account to which such contributions are credited.
2.51 "Surviving Spouse" means the survivor of a deceased former Member
to whom such deceased former Member had been legally married (as determined by
the Committee) on the earlier of (a) the time payments commenced under the Plan
or (b) for at least one year at the date of the Member's death.
2.52 "Temporary" means an Associate who is employed for a period of
less than 90 days.
2.53 "Transferred Contribution Account" means the account, established
and maintained as part of a Member's Account, to reflect amounts transferred
with respect to a Member's Benefit Derived from Associate Contributions,
pursuant to Section 7.
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2.54 "Trust" or "Trust Fund" means the trust established by the
Company as a part of the Plan.
2.55 "Trustees" means the trustees of the Trust.
2.56 "Unit" means the unit measuring the value of a Member's
proportionate interest in the Investment Funds.
2.57 "Valuation Date" means the last day of each Plan Year and the
last day of any month or months in a Plan Year as the Committee in its
discretion may from time to time determine or any other day as the Committee in
its discretion may from time to time determine.
2.58 "Ward" means Montgomery Ward & Co., Incorporated, an Illinois
corporation, and any successor to all or substantially all of its business and
assets.
2.59 "Year" means the 12 consecutive month period beginning on the
date an Associate's Service commenced or recommenced after a Break in Service,
as determined by the Committee, or an anniversary date thereof.
2.60 "Year of Service" means a Year in which an Associate performs
1,000 Hours of Service. For purposes of determining Years of Service under
Sections 3 and 11, each Member who was employed by Amoco Oil Company or its
affiliates on December 31, 1995 and who became an Associate of Signature, on
January 1, 1996 in connection with the Stock Purchase Agreement By and Between
Amoco Oil Company, Amoco Oil Holding Company, Montgomery Ward & Co.,
Incorporated and Signature Financial/Marketing, Inc., dated December 29, 1995
shall have all years of service with Amoco Oil Company or its affiliates treated
as Years of Service with the Company. Also, for purposes of determining Years of
Service under Sections 3 and 11, each Member who was an employee of Emanacom
Data Services Inc. on July 16, 1996 and who became an Associate of Signature on
July 16, 1996 shall have all years of service with Emanacom Data Services Inc.
treated as Years of Service with the Company.
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SECTION 3 MEMBERSHIP
3.1 (a) Subject to the following provisions of this Section 3, each
Associate who was a Member of the Plan immediately prior to the Effective
Date shall continue to be a Member on and after the Effective Date. Each
other Eligible Associate in Service immediately prior to the Effective Date,
but who was not a Member of the Plan, shall be eligible for membership in
the Plan on the later of the Effective Date or the first day of the month
following the date on which he satisfies the requirements for membership in
the Plan as set forth in Section 3.1(b).
(b) Each Associate who commences Service on or after the Effective Date
shall be eligible to participate in the Plan (other than with respect to
contributions made under Sections 7 and 8 of the Plan), subject to the
following provisions of this Section 3 and provided he is then an Eligible
Associate, on the first day of the month following the later of (i) the date
on which he attains age 21, or (ii) the date on which he completes one Year
of Service. An Eligible Associate who is not employed by either Electric
Ave., Signature or Lechmere shall become eligible to receive Supplemental
Matching Contributions as provided in Section 6.1 beginning with the first
full pay period which occurs in the month following the later of (i) the
date on which the Eligible Associate attains age 21, or (ii) the date on
which he completes one Year of Service. If an individual becomes an Eligible
Associate after the later of the dates specified in (i) and (ii) above and
after completing one Year of Service, he shall be eligible to participate in
the Plan as of the first day of the month following the date on which he
becomes an Eligible Associate. Notwithstanding the above, with respect to
transfers made under Sections 7 and 8 of the Plan, the individual with
respect to which such transfers are made shall be treated as a Member with
respect to such transfers.
(c) Notwithstanding the foregoing, each participant in the Lechmere Plan
on July 1, 1994 shall become a Member in the Plan as of July 1, 1994.
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(d) Notwithstanding the foregoing, each participant in the Amoco
Employee Savings Plan ("Amoco Plan") on December 31, 1995 and each
participant in the Amoco Oil Company Retirement Plan ("Amoco Oil Plan") on
December 31, 1995 who became an Associate of Signature on January 1, 1996
(or, with respect to a participant in the Amoco Plan or the Amoco Oil Plan
on December 31, 1995 who on January 1, 1996 was on medical, military,
personal, educational or family leave status from Amoco Oil Company or its
affiliates, who became an Associate of Signature on any date prior to
January 1, 1997), shall be eligible to become a Member in the Plan as of
the first day of the first month following the date he becomes an Associate
of Signature even if such Associate shall have had less than one Year of
Service, in which case such Associate shall be granted one Year of Service
credit for purposes of eligibility and shall be deemed to be age 21 for
purposes of Section 3, unless such Associate is a Highly Compensated
Associate. Notwithstanding the foregoing, each employee of Emanacom Data
Services Inc. on July 16, 1996 who became an Associate of Signature on July
16, 1996 shall become a Member in the Plan as of the first day of the first
month following July 16, 1996.
(e) Notwithstanding the foregoing, with respect to periods beginning
on or after July 1, 1997, each Full-Time Associate who is not a Temporary
Associate, who is not employed by either Electric Ave., Signature or
Lechmere and who has attained the age of 21 shall be eligible to
participate in the Plan solely with respect to Sections 4 and 5, in the
manner described therein, as of the first day of the fourth calendar month
following commencement of such Associate's employment with the Company.
Solely with respect to contributions made to the Plan on behalf of an
Associate who has not yet met the eligibility requirements of Section
3.1(b) pursuant to Sections 4, 5 and 10.6, (which relates to rollover
contributions), such an Associate shall be treated as a Member with respect
to such contributions.
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(f) Notwithstanding the foregoing, each Associate who is employed by
the Company at Montgomery Ward & Co., Incorporated Romeoville, Illinois
Distribution Center on September 2, 1997, shall be eligible to participate
in the Plan as of such date.
3.2 An Eligible Associate shall be enrolled in the membership of the Plan
as of the first day of the month coincident with or next following the date on
which he becomes eligible for membership and duly files the written enrollment
form prescribed by the Committee.
3.3 An Eligible Associate shall duly file the prescribed written
enrollment form, in accordance with procedures adopted by the Committee. The
written enrollment form shall include an election to reduce the Member's
Compensation, specifying the amount of his contributions under Sections 4.1 and
5.1, and authorizing any necessary payroll deductions, an investment direction,
a beneficiary designation, and an agreement to be bound by all the terms and
conditions of the Plan and Trust and any agreement with any other funding
agency, including an insurance company, constituting a part of the Plan and
Trust Fund. If a Member does not elect to reduce his Compensation in his
application, he shall, notwithstanding any provisions of the Plan to the
contrary, be entitled solely to the benefits provided under Sections 7.3 and
8.4, if applicable.
3.4 The Committee shall notify each Associate when he becomes eligible
for membership, shall furnish an enrollment application form, and shall take any
other necessary or appropriate action to enroll each Associate eligible to be
enrolled under Section 3. If it is determined that an Eligible Associate has not
been enrolled in the membership of the Plan due to error, such Associate may be
retroactively enrolled. The Account of an Associate who is retroactively
enrolled shall upon such enrollment, consist solely of the aggregate amount of
contributions which would have been allocated to his Account had he been
enrolled when first eligible, which shall be paid within the time and upon the
conditions prescribed by the Committee under rules of uniform applicability to
all such Associates.
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3.5 The membership of a Member shall cease upon payment to the Member
of the entire balance in his Account or upon the Member's death prior to such
payment.
3.6 If a Member who terminates Service and incurs a Break in Service
shall again become an Associate, he shall become eligible for membership in the
Plan as of the first day of the month coincident with or next following the date
he again became an Eligible Associate.
3.7 The Committee shall establish and maintain or cause to be
established and maintained in respect to each Member an Account showing his
interest under the Plan and in the Trust Fund (including separate accounts
showing his respective interests, if any, in each of the Investment Funds) with
respect to (a) pre-tax contributions made under Section 4.1, (b) after-tax
contributions made under Section 4.1, (c) contributions made under Sections
5.1(a) and 5.1(c), (d) contributions made under Sections 6.1 and 6.2, (e) all
amounts transferred to the Plan pursuant to Sections 7 and 8 and (f) all amounts
contributed to the Plan prior to the Effective Date and all other relevant data
pertaining thereto. Each Member shall be furnished with a written statement of
his Account at least annually and upon any distribution to him. In maintaining
the Accounts under the Plan or causing them to be maintained, the Committee can
conclusively rely on the valuations of the Trust Fund in accordance with the
Plan and the terms of the Trust.
3.8 The establishment and maintenance of, or allocations and credits
to, the Account of any Member shall not vest in any Member any right, title or
interest in and to any Plan assets or benefits except at the time or times and
upon the terms and conditions and to the extent expressly set forth in the Plan
and in accordance with the terms of the Trust.
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SECTION 4 REQUIRED BASIC CONTRIBUTIONS
4.1 Each Member other than a Member working at Electric Ave. is
required to contribute an amount equal to three percent of his Compensation.
Commencing on or after January 1, 1989, these required Basic Contributions shall
be made on an after-tax basis. Prior to January 1, 1989, required Basic
Contributions were made on a salary-reduction basis. No Member working at
Electric Ave. is permitted to make Basic Contributions. Notwithstanding the
foregoing, with respect to periods beginning on or after July 1, 1997, each
Full-Time Associate who is not a Temporary Associate, who is not employed by
Electric Ave., Signature or Lechmere and who has not yet met the eligibility
requirements of Section 3.1(b) may contribute an amount equal to not less than
nor more than three percent of his Compensation on an after-tax basis.
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SECTION 5 PRE-TAX SUPPLEMENTAL CONTRIBUTIONS
AND AFTER-TAX SUPPLEMENTAL CONTRIBUTIONS
5.1 (a) A Member may elect to reduce his Compensation by an amount not
less than one percent and not more than 10% of such Compensation for
such Plan Year in any whole percentage in accordance with procedures
adopted by the Committee, which procedures may include limitations on
the elections of Highly Compensated Associates, and the Employer shall
contribute such amount to the Plan on behalf of the Member as a Pre-Tax
Supplemental Contribution. Notwithstanding the foregoing, with respect
to periods beginning on or after July 1, 1997, each Full-Time Associate
who is not a Temporary Associate, who is not employed by either
Electric Ave., Signature or Lechmere and who has not yet met the
eligibility requirements of Section 3.1(b) and who has made Basic
Contributions as provided in Section 4.1, may elect to reduce his
Compensation by an amount not less than one percent and not more than
10% of such Compensation for such Plan Year in any whole percentage in
accordance with procedures adopted by the Committee, which procedures
may include limitations on the elections of Highly Compensated
Associates, and the Employer shall contribute such amount to the Plan
on behalf of the Associate as a Pre-Tax Supplemental Contribution.
Notwithstanding the foregoing, the Committee may amend or revoke a
Member's election to reduce his Compensation if such revocation or
amendment is necessary to ensure that a Member's contributions for any
Plan Year will not exceed the limitations of Section 415 of the Code,
to ensure that the discrimination tests of Section 401(k) of the Code
are met for such Plan Year, to ensure that no more than $7,000, as
adjusted for increases in the cost of living in accordance with Section
402(g)(5) of the Code, is deferred by any Member for any calendar year,
or, to ensure that the Company contributions for the Plan Year do not
exceed the amount deductible by the Company with respect to such year
for federal income tax purposes under section 404(a)(3)(A) of the Code.
In the event that the aggregate amount of Pre-Tax Supplemental
Contributions for a Member exceeds the limitation of Section 402(g)(5)
of the Code, the amount of such excess ("excess deferrals"), increased
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by any income and decreased by any losses attributable thereto, shall
be refunded to the Member no later than the April 15th of the calendar
year following the calendar year for which the Pre-Tax Supplemental
Contributions were made. If a Member also participates, in any calendar
year, in any other plans subject to the limitations set forth in
Section 402(g) of the Code and has made excess deferrals under this
Plan when combined with the other plans subject to such limits, to the
extent the Member, in writing submitted to the Committee no later than
the March 1 of the Plan Year following the Plan Year for which the Pre-
Tax Supplemental Contributions were made, designates any Pre-Tax
Supplemental Contributions under this Plan as excess deferrals, the
amount of such designated excess, increased by any income and decreased
by any losses attributable thereto, shall be refunded to the Member no
later than the April 15th of the calendar year following the calendar
year for which the Pre-Tax Supplemental Contributions were made.
(b)(i) Effective January 1, 1997, notwithstanding any
other provision of this Section 5.1, the actual deferral
percentage for the Plan Year for Highly Compensated Associates
who are eligible to participate in the Plan shall not exceed
the greater of the following actual deferral percentage tests:
(A) the actual deferral percentage for the preceding Plan Year
of those Eligible Associates who are not Highly Compensated
Associates multiplied by 1.25; or (B) the actual deferral
percentage for the preceding Plan Year of those Eligible
Associates who are not Highly Compensated Associates
multiplied by two, provided that the actual deferral
percentage for Highly Compensated Associates does not exceed
the actual deferral percentage in the preceding Plan Year for
such other Eligible Associates who are not Highly Compensated
by more than two percent. For purposes of this Section 5.1,
the "actual deferral percentage" for the applicable Plan Year
means, for each specified group of Associates, the average of
the actual deferral ratios (calculated separately for each
Associate in such group) of (A) the amount of contributions
made to the Member's Pre-Tax Supplemental Contribution Account
for the applicable Plan Year, to (B) the amount of the
Member's compensation (as defined in Section 414(s) of the
Code) for the applicable Plan Year. For purposes of this
Section 5.1, the "applicable Plan Year" with respect to Highly
Compensated Associates is the current Plan Year and the
"applicable Plan Year" with respect to Eligible Associates who
are not Highly Compensated Associates is the preceding Plan
Year. The Committee may elect to apply the current Plan Year
as the "applicable Plan Year" with respect to Eligible
Associates who are not Highly Compensated Associates; however,
any such election may not be changed except as provided by the
Secretary of the Treasury. An Eligible Associate's actual
deferral percentage shall be zero if no Pre-Tax Supplemental
Contribution is made on his behalf for such applicable Plan
Year. In calculating the actual deferral percentage for a Plan
Year, Pre-Tax Supplemental Contributions shall be taken into
account only if they are allocated to a Member's Account
within such applicable Plan Year.
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(ii) The Committee shall determine as of the end of
the Plan Year, and at such time or times in its discretion,
whether one of the actual deferral percentage tests specified
in Subsection 5.1(b)(i) is satisfied for such Plan Year and
shall maintain records sufficient to demonstrate satisfaction
of such actual deferral percentage tests. This determination
shall be made after first determining the treatment of excess
deferrals within the meaning of Section 402(g) of the Code
under Section 5.1(a). In the event that neither of such actual
deferral percentage tests is satisfied, the Committee shall,
to the extent permissible under the Code and the Regulations,
and to the extent any such recharacterization would not cause
a violation of Section 6.3(a), if the Member so elects,
recharacterize such excess contributions as After-Tax
Supplemental Contributions, in the manner described in
Subsection 5.1(b)(iii) or, to the extent such
recharacterization is not possible or the Member does not so
elect, refund the excess contributions in the manner described
in Subsection 5.1(b)(iv). For purposes of this Section 5.1,
"excess contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of Pre-Tax Supplemental
Contributions (and any earnings and losses allocable thereto)
made to the Pre-Tax Supplemental Contribution Accounts of
Highly Compensated Associates for such Plan Year, over the
maximum amount of such contributions that could be made to the
Pre-Tax Supplemental Contribution Accounts of such Members
without violating the requirements of Subsection 5.1(b)(i),
determined by reducing Pre-Tax Supplemental Contributions made
on behalf of Highly Compensated Associates in order of the
actual deferral percentages beginning with the highest of such
percentages.
(iii) To the extent provided in Subsection
5.1(b)(ii), in accordance with the Code and the Regulations,
if a Highly Compensated Associate so elects in writing no
later than the March 1 following the Plan Year for which such
excess contributions were made, the Committee may
recharacterize excess contributions of such Member for a Plan
Year as After-Tax Supplemental Contributions in order to
satisfy the requirements of Subsection 5.1(b)(i), in which
event the amount of excess contributions so recharacterized
shall, to the extent permitted by the Code and the
Regulations, be treated as having been refunded to the Member
and then contributed by the Member to the Member's After-Tax
Supplemental Contribution Account. Any excess contributions
not so recharacterized shall be distributed before the end of
the Plan Year immediately following the Plan Year for which
such excess contributions were made.
(iv) If a Highly Compensated Associate does not
elect recharacterization under Section 5.1(b)(iii), or, if
required in order to comply with the provisions of Subsection
5.1(b)(i) and the Code, the Committee shall refund excess
contributions for a Plan Year to the affected Highly
Compensated Associate. The distribution of such excess
contributions shall be made to Highly Compensated Associates
to the extent practicable before the 15th day of the third
month immediately following the Plan Year for which such
excess contributions were made, but in no event later than the
end of the Plan Year following such Plan Year. Any such
distribution shall be made to each Highly Compensated
Associate on the basis of the respective portions of such
amounts attributable to each such Highly Compensated
Associate. Notwithstanding the foregoing, for purposes of
determining whether the Plan satisfies the actual deferral
percentage test, the Plan may be treated as comprising
separate plans as described in Sections 1.410(b)-6(b)(3) and
1.410(b)-7(c)(3) of the Regulations.
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(v) Effective January 1, 1997, excess contributions
are allocated to the Highly Compensated Associate with the
largest amounts of Pre-Tax Supplemental Contributions taken
into account in calculating the actual deferral percentage
test for the year in which the excess arose, beginning with
the Highly Compensated Associates with the largest amount of
Pre-Tax Supplemental Contributions and continuing in
descending order until all the excess contributions have been
allocated. For purposes of the preceding sentence, the
"largest amount" is determined after distribution of any
excess contributions.
(vi) For purposes of determining whether the Plan
satisfies the actual deferral percentage test, all salary
reduction contributions that are made under two or more plans
that are aggregated for purposes of Section 401(a)(4) or
410(b) of the Code (other than Section 401(b)(2)(A)(ii) of the
Code) shall be treated as made under a single plan and, if two
or more plans are permissively aggregated for purposes of
Section 401(k) of the Code, the aggregated plans must also
satisfy Section 401(a)(4) or 410(b) of the Code as though they
were a single plan; provided, however, that plans may be
aggregated to satisfy the actual deferral percentage test only
if they have the same plan year. In calculating the actual
deferral percentage, a Highly Compensated Associate's actual
deferral ratio shall be determined by treating all cash or
deferred arrangements of the Company or any Affiliate under
which the Highly Compensated Associate is eligible to
participate (other than those which may not be permissively
aggregated) as a single arrangement. Notwithstanding the
foregoing, for purposes of determining whether the Plan
satisfies the actual deferral percentage test, the Plan may be
treated as comprising separate plans as described in Sections
1.410(b)-6(b)(3) and 1.410(b)-7(c)(3) of the Regulations.
(c) On or before June 30, 1994, subject to Subsections 5.1(d)
and 6.3(a), a Member could have elected to make After-Tax Supplemental
Contributions to the Plan of an amount of up to 10% of his Compensation
in any whole percentage through payroll deductions, in accordance with
procedures adopted by the Committee. Effective July 1, 1994, After-Tax
Supplemental Contributions may not be made to the Plan.
(d) The aggregate percentage of the Pre-Tax Supplemental
Contribution made on behalf of a Member and such Member's After-Tax
Supplemental Contribution must not exceed 10% of the Member's
Compensation.
5.2 A Member may temporarily suspend the reduction of his
Compensation and any payroll deduction contributions elected under Section 5.1,
as of the first day of any month without terminating his membership in the Plan,
by giving at least 30 days' prior written notice thereof to the Committee. A
Member may resume reduction of his Compensation and any payroll deduction
contributions under Section 5.1 as the
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first day of any month following the date of such suspension and must give the
Committee prior written notice of any subsequent election under Section 5.1,
specifying the first day of the month in which his Compensation is to be reduced
and any deduction to be made from his paycheck. A Member may not temporarily
suspend the reduction of his Compensation and any payroll deduction
contributions more often than once in any Plan Year.
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SECTION 6 COMPANY CONTRIBUTIONS
6.1 (a) Effective July 1, 1997, the Company shall make no Matching
Contributions with respect to a Member's Basic Contribution unless such
Member is employed by either Signature or Lechmere, in which case the
Company shall make a Matching Contribution equal to 25% of the amount
of the Basic Contributions made by the Member pursuant to Section 4.1.
No contributions shall be made by the Company to Members employed by
either Signature or Lechmere with respect to any such Member's
contributions pursuant to Section 5.
(b) Effective July 1, 1997, the Company shall contribute in
respect of each pay period on behalf of each of the Eligible Associates
who are Members and who are not employed by either Electric Ave.,
Signature or Lechmere with respect to Supplemental Matching
Contributions, a certain percentage, as specified in the chart below,
of the amount of the Pre-Tax Supplemental Contributions made by such
Member pursuant to Section 5.1(a) (with no such Member's Pre-Tax
Supplemental Contributions in excess of three percent of such Member's
Compensation counted for this purpose) as Supplemental Matching
Contributions.
Supplemental Matching Contribution on First Three Percent of
Pre-Tax Supplemental Contributions
----------------------------------
<TABLE>
<CAPTION>
Percent of Eligible
Pre-Tax Supplemental
Member's Age as of each January 1 Contributions Matched
--------------------------------- ---------------------
<S> <C>
Under 40 years 5%
40-44 years 10%
45-49 years 15%
50-54 years 30%
55-59 years 40%
60 years and over 50%
</TABLE>
For purposes of determining a Member's Supplemental Matching
Contribution, a Member's age on January 1 will be his age on his next
birthday if such birthday is on or before June 30, or his age on his
last birthday if his next birthday is on or after July 1.
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6.2 (a) In addition to contributions under Sections 4.1 and 5.1, the
Company may make Profit Sharing Contributions, as determined by the
Board of Directors in its sole discretion. Any such Profit Sharing
Contributions may not exceed the maximum amount permitted for
deductions under the Code. The Board of Directors may designate all or
a portion of the Profit Sharing Contributions as Electric Ave. Profit
Sharing Contributions or as allocable among Members employed by
particular Participating Companies or divisions.
(b) All Profit Sharing Contributions under Section 6.2(a), other
than Electric Ave. Profit Sharing Contributions, shall be allocated
among the Eligible Associates who are Members in Service of the
applicable Participating Company or division as of the last day of the
Plan Year other than those Members working at Electric Ave. (and if
necessary for the Plan to meet the requirements of Section 410(b) of
the Code, such additional Members with the highest number of Hours of
Service other than those Members working at Electric Ave. with the
number of Members as required to meet the requirements of Section
410(b) of the Code, whether or not in Service as of the last day of the
Plan Year) in the proportion that the Basic Contributions made on
behalf of or by each such Member pursuant to Section 4.1 bears to the
total of the contributions made pursuant to Section 4.1 for such Plan
Year on behalf of or by all such Members in Service of the applicable
Participating Company or division as of the last day of the Plan Year
other than those Members working at Electric Ave. All Electric Ave.
Profit Sharing Contributions under Section 6.2(a) shall be allocated
among the Eligible Associates who are Members working at Electric Ave.
and in Service as of the last day of the Plan Year (and if necessary
for the Plan to meet the requirements of Section 410(b) of the Code,
such additional Members working at Electric Ave. and with the highest
number of Hours of Service with the number of Members as required to
meet the requirements of Section 410(b) of the Code, whether or not in
Service as of the last day of the Plan Year) in the proportion that the
Pre-Tax Supplemental Contributions made on behalf of or by each such
Member working at Electric Ave. pursuant to
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Section 5.1 up to three percent of such Member's Compensation bears to
the total of the Pre-Tax Supplemental Contributions (with no Member's
Pre-Tax Supplemental Contributions in excess of three percent of such
Member's Compensation counted for this purpose) made on behalf of or by
all such Members working at Electric Ave. in Service as of the last day
of the Plan Year pursuant to Section 5.1 for such Plan Year.
6.3 (a) Effective January 1, 1997, notwithstanding any other
provision of this Section 6, the average contribution percentage for
the Plan Year for Highly Compensated Associates shall not exceed the
greater of the following average contribution percentage tests: (i) the
average contribution percentage for the preceding Plan Year of those
Eligible Associates who are not Highly Compensated Associates
multiplied by 1.25; or (ii) the average contribution percentage for the
preceding Plan Year of those Eligible Associates who are not Highly
Compensated Associates multiplied by two, provided that the average
contribution percentage for Highly Compensated Associates does not
exceed the average contribution percentage in the preceding Plan Year
for such other Eligible Associates who are not Highly Compensated by
more than two percent. For purposes of this Section 6.3, the "average
contribution percentage" for the applicable Plan Year means, for each
specified group of Associates, the average of the actual contribution
ratios (calculated separately for each Associate in such group) of (i)
the sum of (A) Matching Contributions and Profit Sharing Contributions
described in Sections 6.1 and 6.2, respectively credited to his
Employer Contribution Account for the applicable Plan Year, (B) after-
tax Basic Contributions credited to his Basic Contribution Account for
the applicable Plan Year, (C) After-Tax Supplemental Contributions
credited to his After-Tax Supplemental Contribution Account for the
applicable Plan Year and (D) if the Committee so elects in accordance
with and to the extent permitted by the Regulations, Pre-Tax
Supplemental Contributions credited to his Pre-Tax Supplemental for the
applicable Plan Year, to (ii) the amount of the Member's compensation
(as defined in Section 414(s) of the Code) for the
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applicable Plan Year. For purposes of this Section 6.3, the "applicable
Plan Year with respect to Highly Compensated Associates is the current
Plan Year and the "applicable Plan Year" with respect to Eligible
Associates who are not Highly Compensated Associates is the preceding
Plan Year. The Committee may elect to apply the current Plan Year as
the "applicable Plan Year" with respect to Eligible Associates who are
not Highly Compensated Associates; however, any such election may not
be changed except as provided by the Secretary of the Treasury. An
Eligible Associate's average contribution percentage shall be zero if
no contributions are made on his behalf for such applicable Plan Year.
In calculating the average contribution percentage for a Plan Year,
contributions shall be taken into account only if they are allocated to
a Member's Account within such applicable Plan Year. For this purpose,
contributions are considered allocated as of a date within an
applicable Plan Year if the allocation is not contingent on
participation or performance of services after such date and the
contributions are actually paid to the Trust no later than 12 months
after the close of the applicable Plan Year to which the contributions
relate.
(b) For purposes of determining whether the Plan satisfies the
average contribution percentage test, all employee and employer
matching contributions that are made under two or more plans that are
aggregated for purposes of Section 401(a) or 410(b) of the Code (other
than Section 410(b)(2)(A)(ii) of the Code) shall be treated as made
under a single plan and, if two or more such plans are permissively
aggregated for purposes of Section 401(m) of the Code, the aggregated
plans must also satisfy Sections 401(a)(4) and 410(b) of the Code as
though they were a single plan; provided, however, that plans may be
aggregated to satisfy the average contribution percentage test only if
they have the same plan year. For purposes of calculating the average
contribution percentage, the actual contribution ratio of a Highly
Compensated Associate shall be determined by treating all plans of the
Company and may Affiliate under which the Highly Compensated Associate
participates as a single plan. Notwithstanding the foregoing, for
purposes of determining whether the
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Plan satisfies the average contribution percentage test, the Plan may be
treated as comprising separate plans as described in sections 1.410(b)-
6(b)(3) and 1.410(b)-7(c)(3) of the Regulations.
(c) The Committee shall determine as of the end of the Plan Year, and
at such time or times in its discretion, whether one of the average
contribution percentage tests specified in Subsection 6.3(a) is satisfied
for such Plan Year. This determination shall be made after first
determining the treatment of excess deferrals within the meaning of Section
402(g) of the Code under Section 5.1(a) and then determining the treatment
of excess contributions under Section 5.1(b). In the event that neither of
the average contribution percentage tests is satisfied, the Committee shall
refund or forfeit the excess contributions in the manner described in
Subsection 6.3(e). For purposes of this Section 6.3, "excess aggregate
contributions" means, with respect to any Plan Year and with respect to any
Member, the excess of the aggregate amount of contributions (and any
earnings and losses allocable thereto) made to (i) the Matching
Contribution Account, (ii) the Profit Sharing Contribution Account, (iii)
the after-tax Basic Contribution Account, (iv) After-Tax Supplemental
Contribution Account and (v) the Pre-Tax Supplemental Contribution Account
(if the Regulations permit and the Committee elects to take into account
Pre-Tax Supplemental Contributions when calculating the average
contribution percentage) of Highly Compensated Associates for such Plan
Year, over the maximum amount of such contributions that could be made to
the Matching Contribution Account, Profit Sharing Contribution Account,
after-tax Basic Contribution Account, After-Tax Supplemental Contribution
Account and Pre-Tax Supplemental Contribution Account of such Members
without violating the requirements of Subsection 6.3. Effective January 1,
1997, excess aggregate contributions are allocated to the Highly
Compensated Associates with the largest amounts of aggregate contributions
taken into account in calculating the actual contribution percentage test
for the year in which the excess arose, beginning with the Highly
Compensated Associates with the largest amounts of excess aggregate
contributions and continuing in descending order until all the
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excess aggregate contributions have been allocated. For purposes of the
preceding sentence the "largest amount" is determined after
distribution of any excess aggregate contributions.
(d) If the Committee is required to refund excess aggregate
contributions for any Highly Compensated Associate for a Plan Year in
order to satisfy the requirements of Subsection 6.3(a), then the refund
of such excess aggregate contributions shall be made with respect to
such Highly Compensated Associates to the extent practicable before the
15th day of the third month immediately following the Plan Year for
which such excess aggregate contributions were made, but in no event
later than the end of the Plan Year following such Plan Year. For each
of such Associates, the amounts so refunded shall be made in the
following order of priority (i) by distributing amounts contributed to
the After-Tax Supplemental Contribution Account, and earnings thereon;
(ii) by distributing amounts contributed to the Pre-Tax Supplemental
Account (to the extent such amounts are included in the average
contribution percentage), and earnings thereon; (iii) by distributing
amounts contributed to the after-tax Basic Contribution Account, and
earnings thereon and Matching Contributions related thereto; (iv) by
distributing amounts contributed to the Matching Contribution Account,
and earnings thereon; and (v) by distributing amounts contributed to
the Profit Sharing Contribution Account and earnings thereon.
(e) Notwithstanding any other provision of the Plan, the sum
of the actual deferral percentage determined in accordance with
Subsection 5.1(b)(i) of those Highly Compensated Associates and the
average contribution percentage determined in accordance with Section
6.3(a) of those Highly Compensated Associates shall not exceed the
Aggregate Limit (as defined below). The actual deferral percentage and
the average contribution percentage of the Highly Compensated
Associates are determined after any corrections required to meet the
actual deferral percentage and average contribution percentage tests
are made.
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<PAGE>
(f) For purposes of Section 6.3(d) above, "Aggregate Limit"
for a Plan Year means the greater of: (i) the sum of (A) 1.25 times the
greater of the actual deferral percentage of those non-Highly
Compensated Associates eligible to participate in the Plan ("eligible
NHCAs") for the preceding Plan Year or the average contribution
percentage of the eligible NHCAs for the preceding Plan Year, and (B)
two percentage points plus the lesser of the actual deferral percentage
of the eligible NHCAs for the preceding Plan Year or the average
contribution percentage of the eligible NHCAs for the preceding Plan
Year (in no event, however, may this amount exceed twice the lesser of
the actual deferral percentage of the eligible NHCAs for the preceding
Plan Year or the average contribution percentage of the eligible NHCAs
for the preceding Plan Year); or (ii) the sum of (A) 125% of the lesser
of the actual deferral percentage of the eligible NHCAs for the
preceding Plan Year or the average contribution percentage of the
eligible NHCAs for the preceding Plan Year, and (B) two percentage
points plus the greater of the actual deferral percentage of the
eligible NHCAs for the preceding Plan Year or the average contribution
percentage of the eligible NHCAs for the preceding Plan Year. In no
event, however, may this amount exceed twice the greater of the actual
deferral percentage of the eligible NHCAs for the preceding Plan Year
or the average contribution percentage of the eligible NHCAs for the
preceding Plan Year.
(g) The Committee shall determine as of the end of the Plan
Year, and at such time or times in its discretion, whether the
Aggregate Limit has been exceeded. In the event that the Aggregate
Limit is exceeded, the average contribution percentage of the eligible
Highly Compensated Associates shall be reduced in the same manner as
described in Sections 6.3(c)-(d).
6.4 The Company's contributions under Sections 5.1, 6.1 and 6.2, and
any Member's contributions under Sections 4.1 and 5.1, if any, shall be paid
directly to the Trustee under the Trust during the month in respect of which
they are made, or during the month next following, as the Committee may
determine, provided that the total amount of the Company's contributions under
the Plan for any taxable year
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shall be paid in full on or before such date as the federal income tax laws
applicable to such payment require the payment to be made in order to permit
deduction of such payment for such taxable year. Notwithstanding anything herein
to the contrary, effective February 3, 1997, any Pre-Tax Supplemental
Contributions (or any other pre-tax contributions) shall be made as soon as such
amounts can reasonably be segregated from the general assets of the Company and
each Participating Company, provided that in no event shall such contributions
be made later than the 15th business day of the month immediately following the
month in which such amounts would otherwise have been payable to the Member in
cash.
6.5 The Company's contributions made for a taxable year pursuant to
Sections 5.1, 6.1 and 6.2, if any, and any Member's contributions under Sections
4.1 and 5.1, shall be paid directly by the Company to the Trustee in cash, or,
at the option of the Company, in whole or in part in other property acceptable
to the Trustee.
6.6 Amounts forfeited pursuant to Section 11 shall be used to reduce
the Company's contribution obligations pursuant to this Section 6. Amounts shall
be deemed forfeited pursuant to Section 11 as determined by the Committee upon
the earlier of the commencement of a distribution of the Member's nonforfeitable
interest in the Member's Account or the Member's incurrence of five consecutive
one-year Breaks in Service.
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6.7 If Basic Contributions for any Member for a Plan Year exceed the
compensation limitations of Section 401(a)(17) of the Code, such excess
contributions shall reduce the Member's obligation to make Basic Contributions
in the following year.
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SECTION 7 TRANSFER OF AMOUNTS ATTRIBUTABLE TO MEMBERS'
CONTRIBUTIONS AND PROFIT- SHARING PLAN BALANCES
UNDER THE RETIREMENT SECURITY PLAN
7.1 The Committee shall establish and maintain or cause to be
established and maintained, as part of a Member's Account, a Transferred
Contribution Account and a Profit-Sharing Plan Balance Account, showing the
Member's interest under the Plan and in the Trust Fund allocable to the amounts
transferred from the trust established as part of the Retirement Security Plan
and attributable to the Member's Benefit Derived from Associate Contributions
and Profit Sharing Plan Balance, if any, as determined by the Committee in its
sole discretion, and all relevant data pertaining thereto. The amount
transferred with respect to a Member's Benefit Derived from Associate
Contributions shall be credited by the Committee to the Member's Transferred
Contribution Account. The amount transferred with respect to a Member's
Profit-Sharing Plan Balance shall be credited by the Committee to the Member's
Profit-Sharing Plan Balance Account. All such transferred amounts shall be held
by the Trustee for the exclusive benefit of such Member in accordance with the
terms of the Plan, to be commingled, managed, invested and reinvested with the
other assets of the Plan. Upon such transfer, the trustees of the Retirement
Security Plan shall have no further liability whatsoever with respect to the
respective transferred amounts or the benefits which had been based thereon, and
the Member shall look solely to the Plan for any payment or other benefit in
respect of the amount so transferred.
7.2 Except to the extent otherwise determined by the Committee with
respect to payments from a Member's Account, adjustments, charges or allocations
to the Member's Transferred Contribution Account and Profit-Sharing Plan Balance
Account shall be made by adding thereto, or deducting therefrom, as the case may
be, such proportion of any adjustments, charges or allocations as the amount
therein as of the last preceding Valuation Date bears to the total amount in the
Member's Account as of such preceding Valuation Date. In making such
adjustments, charges or allocations the Committee can conclusively rely on the
valuations of the Trust Fund by the Trustee and in accordance with the Plan and
the terms of the Trust.
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7.3 Except as otherwise provided in Section 11.5, any amount credited
to a Member's Transferred Contribution Account and Profit-Sharing Plan Balance
Account, if any, shall be paid from the Trust Fund to the Member or his
Beneficiary or Surviving Spouse at the same time and in the same manner as any
payment made in accordance with Section 12.
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SECTION 8 TRANSFER OF AMOUNTS ATTRIBUTABLE TO MEMBERS'
ACCOUNT BALANCE UNDER THE LECHMERE PLAN
8.1 Each Member who was a member of the Lechmere Plan on June 30, 1994
shall have an amount equal to his account balance under the Lechmere Plan, if
any, transferred from the trust established as part of the Lechmere Plan to the
Trust.
8.2 The Committee shall establish and maintain or cause to be
established and maintained, as part of the Account of a Member, a Lechmere
Account, which shall provide for a separate accounting in the name of each such
Member which shall reflect all contributions of such Member during his
participation in the Lechmere Plan, all amounts contributed by a participating
employer of the Lechmere Plan on his behalf, earnings on all such contributions,
any distributions, withdrawals and any expenses charged against such
contributions (the "Lechmere Account"). The separate accounting in the name of
each Member who was a participant in the Lechmere Plan shall include a separate
accounting for pre-tax contributions, after-tax contributions, rollover
contributions and matching contributions made on behalf of such Member under the
Lechmere Plan. The amount transferred to the Trust pursuant to Section 8.1 with
respect to a Member's account balance under the Lechmere Plan shall be credited
by the Committee to the Member's Lechmere Account. All such transferred amounts
shall be held by the Trustee for the exclusive benefit of such Member in
accordance with the terms of the plan, to be commingled, managed, invested and
reinvested with the other assets of the Plan. Upon such transfer, the Member
shall look solely to the Plan for any payment or other benefit in respect of the
amount so transferred.
8.3 Except to the extent otherwise determined by the Committee with
respect to payments from a Member's Account, adjustments, charges or allocations
to the Member's Lechmere Account shall be made by adding thereto, or deducting
therefrom, as the case may be, such proportion of any adjustments, charges or
allocations as the amount therein as of the last preceding Valuation Date bears
to the total amount in the Member's Account as of such preceding Valuation Date.
In making such adjustments or charges, the
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Committee can conclusively rely on the valuations of the Trust Fund by the
Trustee and in accordance with the Plan and the terms of the Trust.
8.4 Except as otherwise provided in Section 11.5, any amount credited
to a Member's Lechmere Account, if any, shall be paid from the Trust Fund to the
Member or his Beneficiary or Surviving Spouse at the same time and in the same
manner as any payment made in accordance with Section 12.
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SECTION 9 INVESTMENT OF CONTRIBUTIONS
9.1 All amounts of money, securities or other property received under
the Plan, including any amounts transferred to the Plan under Sections 7 and 8,
shall be delivered to the Trustee under the Trust, to be managed, invested,
reinvested and distributed for the exclusive benefit of the Members and their
Beneficiaries in accordance with the Plan, the Trust and any agreement with an
insurance company or other financial institution constituting a part of the Plan
and Trust. The Trustee shall cause to be established and maintained six funds or
such other number of funds as the Committee shall determine, to be designated
respectively as Fund A, Fund B, Fund C, Fund D, Fund E, and Fund F, or as
otherwise designated by the Committee, for the investment of all such amounts.
9.2 Effective for periods beginning on or after July 1, 1997, a Member
may, by making a telephonic investment direction, specify the percentage (in
multiples of five percent or such other percentage as the Committee may
determine) of such Member's Account to which the member is permitted investment
direction as described below that shall be invested in one or more of the Funds
designated by the Committee pursuant to the uniform and nondiscriminatory
procedures established by the Committee. Unless an effective investment
direction is received, all amounts with respect to which the Member is permitted
investment direction as described below shall be invested in Fund A. For periods
beginning on or after May 1, 1998, Members may direct the investment of all
amounts in the Member's Account. For periods beginning on or after July 1, 1997
and ending before May 1, 1998 Members employed by Lechmere or Signature could
direct the investment of all amounts in the Member's Account, other than amounts
in the Member's Basic Contribution Account and Transferred Contribution Account.
For periods beginning before July 1, 1997 all amounts in a Member's Basic
Contribution Account and Transferred Contribution Account were invested in such
percentages as the Committee specified, in any of the Funds.
9.3 Effective July 1, 1997, a Member may change an investment direction
as to his Account once in each calendar month, by providing a telephonic notice
of such change in investment direction (or by such other
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method as the Committee may permit). With respect to future contributions, such
telephonic notice shall be processed in due course and will be effective as soon
as administratively feasible. With respect to a change in the investment of a
Member's existing Account balances, such change will be processed in due course
and will be effective as soon as administratively feasible.
9.4 The Plan is intended to constitute a plan described in Section
404(c) of ERISA and Title 29 of the Code of Federal Regulations Section
2550.404c-1.
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SECTION 10 VALUATIONS AND MAINTENANCE OF MEMBERS' ACCOUNTS
10.1 As of each Valuation Date, the Trust Fund shall be valued pursuant
to the terms of the Trust to reflect the effect of income received and accrued,
realized and unrealized profits and losses, and all other transactions of the
preceding period, but such valuation shall not include any contributions
received by the Trustee during such month. Such valuation shall be conclusive
and binding upon all persons having an interest in the Trust Fund.
10.2 All contributions made on behalf of, or allocated to, a Member
shall be credited to his Account. The value of a Member's Account may be
determined by aggregating the value of his separate interests, if any, in each
Fund.
10.3 (a) For the first month for which contributions are received in an
Investment Fund under the Plan, a Unit in each Investment Fund shall be
valued at one dollar and there shall be credited to each Member as of
the Valuation Date in such month one Unit in each Fund for each dollar
of the contributions made by him or on his behalf and received by the
Trustee during such month which is invested in such Investment Fund in
accordance with the Plan. As of each subsequent Valuation Date, the
value of a Unit in each Investment Fund shall be determined by dividing
(i) the sum of the cash and the fair market value of any other
property, as determined by the Trustee in accordance with Section 10.1,
then held in such Investment Fund, by (ii) the total number of
outstanding Units for such Investment Fund immediately prior to such
Valuation Date.
(b) As soon as practicable after the end of each month
following the first month during which contributions are received by
the Trustee, there shall be credited to each Member a number of Units
(or fractions thereof) in each such Investment Fund calculated by
dividing (i) the portion of the contributions made by him or on his
behalf and received by the Trustee for such month which is invested in
such Investment Fund in accordance with the Plan, by (ii) the value of
a Unit in such Investment Fund as of the Valuation Date in such month.
A Member's Account at any time shall reflect all Units credited
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thereto as provided in the foregoing provisions of Section 10 less all
Units the value of which has been previously withdrawn by him from such
Account.
10.4 The expenses of administering the Plan, including (a) the fees
and expenses of any Associate and of the Trustee for the performance of their
duties under the Plan and Trust, (b) the expenses incurred by the members of the
Committee in the performance of their duties under the Plan (including
reasonable compensation for any legal counsel, certified public accountants,
consultants, and agents and cost of services rendered in respect of the Plan),
and (c) all other proper charges and disbursements of the Trustee or the members
of the Committee (including settlements of claims or legal actions approved by
counsel to the Plan) may be paid out of the Trust Fund, and allocated to and
deducted from the Accounts of Members by the Committee in accordance with the
provisions of Section 10.3 above, if the Company does not pay such expenses
directly.
10.5 Brokerage fees, transfer taxes and other expenses incident to the
purchase or sale of securities by the Trustee shall be deemed to be part of the
cost of such securities, or deducted in computing the proceeds therefrom, as the
case may be. Taxes, if any, of any and all kinds whatsoever, which are levied or
assessed on any assets held or income received by the Trustee shall be allocated
to and deducted from the Accounts of Members by the Committee in accordance with
the provisions of Section 10.3 above.
10.6 Notwithstanding anything herein to the contrary, the Committee,
in its sole discretion in connection with the Company's acquisition of
businesses, may authorize an Associate to transfer to the Trust, to be held as
part of the Associate's Rollover Contribution Account, cash received by the
Associate in one or more distributions together constituting, under the Code, an
Eligible Rollover Distribution from or under another qualified trust or
qualified plan. The Committee may, in its sole discretion, develop procedures
for accepting Eligible Rollover Distributions to the Plan. The interest of an
Associate with respect to a Rollover Contribution to the Trust, together with
earnings thereon, shall be fully vested, and the assets attributable thereto
shall be held, invested and distributed pursuant to the terms of the Plan
governing the Associate's After-Tax Supplemental
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Contribution Account; provided, however, that the interest of an Associate with
respect to Rollover Contributions shall be segregated for accounting and
reporting purposes.
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SECTION 11 ELIGIBILITY FOR BENEFITS
11.1 At all times, each Eligible Associate who became a Member before
July 1, 1994 shall have a nonforfeitable interest in all amounts credited to his
Account.
11.2 (a) Each Eligible Associate who becomes a Member of the Plan
after June 30, 1994 shall have a nonforfeitable interest in amounts
credited to his Matching Contribution Account, Profit Sharing
Contribution Account, and, with respect to periods beginning on or
after July 1, 1997, his Supplemental Matching Contribution Account if
applicable, in accordance with the following schedule:
Years of Vested
Service Percentage
------- -----------
less than 3 0%
3 or more 100%
(b) Notwithstanding the foregoing, a Member who is employed by
the Company on his (i) normal retirement date, as determined under the
Retirement Security Plan, (ii) death, or (iii) disability, shall have a
nonforfeitable interest in this Matching Contribution Account, Profit
Sharing Contribution Account and, with respect to periods beginning on
or after July 1, 1997, his Supplemental Matching Contribution Account,
if applicable, as of such normal retirement date, death or disability.
Furthermore, an Associate who terminates in his third year of
employment shall have a nonforfeitable interest in his Matching
Contribution Account, Profit Sharing Contribution Account, and, with
respect to periods beginning on or after July 1, 1997, his Supplemental
Matching Contribution Account, if applicable, if he performs two Years
of Service and at least five months of Service in his third (final)
year of employment. If a Member has received a distribution of less
than 100% of the Member's Account and is subsequently rehired before
incurring five consecutive one year Breaks in Service, he may repay the
amount of the distribution to the Trust before the earlier of five
years after the first day the Associate is rehired, or the close of the
first period of five consecutive one year Breaks in Service commencing
after the distribution. If upon termination of a Member's Service the
balance of his nonforfeitable Account
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is zero, the Member shall be deemed to have received a distribution of
such nonforfeitable Account upon termination of his Service. If a
Member is deemed to have received a distribution, he may notify the
Committee of his return to Service and his desire to have his account
reinstated before the close of the first period of five consecutive one
year Breaks in Service commencing after the deemed distribution
("Committee Notification"). Upon such repayment or Committee
Notification, the Member shall be credited on the vesting schedule with
all previous Years of Service, and the Member's Account will be
credited with the amount of his Account which was not vested at the
time of the termination of his Service. No additional Years of Service
shall be credited, however, until the Member shall have completed 1,000
Hours of Service in any Plan Year ending after re-employment by the
Company.
The amount credited to the Account of a rehired Associate upon
repayment of a distribution or Committee Notification will be restored
from the following sources, to the extent necessary, in the order
listed:
(i) Forfeitures for the Plan Year;
(ii) Company contributions;
(iii) Trust earnings or gains.
In the event that the amount derived from the foregoing sources
shall not be sufficient to restore the amount credited to the Member's
Account upon repayment or Committee Notification, the Company shall be
obligated to make an additional contribution to the Trust to the extent
required.
A Member who has received a distribution or is deemed to have
received a distribution of his vested interest and either elects not to
make repayment of such amount or elects not to perform Committee
Notification and who has incurred five consecutive one year Breaks in
Service, shall not be entitled to an increase in the Member's pre-Break
in Service credit based upon any post-Break in Service credit, but in
determining the Member's post-Break in Service credit all of his
pre-Break in Service and post-Break in Service credit shall be
aggregated. If a termination of a Member's Service shall occur prior
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to the vesting of any of the Member's interest in his Account and if he
is subsequently rehired, his pre-Break in Service and post-Break in
Service credit will be aggregated if the period of his absence does not
exceed the greater of five consecutive one year Breaks in Service or
his Years of Service with the Company. If the Member's period of
absence does exceed the greater of five consecutive one year Breaks in
Service or his Years of Service with the Company, his pre-Break in
Service credit shall not be considered in determining his vested
interest.
(c) Notwithstanding anything herein to the contrary, if the
Plan's vesting schedule is amended, or if the Plan is amended in any
way that directly or indirectly affects the computation of the Member's
nonforfeitable percentage or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each Member
with at least three Years of Service with the Company may elect, within
a reasonable period after the adoption of the amendment or change, to
have such Member's vested interest in such Matching Contribution
Account, Profit Sharing Contribution Account and with respect to
periods beginning on or after July 1, 1997, his supplemental Matching
Contribution Account, if applicable, computed under the Plan without
regard to such amendment or change.
The period during which the election may be made shall commence
with the date the amendment is adopted or deemed to be made and shall
end on the latest of:
(i) 60 days after the amendment is adopted;
(ii) 60 days after the amendment becomes effective; or
(iii) 60 days after the Member is issued written notice of
the amendment by the Company or Plan Administrator.
11.3 Notwithstanding the foregoing, the nonforfeitable interest of a
Member who was employed by the Company on or before July 1, 1994 in amounts
credited to his Matching Contribution Account and Profit Sharing Contribution
Account shall not be less than his vested percentage determined as of June 30,
1994. In addition, notwithstanding the foregoing, a Member who was a participant
in the Lechmere Plan shall have a nonforfeitable interest in the portion of his
Lechmere Account attributable to matching contributions under the
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Lechmere Plan in accordance with the following schedule to the extent that the
following schedule results in a greater nonforfeitable interest in such
contributions:
Years Vested
of Service Percentage
---------- ----------
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 or more 100%
11.4 Subject to Section 12.2, after termination of a Member's Service
payment of the Member's vested Account shall be made by one of the methods of
distribution described and at the time specified in Section 12 below.
11.5 If a former Member dies before payment of the full value of his
vested Account from the Trust Fund, an amount equal to the value of the unpaid
portion thereof shall be paid to his Beneficiary from the Trust Fund. Such
payment shall be made by one of the methods of distribution described and at the
time specified in Section 12 below.
11.6 (a) A Member may, while in Service, withdraw out of the Trust
Fund amounts permitted by the Committee, pursuant to Subsections (b),
(c) or (f) below, under rules uniformly applicable to all Members
similarly situated, by giving prior notice to the Committee and the
Participating Company that employs him, and in the case of each such
withdrawal, which shall be not less than 30 days following the date
such notice is given to the Committee, as of which the withdrawal is to
be made, and explaining the reason for such withdrawal.
(b) Profit Sharing Plan Balance Account. Subject to Subsection
(a) above, the Committee may permit a Member to withdraw all or part of
the amount credited to his Profit-Sharing Plan Balance Account for any
reason listed in Subsection (d) below or for any of the following
reasons:
(i) the Member's entrance into the United States Armed
Forces;
(ii) to purchase a place of residence for the Member;
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(iii) to provide for the college expenses for the Member's
children;
(iv) death in the Member's immediate family; or
(v) extreme financial hardship of any nature, as
determined solely by the Committee.
(c) After-Tax Supplemental Contribution Account, Pre-Tax
----------------------------------------------------
Supplemental Contribution Account, Matching Contribution Account, Basic
-----------------------------------------------------------------------
Contribution Account and Profit-Sharing Plan Balance Account. Subject
------------------------------------------------------------
to Subsection (a) above, upon a showing of immediate and heavy
financial hardship caused by unusual expenses beyond the control of a
Member, the Committee may permit a Member to withdraw amounts credited
to his:
(i) After-Tax Supplemental Contribution Account;
(ii) Pre-Tax Supplemental Contribution Account (exclusive
of earnings thereon credited on or after January 1, 1989); and
(iii) for periods beginning on or after July 1, 1997, and
for Members other than Members employed by Electric Ave.,
Signature or Lechmere:
(A) the vested portion of his Matching Contribution
Account, including the vested portion of his Supplemental
Matching Contribution Account;
(B) amounts credited to his Basic Contribution Account
(exclusive of earnings credited on pre-tax Basic
Contributions on or after January 1, 1989); and
(C) his Profit-Sharing Plan Balance Account.
The amount of any such withdrawal may not exceed the amount
required to meet the immediate and heavy financial need created by such
hardship (including amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to result from
the distribution) and not reasonably available from other resources of
the Member, including amounts available for withdrawal under
Subsections (b) above and (f) below and amounts available for loan
under Section 15 of this Plan or any other plan maintained by a
Participating Company. To the extent administratively feasible, such
withdrawals shall be charged against the Member's Account, to the
extent applicable, in the following order:
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(i) first, against the Member's Profit-Sharing Plan
Balance Account, if any;
(ii) second, against the Member's pre-1987 after-tax Basic
Contributions and After-Tax Supplemental Contributions, if any;
(iii) third, against the Member's post-1986 after-tax Basic
Contributions and After-Tax Supplemental Contributions and any
earnings thereon, if any;
(iv) fourth, against the earnings on the Member's pre-1987
after-tax Basic Contributions and After-Tax Supplemental
Contributions, if any;
(v) fifth, against the Member's pre-tax Basic
Contributions and Pre-Tax Supplemental Contribution Account, if
any; and
(vi) sixth, against the vested portion of the Member's
Matching Contribution Account, if any.
The amount available for withdrawal under this Subsection (c) shall be
limited by the amounts reflected in the positions of the Member's
Account set forth in the preceding sentence.
(d) For purposes of Subsection (c) above, hardship withdrawals
shall be available only if the withdrawal is made on account of an
immediate and heavy hardship of the Member resulting from:
(i) uninsured medical expenses described in Section 213(d)
of the Code incurred by the Member, his spouse or any dependent
of the Member (as defined in Section 152 of the Code),
(ii) the purchase (excluding mortgage payments) of a
principal residence of the Member,
(iii) payment of tuition, related educational fees, and room
and board expenses, for the next 12 months of post-secondary
education for the Member or his Spouse, children or dependents,
(iv) the need to prevent the eviction of the Member from
his principal residence or foreclosure on the mortgage of the
Member's principal residence,
(v) death in Member's immediate family; "immediate family"
means Spouse, Children, or Parents of Member; or
(vi) such other events as may be prescribed by Regulations
or other procedures under the Code and adopted by the Committee.
(e) Any Member who makes a hardship withdrawal of amounts
credited to his pre-tax Basic Contributions and Pre-Tax Supplemental
Contribution Account pursuant to Subsection (d) of this
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Section 11.6 shall not be permitted to make pre-tax Basic Contributions
or Pre-Tax Supplemental Contributions under the Plan after the
expiration of the 12-month period immediately following the date on
which such hardship withdrawal is received.
(f) Lechmere Account. Subject to Subsection (a) above, the
----------------
Committee may permit a Member to withdraw all or part of the balance in
his Lechmere Account for any of the reasons listed in Subsection (d)
above or for any of the following reasons:
(i) the Member's attainment of age 59-1/2; or
(ii) the permanent disability of the Member.
Notwithstanding the foregoing, any Member who has after-tax
contributions and rollover contributions in his Lechmere Account, may
withdraw the portion of his Lechmere Account attributable to such
after-tax contributions and rollover contributions in accordance with
Subsection (a).
(g) After Tax Supplemental Contribution Account, Basic
--------------------------------------------------
Contribution Account and Profit-Sharing Plan Balance Account. Subject
------------------------------------------------------------
to Subsection (a) above, upon a showing of need as described below, the
Committee may permit a Member, other than a Member employed by either
Electric Ave., Signature or Lechmere, to withdraw not more frequently
than once during each Plan Year amounts credited to his After-Tax
Supplemental Contribution Account; for periods beginning on or after
July 1, 1997, amounts credited to his Basic Contribution Account
attributable to after-tax Contributions; and amounts credited to his
Profit-Sharing Plan Balance Account attributable to after-tax
Contributions; provided, however, that the minimum withdrawal that may
be made by a Member is $500.00. For purposes of this Subsection (g),
withdrawals will be permitted only if the withdrawal is needed to pay
for:
(i) adoption fees associated with the Member's adoption of
a child under the age of 18;
(ii) child care expenses for the Member's children;
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(iii) adult care expenses for the Member or the
Member's spouse, child, parent or sibling;
(iv) expenses related to the purchase or repair of the
Member's automobile, or payments to prevent the repossession of
the Member's automobile;
(v) expenses related to home repairs or improvements
undertaken by the Member;
(vi) payments by the Member to prevent eviction or
foreclosure on any residence, including, but not limited to,
mortgage, rent or tax payments;
(vii) legal expenses for the Member or the Member's spouse,
child or parent;
(viii) primary or secondary school tuition expenses for the
Member's children; and
(ix) any financial hardship as determined by the
Administrative Director.
(h) No Other Withdrawals Permitted. A Member may not withdraw
------------------------------
any amounts from his Account except as provided in this Section 11.6 or
in 11.7.
11.7 Notwithstanding any of the provisions of this Plan, including
Section 11.6 above, any Member who remains in Service after his normal
retirement date, as determined under the Retirement Security Plan, may elect, no
later than 60 days after his normal retirement date, to receive in one lump sum,
the value of his Profit-Sharing Plan Balance Account.
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SECTION 12 METHOD OF PAYMENT OF BENEFITS
12.1 (a) Any benefit payable under the Plan shall be paid in one of
the following methods of distribution, as the Member (or in the case of
the Member's death, the Member's Beneficiary) may elect:
(i) the purchase therewith and delivery to the Member
(or Beneficiary) by the Trustee of a single premium immediate or
deferred annuity (fixed or variable) contract issued by such
insurance company and containing such provisions as the Committee
shall designate, which contract shall (A) provide for monthly
payments continuing, in the case of a Member, for the life of the
Member or the joint lives of the Member and his Beneficiary or
for a period not in excess of the life expectancy, as determined
under the Regulations, of such Member, or the joint life
expectancy, as determined under the Regulations, of such Member
and his Beneficiary, if any, and, in the case of a Beneficiary,
for the life of such Beneficiary or for a period not in excess of
the life expectancy, as determined under the Regulations, of such
Beneficiary, (B) contain, if the Committee so determines,
provisions which prevent the cash surrender thereof and which
make the payments due thereunder nonassignable, (C) provide that
the actuarial value of any payments to a contingent annuitant
other than the spouse of the Member shall not exceed one-half of
the actuarial value of the monthly payments which the Member
would otherwise have received without optional modification;
(ii) one lump sum payment thereof from the Trust Fund;
or
(iii) in any combination of (i) or (ii) above; provided
that, the entire Basic Account Balance must be paid by either (i)
or (ii), and all other Account Balances must be paid by either
method (i) or (ii).
(iv) notwithstanding the foregoing, if the total value
of the Member's Account Balances is $3,500, or less (or for
periods beginning on or after January 1, 1998, $5,000 or less),
or such other amount prescribed in the Regulations, payment shall
be made to the Member in one lump-sum.
(b) Notwithstanding the foregoing, any Member who was a
Participant in the Lechmere Plan (or Beneficiary thereof) may elect, by
completing such form as required by the Committee, to have his benefit
payable under the Plan in a series of substantially equal monthly or
annual installments. If such Member (or Beneficiary thereof) elects the
form of distribution under this Section 12.1(b), the period over which
payments are to be made shall not exceed the life expectancy, as
determined under the Regulations, of the Member, or the joint life
expectancy, as determined under the Regulations, of the Member and his
Beneficiary, if any, and, in the case of a Beneficiary, for the life of
such Beneficiary or
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for a period not in excess of the life expectancy, as determined under
the Regulations, of such Beneficiary.
(c) The Committee, in its sole discretion, may direct the
Trustee to make one or more advances from the Trust Fund to a
terminated Member, Beneficiary or Member's estate prior to the date
upon which a final distribution would otherwise be made from the Trust
Fund in accordance with the Plan. Such advances shall be based upon the
Committee's estimate of the benefit amount which would be payable, and
shall reduce the amount which becomes payable as of the date of such
final distribution. In any case where installment payments are to be
paid or are being paid to a Beneficiary, any balance of unpaid
installments upon or after said Beneficiary's death shall be payable to
the estate of such Beneficiary.
(d) Notwithstanding any provision of the Plan to the contrary,
a Distributee may elect, at the time and in the manner prescribed by
the Committee, to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover. 12.2 (a Notwithstanding any other
provision of the Plan, for periods beginning before January 1, 1999,
any benefit payable to a Member shall commence no later than the April
1st of the calendar year following the calendar year in which such
Member attains age 70 1/2; provided, however, if a Member attained age
70 1/2 prior to January 1, 1988, except as otherwise provided in
Subsection 12.2(e), any benefit payable to such Member shall commence
no later than the April 1st of the calendar year following the later of
(i) the calendar year in which the Participant attains age 70 1/2 or
(ii) the calendar year in which the Member retires. Notwithstanding the
preceding provisions, for periods beginning on or after January 1,
1999, any benefit payable to a Member who is not a five percent owner
(as described in Subsection (e)) shall commence no later than April 1st
of the calendar year following the calendar year in which the Member
retires. Any benefit payable hereunder shall be paid, in accordance
with the Regulations, over a period not extending beyond the life
expectancy of such Member or the joint life
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expectancies of such Member and his Beneficiary. Life expectancy for
purposes of this Section shall not be recalculated annually in
accordance with the Regulations.
(b) If distribution of a Member's benefit has commenced prior
to a Member's death, and such Member dies before his entire benefit is
distributed to him, distribution of the remaining portion of the
Member's benefit to the Member's Beneficiary shall be made at least as
rapidly as under the method of distribution in effect on the date of
the Member's death.
(c) If a Member dies before distribution of his benefit has
commenced, distributions to any Beneficiary shall be made on or before
the December 31st of the calendar year which contains the fifth
anniversary of the date of such Member's death; provided, however, that
any distribution to a Beneficiary may be made over the life of the
Beneficiary or a period not extending beyond the life expectancy of the
Beneficiary. Such distribution shall commence not later than the
December 31 of the calendar year immediately following the calendar
year in which the Member died, or, in the event such Beneficiary is the
Member's Surviving Spouse, not later than the date on which such Member
would have attained age 70 1/2, if later (or, in either case, on any
later date prescribed by Regulations). If such Member's Surviving
Spouse dies after such Member's death but before distributions to such
Surviving Spouse commence, this Subsection (c) shall be applied to
require payment of any further benefits as if such Surviving Spouse
were the Member.
(d) Pursuant to Regulations, any benefits paid to a child shall
be treated as if paid to a Member's Surviving Spouse if such amount
will become payable to such Surviving Spouse on the child's attaining
majority, or other designated event permitted by Regulations.
(e) If a Member who is a five percent owner attained age 70 1/2
before January 1, 1988, any benefit payable to such Member shall
commence no later than the April 1st of the calendar year following the
later of (i) the calendar year in which the Member attains age 70 1/2
or (ii) the earlier of (A) the calendar year within which the Member
becomes a five percent owner or (B) the calendar year in
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which the Member retires. For purposes of this Subsection (e), a five
percent owner shall mean a five percent owner of such Member's employer
as defined in Section 416(i) of the Code at any time during the Plan
Year ending with or within the calendar year in which such owner
attains age 70 1/2. Once distributions have begun to a five percent
owner pursuant to this Subsection (e), they must continue even if the
Member ceases to be a five percent owner in a subsequent year.
12.3 Subject to Section 12.1(a)(iv) and the third sentence of this
Section 12.3, after a Member's termination of Service, the Member must make an
election before payments will commence pursuant to the provisions of the Plan;
provided, however, if the payee is the Member, the Member's spouse must consent,
in writing, to such election or any revocation or change therein (unless the
Committee makes a written determination in accordance with the Code and
Regulations that no such consent is required). If a distribution is one to which
the qualified joint and survivor and qualified preretirement survivor annuity
rules do not apply and the Committee informs the Member that the Member has a
right to a period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution or a particular distribution
option, and the Member, after receiving such notice, affirmatively elects a
distribution, the Committee may authorize the commencement of such distribution
to begin as soon as administratively feasible in accordance with such
administrative practices as determined by the Committee. In no event shall
payment commence later than 60 days after the close of the Plan Year during
which the later of the Member's attainment of age 65 or the termination of the
Member's Service occurs, unless specifically authorized by the Member. In the
case of a Beneficiary, all benefits shall be paid in one lump cash sum unless
other optional methods of distribution which may be permissible under the Code
and Regulations are made available to the Member or his Beneficiary by the
Committee.
12.4 In any case where distribution of any benefit amount from the
Trust Fund is to be deferred, the Committee shall, upon the written request of
the former Member, direct the Trustee to invest such benefit amount in the same
manner as the normal Accounts maintained for Members pursuant to the Plan, from
which account
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such payment shall be made. Any benefit amount so deferred pursuant to the
foregoing sentence shall be held in the normal Accounts maintained for Members
pursuant to the Plan.
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SECTION 13 MAXIMUM AMOUNT OF ALLOCATION
13.1 The provisions of this Section 13 shall govern notwithstanding
any other provisions of the Plan.
13.2 Except as otherwise provided in Section 13.3, Annual Additions
to a Member's Account in respect of any Plan Year may not exceed the limitations
set forth in Section 415 of the Code, which are incorporated herein by
reference. For this purpose, the term "Annual Additions" shall have the meaning
set forth in Section 415(c)(2) of the Code, as modified elsewhere in the Code
and Regulations. For purposes of this Section 13.2, a Member's contributions
shall be determined without regard to any amounts transferred to the Plan
pursuant to Sections 7 and 8.
13.3 In the event that the amounts which would otherwise be allocated
to a Member's Account must be reduced by reason of Section 13.2, the amounts
shall be allocated at the end of the next succeeding Plan Year first, to the
extent permissible under Section 13.2 after taking account of contributions made
for such succeeding Plan Year, to the Member's Account, and any unallocated
portion of such amount shall be allocated to the Accounts of other Members as
the Committee in its sole and uncontrolled discretion, based on
nondiscriminatory standards, shall determine.
13.4 The Committee shall, to the extent required by ERISA and in
accordance with the Regulations in order to maintain the tax-qualified status of
the Plan, apply the limitations contained in this Section 13 (after giving due
consideration to the wishes of the Member) by taking into account the benefits
payable and the contributions made under any other plans maintained by the
Company or any Affiliate which are qualified under Section 401(a) of the Code,
and if such other plan is a defined benefit plan, for periods beginning on or
before December 13, 1999, the sum of the defined benefit plan fraction and the
defined contribution plan fraction (as described in Section 415(e) of the Code,
including Subsection (6) thereof) shall not exceed one.
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SECTION 14 DESIGNATION OF BENEFICIARIES
14.1 Each Member shall file with the Committee a written designation
of one or more persons as the Beneficiary who shall be entitled to receive the
amount, if any, payable under the Plan upon his death. A Member may from time to
time revoke or change his beneficiary designation without the consent of any
prior Beneficiary by filing a new designation with the Committee.
Notwithstanding the foregoing, if the Member is married, his spouse must
consent, in writing, to such designation or any revocation or change therein
(unless the Committee makes a written determination in accordance with the Code
and Regulations that no such consent is required). The last such designation
received by the Committee shall be controlling; provided, however, that no
designation, or change or revocation thereof, shall be effective unless received
by the Committee prior to the Member's death, and in no event shall it be
effective as of a date prior to such receipt.
14.2 If no such beneficiary designation is in effect at the time of a
Member's death, or if no designated Beneficiary survives the Member, the payment
of the amount, if any, payable under the Plan upon his death shall be made to
the Member's Surviving Spouse, if any, or if the Member has no Surviving Spouse,
then to his children, parents, brothers, and sisters, or other relatives as the
Committee shall determine. If the Committee is in doubt as to the right of any
person to receive such amount, the Committee may direct the Trustee to retain
such amount, without liability for any interest thereon, until the rights
thereto are determined, or the Committee may direct the Trustee to pay such
amount into any court of appropriate jurisdiction and such payment shall be a
complete discharge of the liability of the Plan and the Trust therefor.
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SECTION 15 LOANS TO MEMBERS
15.1 A Member may borrow from his interest in the Trust Fund once each
Plan Year, subject to the following provisions of this Section 15.1 and to such
additional standards as the Committee may adopt pursuant thereto, by making
prior written application to the Committee on a form provided for that purpose
by the Committee. Such application (hereinafter referred to as a "completed
application") shall (a) specify the terms pursuant to which the loan is
requested to be made, including the requested effective date, which shall be the
last day of a month and no less than 15 days following the date the completed
application is given to the Committee, (b) designate the extent, if any, that
the loan will be made from fixed income or equity fund, in which the Member has
an interest, (c) authorize the repayment of the loan through payroll deductions,
(d) provide such information and documentation as the Committee shall require,
and (e) include a note, duly executed by the Member, granting a security
interest in his entire interest in the Trust Fund to secure the loan.
15.2 The Committee shall establish standards in accordance with ERISA
and the Code, which shall be uniformly applicable to all Members similarly
situated and shall govern the Committee's approval or disapproval of completed
applications. The terms for each loan shall be set solely in accordance with
such standards. Such standards shall prescribe the annual rate of interest to be
charged on each loan to a Member under the Plan, which shall be determined by
reference to the prevailing interest rates charged by commercial lenders under
similar circumstances. Such standards may also prescribe a maximum percentage of
a Member's pay which may be subjected to payroll deductions for loan repayment
under varying circumstances, minimum and maximum repayment periods, a maximum
and minimum loan amount, and other relevant factors. Each time a Member takes
such a loan, he shall not be permitted to take a subsequent loan under the Plan
until the first loan has been repaid in full. The maximum amount available for
loan under the Plan shall not exceed the lesser of: (a) $50,000, or (b) 50% of
the Member's Account as of the Valuation Date immediately following the date on
which the Committee receives the completed application.
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15.3 The Committee shall, in accordance with its established
standards, review and approve or disapprove a completed application as soon as
practicable after its receipt thereof, and shall promptly notify the applying
Member of such approval or disapproval. Notwithstanding the foregoing, the
Committee may defer its review of a completed application, or defer payment of
the proceeds of an approved loan, if the proceeds of the loan would otherwise be
paid during the period commencing on December 1st and ending on the following
January 31st. In addition, in the event the Trustee, in its sole discretion,
determines that it is not reasonably and prudently able, in the interests of
Members, to liquidate the necessary amount from any of the fixed income or
equity funds to comply with all the designations in Members' completed
applications in accordance with this Section 15.3, the Trustee shall notify the
Committee, and the amount to be paid to each Member whose completed application
designated that a loan be made from such fixed income or equity fund shall be
reduced in proportion to the ratio which the aggregate amount that the Trustee
has advised the Committee may prudently be liquidated bears to the aggregate
amount which all such Members designated to be paid from such fixed income or
equity fund.
15.4 Subject to Section 15.3, the Committee, upon approval of a
completed application, shall cancel all or any part of the Member's interest in
the fixed income or equity funds in the aggregate amount, if any, necessary to
make payment of the loan from each such Investment Fund to the extent designated
in the completed application and shall direct the Trustee to transfer cash to
the Member in such aggregate amount from each such Investment Fund. The
Committee shall maintain sufficient records regarding such amounts to permit an
accurate crediting of repayments of the loan.
15.5 The unpaid balance owed by a Member on a loan under the Plan
shall not reduce the amount credited to his or her Account. However, from the
time of payment of the proceeds of the loan to the Member such Account shall he
deemed invested, to the extent of such unpaid balance, in such loan until the
complete repayment thereof or distribution from such Account.
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15.6 Each loan to a Member under the Plan shall be repaid in level
amounts through regular payroll deductions; provided, however, that a Member
shall be permitted to prepay a loan without penalty. Effective as of December
12, 1994, loan repayments by a Member who is performing service in the uniformed
services (as defined in Chapter 43 of title 38, United States Code) will be
suspended under the Plan as permitted under Section 414(u) of the Code. Except
as otherwise permitted by the Code and the Regulations, each loan shall have a
repayment period not to exceed five years, unless the loan is used to acquire
any dwelling unit which within a reasonable period of time is to be used as the
principal residence of the Member. Principal residence status shall be
determined by the Committee at the time the loan is made. Repayments of
principal and interest on a loan made to a Member under the Plan shall be made
to the fixed income or equity fund in the same proportion as that in which each
such Investment Fund was liquidated in order to make payment of the loan
proceeds to the Member; provided, however, that, if a Member has elected,
pursuant to Section 9.2 to have all or any portion of his interest in the fixed
income or equity fund transferred to such other Investment Fund, then the
aforementioned purchase proportion on repayment shall be adjusted pro rata by
the Committee to reflect such transfer.
15.7 Repayment of all loans under the Plan shall be secured by the
Member's entire interest in the Trust Fund. If at any time prior to the full
repayment of a loan to a Member under the Plan the Member should cease to be a
Member by reason of his retirement, death or otherwise, or the Plan should
terminate, the unpaid balance owed by the Member on the loan shall be due and
payable immediately, and, to the extent not repaid, the amount of the
distribution otherwise payable to the Member (or, in the case of his death, to
his designated Beneficiary) shall be reduced by the amount owed on the loan at
the time of such distribution. Such reduction shall constitute a complete
discharge of all liability to the Plan for the loan.
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SECTION 16 ADMINISTRATION OF THE PLAN
16.1 The Committee shall have authority and responsibility for the
administration and interpretation of the Plan, and, for purposes of ERISA, shall
be the "administrator" of the Plan and its "named fiduciary" with respect to
matters for which it is responsible; provided that the Board of Directors shall
have the sole authority to amend, suspend or terminate the Plan, except as
otherwise provided in Subsection 16.4(c) hereof. The Committee shall consist of
not less than three persons, who need not be directors of Ward, as from time to
time appointed by the Board of Directors. Any Committee member may resign and
the Board of Directors may remove any Committee member, with or without cause,
at any time. To the maximum extent permitted by ERISA, every action and
determination of the Committee in accordance with this Section shall be final
and binding upon each Member, Beneficiary, other Associate and every other
person entitled to or claiming participation in the Plan or benefits from the
Plan. No member of the Committee shall be entitled to act on or decide any
matter relating solely to himself or to any of his rights or benefits under the
Plan.
16.2 The Committee shall appoint the Trustees, and may remove any
Trustees in accordance with the Trust Agreement. Upon acceptance of their
appointments, the Trustees shall have exclusive authority to manage and control
the Trust Fund, subject to the provisions of the Plan and the Trust Agreement
and, for purposes of ERISA, shall be the "named fiduciary" of the Plan with
respect to matters for which they are responsible; provided that, as provided in
the Trust Agreement, the Trustees may appoint one or more Investment Managers
and may delegate authority to the Investment Managers so appointed as provided
therein and permitted by ERISA.
16.3 The Committee shall appoint an Administrative Director and may
from time to time allocate or delegate to any subcommittee or member of the
Committee, the Administrative Director and others, not necessarily Associates,
such duties relative to compliance with the reporting and disclosure obligations
of ERISA and the administration and interpretation of the Plan as it deems
necessary or appropriate including matters involving the exercise of discretion.
The Administrative Director may from time to time delegate to others not
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necessarily Associates, such of his duties as he deems necessary or appropriate.
The Committee may remove, with or without cause, at any time the Administrative
Director and any person to whom duties are delegated by the Committee or the
Administrative Director in accordance with this Section.
16.4 In furtherance of, and not by way of limitation on, the
responsibilities and authority conferred on the Committee in Section 16.1
hereof, the Committee shall administer the Plan in accordance with its terms and
provisions and shall have the following specific responsibilities and
authorities:
(a) to construe and interpret the Plan and determine all
questions arising in its operation;
(b) to develop and from time to time review a policy for funding
the Plan which shall be consistent with the objectives of the Plan in
accordance with the Regulations and to advise the Trustees of such
policy and of any changes therein from time to time;
(c) to make such amendments in the Plan and the Trust Agreement
as it deems necessary or appropriate;
(d) to receive reports from the Trustees and from the
Administrative Director on the discharge of their duties and authority
with respect to the Plan, including in the case of the Administrative
Director the preparation, distribution and maintenance of all documents
necessary or appropriate for compliance with the reporting, disclosure
and recordkeeping requirements contained in ERISA, as well as such
other records or data as may be necessary or appropriate for the proper
administration of the plan;
(e) to employ such certified public accountants, legal counsel
and other persons as may be required by ERISA or as it shall otherwise
deem necessary or appropriate in connection with the operation of the
Plan;
(f) to adopt such rules and procedures as the Committee deems
necessary or appropriate in order to fulfill its responsibilities with
respect to the Plan; provided that such rules and procedures are
uniformly and consistently applied to persons in similar circumstances;
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(g) to hold regular meetings designed to insure the discharge of
its responsibilities hereunder, and to maintain an accurate written
record of all such meetings; and
(h) to furnish the Board of Directors with reports, including
subjects reported upon to it by the Trustees and the Administrative
Director.
16.5 Subject to the by-laws of the Company and the resolutions of the
Board of Directors, the Committee shall establish its own rules of procedure and
the time and place of its meetings. A majority of the members of the Committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the Committee members at a meeting at which a quorum is present
shall be the act of the Committee. Any action which may be taken at a meeting of
the Committee may be taken without a meeting if a consent, in writing, setting
forth the action so taken, shall be signed by all of the members of the
Committee.
16.6 The Company has entered into the Trust Agreement with the
Trustees providing for the administration and management of the Trust Fund. All
benefits and other amounts payable hereunder shall be paid exclusively from the
Trust Fund, and neither the Company, the Committee, any Trustee, the
Administrative Director, nor any director, officer, Associate or agent of the
Company assumes any responsibility or liability therefor. The Trust Fund may be
commingled for investment purposes with like separate trust funds of any other
plans and trusts of Ward or any Affiliate which meet the requirements of
Sections 401(a) and 501(a) of the Code. Each Member, each Beneficiary or each
other person who shall claim the right to any payment under the Plan shall look
exclusively to the Trust Fund therefor and shall not have any right or claim
therefor against the Company, the Committee, any Trustee, the Administrative
Director or any director, officer, Associate or agent of the Company. Except as
otherwise required by ERISA, neither the Company, the Committee, the
Administrative Director, nor any director, officer, Associate or agent of the
Company shall be required to inquire into or be responsible for any act or
failure to act of any Trustee or any Member. To the maximum extent permitted by
ERISA and applicable state law, each member of the Committee, each Trustee, the
Administrative Director and each director and officer of the Company, and each
Associate who performs service on behalf of the
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Plan or the Trust, shall be indemnified and saved harmless by the Company out of
its own assets (including the proceeds of any insurance policy the premiums of
which are paid by the Company) from and against any and all losses, costs and
expenses (including any amounts paid in settlement of a claim with the
Committee's approval) to which any of them may be subjected by reason of any act
done or omitted to be done in good faith in their official capacities with
respect to the Plan or the Trust Agreement, including all expenses reasonably
incurred in their defense.
16.7 (a) Any claim for benefits shall be submitted on a prescribed
claim form to the claimant's local personnel department. If the claim
is wholly or partially denied, written notice of the denial shall be
furnished within 90 days after receipt of the claim; provided that, if
special circumstances require an extension of time for processing the
claim, an additional 90 days from the end of the initial period shall
be allowed for processing the claim, in which event the claimant shall
be furnished with a written notice of the extension prior to the
termination of the initial 90-day period indicating the special
circumstances requiring an extension. The written notice denying the
claim shall set forth the reasons for the denial, including specific
reference to pertinent provisions of the Plan on which the denial is
based, a description of any additional information necessary to perfect
the claim and information regarding review of the claim and its denial.
(b) All disputed claims for benefits shall be submitted within
60 days after receipt by the claimant of the written notice of denial
to, and decided within a reasonable period of time by, the
Administrative Director or one member of the Committee designated by
its Chairman. Written notice of the decision on each such claim shall
be furnished to the claimant within 60 days after receipt by the
Administrative Director of a request for review, unless special
circumstances require an extension of time for processing, in which
event an additional 60 days shall be allowed for review and the
claimant shall be so notified in writing. If the claim is wholly or
partially denied, such written notice shall set forth an explanation of
the specific findings and conclusions on which such denial is based. A
claimant may
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review all pertinent documents and may request a review by the
Committee of such a decision denying the claim. Such a request shall be
made in writing and filed with the Committee within 60 days after
delivery to the claimant of written notice of the decision. Such
written request for review shall contain all additional information
which the claimant wishes the Committee to consider. The Committee may
hold a hearing or conduct an independent investigation, and the
decision on review shall be made as soon as possible after the
Committee's receipt of the request for review, but in no event later
than the third regularly scheduled meeting of the Committee after the
Committee's receipt of the request for review. Written notice of the
decision on review shall be promptly furnished to the claimant and
shall include specific reasons for the decision. For all purposes under
the Plan, such decision on claims (where no review is requested) and
decision on review (where review is requested) shall be final, binding
and conclusive on all interested persons as to participation and
benefits eligibility, the amount of benefits and as to any other matter
of fact or interpretation relating to the Plan. In the case of a Member
covered by a collective bargaining agreement, a disputed claim for
benefits shall be governed by the grievance and arbitration procedures
established under such agreement; provided, however, that, if such
agreement permits, the Committee will review such a claim before it is
referred to formal grievance procedures.
16.8 Except as otherwise provided in the Plan or the Trust Agreement,
all expenses and charges incurred in the administration and operation of the
Plan and the Trust Agreement shall be paid out of the Trust Fund. No
compensation shall be paid by the Plan to any member of the Committee, any
Trustee or the Administrative Director if employed by the Company or any
Affiliate, but said persons may be reimbursed for their reasonable expenses
incurred in carrying out their duties, responsibilities and authority hereunder,
and the compensation, or a properly allocable portion thereof, paid to other
Associates who are involved in the administration of the Plan and all other
properly allowable expenses shall, to the extent not paid by the Company, be
treated as administrative expenses. No bond shall be required of the members of
the Committee, the Trustees or the Administrative Director, except as otherwise
required by law.
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16.9 Any notice, election, application, instruction, designation or
other form of communication required to be given or submitted by any Member,
other Associate or Beneficiary shall be in such form as is prescribed from time
to time by the Committee, sent by first class mail or delivered in person to the
Administrative Director of the Plan, Montgomery Ward & Co., Incorporated,
Montgomery Ward Plaza, Chicago, Illinois 60671, and shall be deemed to be duly
given only upon actual receipt thereof by the Administrative Director. Any
notice, statement, report and other communication from the Company, the
Committee or the Administrative Director to any Member, other Associate or
Beneficiary required or permitted by the Plan shall be deemed to have been duly
given when delivered to such person or mailed by first class mail to such person
at his address last appearing on the records of the Company. Each person
entitled to receive a payment under the Plan shall file in accordance herewith
his complete mailing address and each change therein. A check or communication
mailed to any person at his address on file with the Administrative Director
shall be deemed to have been received by such person for all purposes of the
Plan, and neither the Committee, the Administrative Director nor any Associate
or agent of the Company shall be obliged to search for or ascertain the location
of any such person except as required by ERISA. If the Administrative Director
shall be in doubt as to whether payments are being received by the person
entitled thereto, it may, by registered mail addressed to such person at his
address last known to the Administrative Director, notify such person that all
future payments will be withheld until such person submits to the Administrative
Director his proper mailing address and such other information as the
Administrative Director may reasonably request.
16.10 Each Member shall file with the Committee such pertinent
information concerning himself and his Beneficiary, and each Beneficiary shall
file with the Committee such information concerning himself, as the Committee or
the Administrative Director may specify, and in such manner and form as the
Committee or Administrative Director may specify or provide, and no Member or
Beneficiary shall have any right or be entitled to any benefits or further
benefits under the Plan unless such information is filed by him or on his
behalf.
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16.11 If the Committee receives notification from the Trustee of any
trust fund established by the Company as a part of an employee benefit plan
other than the Trust Fund that such Trustees have a claim against the Trust Fund
by reason of overpayment or otherwise, then the Committee may, subject to the
restrictions provided in Section 19.6, direct the Trustees to withhold further
payments under the Plan, pay the amount of such claim to any court of competent
jurisdiction or take any other action which the Committee shall deem
appropriate.
16.12 The Agent for the service of legal process of the Plan shall be
the Secretary of Ward.
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SECTION 17 TERMINATION OF EMPLOYER PARTICIPATION
17.1 Any Participating Company may terminate its participation in the
Plan by giving the Committee prior written notice specifying a termination date
which shall be the last day of a month at least 60 days subsequent to the date
such notice is received by the Committee. The Committee may terminate any
Participating Company's participation in the Plan, as of any termination date
specified by the Committee, for the failure of the Participating Company to make
proper contributions or to comply with any other provision of the Plan and shall
terminate a Participating Company's participation upon complete and final
discontinuance of the contributions. In the event of any such termination, the
Committee shall promptly notify the IRS and request such determination as
counsel to the Plan may recommend and as the Committee may deem desirable.
17.2 Upon termination of the Plan as to any Participating Company, such
Participating Company shall not make any further contributions under the Plan
and no amount shall thereafter be payable under the Plan to or in respect of any
Members then employed by such Participating Company except as provided in this
Section 17. To the maximum extent permitted by ERISA, any rights of Members no
longer employed by such Participating Company and of former Members and their
Beneficiaries and Surviving Spouses under the Plan shall be unaffected by such
termination and any transfers, distributions or other dispositions of the assets
of the Plan as provided in this Section 17 shall constitute a complete discharge
of all liabilities under the Plan with respect to such Participating Company's
participation in the Plan and any Member then employed by such Participating
Company.
Upon receipt by the Committee of IRS approval of such termination, the
full current value of such amount shall be paid from the Trust Fund in the
manner described in Section 18.4 or transferred to a successor employee benefit
plan which is qualified under Section 401(a) of the Code; provided, however,
that in the event of any transfer of assets to a successor employee benefit plan
the provisions of Section 17.3 will apply. No advances against such payments
shall be made prior to such receipt of approval, but after such receipt the
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Committee, in its sole discretion, may direct the Trustee to make one or more
advances in accordance with Section 12.1.
All determinations, approvals and notifications referred to above shall
be in form and substance and from a source satisfactory to counsel for the Plan.
To the maximum extent permitted by ERISA, the termination of the Plan as to any
Participating Company shall not in any way affect any other Participating
Company's participation in the Plan.
17.3 No transfer of the Plan's assets and liabilities to a successor
employee benefit plan (whether by merger or consolidation with such successor
plan or otherwise) shall be made unless each Member would, if either the Plan or
such successor plan then terminated, receive a benefit immediately after such
transfer which (after taking account of any distributions or payments to them as
part of the same transaction) is equal to or greater than the benefit he would
have been entitled to receive immediately before such transfer if the Plan had
then been terminated. The Committee may also request appropriate indemnification
from the employer or employers maintaining such successor plan before making
such a transfer.
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SECTION 18 AMENDMENT OR TERMINATION OF THE PLAN AND TRUST
18.1 Subject to the provisions of Section 16.4(c), the Board of
Directors reserves the right at any time to amend, suspend, discontinue or
terminate the Plan, any contributions thereunder, the Trust, in whole or in part
and for any or no reason and without the consent of any Participating Company,
Member, Beneficiary or Surviving Spouse; and the Committee may adopt amendments
as it deems necessary or appropriate. Each Participating Company by its adoption
of the Plan shall be deemed to have delegated this authority to the Board of
Directors and the Committee. The Plan shall automatically be terminated upon
complete and final discontinuance of contributions thereunder.
18.2 Subject to the provisions of Section 18.1, any amendment,
modification, suspension or termination of any provisions of the Plan may be
made retroactively if necessary or appropriate to qualify or maintain the Plan
and Trust as a plan and trust meeting the requirements of Sections 401(a),
401(k), 401(m) and 501(a) of the Code or any other applicable section of law
(including ERISA) and the Regulations issued thereunder.
18.3 Notice of any amendment, modification, suspension or termination
of the Plan shall be given by the Board of Directors or the Committee, whichever
adopts the amendment to the other and to the Trustees and all Participating
Companies and, where and to the extent required by law, to Members and other
interested parties.
18.4 Upon termination of the Plan, the Company shall not make any
further contributions under the Plan and no amount shall thereafter be payable
under the Plan in respect of any Member except as provided in this Section 18.
To the maximum extent permitted by ERISA transfers, distributions or other
dispositions of the assets of the Plan as provided in this Section 18 shall
constitute a complete discharge of all liabilities under the Plan. The Committee
shall remain in existence and all of the provisions of the Plan which in the
opinion of the Committee are necessary for the execution of the Plan and the
administration and distribution, transfer or other disposition of the assets of
the Plan in accordance with this Section 18.4 shall remain in force. After (a)
payment
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of or provision for all expenses and charges referred to in Sections 10.4 and
10.5 and appropriate adjustment of all Accounts for such expenses and charges in
the manner described in Section 10.3, and (b) adjustment for profits and losses
of the Trust to such termination date in the manner described in Section 10.3
the amount in each Account shall be held, administered, and distributed,
transferred or otherwise disposed of in accordance with the following provisions
of this Section 18.4.
Upon receipt by the Committee of IRS approval of such termination, the
assets of the Plan shall be applied for the benefit of Members, former Members,
Beneficiaries and Surviving Spouses, to the extent of the amounts held under the
Plan for their benefit, in such manner as the Committee shall determine.
All determinations, approvals and notifications referred to above shall
be in form and substance and from a source satisfactory to counsel.
18.5 No transfer of the Plan's assets and liabilities to a successor
employee benefit plan (whether by merger or consolidation with such successor
plan or otherwise) shall be made unless each Member would, if either the Plan or
such successor plan then terminated, receive a benefit immediately after such
transfer which (after taking account of any distributions or payments to them as
part of the same transaction) is equal to or greater than the benefit he would
have been entitled to receive immediately before such transfer if the Plan had
then been terminated. The Committee may also request appropriate indemnification
from the employer or employers maintaining such successor plan before making
such a transfer.
18.6 In no event shall any part of the funds of the Plan (other than
such part as is required to pay taxes, if any, and expenses as provided in
Section 10.4) be used for or diverted to any purposes other than for the
exclusive benefit of Members and their Beneficiaries and Surviving Spouses under
the Plan.
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SECTION 19 GENERAL LIMITATIONS AND PROVISIONS
19.1 Each Member, former Member, Beneficiary and Surviving Spouse shall
assume all risk in connection with any decrease in the value of the assets of
the Trust and the Members' Accounts or special accounts and neither the
Participating Companies nor the Committee shall be liable or responsible
therefor.
19.2 The Trust shall be the sole source of benefits under the Plan and,
except as otherwise required by ERISA, the Company, the Committee and the
Administrative Director assume no liability or responsibility for payment of
such benefits, and each Member, Surviving Spouse, Beneficiary or other person
who shall claim the right to any payment under the Plan shall be entitled to
look only to the Trust for such payment and shall not have any right, claim or
demand therefor against the Company, the Committee or the Administrative
Director or any member thereof, or any associate or director of the Company.
19.3 Nothing contained in the Plan shall give any associate the right
to be retained in the employment of the Company or any of its subsidiaries or
affiliated or associated corporations or affect the right of any such employer
to dismiss any associate. The adoption and maintenance of the Plan shall not
constitute a contract between the Company and any associate or consideration
for, or an inducement to or condition of, the employment of any associate.
19.4 Notwithstanding any other provision of this Plan, the payment of
benefits to Members and their Beneficiaries, Surviving Spouses and other
eligible survivors under the Plan may be paid as a part of and concomitantly
with any benefits to which he is entitled under the Retirement Security Plan.
19.5 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his affairs because of illness or
accident, or is a minor, or has died, then any payment due him or his estate
(unless a prior claim therefor has been made by a duly appointed legal
representative) may, if the Committee so elects, be paid to his spouse, a child,
a relative, an institution maintaining or having custody of such person, or any
other person deemed by the Committee to be a proper recipient on behalf of such
person otherwise
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entitled to payment. Any such payment shall be a complete discharge of the
liability of the Plan and the Trust therefor.
19.6 (a) Except insofar as may otherwise be required by law or pursuant to
the terms of a Qualified Domestic Relations Order, no amount payable at any
time under the Plan and the Trust shall be subject in any manner to
alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge,
attachment, charge or encumbrance of any kind nor in any manner be subject
to the debts or liabilities of any person and any attempt to so alienate or
subject any such amount, whether presently or thereafter payable, shall be
void. If any person shall attempt to, or shall, alienate, sell, transfer,
assign, pledge, attach, charge or otherwise encumber any amount payable
under the Plan and Trust, or any part thereof, or if by reason of his
bankruptcy or other event happening at any such time such amount would be
made subject to his debts or liabilities or would otherwise not be enjoyed
by him, then the Committee, if it so elects, may direct that such amount be
withheld and that the same or any part thereof be paid or applied to or for
the benefit of such person, his spouse, children or other dependents, or
any of them, in such manner and proportion as the Committee may deem
proper. For purposes of the Plan, a "Qualified Domestic Relations Order"
means any judgment, decree or order (including approval of a settlement
agreement) which has been determined by the Committee in accordance with
procedures established under the Plan, to contribute a qualified domestic
relations order within the meaning of Section 414(p)(1) of the Code.
(b) Notwithstanding the preceding Subsection (a) effective with
respect to judgments, orders and decrees issued, and settlement agreements
entered into, on or after August 5, 1997, the Plan shall not be treated as
failing to meet the requirements of the preceding Subsection (a) solely by
reason of any offset of a Member's benefits against an amount that the
Member is ordered or required to pay to the Plan as a result of the
Member's breach of fiduciary duty to the Plan or commission of a criminal
act against the Plan to the extent permitted under Section 401(a)(13)(C)-
(D) of the Code.
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19.7 If the Committee cannot ascertain the whereabouts of any person to
whom a payment is due under the Plan, and if, after five years from the date
such payment is due, a notice of such payment due is mailed to the last known
address of such person, as shown on the records of the Committee or the Company,
and within three months after such mailing such person has not made written
claim therefor, the Committee, if it so elects, after receiving advice from
counsel to the Plan, may direct that such payment and all remaining payments
otherwise due to such person be cancelled on the records of the Plan and the
amount thereof applied to reduce the contributions of the Company, and upon such
cancellation, the Plan and the Trust shall have no further liability therefor
except that, in the event such person later notifies the Committee of his
whereabouts and requests the payment or payments due to him under the Plan, the
amount so applied shall be paid to him as provided in Section 12.
19.8 Any and all rights or benefits accruing to any persons under the
Plan shall be subject to the terms of the trust agreement which Ward shall enter
into with the Trustees providing for the administration of the Trust Fund.
19.9 Upon such terms and conditions as the Committee may approve, and
subject to any required IRS approval, benefits may be provided under the Plan to
a Member with respect to any period of his prior employment by any organization,
and such benefits may be provided for, in whole or in part, by funds
transferred, directly or indirectly (including a rollover from an individual
retirement account, or an individual retirement annuity as described in Section
408 of the Code), to the Trust from an employee benefit plan of such
organization which qualified under Section 401(a) of the Code.
19.10 Effective as of December 12, 1994, notwithstanding any provision
of the Plan to the contrary, contributions, benefits and service credit with
respect to qualified military service will be provided in accordance with
Section 414(u) of the Code.
19.11 Whenever used in the Plan the masculine gender includes the
feminine.
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19.12 The captions preceding the sections of the Plan have been
inserted solely as a matter of convenience and in no way define or limit the
scope or intent of any provisions of the Plan.
19.13 The Plan and all rights thereunder shall be governed by and
construed in accordance with ERISA and the laws of the State of Illinois.
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SECTION 20 TOP HEAVY PROVISIONS
20.1 The Plan will be considered a Top Heavy Plan for any Plan Year if
it is determined to be a Top Heavy Plan as of the last day of the preceding Plan
Year. Notwithstanding any other provisions in the Plan, the provisions of this
Section 20 shall apply and supersede all other provisions in the Plan with
respect to a Plan Year with respect to which the Plan is determined to be a Top
Heavy Plan.
20.2 For purposes of this Section 20 and as otherwise used in this Plan,
the following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean any entity affiliated with the Company
within the meaning of Section 414(b), 414(c), 414(m) or 414(o) of the Code,
except that for purposes of applying the provisions hereof with respect to
the limitation on contributions, Section 415(h) of the Code shall apply.
(b) "Aggregation Group" shall mean the group composed of each
qualified retirement plan of the Company or an Affiliate in which a Key
Associate is a participant and each other qualified retirement plan of the
Company or an Affiliate which enables a plan of the Company or an Affiliate
in which a Key Associate is a participant to satisfy Sections 401(a)(4) or
410(b) of the Code. In addition, the Company may choose to treat any other
qualified retirement plan as a member of the Aggregation Group if such
Aggregation Group will continue to satisfy Sections 401(a)(4) and 410(b) of
the Code with such plan being taken into account.
(c) "Key Associate" shall mean a "Key Employee" as defined in Section
416(i)(1) and (5) of the Code and Regulations promulgated thereunder.
(d) "Top Heavy Plan" shall mean a "Top Heavy Plan" as defined in
Section 416(g) of the Code and Regulations promulgated thereunder.
20.3 Subject to Section 20.4, for each Plan Year that the Plan is a Top
Heavy Plan, the Company's contribution (including contributions attributable to
salary reduction) allocable to the Account of each Member who is in Service at
the end of the Plan Year and who is not a Key Associate, shall not be less than
the lesser of
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(a) three percent of such Member's compensation (as described in Section 415 of
the Code), or (b) the percentage at which contributions for such Plan Year are
made and allocated on behalf of the Key Associate for whom such percentage is
the highest. For the purpose of determining the appropriate percentage under
Subsection (b), all defined contribution plans required to be included in an
Aggregation Group shall be treated as one plan. Subsection (b) shall not be
applicable if the Plan is required to be included in an Aggregation Group which
enables a defined benefit plan also required to be included in said Aggregation
Group to satisfy Sections 401(a)(4) or 410(b) of the Code.
20.4 (a) For each Plan Year that the Plan is a Top Heavy Plan, one shall be
substituted for 125% as the multiplicand of the dollar limitation in
determining the denominator of the defined benefit plan fraction and of the
defined contribution plan fraction for purposes of Section 415(e) of the
Code.
(b) If, after substituting 90% for 60% wherever the latter appears in
Section 416(g) of the Code, the Plan is not determined to be a Top Heavy
Plan, the provisions of Subsection (a) hereof shall not be applicable if
the minimum contribution by the Company allocable to the Account of any
Member who is not a Key Associate as specified in Section 20.3 is
determined by substituting "four percent" for "three percent".
-75-
<PAGE>
20.5 The Committee shall, to the extent permitted by the Code and in
accordance with Regulations, apply the provisions of this Section 20 by taking
into account the benefits payable and the contributions made under any other
plans maintained by the Company or any of its subsidiaries or affiliated or
associated entities which are qualified under Section 401(a) of the Code to
prevent inappropriate omissions or duplication of minimum benefits or
contributions.
MONTGOMERY WARD & CO., INCORPORATED
By: /s/ Philip Dobias
-----------------------------------
Its: VP Comp, Benefits and HR Strategy
-----------------------------------
ATTEST:
By: /s/ Jill S. Chapman
--------------------------
Its: Benefits Director
--------------------------
-76-
<PAGE>
10.(x)(D)
SUPPLEMENTAL EMPLOYMENT AGREEMENT
---------------------------------
THIS SUPPLEMENTAL AGREEMENT
IS ADDED TO THE EMPLOYMENT AGREEMENT OF
TOM GRIMES DATED FEBRUARY 3, 1997
As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997
necessitated the re-approval by the Court of all Senior Executive Employment
Agreements. This letter affirms this Supplemental Employment Agreement with you.
The terms of your original agreement as a member of the Senior Executive Team at
Montgomery Ward remain the same (including your G.E. Guarantee of your base and
bonus payments) except that decisions concerning equity considerations will be
deferred until Montgomery Ward emerges from bankruptcy with a confirmed Plan of
Reorganization. The following provisions are added to and modify your existing
Employment Agreement:
EQUITY CONSIDERATION
- - --------------------
Due to Chapter 11 filing, the specifics of long term equity awards to
individual participants are not possible to announce at this time. However,
upon the company's emergence from bankruptcy, you will be eligible for
participation in any equity plans at a level consistent with your Executive
Committee peers, provided that you are actively employed by Montgomery Ward
at such time and have a satisfactory performance evaluation.
EMERGENCE PLAN
- - --------------
In lieu of equity participation during the Chapter 11 process, you will
participate in a special Emergence Bonus Plan (copy attached) that has a
target range of $250,000 to $625,000 that is payable upon Montgomery Ward's
emergence from bankruptcy with a confirmed Plan of Reorganization.
BENEFITS & PERQUISITES
- - ----------------------
In addition to all normal company benefit plans, you will participate in
the following Executive Benefits Plan:
. Annual Physical Examination
. Executive Accident Insurance
. Executive Medical Coverage
. Executive Vacation
TERMINATION PLAN
- - ----------------
The term of this employment agreement is for October 1, 1997 until October
1, 2000. If your employment is terminated by Montgomery Ward for any reason
other than "Cause" as
<PAGE>
defined below or your voluntary resignation, you will receive a lump sum
payment equal to the greater of your base salary for the remainder of the
agreement period; or, your base salary for a twenty-four month period.
In addition, you will receive Executive Outplacement Services and continue
to participate in Executive Benefits Plans which includes the Health Care
Plan along with "Benefits and Perquisites" described above for the twenty-
four month period following your separation.
If this agreement is not renewed at the end of its term, you will receive
within thirty (30) days following the end of this agreement a lump sum
payment equal to twenty-four months base salary, as well as the
outplacement and Executive Benefits.
"Cause" shall mean (i) your willful failure to substantially perform your
duties hereunder, (ii) your willful failure to follow a written, lawful
order or written directive for the Board of Directors or Chief Executive
Officer of the company, or (iii) your conviction of any kind of felony or
any misdemeanor involving moral turpitude. For purposes of this paragraph,
no act, or failure to act, on your part will be considered "willful" unless
such act, or failure to act by you was not in good faith and was without
reasonable belief that your action or omission was in the best interest of
the Company.
For purposes of this agreement, any diminution of your job title, executive
committee membership, base salary, target bonus, other compensation or
benefits, or a reduction in your job responsibilities, or a relocation of
your job location of greater than 50 miles from the present location
without your prior written approval during the terms of this agreement,
will allow you to elect the terms of this section as if you were terminated
without "Cause". However, such election must be done in writing to the
Chairman & CEO within sixty (60) days of the triggering event.
CHANGE OF CONTROL
- - -----------------
After a Change of Control Event as defined below, and for a period of three
years after such date, if you are separated from the Company under
provisions in the Termination Plan above (including any of the diminutions,
reductions or relocation provisions under which you may elect to leave the
Company), the lump sum severance payment will be three years base salary,
plus three times your target bonus amount. In addition, your Executive
Benefits will be extended to three years from your separation date.
A "Change of Control" shall mean:
(i) any sale, lease, license, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all, of the business and for assets of the Company or Holding (without
regard to Signature);
(ii) the possession by any person or entity (other than Holding, General
Electric Capital Corporation or an affiliate of either of them) of
beneficial ownership (as such term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of either (A) a number of
securities carrying a greater voting power than General Electric Capital
Corporation and its affiliates taken together or (B) over 50% of the then
outstanding voting
<PAGE>
securities of the Company (entitled to vote generally in the election of
directors) ("Outstanding Company Voting Securities"); or
(iii) merger, consolidation or reorganization ("Business Combination")
unless following such Business Combination all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the entity resulting from the Business Combination in
substantially the same proportions as their ownership immediately prior to
the Business Combination of the Outstanding Company Voting Securities;
provided that a Change of Control shall not be construed to include any
transaction that occurs solely as a result of transfer of equity to holders
of claims against the Company or Holding or any affiliate on account of
such claims in connection with the consummation of a plan of reorganization
for the Company or Holding or any affiliate in connection with the
proceedings under Chapter 11 of the United States Bankruptcy Code pending
at the date of hereof.
Except as provided in the following sentence, payments pursuant to this
employment agreement ("Payments") shall not exceed the largest sum
("Parachute Limitation") which will not result, directly or indirectly, in
the treatment of any amount paid or payable by the Company or any successor
to you (whether or not pursuant to this employment agreement, and including
the Payments) as an Excess Parachute Payment. Notwithstanding the
preceding sentence, you shall receive the full amount of the Payments
without regard to the Parachute Limitation if you would realize a greater
aftertax amount receiving the full amount of the Payments without regard to
the Parachute Limitation than you would realize by receiving the Payments
limited to the Parachute Limitation as provided in the preceding sentence.
All computations and determinations required by the preceding paragraph
shall be made by your accountant, acting in good faith. The computations
and determinations made any time by your accountant shall affect only those
Payments not yet made pursuant to this employment agreement. For purposes
of this employment agreement, the term "Excess Parachute Payment" shall
have the same meaning as the term "excess parachute payment" has under
section 280G of the Internal Revenue Code of 1986, as amended and the
regulations thereunder.
PAYMENT GUARANTEE
- - -----------------
In the event of your separation from Montgomery Ward for reasons other than
"Cause" or voluntary resignation, to the extent that you are eligible to
receive a guaranteed payment from General Electric Capital Corporation of
base salary and/or bonus amounts due to non-payment under your previous
compensation agreement with Montgomery Ward, then the obligation of the
Company under this agreement shall be reduced dollar for dollar of any
amount representing base salary or bonus amounts which would become payable
by General Electric Capital Corporation under that compensation guarantee.
<PAGE>
NON-COMPETE
- - -----------
In the event that you voluntarily leave Montgomery Ward, you will be bound
by a non-compete agreement that provides that you will not be directly
employed by nor perform work as director, officer, independent contractor,
partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc.,
Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a
period of one (1) year following your termination date.
This Agreement will be subject to the Laws of Illinois where applicable.
/s/ Tom Grimes
--------------------------
November 6, 1997
--------------------------
Date
/s/ Robert A. Kasenter
--------------------------
<PAGE>
10.(xiv)(B)
AMENDMENT
---------
THIS AMENDMENT
IS ADDED TO THE EMPLOYMENT AGREEMENT
OF SPENCER H. HEINE DATED APRIL 13, 1997
As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997
necessitated the re-approval by the Court of all Senior Executive Employment
Agreements. This letter re-affirms our April 13, 1997 Employment Agreement with
you and adds this Amendment as a part of your Employment Agreement going
forward. The terms of your agreement as a member of the Senior Executive Team
at Montgomery Ward remain the same except that decisions concerning equity
considerations will be deferred until Montgomery Ward emerges from bankruptcy
with a confirmed Plan of Reorganization and the following provisions are added
to and modify your existing April 13, 1997 Employment Agreement:
EQUITY CONSIDERATION
- - --------------------
Due to Chapter 11 filing, the specifics of long term equity awards to
individual participants are not possible to announce at this time.
However, upon the company's emergence from bankruptcy, you will be eligible
for participation in any equity plans at a level consistent with your
Executive Committee peers, provided that you are actively employed by
Montgomery Ward at such time and have a satisfactory performance
evaluation.
EMERGENCE PLAN
- - --------------
In lieu of equity participation during the Chapter 11 process, you will
participate in a special Emergence Bonus Plan (copy attached) that has a
target range of $200,000 to $500,000 that is payable upon Montgomery Ward's
emergence from bankruptcy with a confirmed Plan of Reorganization.
BENEFITS & PERQUISITES
- - ----------------------
In addition to all normal company benefit plans, you will participate in
the following Executive Benefits Plan:
. Annual Physical Examination
. Executive Accident Insurance
. Executive Medical Coverage
. Executive Vacation
<PAGE>
TERMINATION PLAN
- - ----------------
The term of this employment agreement is for October 1, 1997 until October
1, 2000. If your employment is terminated by Montgomery Ward for any
reason other than "Cause" as defined below or your voluntary resignation,
you will receive a lump sum payment equal to the greater of your base
salary for the remainder of the agreement period; or, your base salary for
a twenty-four month period.
In addition, you will receive Executive Outplacement Services and continue
to participate in Executive Benefits Plans which includes the Health Care
Plan along with "Benefits and Perquisites" described above for the twenty-
four month period following your separation.
If this agreement is not renewed at the end of its term, you will receive
within thirty (30) days following the end of this agreement a lump sum
payment equal to twenty-four months base salary, as well as the
outplacement and Executive Benefits.
"Cause" shall mean (i) your willful failure to substantially perform your
duties hereunder, (ii) your willful failure to follow a written, lawful
order or written directive for the Board of Directors or Chief Executive
Officer of the company, or (iii) your conviction of any kind of felony or
any misdemeanor involving moral turpitude. For purposes of this paragraph,
no act, or failure to act, on your part will be considered "willful" unless
such act, or failure to act by you was not in good faith and was without
reasonable belief that your action or omission was in the best interest of
the Company.
For purposes of this agreement, any diminution of your job title, executive
committee membership, base salary, target bonus, other compensation or
benefits, or a reduction in your job responsibilities, or a relocation of
your job location of greater than 50 miles from the present location
without your prior written approval during the terms of this agreement,
will allow you to elect the terms of this section as if you were terminated
without "Cause". However, such election must be done in writing to the
Chairman & CEO within sixty (60) days of the triggering event.
CHANGE OF CONTROL
- - -----------------
After a Change of Control Event as defined below, and for a period of three
years after such date, if you are separated from the Company under
provisions in the Termination Plan above (including any of the diminutions,
reductions or relocation provisions under which you may elect to leave the
Company), the lump sum severance payment will be three years base salary,
plus three times your target bonus amount. In addition, your Executive
Benefits will be extended to three years from your separation date.
A "Change of Control" shall mean:
(i) any sale, lease, license, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all, of the business and for assets of the Company or Holding (without
regard to Signature);
<PAGE>
(ii) the possession by any person or entity (other than Holding, General
Electric Capital Corporation or an affiliate of either of them) of
beneficial ownership (as such term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of either (A) a number of
securities carrying a greater voting power than General Electric Capital
Corporation and its affiliates taken together or (B) over 50% of the then
outstanding voting securities of the Company (entitled to vote generally in
the election of directors) ("Outstanding Company Voting Securities"); or
(iii) merger, consolidation or reorganization ("Business Combination")
unless following such Business Combination all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the entity resulting from the Business Combination in
substantially the same proportions as their ownership immediately prior to
the Business Combination of the Outstanding Company Voting Securities;
provided that a Change of Control shall not be construed to include any
transaction that occurs solely as a result of transfer of equity to holders
of claims against the Company or Holding or any affiliate on account of
such claims in connection with the consummation of a plan of reorganization
for the Company or Holding or any affiliate in connection with the
proceedings under Chapter 11 of the United States Bankruptcy Code pending
at the date of hereof.
Except as provided in the following sentence, payments pursuant to this
employment agreement ("Payments") shall not exceed the largest sum
("Parachute Limitation") which will not result, directly or indirectly, in
the treatment of any amount paid or payable by the Company or any successor
to you (whether or not pursuant to this employment agreement, and including
the Payments) as an Excess Parachute Payment. Notwithstanding the
preceding sentence, you shall receive the full amount of the Payments
without regard to the Parachute Limitation if you would realize a greater
aftertax amount receiving the full amount of the Payments without regard to
the Parachute Limitation than you would realize by receiving the Payments
limited to the Parachute Limitation as provided in the preceding sentence.
All computations and determinations required by the preceding paragraph
shall be made by your accountant, acting in good faith. The computations
and determinations made any time by your accountant shall affect only those
Payments not yet made pursuant to this employment agreement. For purposes
of this employment agreement, the term "Excess Parachute Payment" shall
have the same meaning as the term "excess parachute payment" has under
section 280G of the Internal Revenue Code of 1986, as amended and the
regulations thereunder.
NON-COMPETE
- - -----------
In the event that you voluntarily leave Montgomery Ward, you will be bound
by a non-compete agreement that provides that you will not be directly
employed by nor perform work as director, officer, independent contractor,
partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc.,
Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a
period of one (1) year following your termination date.
<PAGE>
This Agreement will be subject to the Laws of Illinois where applicable.
/s/ Spencer Heine
-----------------------------
November 3, 1997
-----------------------------
Date
/s/ Robert A. Kasenter
-----------------------------
<PAGE>
10.(xiv)(C)
November 3, 1997
Spencer Heine
Executive Vice President
General Counsel and
President Montgomery Ward Properties
Montgomery Ward
Chicago, IL 60671
Dear Spencer:
As we discussed, last Friday, October 31, 1997, the court approved our Executive
Compensation Plan for Executive Committee members. A copy of the court order is
attached. This package includes the pieces of your personal compensation and
security plan for your position at Montgomery Ward.
Your plan includes:
1.) The assumption of your employment agreement dated April 11, 1997
(attached) that gives specific details on your compensation plan with
Wards.
2.) The Wards Executive Committee Severance Plan.
3.) The Montgomery Ward Special Emergence Bonus Plan.
Please read your agreements and plan documents very carefully. Payments under
these plans are considered "administrative" claims and have a very secure
priority in our claims payment. If you have any questions, please contact Bob
Kasenter and he will provide you with any answers.
Once you are comfortable with your participation in your plans, please sign the
documents and return them to Bob.
These plans provide us with the incentives and the security we requested so that
we can focus on the turnaround of our company. Now it is up to us to make it
happen.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman and C.E.O.
Attachment
<PAGE>
[LETTERHEAD APPEARS HERE]
MONTGOMERY WARD
SPECIAL EMERGENCE BONUS PLAN
Spencer Heine
EVP, General Counsel and Montgomery Ward Properties
Montgomery Ward
Dear Spencer:
You have been selected to participate in a special Emergence Bonus Plan for
members of the Montgomery Ward Executive Committee. This Plan will pay you a
lump-sum bonus based upon the date we have a court approved Plan of
Reorganization (POR). Your bonus potential is as follows:
BONUS AMOUNT POR APPROVAL AS OF
------------ ------------------
$500,000 April 1, 1999
$400,000 October 1, 1999
$200,000 After October 1, 1999
The bonus amount earned based upon the date of the POR's approval will be paid
within thirty (30) days of the approval. This bonus payment will be subject to
the following rules:
1. Any award under this plan will be made as a lump sum payment and will
be subject to normal tax withholding.
2. In order to receive an award payment under this plan, except for a Change
of Control, the participant must be actively employed by the Company upon
approval of a POR from the bankruptcy court.
3. In the event of a Change of Control as defined in the Wards Executive
Committee Plan, participants who are actively employed as of the date of
the change of control and who are no longer employed by the company upon
approval from the bankruptcy court of a POR will be eligible for an award
under the plan if the separation date is within six months of the approved
POR.
<PAGE>
By copy of this letter, you are offered participation in this Special Emergence
Bonus Plan. If you agree to participate and be governed by the rules of this
plan, please sign your acceptance below and return this letter to Bob Kasenter.
This plan offers us an opportunity to earn a bonus for successfully doing what
we want to do.....emerge from bankruptcy quickly. With your help, we will
accomplish this goal.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman & CEO
I have read the Wards Executive Committee Severance Plan and understand its
terms and have voluntarily signed this Agreement thereby agreeing to participate
in this Plan and accept its provisions.
Spencer H. Heine
- - ----------------------------
Print Executive's Name
/s/ Spencer H. Heine
- - ----------------------------
Executive's Signature
11/3/97 /s/ Robert A. Kasenter
- - ---------------------------- ---------------------------
Date
<PAGE>
10.(xvi)(A)
September 2, 1997
Thomas J. Paup
1353 Park Lane
Pelham Manor, NY 10803
Dear Tom:
As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997
necessitated the approval by the Court of all Senior Executive Employment
Agreements. This letter confirms our employment agreement with you. The terms
of your agreement as a member of the Senior Executive Team at Montgomery Ward
are as follows:
POSITION
- - --------
Your job title is EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER.
You will be a member of the Montgomery Ward Executive Committee and be
responsible for all Controller, Tax, Audit, Accounting and Systems
activities for the Company.
BASE SALARY
- - -----------
Your annual base salary is $400,000 and is paid semi-monthly. Any salary
adjustments will require approval of the Compensation Committee of the
Board of Directors, and until our emergence from bankruptcy, the Court. We
anticipate the first salary review to occur in May, 1998.
SHORT TERM BONUS
- - ----------------
Your short term incentive plan target is $150,000 annually. Based upon the
achievement of specific goals as set by the Chairman & CEO, or his
designee, and approved by the Compensation Committee of the Board of
Directors, you may earn from zero up to 150% of your annual target amount.
Some or all of your annual target award may be canceled due to non-
achievement of your personal or total company objectives.
For 1997 and 1998 your annual target award of $150,000 is guaranteed.
HIRING BONUS
- - ------------
You will receive a hiring bonus of $50,000 within 30 days of your
employment date.
<PAGE>
Thomas J. Paup
September 2, 1997
Page 2
EQUITY CONSIDERATION
- - --------------------
Due to Chapter 11 filing, the specifics of long term equity awards to
individual participants are not possible to announce at this time.
However, upon the company's emergence from bankruptcy, you will be eligible
for participation in any equity plans at a level consistent with your
Executive Committee peers, provided that you are actively employed by
Montgomery Ward at such time and have a satisfactory performance
evaluation.
EMERGENCE PLAN
- - --------------
In lieu of equity participation during the Chapter 11 process, you will
participate in a special Emergence Bonus Plan (copy attached) that has a
target of $400,000 that is payable upon Montgomery Ward's emergence from
bankruptcy with a confirmed Plan of Reorganization.
BENEFITS & PERQUISITES
- - ----------------------
In addition to all normal company benefit plans, you will participate in
the following Executive Benefits Plan:
. Annual Physical Examination
. Executive Accident Insurance
. Executive Medical Coverage
. Executive Vacation
TERM OF EMPLOYMENT
- - ------------------
The term of this employment agreement is for September 22, 1997 until
September 22, 2000.
TERMINATION PLAN
- - ----------------
If your employment is terminated by Montgomery Ward for any reason other
than "Cause" as defined below or your voluntary resignation, you will
receive a lump sum payment equal to the greater of your base salary for the
remainder of the agreement period; or, your base salary for a twenty-four
month period.
<PAGE>
Thomas J. Paup
September 2, 1997
Page 3
In addition, you will receive Executive Outplacement Services and
continuation of Executive Benefits for the twenty-four month period
following your separation.
If this agreement is not renewed at the end of its term, you will receive
within thirty (30) days following the end of this agreement a lump sum
payment equal to twenty-four months base salary, as well as the
outplacement and severance benefits above.
"Cause" shall mean (i) your willful failure to substantially perform your
duties hereunder, (ii) your willful failure to follow a written, lawful
order or written directive for the Board of Directors or Chief Executive
Officer of the company, or (iii) your conviction of any kind of felony or
any misdemeanor involving moral turpitude. For purposes of this paragraph,
no act, or failure to act, on your part will be considered "willful" unless
such act, or failure to act by you was not in good faith and was without
reasonable belief that your action or omission was in the best interest of
the Company.
For purposes of this agreement, any diminution of your job title, executive
committee membership, base salary, target bonus, other compensation or
benefits, or a reduction in your job responsibilities, or a relocation of
your job location of greater than 50 miles from the present location
without your prior written approval during the terms of this agreement,
will allow you to elect the terms of this section as if you were terminated
without "Cause." However, such election must be done in writing to the
Chairman & CEO within sixty (60) days of the triggering event.
CHANGE OF CONTROL
- - -----------------
A Change of Control is defined as an event where the Company is sold to a
third party (not including re-organization as a result of the emergence
from bankruptcy). After a Change of Control event and for a period of
three years after such date, if you are separated from the Company under
provisions in the Termination Plan above (including any of the diminutions,
reductions or relocation provisions under which you may elect to leave the
Company), the lump sum severance payment will be three years base salary,
plus three times your target bonus amount. In addition, your Executive
Benefits will be extended to three years from your separation date.
<PAGE>
Thomas J. Paup
September 2, 1997
Page 4
NON-COMPETE
- - -----------
In the event that you voluntarily leave Montgomery Ward, you will be bound
by a non-compete agreement that provides that you will not be directly
employed by nor perform work as director, officer, independent contractor,
partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc.,
Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a
period of one (1) year following your termination date.
RELOCATION
- - ----------
Montgomery Ward will provide you with a relocation plan, including movement
of household goods, househunting trips, home purchase plan at 100% of the
appraised value of your home, and payment of your closing costs on your
home purchase, plus up to two points on your financing of a new home. Your
temporary housing expenses in the Chicago area for the first six months (or
until relocation if sooner) will be paid by Montgomery Ward. You will
receive a gross up for the taxes you incur as a result of your relocation.
This agreement will be subject to the Laws of Illinois where applicable.
If you are in agreement with this offer letter, please sign for your acceptance
below and return it to me.
Sincerely,
/s/ Robert A. Kasenter
Robert A. Kasenter
Agreed: /s/ Thomas J. Paup
--------------------------
Thomas J. Paup
September 2, 1997
--------------------------
Date
c: Roger Goddu
Burnie Donoho
<PAGE>
10.(xvi)(B)
September 4, 1997
Mr. Thomas J. Paup
1353 Park Lane
Pelham Manor, NY 10803
Dear Tom:
Reference is made to your Compensation Agreement (the "Agreement") dated as of
September 2, 1997, with Montgomery Ward & Co., Incorporated (the "Company").
In order to induce you to accept the offer of employment contained in the
Agreement, General Electric Capital Corporation ("GE Capital"), as a principal
shareholder in the Company, hereby agrees with you that if, for any reason other
than termination of your employment, either voluntarily by you or for "cause" by
the Company, the Company shall fail to pay to you the base salary for the first
three years of such Agreement and the guaranteed bonuses for each of the first
two years of such Agreement and the Emergence Bonus, then GE Capital shall pay
such amounts to you as provided in and subject to the conditions of the
Agreement. This obligation on the part of GE Capital shall be triggered by your
written notice to GE Capital that the Company has ceased to make such payments
as required by such Agreement.
Sincerely,
General Electric Capital Corporation
By /s/ Edward D. Stewart
------------------------------
Edward D. Stewart
Executive Vice President
<PAGE>
10.(xvi)(C)
November 3, 1997
Tom Paup
Executive Vice President Finance & C.F.O.
Montgomery Ward
Chicago, IL 60671
Dear Tom:
As we discussed, last Friday, October 31, 1997, the court approved our Executive
Compensation Plan for Executive Committee members. A copy of the court order is
attached. This package includes the pieces of your personal compensation and
security plan for your position at Montgomery Ward.
Your plan includes:
1.) Your employment agreement dated September 2, 1997 continues to have
guarantees of your base salary and specified bonuses as written in the
GECC agreement attached. We fully expect that these payments will be
made by Montgomery Ward. But, if they are not paid by Wards, GE will
pay them.
2.) The Wards Executive Committee Severance Plan.
3.) The Montgomery Ward Special Emergence Bonus Plan.
Please read your severance and emergence plan documents very carefully.
Payments under these plans are considered "administrative" claims and have a
very secure priority in our claims payment. If you have any questions, please
contact Bob Kasenter and he will provide you with any answers.
Once you are comfortable with your participation in your plans, please sign the
documents and return them to Bob.
These plans provide us with the incentives and the security we requested so that
we can focus on the turnaround of our company. Now it is up to us to make it
happen.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman and C.E.O.
Attachment
<PAGE>
[LETTERHEAD OF MONTGOMERY WARD APPEARS HERE]
MONTGOMERY WARD
SPECIAL EMERGENCE BONUS PLAN
Thomas Paup
EVP Finance & CFO
Montgomery Ward
Dear Tom:
You have been selected to participate in a special Emergence Bonus Plan for
members of the Montgomery Ward Executive Committee. This Plan will pay you a
lump-sum bonus based upon the date we have a court approved Plan of
Reorganization (POR). Your bonus potential is as follows:
<TABLE>
<CAPTION>
Bonus Amount POR APPROVAL AS OF
------------ -----------------------
<S> <C>
$ 500,000 April 1, 1999
$ 400,000 October 1, 1999
$ 200,000 After October 1, 1999
</TABLE>
The bonus amount earned based upon the date of the POR's approval will be paid
within thirty (30) days of the approval. This bonus payment will be subject to
the following rules:
1. Any award under this plan will be made as a lump sum payment and will be
subject to normal tax withholding.
2. In order to receive an award payment under this plan, except for a Change
of Control, the participant must be actively employed by the Company upon
approval of a POR from the bankruptcy court.
3. In the event of a Change of Control as defined in the Wards Executive
Committee Plan, participants who are actively employed as of the date of
the change of control and who are no longer employed by the company upon
approval from the bankruptcy court of a POR will be eligible for an award
under the plan if the separation date is within six months of the approved
POR.
<PAGE>
By copy of this letter, you are offered participation in this Special Emergence
Bonus Plan. If you agree to participate and be governed by the rules of this
plan, please sign your acceptance below and return this letter to Bob Kasenter.
This plan offers us an opportunity to earn a bonus for successfully doing what
we want to do.....emerge from bankruptcy quickly. With your help, we will
accomplish this goal.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman & CEO
I have read the Wards Executive Committee Severance Plan and understand its
terms and have voluntarily signed this Agreement thereby agreeing to participate
in this Plan and accept its provisions.
Thomas J. Paup
- - ---------------------------------------
Print Executive's Name
/s/ Thomas J. Paup
- - ---------------------------------------
Executive's Signature
11/13/97 /s/ Robert A. Kasenter
- - --------------------------------------- -------------------------------
Date
<PAGE>
10.(xvii)(A)
CONFIDENTIAL
------------
March 17, 1997
Kevin Freeman
105 Harbor Drive
Unit 128
Stamford, CT 06902
Dear Kevin:
This letter confirms our offer to you as Executive Vice President, Store
Operations for Montgomery Ward. You will report to Burnie Donoho, Vice Chairman
and Chief Operating Officer. You will be a member of the Montgomery Ward
Executive Committee. Your compensation plan will include the following:
1.) Base salary of $450,000 annually, paid semi-monthly.
2.) Target bonus on the Performance Management Plan of $150,000. Based
upon the achievement of superior performance against specific
objectives for the year, you have the opportunity to earn up to 150%
of your target bonus. For fiscal 1997, your target bonus of $150,000
will be guaranteed. For fiscal 1998, $75,000 of your target bonus will
be guaranteed.
3.) You will receive a hiring bonus of $50,000 within 30 days of
employment to handle miscellaneous losses incurred by the move.
4.) You will participate in the senior officer perquisites, including;
financial counselling, tax assistance, executive medical, and annual
physical examination.
5.) Montgomery Ward will provide you with a relocation plan, including
movement of household goods, househunting trips, home purchase plan at
100% of the appraised value of your home, and payment of your closing
costs on your home purchase, plus up to two points on your financing
of a new home. Your temporary housing expenses in the Chicago area for
the first six months (or until relocation if sooner) will be paid by
Montgomery Ward. You will receive a gross up for the taxes you incur
as a result of your relocation.
<PAGE>
Kevin Freeman
March 17, 1997
Page 2
6.) As soon as possible after your start date, you will receive a stock
option for 200,000 shares of Montgomery Ward Holding stock at the 1997 fair
value. These options will vest as follows:
80,000 - April 1, 1998
60,000 - April 1, 1999
60,000 - April 1, 2000
All stock options in point 6 to the Terms and Conditions of the
Stockholders Agreement. (A copy of the current 10-Q is included).
7.) If Montgomery Ward initiates a separation of your employment for any
reason other than "Cause" as defined below, you will receive:
A) Your base salary through April 1, 2000, however, not less
than twelve months.
B) The continuation of the vesting of your stock and stock
options through April 1, 2000.
"Cause" shall mean (i) your willful failure to substantially perform
your duties hereunder, (ii) your willful failure to follow a written,
lawful order or written directive from the Board of Directors or Chief
Executive Officer of the company, or (iii) your conviction of any kind
of felony or any misdemeanor involving moral turpitude. For purposes
of this paragraph, no act, failure to act, on your part shall be
considered "willful" unless such act, or failure to act by you was not
in good faith and was without reasonable belief that your action or
omission was in the best interest of the Company.
If you voluntarily leave Montgomery Ward, or are separated for
"Cause", you will receive no severance payments, nor will your stock
continue to vest beyond your separation date.
<PAGE>
Kevin Freeman
March 17, 1997
Page 3
8.) The non-compete provision of the Stockholder's Agreement is modified
for you to provide only a one year non-compete period following any
separation from Montgomery Ward; and, such non-competition will apply
only to Sears, J.C. Penney and Toys 'R Us.
I am happy that you are considering joining Montgomery Ward. If you are in
agreement with this letter, please sign below and return it to me whereupon it
will become our binding agreement. I am certain that your management ability
can help move Montgomery Ward to the premier position in the Industry.
Sincerely,
/s/ Robert A. Kasenter
Robert A. Kasenter
Executive Vice President
Human Resources
cc: Roger Goddu
Burnie Donoho
/s/ Kevin Freeman
---------------------------------
Kevin Freeman
3-19-97
---------------------------------
Date
<PAGE>
10.(xvii)(B)
April 30, 1997
Mr. Kevin Freeman
105 Harbor Drive, #128
Stamford, Connecticut 06902
Dear Kevin:
Reference is made to your Compensation Agreement (the "Agreement") dated as of
March 17, 1997, with Montgomery Ward & Co., Incorporated (the "Company").
In order to induce you to accept the offer of employment contained in the
Agreement, General Electric Capital Corporation ("GE Capital"), as a principal
shareholder in the Company, hereby agrees with you that if, for any reason other
than termination of your employment, either voluntarily by you or for "cause" by
the Company, the Company shall fail to pay to you the base salary for the first
three years of such Agreement and the guaranteed bonuses for each of the first
two years of such Agreement, then GE Capital shall pay such amounts to you as
provided in and subject to the conditions of the Agreement. This obligation on
the part of GE Capital shall be triggered by your written notice to GE Capital
that the Company has ceased to make such payments as required by such Agreement.
Very truly yours,
General Electric Capital Corporation
By: /s/ Edward D. Stewart
------------------------------
Edward D. Stewart
Executive Vice President
<PAGE>
10.(xvii)(C)
November 3, 1997
Kevin Freeman
Executive Vice President Store Operations
Montgomery Ward
Chicago, IL 60671
Dear Kevin:
As we discussed, last Friday, October 31, 1997, the court approved our Executive
Compensation Plan for Executive Committee members. A copy of the court order is
attached. This package includes the pieces of your personal compensation and
security plan for your position at Montgomery Ward.
Your plan includes:
1.) Your employment agreement dated March 17, 1997 continues to have
guarantees of your base salary and specified bonuses as written in the
GECC agreement attached. We fully expect that these payments will be
made by Montgomery Ward. But, if they are not paid by Wards, GE will
pay them.
2.) The Wards Executive Committee Severance Plan.
3.) The Montgomery Ward Special Emergence Bonus Plan.
Please read your severance and emergence plan documents very carefully. Payments
under these plans are considered "administrative" claims and have a very secure
priority in our claims payment. If you have any questions, please contact Bob
Kasenter and he will provide you with any answers.
Once you are comfortable with your participation in your plans, please sign the
documents and return them to Bob.
These plans provide us with the incentives and the security we requested so that
we can focus on the turnaround of our company. Now it is up to us to make it
happen.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman and C.E.O.
Attachment
<PAGE>
[LETTERHEAD OF WARDS APPEARS HERE]
MONTGOMERY WARD
SPECIAL EMERGENCE BONUS PLAN
Kevin Freeman
EVP Store Operations
Montgomery Ward
Dear Kevin:
You have been selected to participate in a special Emergence Bonus Plan for
members of the Montgomery Ward Executive Committee. This Plan will pay you a
lump-sum bonus based upon the date we have a court approved Plan of
Reorganization (POR). Your bonus potential is as follows:
BONUS AMOUNT POR APPROVAL AS OF
------------ ---------------------
$562,500 April 1, 1999
$450,000 October 1, 1999
$225,000 After October 1, 1999
The bonus amount earned based upon the date of the POR's approval will be paid
within thirty (30) days of the approval. This bonus payment will be subject to
the following rules:
1. Any award under this plan will be made as a lump sum payment and will
be subject to normal tax withholding.
2. In order to receive an award payment under this plan, except for a Change of
Control, the participant must be actively employed by the Company upon
approval of a POR from the bankruptcy court.
3. In the event of a Change of Control as defined in the Wards Executive
Committee Plan, participants who are actively employed as of the date of the
change of control and who are no longer employed by the company upon
approval from the bankruptcy court of a POR will be eligible for an award
under the plan if the separation date is within six months of the approved
POR.
<PAGE>
By copy of this letter, you are offered participation in this Special Emergence
Bonus Plan. If you agree to participate and be governed by the rules of this
plan, please sign your acceptance below and return this letter to Bob Kasenter.
This plan offers us an opportunity to earn a bonus for successfully doing what
we want to do.....emerge from bankruptcy quickly. With your help, we will
accomplish this goal.
Sincerely,
/s/ Roger V. Goddu
Roger V. Goddu
Chairman & CEO
I have read the Wards Executive Committee Severance Plan and understand its
terms and have voluntarily signed this Agreement thereby agreeing to participate
in this Plan and accept its provisions.
Kevin Freeman
- - --------------------------------
Print Executive's Name
/s/ Kevin Freeman
- - --------------------------------
Executive's Signature
11/6/97 /s/ Robert A. Kasenter
- - -------------------------------- -------------------------------
Date
<PAGE>
10.(xvii)(D)
SUPPLEMENTAL EMPLOYMENT AGREEMENT
---------------------------------
THIS SUPPLEMENTAL AGREEMENT
IS ADDED TO THE EMPLOYMENT AGREEMENT OF
KEVIN FREEMAN DATED MARCH 19, 1997
As you know, Montgomery Ward's filing under Chapter 11 on July 7, 1997
necessitated the re-approval by the Court of all Senior Executive Employment
Agreements. This letter affirms this Supplemental Employment Agreement with you.
The terms of your original agreement as a member of the Senior Executive Team at
Montgomery Ward remain the same (including your G.E. Guarantee of your base and
bonus payments) except that decisions concerning equity considerations will be
deferred until Montgomery Ward emerges from bankruptcy with a confirmed Plan of
Reorganization. The following provisions are added to and modify your existing
Employment Agreement:
EQUITY CONSIDERATION
- - --------------------
Due to Chapter 11 filing, the specifics of long term equity awards to
individual participants are not possible to announce at this time. However,
upon the company's emergence from bankruptcy, you will be eligible for
participation in any equity plans at a level consistent with your Executive
Committee peers, provided that you are actively employed by Montgomery Ward
at such time and have a satisfactory performance evaluation.
EMERGENCE PLAN
- - --------------
In lieu of equity participation during the Chapter 11 process, you will
participate in a special Emergence Bonus Plan (copy attached) that has a
target range of $225,000 to $562,500 that is payable upon Montgomery Ward's
emergence from bankruptcy with a confirmed Plan of Reorganization.
BENEFITS & PERQUISITES
- - ----------------------
In addition to all normal company benefit plans, you will participate in
the following Executive Benefits Plan:
. Annual Physical Examination
. Executive Accident Insurance
. Executive Medical Coverage
. Executive Vacation
<PAGE>
TERMINATION PLAN
- - ----------------
The term of this employment agreement is for October 1, 1997 until October
1, 2000. If your employment is terminated by Montgomery Ward for any reason
other than "Cause" as defined below or your voluntary resignation, you will
receive a lump sum payment equal to the greater of your base salary for the
remainder of the agreement period; or, your base salary for a twenty-four
month period.
In addition, you will receive Executive Outplacement Services and continue
to participate in Executive Benefits Plans which includes the Health Care
Plan along with "Benefits and Perquisites" described above for the twenty-
four month period following your separation.
If this agreement is not renewed at the end of its term, you will receive
within thirty (30) days following the end of this agreement a lump sum
payment equal to twenty-four months base salary, as well as the
outplacement and Executive Benefits.
"Cause" shall mean (i) your willful failure to substantially perform your
duties hereunder, (ii) your willful failure to follow a written, lawful
order or written directive for the Board of Directors or Chief Executive
Officer of the company, or (iii) your conviction of any kind of felony or
any misdemeanor involving moral turpitude. For purposes of this paragraph,
no act, or failure to act, on your part will be considered "willful" unless
such act, or failure to act by you was not in good faith and was without
reasonable belief that your action or omission was in the best interest of
the Company.
For purposes of this agreement, any diminution of your job title, executive
committee membership, base salary, target bonus, other compensation or
benefits, or a reduction in your job responsibilities, or a relocation of
your job location of greater than 50 miles from the present location
without your prior written approval during the terms of this agreement,
will allow you to elect the terms of this section as if you were terminated
without "Cause". However, such election must be done in writing to the
Chairman & CEO within sixty (60) days of the triggering event.
CHANGE OF CONTROL
- - -----------------
After a Change of Control Event as defined below, and for a period of three
years after such date, if you are separated from the Company under
provisions in the Termination Plan above (including any of the diminutions,
reductions or relocation provisions under which you may elect to leave the
Company), the lump sum severance payment will be three years base salary,
plus three times your target bonus amount. In addition, your Executive
Benefits will be extended to three years from your separation date.
A "Change of Control" shall mean:
(i) any sale, lease, license, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially
all, of the business and/or assets of the Company or Holding (without
regard to Signature);
<PAGE>
(ii) the possession by any person or entity (other than Holding, General
Electric Capital Corporation or an affiliate of either of them) of
beneficial ownership (as such term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of either (A) a number of
securities carrying a greater voting power than General Electric Capital
Corporation and its affiliates taken together or (B) over 50% of the then
outstanding voting securities of the Company (entitled to vote generally in
the election of directors) ("Outstanding Company Voting Securities"); or
(iii) merger, consolidation or reorganization ("Business Combination")
unless following such Business Combination all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the entity resulting from the Business Combination in
substantially the same proportions as their ownership immediately prior to
the Business Combination in substantially the same relative proportions as
their ownership immediately prior to the Outstanding Company Voting
Securities; provided that a Change of Control shall not be construed to
include any transaction that occurs solely as a result of transfer of
equity to holders of claims against the Company or Holding or any affiliate
on account of such claims in connection with the consummation of a plan of
reorganization for the Company or Holding or any affiliate in connection
with the proceedings under Chapter 11 of the United States Bankruptcy Code
pending at the date of hereof.
Except as provided in the following sentence, payments pursuant to this
employment agreement ("Payments") shall not exceed the largest sum
("Parachute Limitation") which will not result, directly or indirectly, in
the treatment of any amount paid or payable by the Company or any successor
to you (whether or not pursuant to this employment agreement, and including
the Payments) as an Excess Parachute Payment. Notwithstanding the preceding
sentence, you shall receive the full amount of the Payments without regard
to the Parachute Limitation if you would realize a greater aftertax amount
receiving the full amount of the Payments without regard to the Parachute
Limitation than you would realize by receiving the Payments limited to the
Parachute Limitation as provided in the preceding sentence.
All computations and determinations required by the preceding paragraph
shall be made by your accountant, acting in good faith. The computations
and determinations made any time by your accountant shall affect only those
Payments not yet made pursuant to this employment agreement. For purposes
of this employment agreement, the term "Excess Parachute Payment" shall
have the same meaning as the term "excess parachute payment" has under
section 280G of the Internal Revenue Code of 1986, as amended and the
regulations thereunder.
PAYMENT GUARANTEE
- - -----------------
In the event of your separation from Montgomery Ward for reasons other than
"Cause" or voluntary resignation, to the extent that you are eligible to
receive a guaranteed payment from General Electric Capital Corporation of
base salary and/or bonus amounts due to
<PAGE>
non-payment under your previous compensation agreement with Montgomery
Ward, then the obligation of the Company under this agreement shall be
reduced dollar for dollar of any amount representing base salary or bonus
amounts which would become payable by General Electric Capital Corporation
under that compensation guarantee.
NON-COMPETE
- - -----------
In the event that you voluntarily leave Montgomery Ward, you will be bound
by a non-compete agreement that provides that you will not be directly
employed by nor perform work as director, officer, independent contractor,
partner, or consultant for Sears, K-Mart Corporation, WalMart Stores Inc.,
Dayton Hudson Corporation or J.C. Penney or any of their affiliates for a
period of one (1) year following your termination date.
This Agreement will be subject to the Laws of Illinois where applicable.
/s/ Kevin Freeman
------------------------
November 6, 1997
------------------------
Date
/s/ Robert A. Kasenter
------------------------
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 11, 1999 included in this Form 10-K, into the Company's
previously filed Registration Statement File No. 33-57075.
/s/ Arthur Andersen LLP
Chicago, IL
April 2, 1999
<PAGE>
EXHIBIT 24
MONGOMERY WARD HOLDING CORP.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned directors
and/or officers of Montgomery Ward Holding Corp., a Delaware corporation, hereby
constitutes and appoints SPENCER H. HEINE, THOMAS J. PAUP AND PHILIP D. DELK,
his or her true and lawful attorneys-in-fact and agents to execute in his or her
name and capacity the 1998 Annual Report on Form 10-K of this Corporation and
any amendments to such annual report, with all exhibits thereto, and any and all
documents in connection therewith pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, each of them with full power to act without the
others.
AND FURTHER, that each of the undersigned directors and/or officers of the
Corporation hereby grants to said attorneys-in-fact and agents and each of them,
full power and authority to do and perform any and all acts and things essential
and necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person in connection with the proper
exercise of the powers granted hereunder.
<PAGE>
IN WITNESS WHEREOF, the undersigned as directors and/or officers of said
Montgomery Ward Holding Corp. or as individuals, have hereunto set their hands
and seals as of this ____ day of March, 1999.
NAME AND TITLE /s/ Dennis D. Dammerman
-----------------------------------
Dennis D. Dammerman, Director
NAME AND TITLE /s/ Denis J. Nayden
-----------------------------------
Denis J. Nayden, Director
NAME AND TITLE /s/ Edward D. Stewart
-----------------------------------
Edward D. Stewart, Director
NAME AND TITLE /s/ James A. Parke
-----------------------------------
James A. Parke, Director
NAME AND TITLE /s/ Roger V. Goddu
-----------------------------------
Roger V. Goddu, Director
NAME AND TITLE /s/ Silas S. Cathcart
-----------------------------------
Silas S. Cathcart, Director
NAME AND TITLE /s/ Bernard F. Brennan
-----------------------------------
Bernard F. Brennan, Director
NAME AND TITLE /s/ Tommy T. Cato
-----------------------------------
Tommy T. Cato, Director
2
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