[Letterhead]
April 19, 1996
Mike Searles
64 Balfour Drive
West Hartford, CT 07761
Dear Mike:
This letter will confirm our offer to you to join Montgomery Ward as
Executive Vice President Apparel and Gold 'N Gems. You will report to the
Chairman and C.E.O. and become a member of the Executive Committee of
Montgomery Ward Retail. Your compensation plan will be as follows:
1.) Base salary will be $500,000 annually, paid semi-monthly.
2.) Target bonus on the Short-Term Performance Management Plan will be
$250,000 annually. Your objectives under this incentive plan will
be set by the Board Committee on Senior Executive Compensation as
required by the tax and S.E.C. regulations. Under the provisions of
this plan, you can earn up to 150% of the target amount by
exceeding the objectives. For 1996 and 1997, your target bonus of
$250,000 will be guaranteed.
3.) You will participate in the Executive Long Term Incentive Plan with
a target award of 50% of your average annual base salary for the
three year cycle. For the 1994-1996 cycle, which ends in December
of 1996, you will participate at a target amount of $150,000.
Thereafter, you will participate at the full 50% target level for
all cycles, including the 1995-1997 and 1996-1998 cycles. A copy
of the plan description is attached.
4.) You will participate in all Senior Officer Perquisite Plans,
including In-Town Limo Service, Financial Planning, Tax Preparation,
Supplemental Medical and Life coverage and annual physicals. You
will also participate in the Montgomery Ward Change of Control
Security Plan for Senior Officers. Copies of these plans are attached.
Mike Searles
April 19, 1996
Page 2
5.) The Stock Ownership Committee will be requested (and endorsed by
Bernie Brennan) to grant you options for 300,000 shares of
Montgomery Ward Holding Stock at $24.50 per share. These options will
have a ten year term and will vest as follows:
150,000 June 1, 1997
150,000 June 1, 1998
These Stock Options will be offered in accordance with the Terms and
Conditions of the Stockholders Agreement. A copy of the current
Prospectus is included.
6.) Montgomery Ward will provide you with a full relocation plan,
including movement of household goods, househunting trips, and home
purchase at 100% of the $1.5 million purchase value of your home in
West Hartford. In addition, Montgomery Ward will pay your closing
costs on your home purchase in the Chicago area, plus up to two
points on your financing of a new home. Your temporary housing
expenses in the Chicago area for the first four months (or until
relocation if sooner) will be paid by Montgomery Ward.
7.) If Montgomery Ward initiates a separation of your employment for any
reason other than "Cause" as defined below, or if you terminate
your employment for "Good Reason" as defined below, you will receive
the higher of either your base pay and most recent short term bonus
award through May 31, 1998; the payments provided in the Montgomery
Ward Change of Control Security Plan; or, 18 months base salary plus
1 1/2 times your most recent short term P.M.P. Award. (See attached
plans.) Also, all stock options in point 5 above will immediately
vest if you are separated by the Company without "Cause", or if you
terminate your employment for "Good Reason" as defined below.
Additionally, you will be permitted to retain your health care
coverage at the associate rate for 18 months following termination.
Mike Searles
April 19, 1996
Page 3
"Cause" shall mean (i) your willful failure to substantially perform
your duties hereunder and to remedy such failure within ninety (90)
days after receiving notice from the Board of Directors of the
Company or their representative specifying the details thereof,
(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 their representative and to remedy such
failure within ninety (90) days after receiving notice from the
Board of Directors of the Company or their representative specifying
the details thereof, or (iii) your conviction of any kind of felony
or your conviction of any misdemeanor involving moral turpitude that
negatively reflects on the Company. For purposes of this paragraph,
no act, or failure to act, on your part shall be considered "willful"
unless such act, or failure to act by you was not in good faith and
was without reasonable belief that your action or omission was in the
best interest of the Company. NOTE: "Cause" does not include poor
work performance.
If you are not made President, Montgomery Ward Retail on or before
January 1, 1998, or if another Executive is named President,
Montgomery Ward Retail during that period, you may elect (within
90 days and with 90 days written notice) to treat your employment as
separated without "Cause" and will receive a special severance plan
equal to 18 months base salary plus 1 1/2 times your most recent
short term P.M.P. Award in lieu of any other severance plan and your
stock options in point 5 above will immediately vest. Additionally,
you will be permitted to retain your health care coverage at the
associate rate for the severance period.
If you voluntarily leave Montgomery Ward without "Good Reason", or
are separated for "Cause", you will receive no severance payments,
nor will your stock or stock options (as the case may be) continue
to vest beyond your separation date. "Good Reason" shall mean any
action by Montgomery Ward which, without you prior written consent
significantly reduces your job responsibilities, job title,
compensation, or benefits.
Mike Searles
April 19, 1996
Page 4
If you are in agreement with the compensation plan as detailed above, please
sign this letter below and return it to me.
Mike, I am pleased that you will be joining Montgomery Ward and I look forward
to working with you on moving our business to the next level.
Sincerely,
/s/ Robert A. Kasenter
________________________
Robert A. Kasenter
Executive Vice President
Human Resources
cc: Bernie Brennan
Silas Cathcart
Dan Porter
/s/ Michael S. Searles
________________________
Mike Searles
4/22/96
________________________
Date