<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
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Date