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                                   SECOND AMENDMENT
                                          TO
                                   CREDIT AGREEMENT

         THIS AMENDMENT (the "Amendment") dated as of December 23, 1996 (the
"Second Amendment Effective Date"), is made and entered into among MONTGOMERY
WARD & CO., INCORPORATED (the "Company") and the banks listed on the signature
pages hereof (herein, together with their respective successors and assigns,
collectively called the "Lenders" and individually called a "Lender").

         WHEREAS the Lenders are parties to that certain Credit Agreement dated
as of October 4, 1996, as amended as of December 23, 1996 (the "Credit
Agreement"), among Montgomery Ward & Co., Incorporated, various Lenders, The
Bank of New York as Documentation Agent, and The Bank of Nova Scotia, as
Administrative Agent; and

         WHEREAS the Company and the Lenders desire to amend the Credit
Agreement in certain respects;

         NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:

                                      ARTICLE I

                                      AMENDMENTS

         1.1  SECTION 1.1  of the Credit Agreement is hereby amended by adding
the following definition to read in its entirety as follows:

         "APPLICABLE MARGIN" means as to any Type of Loan, for any period set
    forth below, a rate per annum, as follows:


                                         EURODOLLAR           BASE RATE
            PERIOD                          LOAN                LOAN
            ------                       ----------           ---------

    Prior to December 23,                   1.50%               0.00%
    1996

    December 23, 1996                       1.50%               0.25%
    through March 31, 1997

    April 1, 1997                           2.00%               0.75%
    through June 30, 1997

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                                         EURODOLLAR           BASE RATE
            PERIOD                          LOAN                LOAN
            ------                       ----------           ---------

    After June 30, 1997                     2.50%               1.25%


         1.2  SECTION 6.1 of the Credit Agreement is hereby amended so that
SECTION 6.1 shall read in its entirety as follows:

         6.1  INTEREST RATES.  The Company hereby promises to pay interest on
    the unpaid principal amount of each Loan for the period commencing on the
    Funding Date of such Loan until such Loan is paid in full, as follows:

                   (a)  if such Loan is a Base Rate Loan, at a rate per
              annum equal to the Base Rate from time to time in effect,
              plus the Applicable Margin;

                   (b)  if such Loan is a Eurodollar Loan, at a rate per
              annum during each Interest Period equal to the Eurodollar
              Rate applicable to such Interest Period, plus the Applicable
              Margin;

    PROVIDED, HOWEVER, that after maturity of any Loan (whether by acceleration
    or otherwise), such Loan shall bear interest on the unpaid principal amount
    thereof at a rate per annum equal to the Base Rate from time to time in
    effect (but not less than the applicable interest rate in effect at
    maturity) plus 2% per annum.  The Company hereby further promises to pay
    any additional interest on the unpaid principal amount of each applicable
    Eurodollar Loan, whether before or after the maturity thereof, as may be
    required in accordance with SECTION 9.


                                      ARTICLE II

                            REPRESENTATIONS AND WARRANTIES

         The Company hereby represents and warrants to the Agents and the
Lenders as follows:

         2.1  NO DEFAULT.  No Event of Default or Unmatured Event of Default
has occurred and is continuing or will exist after giving effect to this
Amendment.

         2.2  DUE EXECUTION.  The execution, delivery and performance of this
Agreement, (i) are within the Company's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not require any
governmental approval

                                          2

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which has not been previously obtained (and each such governmental approval that
has been previously obtained remains effective), (iv) do not and will not
contravene or conflict with any provision of law, or of any judgment, decree or
order, or of the Company's charter or by-laws, and (v) do not and will not
contravene or conflict with, or cause any Lien to arise under, any provision of
any agreement binding upon the Company, any Subsidiary or any of their
respective properties.

         2.3  VALIDITY. The Credit Agreement as amended by this Amendment
constitutes the legal, valid and binding obligations of the Company, enforceable
against it in accordance with its respective terms, without defense,
counterclaim or offset.

         2.4  CREDIT AGREEMENT.  All representations and warranties of the
Company contained in SECTIONS 10.1, 10.2, 10.3, 10.4(a), 10.7, 10.10, 10.11,
10.12, 10.15 and 10.18 of the Credit Agreement are true and correct as of the
date hereof with the same effect as though made on the date hereof.

                                     ARTICLE III

                                       GENERAL

         3.1  EXPENSES.  The Company agrees to pay all fees and expenses of
McDermott, Will & Emery as counsel to the Documentation Agent and the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment.

         3.2  EFFECTIVENESS. (a) Article I of this Amendment shall become
effective as of the Second Amendment Effective Date, subject, however, to
receipt by the Documentation Agent of counterparts of this Amendment, whether
on the same or different counterparts, executed by the Company and the Required
Lenders (or in the case of any Lender as to which an executed counterpart shall
not have been so received, telegraphic, telefax, telex or other written
confirmation of execution of a counterpart hereof by such Lender) in form and
substance reasonably satisfactory to the Documentation Agent.

         (b)  Concurrent with the effectiveness of this Amendment pursuant to
SECTION 3.2(a), the Company hereby agrees that it will cause the following
documents to be furnished to the Documentation Agent in form and substance
reasonably satisfactory to the Documentation Agent.

              (i)  RESOLUTIONS.  Copies of the resolutions of the board of
    directors of each of the Company and the Guarantor authorizing the
    transactions contemplated by this Amendment and the Guaranty, certified by
    the Secretary or an Assistant Secretary (or in the case of the Guarantor,
    the Clerk or Assistant Clerk) of the Company and the Guarantor;

                                          3

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              (ii) INCUMBENCY.  A certificate of the Secretary or Assistant
    Secretary (or in the case of the Guarantor, the Clerk or Assistant Clerk)
    of each of the Company and the Guarantor certifying the names and true
    signatures of the officers of the Company or the Guarantor authorized to
    execute, deliver and perform, as applicable, this Amendment and the
    Guaranty; and

             (iii) OPINION OF COUNSEL FOR THE COMPANY AND THE GUARANTOR.  A
    letter from Altheimer & Gray, counsel for the Company and the Guarantor,
    addressed to the Agents and the Banks substantially in the form attached
    hereto.

         3.3  DEFINITIONS.  Except as otherwise herein specifically defined,
all the capitalized terms contained herein shall have the meaning ascribed to
such terms in the Credit Agreement.

         3.4  REAFFIRMATION.  Except as hereinabove expressly provided, all the
terms and provisions of the Credit Agreement shall remain in full force and
effect and all references therein and in any related documents to the Credit
Agreement shall henceforth refer to the Credit Agreement as amended by this
Amendment.  This Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement.

         3.5  SUCCESSORS.  This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.

         3.6  GOVERNING LAW.  This Amendment shall be governed by and construed
in accordance with the laws of the State of Illinois.

         3.7  COUNTERPARTS.  This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same agreement.


                                          4

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    Delivered at Chicago, Illinois as of the day, month and year first above
written.

                                  MONTGOMERY WARD & CO., INCORPORATED


                                  By:   /s/ Douglas V. Gathany
                                      -------------------------------
                                  Name:  Douglas V. Gathany


ACCEPTED AND APPROVED:


THE BANK OF NEW YORK, in its
individual capacity and in
its capacity as Documentation Agent

By:
   ------------------------------
Name:


THE BANK OF NOVA SCOTIA, in its
individual capacity and in its
capacity as Administrative Agent

By:
   ------------------------------
Name:


GENERAL ELECTRIC CAPITAL CORPORATION,
in its individual capacity

By:
   ------------------------------
Name:

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GUARANTY REAFFIRMED:


LECHMERE, INC.


By:   /s/ Carol J. Harms
   ------------------------------
Name:  Carol J. Harms