<PAGE>

                                 EMPLOYMENT AGREEMENT

    EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into on the __
day of January, 1997 (the "Effective Date"), by and among Montgomery Ward & Co.,
Incorporated, an Illinois corporation (together with its successors and assigns
permitted under this Agreement, the "Company"), Montgomery Ward Holding Corp., a
Delaware corporation ("Holding") and Burnett Donoho (the "Executive").


                                 W I T N E S S E T H

    WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept such employment, subject to the terms and provisions of this
Agreement;

    NOW THEREFORE, in consideration of the mutual covenants and premises
contained herein, the parties hereto agree as follows:

    1.   DEFINITIONS.  As used herein, the following terms shall have the
following meanings:

    (a)  "Affiliate" of a person or other entity shall mean a person or other
entity that directly or indirectly controls, is controlled by, or us under
common control with, the person or other entity specified.

    (b)  "Base Salary" shall mean the salary provided for in Section 4 herein.

    (c)  "Board" shall mean the Board of Directors of any one or more of the
Company, Holding and each Subsidiary, as the context may provide.

    (d)  "Cause" shall mean any one or more of the following:

         (i)   the Executive is convicted of a felony involving moral turpitude
or any other felony if in the case of such other felony the Executive is unable
to show that he (A) acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, Holding or any
Subsidiary or (B) had no reason to believe his conduct was unlawful;

         (ii)  a majority of the Company's Board, consisting of at least a 2/3
majority of the non-management directors, determines that:

              (A)  the Executive has engaged in illegal conduct which is
materially injurious to the Company;

              (B)  the Executive has engaged in conduct that constitutes
willful or gross misconduct in carrying out his duties under this Agreement; or

<PAGE>

              (C)  the Executive has neglected or refused, after written notice
from the Board of the Company, to attend to the material duties assigned to him
by such Board, provided that such duties are consistent with his position,
duties and responsibilities as set forth in Section 3 herein.

    (e)  A "Change in 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 or (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; PROVIDED, that in the case of
either (A) or (B), no Change in Control shall be deemed to occur unless and
until, after the occurrence of such event, a majority of the members of the
Board of the Company or Holding are removed or replaced within six months
following any event described in either (A) or (B) above.

    (f)  "Constructive Termination" shall mean a termination of the Executive's
employment at his initiative within six months following the occurrence (except
in consequence of a prior termination), without the Executive's prior written
consent, of one or more of the following events, in each such case after the
Executive shall have given the Company (A) prior written notice reasonable in
the circumstances and (B) an opportunity to cure reasonable in the
circumstances:

         (i)   a reduction in the Executive's then current Base Salary or
Annual Bonus opportunity (as described in Section 5 herein) or the termination
or material reduction of any material employee benefit or perquisite enjoyed by
him (other than as part of an across-the-board reduction of such benefit or
perquisite applicable to all executive officers of the Company);

         (ii)  reduction by overt action of the Board in the scope of the
responsibilities and authority assigned to the position held by the Executive or
a removal of the Executive from any of the positions (including any
directorship) described in Section 3(a) herein (other than in connection with or
as a result of the sale, transfer or dissolution of any Subsidiary) or the
creation of a position (other than member of a Board) in the Company of equal or
superior rank to the highest position then held by the Executive in the Company;

         (iii) the failure of the Company or Holding, as appropriate, to obtain
the assumption in writing of its obligation to perform this Agreement by any
successor to the Company, Holding or their business within 15 days after the
occurrence of the transaction which results in such person or entity becoming a
successor to the Company, Holding or their business; or


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<PAGE>

         (iv)  a Change of Control.

    (g)  "Disability" shall mean the Executive's inability to substantially
perform his duties and responsibilities under this Agreement by reason of any
physical or mental incapacity, as determined by a majority of the Company's
Board, consisting of at least a 2/3 majority of the non-management directors,
for 90 days in any period of 180 consecutive days.

    (h)  "ERISA" shall mean the Employee Retirement Income Security Act of
1974.

    (i)  "Fair Market Value Per Share" shall mean the fair market value of a
share of Class A Common Stock of Holding as determined in accordance with
Article III of the Stockholders' Agreement.

    (j)  "Plan" shall mean the Montgomery Ward & Co., Incorporated Stock
Ownership Plan.

    (k)  "Start Date" shall mean                 .

    (l)  "Stock" shall mean all capital stock of Holding.

    (m)  "Stockholders' Agreement" shall mean that certain Stockholders'
Agreement, dated as of June 18, 1988, as amended through December 10, 1996.

    (n)  "Subsidiary" shall mean any corporation in which the Company or
Holding owns, directly or indirectly, more than 50% of the outstanding voting
securities of such corporation entitled to vote in the election of directors.

    2.   AGREEMENT TERM AND EMPLOYMENT PERIOD.  The Company hereby employs the
Executive, and the Executive hereby accepts such employment, pursuant to the
terms and conditions set forth in this Agreement.  The term of this Agreement
shall commence on the date hereof and shall end on January 31, 2000.  The
employment period shall commence on the Start Date and end on the earlier of (i)
the effective date of any termination of employment and (ii) January 31, 2000
(the "Employment Period").

    3.   POSITION, DUTIES AND RESPONSIBILITIES.

    (a)  During the Employment Period, the Executive shall be employed and
serve as the Vice Chairman and Chief Operating Officer of the Company and the
Chief Operating Officer of Holding (or such other position or positions as may
be agreed upon in writing by the Executive and the Company).  The Executive's
services shall be performed in Chicago, Illinois and the Executive shall not be
transferred outside that area without his consent, other than for normal
business travel and temporary assignments.  In addition, Executive is entering
into this Agreement on the basis that, pursuant to the terms of the
Stockholders'


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<PAGE>

Agreement the Executive shall be elected a member of the Board of Holding and
the Company and, following such election, shall be nominated and recommended for
election to each such Board at each annual meeting of such entity held during
the Employment Period.  The Executive shall report to the Chairman and Chief
Executive Officer of the Company and the Chief Executive Officer of the Board of
Holding, or a duly organized committee thereof.

    (b)  The Executive shall perform such duties and carry out such
responsibilities incident to his position as may be determined from time to time
by the Chairman and Chief Executive Officer of the Company, which shall be
consistent with the duties and responsibilities customarily performed by persons
in a similar executive capacity.  Subject to periods of vacation, sick leave,
and the like to which he may be entitled, the Executive shall devote all of his
business time, attention and skill to the performance of such duties and
responsibilities, and shall use his best efforts to promote the interests of the
Company.

    (c)  Notwithstanding anything to the contrary contained herein, nothing
shall preclude the Executive from (i) serving on the boards of trade
associations and/or charitable organizations (subject to the reasonable approval
of the Chairman and Chief Executive Officer of the Company), (ii) engaging in
charitable activities and community affairs, and (iii) managing his personal
investments and affairs, provided that such activities individually or
collectively do not interfere with the proper performance of his duties and
responsibilities hereunder.

    4.   BASE SALARY.  During the Employment Period, the Company shall pay to
the Executive for the services to be rendered by the Executive hereunder a base
salary at the rate of Seven hundred thousand dollars ($700,000) per annum ("Base
Salary").  Base Salary shall be reviewed at least once each year and may be
increased at any time from time to time in the discretion of the Board of the
Company, and shall be payable in accordance with the Company's customary payroll
practices applicable for senior-level executives generally.  After any increase
in Base Salary, Base Salary shall not thereafter be reduced without the consent
of the Executive.

    5.   ANNUAL BONUS; RELOCATION; SUPPLEMENTAL PENSION PAYMENTS.

    (a)  In addition to the Base Salary and any other benefits or emoluments
received from the Company, Holding or any affiliate thereof, the Executive shall
be eligible to receive an annual cash bonus in an amount equal to not more than
40% of the Base Salary (the "Annual Bonus"), payable within the first fiscal
quarter following the close of each of the Company's fiscal years during the
Employment Period.  The Annual Bonus shall be based on performance targets to be
established from time to time by the Board of the Company (or any committee
thereof appointed for such purpose); provided that for the fiscal years ending
in 1997, and 1998, the Annual Bonus will be not less than $250,000 for each of
such years without regard to such performance targets.  The Annual Bonus may be
increased based on


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<PAGE>

the achievement of exceptional performance against the aforementioned targets,
as determined by the Board of the Company in the good faith exercise of its
business judgement.

    (b)  The Company will provide executive with a relocation plan that
includes interim living expense for up to six months, movement of household
goods and payment of closing costs for home purchase in the Chicago area.
Additionally, Company will pay executive a one-time payment of $50,000 upon the
completion of his relocation to the Chicago area.

    (c)  The Company will provide Executive with a Special Retention Plan that
provides Executive a cash award of $100,000 for every full six months of
Executive's active service with the Company up to a maximum of $500,000 total,
all or any earned part of which will be paid on December 31, 1999.

    6.   STOCK OPTION AWARDS.

    (a)  Holding shall, as promptly as possible, grant to the Executive
non-qualified stock options (the "Options"), pursuant to the Plan, to purchase
one million (1,000,000) shares of Class A Common Stock Series 3 of Holding.
Such Options shall be granted pursuant to the terms and conditions of the Plan
and such additional terms and conditions as may be customary or appropriate in
the circumstances.

    (b)  Subject to the terms of this Agreement and the provisions of the Plan,
the Options shall (i) have a per share exercise price equal to the Fair Market
Value Per Share as of the first day of the 1997 fiscal year and (ii) become
vested on the basis of cumulative installments of:

                        400,000 - February 1, 1998
                        300,000 - February 1, 1999
                        300,000 - February 1, 2000

PROVIDED, HOWEVER, that an Option will not vest unless the Executive is at the
applicable date of determination, and has been at all times since the date of
grant of the Option, employed by the Company.  Only Options which are vested may
be exercised.  These options will have a ten year term from the grant date,
after which they will expire if not exercised.

    (c)  Once any Option becomes vested, it shall remain exercisable until (i)
three (3) months after the date of cessation of the Executive's employment with
the company, if such cessation occurs due to the Executive's voluntary
termination as provided under Section 9(e) or termination for Cause as provided
under Section 9(c), or (ii) the third anniversary of the date of cessation of
the Executive's employment with the Company for any other reason.

    (d)  The Options contemplated hereby (and the underlying shares of Stock)
and the Management Options shall equally dilute all holders of Stock then
outstanding (taking into account the impact of then outstanding stock options of
Holding).


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<PAGE>

    7.   EMPLOYEE BENEFIT PROGRAMS.  During his employment with the Company,
the Executive shall be entitled to participate in all employee pension and
welfare benefit plans and programs made available to the Company's senior level
executives or its employees generally, as such plans or programs may be in
effect from time to time, including, without limitation, pension, profit
sharing, savings and other retirement plans or programs, medical, dental,
hospitalization, short-term and long-term disability and life insurance plans,
accidental death and dismemberment protection, travel accident insurance, and
any other pension or retirement plans or programs and any other employee welfare
benefit plans or programs that may be sponsored by the Company from time to
time, including any plans that supplement the above-listed types of plans or
programs, whether funded or unfunded.  The Executive shall be entitled to
post-retirement welfare benefits, if any, as are made available by the Company
to its senior level executives generally.

    8.   REIMBURSEMENT OF BUSINESS EXPENSES; PERQUISITES; VACATION.

    (a)  The Executive is authorized to incur reasonable expenses in carrying
out his duties and responsibilities under this Agreement and the Company or
Holding, as appropriate, shall promptly reimburse him for all such expenses,
subject to documentation in accordance with its company's policy.

    (b)  During the Employment Period, the Executive shall be entitled to
participate in any of the Company's executive fringe benefits (including any
benefits relating to tax and financial planning services), in accordance with
the terms and conditions of such arrangements as are in effect from time to time
for the Company's senior level executives generally.

    (c)  During the Employment Period, the Executive shall be entitled to four
weeks paid vacation per year in accordance with the policies of the Company as
in effect from time to time with respect to senior executives of the Company.

    (d)  Nothing herein shall be construed to prevent the Company from
amending, altering, eliminating or reducing any plans, benefits or programs so
long as the Executive continues to have the opportunity to receive compensation
and benefits consistent with Sections 8(a) through (c).

    9.   TERMINATION OF EMPLOYMENT.

    (a)  TERMINATION DUE TO DEATH.  In the event the Executive's employment is
terminated due to his death, then, this Agreement shall terminate without
further obligation of the Company or Holding under this Agreement to the
Executive's legal representatives other than those accrued hereunder or under
the terms of applicable Company plans or programs which take effect at the date
of his death or those obligations provided in this Section 9 (a).  Provided the
lawful representative of the Executive's estate shall have executed an
employment


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<PAGE>

release as mutually agreed by the parties at the time of execution (the
"Employment Release"), such estate shall be entitled to:

         (i)   all unpaid Base Salary through the end of the contract
employment period.

         (ii)  any Annual Bonus, that would have been paid during the contract
employment period except that the target bonus amount of $250,000 will be used
to calculate the bonus amount.

         (iii) the right to exercise all Options set forth in Section 6(b);

         (iv)  any amount earned, accrued or owing to the Executive but not yet
paid under Section 8 herein; and

         (v)   other or additional benefits in accordance with the plans and
programs of the Company referred to in Section 7 herein.

    (b)  TERMINATION DUE TO DISABILITY.  In the event the Executive's
employment is terminated due to his Disability, then, provided the Executive or
his legal representative shall have executed the Employment Release, the
Executive shall be entitled to:

         (i)   all unpaid Base Salary through the date of termination due to
Disability;

         (ii)  in lieu of any Annual Bonus, an amount equal to 30% of the Base
Salary in effect as the date of such termination;

         (iii) the benefits due him under any then current disability program
of the Company;

         (iv)  the right to exercise the Options to the extent vested pursuant
to the vesting schedule set forth in Section 6(b) for the period of three (3)
years following the termination date;

         (v)   any amount earned, accrued or owing to the Executive but not yet
paid under Section 8 herein; and

         (vi)  other or additional benefits in accordance with the plans and
programs of the Company referred to in Section 7 herein.

    In no event shall a termination of the Executive's employment for
Disability occur unless the party terminating his employment gives written
notice to the other party in accordance with Section 21 herein.


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<PAGE>

    (c)  TERMINATION BY THE COMPANY FOR CAUSE.

         (i)   A termination for Cause shall not take effect unless the
provisions of this clause (i) are complied with.  The Executive shall be given
written notice by the Board of the Company of its intention to terminate him for
Cause, such notice (A) to state in detail the particular act or acts or failure
or failures to act that constitute the grounds on which the proposed termination
for Cause is based and (B) to be given within six (6) months of the Board of the
Company learning of such act or acts or failure or failures to act.  The
Executive shall have ten (10) days after the date that such written notice has
been given to the Executive in which to cure such conduct, to the extent such
cure is possible.  If he fails to cure such conduct, the Executive shall then be
entitled to written notice by the Board of the Company confirming that, in their
judgement, grounds for Cause on the basis of the original notice exist, at which
time his employment with the Company shall thereupon be terminated for Cause.

         (ii)  In the event the Company terminates the Executive's employment
for Cause, then, provided the Executive shall have executed the Employment
Release, the Executive shall be entitled to:

              (A)  all unpaid Base Salary through the date of termination of
his employment for Cause;

              (B)  the right to exercise the Options to the extent vested
pursuant to the vesting schedule set forth in Section 6(b), but, as provided in
Section 6(c), only until the end of the third month after the date of the
Executive's termination;

              (C)  any amounts earned, accrued or owing to the Executive but
not yet paid under Section 8 herein; and

              (D)  other or additional benefits in accordance with the plans or
programs of the Company referred to in Section 7 herein.

         (iii) If the Executive is terminated for Cause solely as the result of
being convicted of a felony, which conviction is ultimately reversed on appeal,
the Executive shall be deemed to have been terminated without Cause and shall be
entitled to the benefits provided under Section 9(d) to the extent such benefits
are greater than those received by the Executive in accordance with Section
9(c), provided, that the date of termination shall be deemed to be the date of
the original termination.

    (d)  TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION.  In the event
the Executive's employment is terminated without Cause, other than due to
Disability or death, or in the event there is a Constructive Termination, then,
provided the Executive shall have executed the Employment Release, the Executive
shall be entitled to:


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         (i)   all unpaid Base Salary and a prorated Annual Bonus for the
fiscal year of the date of termination through the date of termination based on
the prior year's Annual Bonus;

         (ii)  the Base Salary, at the annualized rate in effect on the date of
termination of the Executive's employment (or in the event a reduction in Base
Salary is the basis for a Constructive Termination, then the annualized rate of
the Base Salary in effect immediately prior to such reduction), for a period of
twenty-four (24) months following the date of such termination and, in lieu of
any further Annual Bonus, an amount equal to the greater of two years actual
bonus award using the last paid award or $500,000, in each case in substantially
equal installments payable not less frequently than semi-monthly in arrears;
PROVIDED, that the Company may at any time and from time to time pay the
Executive the present value of such salary continuation payments in a lump sum
(using as the discount rate the applicable Federal rate for short-term Treasury
obligations as published by the Internal Revenue Service for the month in which
such termination occurs);

         (iii) the right to exercise the Options to the extent vested pursuant
to the vesting schedule set forth in Section 6(b), but as provided in Section
6(c), only until the third anniversary of the date of the Executive's
termination without Cause (other than due to Disability or death) or the
Executive's Constructive Termination, as the case may be;

         (iv)  any amount earned, accrued or owing to the Executive but not yet
paid under Section 8 herein;

         (v)   other or additional benefits in accordance with the plans and
programs of the Company referred to in Section 7 herein; and

         (vi)  until the earlier of (1) the second anniversary of the date of
termination or (2) the date the Executive accepts other employment:

              (A)  reimbursement for any employee benefit contribution paid by
the Executive or the Executive's family pursuant to COBRA;

              (B)  outplacement services at the expense of the Company
commensurate with those provided to terminated executives of comparable level
and made available through and at the facilities of a reputable and experienced
vendor; and

              (C)  use of personal, financial and legal counseling services
through the vendor engaged by the Executive and paid for by the Company, up to a
maximum of $10,000 per year.

         If it is determined that any payment or distribution by the Company to
the Executive pursuant to Section 9(d) (determined without regard to any
additional payments required pursuant to this sentence) (a "Payment") would be
subject to the excise tax imposed


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<PAGE>

by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or by similar provisions of state or local tax laws applicable to the Executive
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax and similar provisions, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive with respect to each
Payment an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

         (e)  TERMINATION DUE TO CHANGE OF CONTROL.  If Executive's employment
is terminated due solely to a Change of Control as defined in Section 1(e),
Executive will receive the same entitlements as Section 9(d) except that the
salary continuation payments shall be paid in a lump sum without any discount.

         (f)  VOLUNTARY TERMINATION.  In the event of a termination of
employment by the Executive on his own initiative ("Voluntary Termination"),
other than a termination due to death or Disability or a Constructive
Termination, then, provided the Executive shall have executed the Employment
Release, the Executive shall be entitled to:

              (i)   the Base Salary through the date of termination of his
employment;

              (ii)  the right to exercise the Options to the extent vested
pursuant to the vesting schedule set forth in Section 6(b), but as provided in
Section 6(c), only for a period ending three (3) months after the effective date
of the Executive's Voluntary Termination;

              (iii) any amounts earned, accrued or owing to the Executive but
not yet paid under Section 8 herein; and

              (iv)  other or additional benefits in accordance with the plans
or programs of the company referred to in Section 7 herein.

         (g)  EXPIRATION OF TERM.  If the Executive continues to be employed by
the Company until the expiration of the Term of this Agreement, but does not
continue to be employed by the Company after such time, the Executive shall
receive as salary continuation payments (i) the Base Salary, at an annualized
rate in effect on the date of the expiration of the Term of the Agreement, for a
period of twenty-four (24) months following such expiration, in substantially
equal installments not less frequently than semi-monthly in arrears; PROVIDED,
that the Company may at any time and from time to time pay the Executive the
present value of such salary continuation payments in a lump sum (using as the
discount rate the then applicable


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Federal rate for short-term Treasury obligations as published by the Internal
Revenue Service for the month in which such termination occurs).  The expiration
of the Term of this Agreement shall not constitute termination of the
Executive's employment with the Company under any of Sections 9(a), 9(b), 9(c),
9(d) or 9(e) herein and, other than as set forth in this Section 9(f), the
Executive shall not be entitled to any other compensation or benefits provided
for in this Agreement.

         (h)  OFFSETS.  In the event of any termination of employment under
this Section 9, (i) any remuneration attributable to any subsequent employment
with a Direct Competitor that the Executive may obtain and (ii) any amounts due
the Company under any claim the Company may have against the Executive may, at
the option of the Company, be applied to reduce any amounts due the Executive
under this Agreement.

         (i)  NATURE OF PAYMENTS.  Any amounts due under this Section 9 are in
the nature of severance or salary continuation payments considered to be
reasonable by the Company and are not in the nature of a penalty.

         (j)  ASSIGNMENT.  The severance or salary continuation payments
hereunder may not be transferred, assigned or encumbered in any manner, either
voluntarily or involuntarily, without the prior written consent of the Company.

         (k)  EXCLUSIVITY OF SEVERANCE OR SALARY CONTINUATION PAYMENTS.  Upon
termination of the Executive's employment, he shall not be entitled to any
severance or salary continuation payments or benefits from the Company or
Holding or any payments by the Company or Holding on account of any claim by him
of wrongful termination, including claims under any federal, state or local
human and civil rights or labor laws, common law, other than the payments and
benefits provided under paragraphs 9(a) through (e) of this Section 9 depending
on the factual circumstances of the termination hereunder.

         (l)  TERMINATION AT WILL.  Notwithstanding anything herein to the
contrary, the Executive's employment with the Company is terminable at will with
or without Cause; PROVIDED, that the Executive's entitlement to payments and
benefits following such termination will depend on the type of termination and
therefore be governed by the other provisions of this Section 9.

         (m)  BOARD RESIGNATION.  Upon the Executive's cessation of employment
with the Company for any reason whatsoever, the Executive shall thereupon be
deemed to have resigned from the Board of Holding, the Company and of every
Subsidiary on which he shall then be serving, and of any other company in which
the Executive is then serving as a director at the request of the Company or
Holding, in each case effective as of the date of cessation.

    10.  NON-COMPETITION, NON-SOLICITATION AND PROTECTION OF TRADE SECRETS.


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<PAGE>

         (a)  By and in consideration of the substantial compensation and
benefits to be provided by the Company and Holding hereunder, and in further
consideration of the Executive's exposure to the proprietary information of the
Company, Holding and/or any Affiliate of either of them, the Executive agrees
that he shall not, during the Employment Period and for a period equal to the
greater of (i) the period during which he is receiving salary continuation
payments pursuant to this Agreement or (ii) one (1) year after the Employment
Period, directly or indirectly own, manage, operate, join, control, be employed
by, or participate in the ownership, management, operation or control of or be
connected in any manner, including but not limited to holding the positions of
officer, director, shareholder, consultant, independent contractor, employee,
partner, or investor, with any Direct Competitor (as defined below); PROVIDED,
HOWEVER, that the Executive may invest in stocks, bonds, or other securities of
any corporation or other entity (but without participating in the business
thereof) if such stocks, bonds, or other securities are listed for trading on a
national securities exchange or NASDAQ and the Executive's investment does not
exceed 1% of the issued and outstanding shares of capital stock, or in the case
of bonds or other securities, 1% of the aggregate principal amount thereof
issued and outstanding.  "Direct Competitor" shall mean any of Kmart
Corporation, Wal-Mart Stores, Inc., Sears Roebuck and Co., Dayton Hudson Corp.,
or J. C. Penney or any Affiliate of any of them.

         (b)  The Executive recognizes that the services to be performed by him
hereunder are special, unique and extraordinary and that, by reason of his
employment hereunder, he may acquire confidential information and trade secrets
concerning the operations of the Company, Holding and/or any Affiliate of either
of them.  Accordingly, the Executive agrees that he will not, except in the good
faith performance of his duties on behalf of the Company or Holding, and not
inconsistent with his fiduciary duties owed to the Company or Holding, disclose
on or after the date hereof any secret or confidential information that he has
learned by reason of his association with the Company, Holding and any
Subsidiary, or use any such information to the detriment of the Company, Holding
and any Subsidiary, so long as such confidential information or trade secrets
have not become generally known through no fault of the Executive, provided
that, if required to be disclosed pursuant to a court order or legal process,
the Executive shall give the Company timely notice of such order or process and
cooperate with the Company to avoid or limit such disclosures.

         (c)  The Executive further agrees that he will not, at any time during
the Employment Period, and for a period of two years thereafter, directly or
indirectly solicit or induce any of the employees of the Company, Holding or any
Subsidiary to terminate their employment with the Company, Holding or any
Subsidiary.

         (d)  The Executive agrees that any material breach of the terms of
this Section would result in irreparable injury and damage to the Company,
Holding or any Subsidiary for which the Company, Holding or any Subsidiary would
have no adequate remedy at law; the Executive therefore also agrees that in the
event of said breach or any reasonable threat of material breach, the Company,
Holding or any Subsidiary shall be entitled to seek an


                                          12


<PAGE>

immediate injunction and restraining order to prevent such breach and/or
threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive.  The terms of this
paragraph shall not prevent the Company, Holding or any Subsidiary from pursuing
any other available remedies for any breach or threatened breach hereof,
including but not limited to the recovery of damages.  The Executive, Holding
and the Company agrees that the provisions of this Section are reasonable.
Should a court or arbitrator determine, however, that any provision of this
Section is unreasonable, either in period of time, geographical area, or
otherwise, the parties hereto agree that this Section shall be interpreted and
enforced to the maximum extent which such court or arbitrator deems reasonable.

         (e)  The provisions of this Section 10 shall survive any termination
of this Agreement, and the extension of any claim or cause of action by the
Executive against the Company, Holding or any Subsidiary, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company, Holding or any Subsidiary of the covenants and agreements of
this Section.

    11.  REPRESENTATIONS OF THE EXECUTIVE.  The Executive represents and
warrants that he is free to enter into this Agreement and to perform the duties
required hereunder, and that there is no agreement or understanding, written or
oral, between the Executive and any Employer pertaining to employment
non-competition, disclosure of confidential information and/or trade secrets or
other restrictions preventing the performance of his duties hereunder.

    12.  EFFECT OF AGREEMENT ON OTHER BENEFITS.  Except as specifically
provided in this Agreement, the existence of this Agreement shall not prohibit
or restrict the Executive s entitlement to full participation in the employee
benefit and other plans or programs in which senior-level executives of the
Company are eligible to participate generally (PROVIDED, however, that
notwithstanding anything to the contrary in this Agreement, the Executive may
not participate in any such plans or programs pertaining to severance or salary
continuation payments, or stock options, stock awards or other equity-based
forms of compensation).

    13.  ASSIGNABILITY; BINDING NATURE.  This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
heirs (in the case of the Executive) and assigns.  No right or obligation of the
Company or Holding, as the case may be, under this Agreement may be assigned or
transferred by the Company or Holding, as the case may be, except that such
right or obligation may be assigned or transferred pursuant to a merger or
consolidation in which the Company or Holding, as the case may be, is not the
continuing entity, or pursuant to the sale or liquidation of all or
substantially all of the assets or business of the Company or Holding, as the
case may be, provided that the assignee or transferee is the successor to all or
substantially all of the assets or business of the Company or Holding, as the
case may be, and such assignee or transferee assumes the liabilities,
obligations and duties of the Company or Holding, as the case may be, as
contained in this Agreement, either contractually or as a matter of law.  Each
of the Company and Holding further agrees


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<PAGE>

that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it shall exercise reasonable efforts to cause such assignee
or transferee to expressly assume the liabilities, obligations and duties of the
Company and Holding hereunder.  No right or obligation of the Executive under
this Agreement may be assigned or transferred by the Executive other than his
rights to compensation and benefits, which may be transferred only by will or
operation of law, except as provided herein.  Nothing in this Section 13 shall
be deemed to affect the Executive's rights under this Agreement following a
Change in Control.

    14.  REPRESENTATIONS OF THE COMPANY.  Each of Holding and the Company
represents and warrants that it is fully authorized and empowered by action
of its Board or a duly authorized committee thereof to enter into this
Agreement, that the Agreement is the valid and binding obligation of the
Company enforceable against the Company in accordance with the terms herein,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and other laws of general application affecting
creditors' rights generally and by equitable principles and that the
performance of its obligations under this Agreement will not violate any
agreement between it and any other person, firm or organization.

    15.  ENTIRE AGREEMENT.  This Agreement contains the entire understanding
and agreement between the parties hereto concerning the subject matter hereof
and supersedes all prior agreements, understandings, discussions, negotiations
and undertakings, whether written or oral, between the parties with respect
thereto.

    16.  AMENDMENT OR WAIVER.  No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by the Executive and an
authorized officer of each of the Company and Holding.  No waiver by either
party of any breach by the other party of any condition or provision contained
in this Agreement to be performed by such other party shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or any prior or
subsequent time.  Any waiver must be in writing and signed by the Executive or
an authorized officer of the Company or Holding, as the case may be.

    17.  SEVERABILITY.  In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, in any jurisdiction the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect to the
fullest extent permitted by law in such jurisdiction, and such invalidity or
unenforceability shall have no effect in any other jurisdiction.

    18.  BENEFICIARIES/REFERENCES.  The Executive shall be entitled, to the
extent permitted under applicable law, to select and change a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
the Executive's death by giving the Company and Holding written notice thereof.
In the event of the Executive's death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.


                                          14

<PAGE>

    19.  GOVERNING LAW/JURISDICTION.  This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of Illinois
without reference to principles of conflict of laws.

    20.  CONFIDENTIALITY; PRESS RELEASE.  The Executive shall not disclose the
contents of this Agreement to anyone except as may be required by enforceable
legal process or to the extent there is a public disclosure made by the Company
or Holding of such matters.  The Executive shall use his best efforts to arrange
an opportunity for the Company or its designee to coordinate any press release.

    21.  NOTICES.  Any notice given to a party shall be in writing and shall be
deemed to have been given when delivered personally or, if sent by certified or
registered mail, postage prepaid, return receipt requested, five days after
being sent duly addressed to the party concerned at the address indicated below
or to such changed address as such party may subsequently give such notice.

If to the Company
or Holding:             Montgomery Ward & Co., Incorporated
                        Montgomery Ward Plaza
                        Chicago, IL  60671
                        Attention:  General Counsel

If to the Executive:    Burnett Donoho
                        9 West County Line Road
                        Barrington, Illinois   60010




                        With a copy to:

                        _______________________________
                        _______________________________
                        _______________________________

                        Attention:     ____________________

    22.  WITHHOLDING.  All amounts required to be paid by the Company herein
shall be subject to reduction in order to comply with applicable Federal, state
and local tax withholding requirements.


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<PAGE>

    23.  HEADINGS.  The headings of the sections contained in this Agreement
are for convenience of reference only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.


    24.  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.



         IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first written above.

                                  MONTGOMERY WARD & CO., INCORPORATED


                                  By: /s/ Roger V. Goddu
------------------------------       --------------------------------------
Witness                              Name:
                                     Title:


                                  MONTGOMERY WARD HOLDING CORP.


                                  By:   /s/ Robert A. Kasenter
------------------------------       --------------------------------------
Witness                              Name:
                                     Title:

                                    /s/ Burnett Donoho
------------------------------    -----------------------------------------
Witness                                BURNETT DONOHO


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<PAGE>



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