10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Mark One X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission File No. 0-13365 OshKosh B'Gosh, Inc. A DELAWARE Corporation IRS EMPLOYER IDENTIFICATION NO. 39-0519915 112 Otter Avenue Oshkosh, Wisconsin 54901 Telephone number: (414) 231-8800 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, Par Value $.01 per share Class B Common Stock, Par Value $.01 per share 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--- [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. As of March 17, 1995, there were outstanding 12,081,587 shares of Class A Common Stock and 1,267,713 shares of Class B Common Stock, of which 10,905,781 shares and 445,906 shares, respectively, were held by non- affiliates of the registrant. Based upon the closing sales prices as of March 17, 1995, the aggregate market value of the Class A Common Stock and Class B Common Stock held by non-affiliates was $158,133,824.50 and $6,688,590, respectively. DOCUMENTS INCORPORATED BY REFERENCE OshKosh B'Gosh, Inc definitive Proxy Statement for its annual meeting to be held on May 5, 1995 (or such later date as the directors may determine), Incorporated into Part III. INDEX PART I PAGE Item 1. Business 1 (a) General Development of Business 1 (b) Financial Information About Industry Segments 2 (c) Narrative Description of Business 2 Products 2 Raw Materials, Manufacturing and Sourcing 3 Trademarks 4 Seasonality 4 Working Capital 4 Sales and Marketing 5 Backlog 5 Competitive Conditions 6 Environmental Matters 6 Employees 6 Item 2. Properties 7 Item 3. Legal Proceedings 8 Item 4. Submission of Matters to a Vote of Security Holders 8 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 9 Item 6. Selected Financial Data 10 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition 11 Item 8. Financial Statements and Supplementary Data 15 Item 9. Disagreements on Accounting and Financial Disclosure 35 PART III Item 10. Directors and Executive Officers of the Registrant 35 Item 11. Executive Compensation 35 Item 12. Security Ownership of Certain Beneficial Owners 35 and Management Item 13. Certain Relationships and Related Transactions 35 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 35 PART I ITEM 1. BUSINESS (a) General Development of Business OshKosh B'Gosh, Inc.(together with its subsidiaries, the "Company") was founded in 1895 and was incorporated in the state of Delaware in 1929. The Company designs, manufactures, sources and sells apparel for the children's wear, youth wear, and men's wear markets. While its heritage is in the men's workwear market, the Company is currently best known for its line of high quality children's wear. The children's wear and youth wear business represented approximately 94% of consolidated Company revenues for 1994. The success of the children's wear business can be attributed to the Company's core themes: quality, durability, style, trust and Americana. These themes have propelled the Company to the position of market leader in the branded children's wear industry. The Company also leverages the economic value of the OshKosh B'Gosh name via both domestic and international licensing agreements. The Company's long-term strategy is to provide high quality, high value clothing for the entire family. Toward this end the Company continues to expand its business lines and avenues for marketing its products. In 1990, the Company acquired Essex Outfitters, Inc. ("Essex"), a vertically integrated children's and youth wear retailer marketed under the Boston Trader label through a licensing agreement with Boston Trader Ltd. In 1994, the Company merged the operations of Essex into OshKosh B'Gosh, Inc. and created a new brand name, Genuine Kids , for the line of children's and youth wear formerly marketed under the Boston Trader label. The Genuine Kids line of apparel is sourced from third party manufacturers, primarily offshore, and sold primarily through a chain of 77 domestic retail stores. OshKosh B'Gosh International Sales, Inc. was created in 1985 for the sale of OshKosh B'Gosh products to foreign distributors. In 1990, the Company formed OshKosh B'Gosh Europe, S.A. in conjunction with a joint venture with Poron Diffusion, S.A. to provide further access to European markets. In 1992 the Company acquired Poron's 49% interest in OshKosh B'Gosh Europe, S.A. During 1993 OshKosh B'Gosh made moves to strategically position itself for International expansion. OshKosh B'Gosh/Asia Pacific Ltd. was created in Hong Kong to oversee licensees and distributors in the Pacific Rim, to assist international licensees with the sourcing of product, and to expand the Company's presence in that region. OshKosh B'Gosh U.K. Ltd. and OshKosh B'Gosh Deutschland GmbH, incorporated in the United Kingdom and Germany respectively, were established to increase sales emphasis in those countries. The Company's chain of 60 domestic OshKosh B'Gosh factory outlet stores sells irregular and first quality OshKosh B'Gosh merchandise throughout the United States. In 1994, the Company opened an OshKosh B'Gosh showcase store in New York City bringing total domestic stores to 61. In addition, Oshkosh B'Gosh Europe opened showcase stores in London and Paris during 1994. The showcase stores are designed to reinforce awareness and demand for OshKosh B'Gosh as a global brand. In 1993, the Company distributed its first children's wear mail order catalog, further expanding its channels of distribution. The Company has been expanding its utilization of off-shore sourcing as a cost-effective means to produce its products and to this end leased a production facility in Honduras in 1990 under its wholly owned subsidiary Manufacturera International Apparel S.A. (b) Financial Information About Industry Segments The Company is engaged in only one line of business, namely, the apparel industry. (c) Narrative Description of Business 2 Products The Company designs, manufactures, sources and markets a broad range of children's clothing as well as lines of youth wear and men's casual and work wear clothing under the OshKosh , OshKosh B'Gosh , Baby B'Gosh , Genuine Kids or OshKosh Men's Wear labels. In 1994, the Company created the Our Stuff by OshKosh B'Gosh brandname (initial sales of the product are scheduled for the fall 1995 season). The products are distributed primarily through better quality department and specialty stores, 138 of the Company's own stores, direct mail catalogs and foreign retailers. The children's wear and youth wear business, which is the largest segment of the business, accounted for approximately 94% of 1994 sales compared to approximately 94% and 96% of such sales in 1993 and 1992, respectively. The children's wear and youth wear business is targeted to reach the middle to upper middle segment of the sportswear market. Children's wear is in size ranges from newborn/infant to girls 6X and boys 7. Youth wear is in size ranges girls 7 to 14 and boys 8 to 20. The Company's children's wear and youth wear business include a broad range of product categories organized primarily in a collection format whereby the products in that collection share a primary design theme which is carried out through fabric design, screenprint, embroidery, and trim applications. The Company also offers basic denim products with multiple wash treatments. The product offerings for each season will typically consist of a variety of clothing items including bib overalls, pants, jeans, shorts, and shortalls (overalls with short pant legs), shirts, blouses and knit tops, skirts, jumpers, sweaters, dresses, playwear and fleece. The men's wear line is the original business that started the Company in 1895. The current line comprises the traditional bib overalls, several styles of waistband-work, carpenter, and painters-pants, five pocket jeans, work shirts and flannel shirts as well as coats and jackets. The line is designed with a full array of sizes up to and including size 60 inch waists and 5x size shirts. Most products are designed by an in-house staff. Product design requires long lead times, with products generally being designed a year in advance of the time they actually reach the retail market. In general, the Company's products are traditional in nature and not intended to be "designer" items. In designing new products and styles, the Company attempts to incorporate current trends and consumer preferences in its traditional product offerings. In selecting fabrics and prints for its products, the Company seeks, where possible, to obtain exclusive rights to the fabric design from its suppliers in order to provide the Company with some protection from imitation by competitors for a limited period of time. Raw Materials, Manufacturing and Sourcing All raw materials used in the manufacture of Company products are purchased from unaffiliated suppliers. In 1994, approximately 78% of the Company's direct expenditures for raw materials (fabric) were from its five largest suppliers, with the largest such supplier accounting for approximately 29% of total raw material expenditures. Fabric and various non-fabric items, 3 such as thread, zippers, rivets, buckles and snaps are purchased from a variety of independent suppliers. The fabric and accessory market in which OshKosh B'Gosh purchases its raw materials is composed of a substantial number of suppliers with similar products and capabilities, and is characterized by a high degree of competition. As is customary in its industry, the Company has no long-term contracts with its suppliers. To date, the Company has experienced little difficulty in satisfying its requirements for raw materials, considers its sources of supply to be adequate, and believes that it would be able to obtain sufficient raw materials should any one of its product suppliers become unavailable. Production administration is primarily coordinated from the Company's headquarters facility in Oshkosh with most production taking place in its one Wisconsin, eight Tennessee, and five Kentucky plants. Overseas labor is also accessed through a leased sewing plant in Honduras, where cut apparel pieces are received from the United States and are reimported by OshKosh B'Gosh as finished goods. In addition, product is produced by contractors in 11 countries and imported into the United States. The majority of the product engineering and sample making, allocation of production among plants and independent suppliers, material purchases and invoice payments is done through the Company's Oshkosh headquarters. All designs and specifications utilized by independent manufacturers are provided by the Company. While no long-term, formal arrangements exist with these manufacturers, the Company considers these relationships to be satisfactory. The Company believes it could obtain adequate alternative production capacity if any of its independent manufacturers become unavailable. Because higher quality apparel manufacturing is generally labor intensive (sewing, pressing, finishing and quality control), the Company has continually sought to upgrade its manufacturing and distribution facilities. Economies are therefore realized by technical advances in areas like computer-assisted design, computer-controlled fabric cutting, computer evaluation and matching of fabric colors, automated sewing processes, and computer-assisted inventory control and shipping. In order to realize economies of operation within the domestic production facilities, cutting operations are located in three of the Company's fourteen plants, with all product washing, pressing and finishing done in one facility in Tennessee and all screenprint and embroidery done in one facility in Kentucky. Quality control inspections of both semi-finished and finished products are required at each plant, including those of independent manufacturers, to assure compliance. Customer orders for fashion products are booked from three to six months in advance of shipping. Because most Company production of styled products is scheduled to fill orders already booked, the Company believes that it is better able to plan its production and delivery schedules than would be the case if production were in advance of actual orders. In order to secure necessary fabrics on a timely basis and to obtain manufacturing capacity from independent suppliers, the Company must make substantial advance commitments, sometimes as much as five to seven months prior to receipt of customer orders. Inventory levels therefore depend on Company judgment of market demand. Trademarks The Company utilizes the OshKosh , OshKosh B'Gosh , Baby B'Gosh or Genuine Kids trademarks on most of its products, either alone or in conjunction with a white triangular background. In addition, "The Genuine Article " is embroidered on the small OshKosh B'Gosh patch to signify apparel 4 that is classic in design and all-but-indestructible in quality construction. The Company currently uses approximately 21 registered and unregistered trademarks in the United States. These trademarks and universal awareness of the OshKosh B'Gosh name are significant in marketing the products. Seasonality Products are designed and marketed primarily for three principal selling seasons: RETAIL SALES SEASON PRIMARY BOOKING PERIOD SHIPPING PERIOD Spring/Summer August-September January-April Fall/Back-to-School January-February May-August Winter/Holiday April-May September-December The Company's business is increasingly seasonal, with highest sales and income in the third quarter which is the Company's peak retail selling season at its retail outlet stores. The Company's second quarter sales and income are the lowest both because of relatively low domestic wholesale unit shipments and relatively modest retail outlet store sales during this period. The Company anticipates this seasonality trend to continue to impact 1995 quarterly sales and income. Working Capital Working capital needs are affected primarily by inventory levels, outstanding accounts receivable and trades payable. In June 1994, the Company entered into a credit agreement with a number of banks which provides a $60 million three year revolving credit facility and a $40 million revocable demand line of credit for cash borrowings, issuance of commercial paper and letters of credit. The agreement expires in June 1997. The Company also has a $12.5 million unsecured credit facility available at December 31, 1994 for issuance of letters of credit. There were no outstanding borrowings against these credit arrangements at December 31, 1994. Letters of credit of approximately $26 million were outstanding at December 31, 1994. Inventory levels are affected by order backlog and anticipated sales. Accounts receivable are affected by payment terms offered. It is general practice in the apparel industry to offer payment terms of ten to sixty days from date of shipment. The Company offers net 30 days terms only. The Company believes that its working capital requirements and financing resources are comparable with those of other major, financially sound apparel manufacturers. 5 Sales and Marketing Company products are sold primarily through better quality department and specialty stores, although sales are also made through direct mail catalog companies, foreign retailers and other outlets, including 137 Company operated domestic retail factory stores and one retail showcase store, and the Company's proprietary mail order catalog. No one customer accounted for more than 10% of the Company's 1994 sales. The Company's largest ten and largest 100 customers accounted for approximately 43% and 68% of 1994 sales, respectively. In 1994, the Company's products were sold to approximately 3,300 wholesale customers (approximately 10,600 stores) throughout the United States, and a sizeable number of international accounts. Product sales to better quality department and specialty stores are primarily by an employee sales force with the balance of sales made through manufacturer's representatives or to in-house accounts. In addition to the central sales office in Oshkosh, the Company maintains regional sales offices and product showrooms in Dallas and New York. Most members of the Company's sales force are assigned to defined geographic territories, with some assigned to specific large national accounts. In sparsely populated areas and new markets, manufacturer's representatives represent the Company on a non- exclusive basis. Direct advertising in consumer and trade publications is the primary method of advertising used. The Company also offers a cooperative advertising program, paying half of its customers' advertising expenditures for their products, generally up to two percent of the higher of the customer's prior or current year's gross purchases from the Company. Backlog The dollar amount of backlog of orders believed to be firm as of the end of the Company's fiscal year and as of the preceding fiscal year is not material for an understanding of the business of the Company taken as a whole. 6 Competitive Conditions The apparel industry is highly competitive and consists of a number of domestic and foreign companies. Some competitors have assets and sales greater than those of the Company. In addition, the Company competes with a number of firms that produce and distribute only a limited number of products similar to those sold by the Company or sell only in certain geographic areas being supplied by the Company. A characteristic of the apparel industry is the requirement that a marketer recognize fashion trends and adequately provide products to meet such trends. Competition within the apparel industry is generally in terms of quality, price, service, style and, with respect to branded product lines, consumer recognition and preference. The Company believes that it competes primarily on the basis of quality, style, and consumer recognition and to a lesser extent on the basis of service and price. The Company is focusing attention on the issue of price and service and has taken and will continue to take steps to reduce costs, become more competitive in the eyes of value conscious consumers and deliver the service expected by its customers. The Company's share of the overall children's wear market is quite small. This is due to the diverse structure of the market where there is no truly dominant producer of children's garments across all size ranges and garment types. In the Company's channel of distribution, department and specialty stores, it holds the largest share of the branded children's wear market. Environmental Matters The Company's compliance with Federal, State, and local environmental laws and regulations had no material effect upon its capital expenditures, earnings, or competitive position. The Company does not anticipate any material capital expenditures for environmental control in either the current or succeeding fiscal years. Employees At December 31, 1994, the Company employed approximately 6,600 persons. Approximately 52% of the Company's personnel are covered by collective bargaining agreements with the United Garment Workers of America. The Company considers its relations with its personnel to be good. 7 ITEM 2. PROPERTIES The Company's principal executive and administrative offices are located in Oshkosh, Wisconsin. Its principal office, manufacturing and distribution operations are conducted at the following locations: Approximate Location Floor Area in Principal Square Feet Use Albany, KY 20,000 Manufacturing Byrdstown, TN 32,000 Manufacturing Celina, TN 100,000 Manufacturing Celina, TN 90,000 Laundering/Pressing Columbia, KY 78,000 Manufacturing Columbia, KY 23,000 Manufacturing Dallas, TX (1) 1,995 Sales Offices/Showroom Gainesboro, TN 61,000 Manufacturing Gainesboro, TN 29,000 Warehousing Hermitage Springs, TN 52,000 Manufacturing Jamestown, TN 43,000 Manufacturing Liberty, KY 218,000 Manufacturing/Warehousing Liberty, KY (2) 32,000 Warehousing Los Angeles, CA (3) 667 Sales Offices/Showroom Marrowbone, KY 27,000 Manufacturing McEwen, TN (4) 29,000 Manufacturing New York City, NY (5) 18,255 Sales Offices/Showrooms Oshkosh, WI 99,000 Exec. & Operating Co. Offices Oshkosh, WI 88,000 Manufacturing Oshkosh, WI 128,000 Distribution/Warehousing Red Boiling Springs,TN 41,000 Manufacturing White House, TN 284,000 Distribution/Warehousing All properties are owned by the Registrant with the exception of: (1) Lease expiration date - 1995, (2) Lease expiration date - 1999, (3) Lease expiration date -1997, (4) Lease expiration date - 1997, (5) Lease expiration date - 2007. The Company believes that its properties are well maintained and its manufacturing equipment is in good operating condition and sufficient for current production. Substantially all of the Company's retail stores occupy leased premises. For information regarding the terms of the leases and rental payments thereunder, refer to the "Leases" note to the consolidated financial statements on page 26 of this Form 10-K. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are not parties to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Quarterly Common Stock Data 1994 1993 Stock Price Dividends Stock Price Dividends High Low Per Share High Low Per Share Class A common stock 1st 21-3/4 14-1/2 $0.1025 22-1/2 14-1/2 $0.1025 2nd 15 12-1/4 0.1025 19 14-1/2 0.1025 3rd 15-1/2 13-1/2 0.1025 18-1/4 13-1/2 0.1025 4th 15-1/4 13 0.07 20-1/2 16-1/4 0.205 Class B common stock 1st 22 16-3/4 $0.09 18 12 $0.09 2nd 17 13-3/4 0.09 18-1/4 15-1/4 0.09 3rd 15-1/2 14 0.09 18 13-3/4 0.09 4th 15-1/4 13-1/2 0.06 20-3/4 17 0.18 The Company's Class A common stock and Class B common stock trade on the Over-The-Counter market and is quoted on NASDAQ under the symbols GOSHA and GOSHB, respectively. The table reflects the last price quotation on the NASDAQ National Market System and does not reflect mark-ups, mark-downs, or commissions and may not represent actual transactions. The Company has paid cash dividends on its common stock each year since 1936. The Company's Certificate of Incorporation requires that when any dividend (other than a dividend payable solely in shares of the Company's stock) is paid on the Company's Class B Common Stock, a dividend equal to 115% of such amount per share must concurrently be paid on each outstanding share of Class A Common Stock. As of March 17, 1995, there were 1,939 Class A common stock shareholders of record and 194 Class B common stock shareholders of record. 9 ITEM 6. SELECTED FINANCIAL DATA Financial Highlights (Dollars in thousands, except per share amounts) Year Ended December 31, 1994 1993 1992 1991 1990 Financial Results Net sales $363,363 $340,186 $346,206 $365,173 $323,377 Net income 7,039 4,523 15,135* 23,576 29,552 Return on sales 1.9% 1.3% 4.4% 6.5% 9.1% Financial Condition Working capital $102,463 $111,794 $111,075 $106,803 $103,063 Total assets 217,211 229,131 226,195 214,963 192,196 Long-term debt (less current maturities) 517 757 1,293 2,379 3,459 Shareholders equity 158,814 171,998 175,153 167,380 151,166 Data Per Common Share Net income $ .50 $ .31 $ 1.04* $ 1.62 $ 2.03 Cash dividends declared Class A .3775 .5125 .5125 .5125 .49 Class B .33 .45 .45 .45 .43 Shareholders equity 11.76 11.79 12.01 11.48 10.36 * After a charge of $601 or $.04 per share to reflect cumulative effect of change in accounting for nonpension postretirement benefits. See Note 10 to consolidated financial statements. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993 Net sales in 1994 were $363.4 million, an increase of $23.2 million (6.8%) over 1993 sales of $340.2 million. The Company's 1994 domestic wholesale business of approximately $234 million was 9% less than 1993 sales of approximately $257 million, with a corresponding decline in unit shipments of approximately 6.7%. The decrease in domestic wholesale unit shipments related primarily to the effects of the competitive environment in the children's wear business combined with the effects of prior years poor shipping performance and perceived weakness in product design. The Company's Spring, 1995 children s fashion offering has been well received. Company initiatives undertaken during 1994 resulted in significantly improved shipping performance to customers. In addition, improved product design contributed to better sell-thrus and margins for a majority of our wholesale customers. The Company currently anticipates that unit shipments of its Spring, 1995 wholesale product offering will exceed Spring, 1994 by over 10%. Early indications of acceptance of the Company's Fall, 1995 children's fashion offering have also been promising. Company retail sales at its OshKosh B'Gosh branded outlet stores and Genuine Kids stores were approximately $99.4 million for 1994, a 52.5% increase over 1993 retail sales of approximately $65.2 million. This retail sales increase was primarily driven by the opening of an additional 46 retail stores during 1994. In addition, the Company's comparable store sales for 1994 were up approximately 3.6%. At year end the Company operated 61 OshKosh B'Gosh branded stores and 77 Genuine Kids stores. The Company anticipates continued expansion of its retail business through the opening of approximately 35 additional retail stores during 1995. The Company's gross profit margin as a percent of sales improved to 28.6% in 1994, compared with 28.0% in 1993. This gross profit margin improvement was due primarily to the impact of the Company's increased retail sales at higher gross margins relative to its domestic wholesale business. The favorable impact of the Company's retail gross margins was offset in part by the domestic wholesale gross margin, which was down in 1994 primarily as a result of the adverse impact of reduced unit volume on our manufacturing operations and slightly lower pricing to wholesale customers. As a result of capacity reduction initiatives implemented during 1994 and early 1995, along with increased utilization of contracted manufacturing resources outside of the United States, the Company anticipates further improvement in its gross profit margins during 1995. Selling, general and administrative expenses for 1994 increased $16.5 million over 1993. As a percent of net sales, selling, general and administrative expenses were 26.1% in 1994, up from 23.1% in 1993. The primary reason for the increased selling, general and administrative expenses is the Company's aggressive expansion of its retail business. In addition, the Company's increasing focus on its international operations resulted in an increase in 1994's selling, general and administrative expenses of approximately $2.7 million. Also, the Company's catalog division, initiated in the second half of 11 1993, added approximately $1.6 million to selling, general and administrative expenses in 1994. Continued expansion of the Company's retail business, along with further development of its foreign business and catalog division, will result in higher selling, general and administrative expenses in relation to its net sales in 1995. During the fourth quarter of 1993, the Company recorded a pretax restructuring charge of $10.8 million. Restructuring costs (net of income tax benefit) reduced net income by $7.1 million ($.49 per share) in 1993. The restructuring charge included approximately $3.3 million for facility closings, write-down of the related assets and severance costs pertaining to work force reductions. The restructuring charge also reflected the Company's decision to market its Trader Kids line of children's apparel under the new name Genuine Kids and the resulting costs of the Company's decision not to renew its Boston Trader license arrangement beyond 1994, as well as expenses to consolidate its retail operations. Accordingly, the restructuring charge also included approximately $7.5 million for write-off of unamortized trademark rights and expenses relating to consolidating the Company's retail operations. During 1994, the Company implemented its restructuring plan. The Company closed its McKenzie, Tennessee facility and announced plans to close its Dover, Tennessee facility, which was completed in early 1995. Closing of the Dover facility in 1995 will reduce the Company's work force by approximately 270 employees. The Company was able to sell both operating facilities, and reached satisfactory agreements with all affected employees concerning severance arrangements. The Company began to market a portion of its children's wear line under the Genuine Kids label, discontinuing the Trader Kids line of children's apparel. The Company also consolidated the operations of its retail business into its Oshkosh office. As of December 31, 1994, the Company estimates that remaining restructuring costs are sufficiently provided for in the residual restructuring liability. Remaining costs include charges for facility closings, including disposal of the real estate and severance costs pertaining to work force reductions. This plan should be substantially completed during 1995. The Company's effective tax rate for 1994 was 45.7% compared to 51.3% in 1993. The relatively high effective tax rates for both years result primarily from the Company's foreign operating losses, which provide no tax benefit. In addition, the high 1993 effective tax rate was the result of substantially lower income before income taxes in 1993 (which resulted in part from the restructuring charge). Company management believes that the $11.5 million deferred tax asset at December 31, 1994 can be fully realized through reversals of existing taxable temporary differences and the Company's history of substantial taxable income which allows the opportunity for carrybacks of current or future losses. In November of 1992, the Financial Accounting Standards Board issued its Statement No. 112 entitled Employers Accounting for Post Employment Benefits. This standard had no significant impact on the Company's 1994 financial statements. 12 YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992 Net sales in 1993 were $340.2 million, down 1.7% from 1992 sales of $346.2 million. The Company's domestic wholesale business of approximately $257 million in 1993 was 9.3% less than 1992 sales, due primarily to a decline in unit shipments of approximately 10% in 1993 from 1992. The decrease in domestic wholesale unit shipments related primarily to the effects of the competitive pricing environment in the children's wear business, the Company's difficulty in meeting the delivery requirements of its wholesale customers as well as perceived weakness in its product design. Company retail sales at its OshKosh B'Gosh branded outlet stores and its Trader Kids stores (now marketed under the Genuine Kids name) expanded to approximately $65.2 million in 1993, a 49.9% increase over 1992 retail sales of approximately $43.5 million. Retail sales increases resulted primarily from the opening of an additional 38 retail stores during 1993. Gross profit margin as a percent of sales improved to 28.0% in 1993, compared with 25.1% in 1992. During 1993, the Company experienced a slight improvement in its domestic wholesale gross margins. Increased retail store sales, at higher gross profit margins, had a significant impact on improved overall gross margin performance. Gross margins for 1992 were unfavorably impacted by manufacturing inefficiencies resulting from the restructuring of production lines and increasing workers compensation insurance and employee health care costs. Selling, general and administrative expenses increased $12.1 million in 1993 from 1992. As a percent of net sales, selling, general and administrative expenses were 23.1% in 1993, up from 19.2% in 1992. The primary reason for the increased selling, general and administrative expenses was the Company's increased focus on its retail business. In addition, the Company initiated a catalog division in the second half of 1993 which added approximately $1.2 million to its selling, general and administrative expenses. Increased emphasis on foreign sales opportunities, including the start-up cost associated with the opening of sales offices, also added to the Company's selling, general and administrative expenses during 1993. During the fourth quarter of 1993, the Company recorded a pretax restructuring charge of $10.8 million. Restructuring costs (net of income tax benefit) reduced net income by $7.1 million ($.49 per share) in 1993. During 1992, the Company reduced its estimate of the Absorba line restructuring costs originally recorded in 1991 by $2.8 million, due to the efficient and orderly wind down of operations and favorable settlement of lease obligations. This adjustment to restructuring costs (net of income taxes) increased 1992 net income by $1.8 million ($.12 per share). Royalty income, net of expenses, was $3.4 million in 1993, as compared to $2.6 million in 1992. The increase in net royalty income resulted primarily from additional foreign license agreements. The effective tax rate for 1993 was 51.3% compared to 39.8% in 1992. The higher 1993 effective tax rate resulted from the Company's foreign operating losses, which provide no tax benefit, combined with 13 the Company's substantially lower income before income taxes in 1993 (which resulted in part from the restructuring charge). The Company's early adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, in 1992 had no material impact on 1992's results of operations. The Company elected early adoption of the Statement of Financial Accounting Standards No. 106, Employers Accounting for Post Retirement Benefits Other Than Pensions, in 1992. The Company elected to record the entire transition obligation in 1992, which resulted in a net $.6 million after tax ($.04 per share) reduction in net income. SEASONALITY The Company's business is increasingly seasonal, with highest sales and income in the third quarter which is the Company's peak retail selling season at its retail outlet stores. The Company's second quarter sales and income are the lowest both because of relatively low domestic wholesale unit shipments and relatively modest retail outlet store sales during this period. The Company anticipates this seasonality trend to continue to impact 1995 quarterly sales and income. FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY The Company's financial position remained strong throughout 1994. At December 31, 1994, the Company's cash and cash equivalents were $10.5 million, compared to $17.9 million at the end of 1993 and $21.1 million at the end of 1992. Net working capital at the end of 1994 was $102.5 million, compared to $111.8 million at 1993 year end and $111.1 million at 1992 year end. Cash provided by operations was approximately $22.1 million in 1994, compared to $21.6 million in 1993 and $22.9 million in 1992. Accounts receivable at December 31, 1994 were $23.9 million compared to $19.5 million at December 31, 1993. Inventories at the end of 1994 were $93.9 million, down $6.1 million from 1993. Management believes that year end 1994 inventory levels are generally appropriate for anticipated 1995 business activity. Capital expenditures were approximately $9.9 million in 1994 and $9 million in 1993. Capital expenditures for 1995 are currently budgeted at approximately $12 million. On June 14, 1994, the Company announced a stock repurchase program for up to 1,500,000 shares of its Class A common stock in open market transactions at prevailing prices. Through December 31, 1994, the Company has repurchased approximately 1,084,000 shares of its Class A common stock for approximately $15 million. In June 1994, the Company finalized a credit agreement with participating banks. This arrangement provides a $60 million, three year revolving credit facility and a $40 million revocable demand line of credit for cash borrowings, issuance of commercial paper and letters of credit. The agreement expires in June 1997. The Company believes that these credit facilities, along with cash generated from operations, will be sufficient to finance the Company's stock repurchase program as well as its capital expenditure, seasonal 14 working capital, remaining restructuring and business development needs. Dividends on the Company's Class A and Class B common stock totaled $.3775 per share and $.33 per share, respectively, in 1994, compared to $.5125 per share and $.45 per share on the Company's Class A and Class B common stock, respectively, in 1993. The dividend payout rate was 75% of net income in 1994 and 163% in 1993. The Company's lower earnings from operations in 1993 combined with the fourth quarter 1993 restructuring charge resulted in the unusually high 1993 payout rate. INFLATION The effects of inflation on the Company's operating results and financial condition were not significant. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Financial Statements: Reports of Independent Auditors 16 Consolidated Balance Sheets - December 31, 1994 and 1993 18 Consolidated Statement of Income - years ended December 31, 1994, 1993, and 1992 19 Consolidated Statements of Changes in Shareholders Equity - years ended December 31, 1994, 1993, and 1992 20 Consolidated Statements of Cash Flows - years ended December 31, 1994, 1993, and 1992 21 Notes to Consolidated Financial Statements 22 15 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors OshKosh B'Gosh, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of OshKosh B'Gosh, Inc. and subsidiaries (the Company) as of December 31, 1994 and 1993, and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years then ended. Our audit also included the 1994 and 1993 financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oshkosh B'Gosh, Inc. and Subsidiaries at December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Also, in our opinion, the related 1994 and 1993 financial statements schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Notes 1 and 10 to the consolidated financial statements, effective January 1, 1992, the Company changed its method of accounting for income taxes and nonpension postretirement benefits. Milwaukee, Wisconsin ERNST & YOUNG LLP February 6, 1995 16 REPORT OF SCHUMAKER, ROMENESKO & ASSOCIATES, S.C. INDEPENDENT AUDITORS The Board of Directors OshKosh B'Gosh, Inc. and Subsidiaries We have audited the accompanying consolidated statements of income, changes in shareholders' equity and cash flows of OshKosh B'Gosh, Inc. and Subsidiaries for the year ended December 31, 1992. Our audit also included the 1992 financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of OshKosh B'Gosh, Inc. and Subsidiaries for the year ended December 31, 1992 in conformity with generally accepted accounting principles. Also, in our opinion, the related 1992 financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Notes 1 and 10 to the consolidated financial statements, effective January 1, 1992, the Company changed its method of accounting for income taxes and nonpension postretirement benefits. Oshkosh, Wisconsin SCHUMAKER, ROMENESKO & ASSOCIATES, S.C. February 15, 1993 17 Consolidated Balance Sheets OshKosh B'Gosh, Inc. (Dollars in thousands, except share and per share amounts) and Subsidiaries December 31, 1994 1993 ASSETS Current assets Cash and cash equivalents $ 10,514 $ 17,853 Accounts receivable, less allowances of $3,700 in 1994 and $3,310 in 1993 23,857 19,477 Inventories 93,916 99,999 Prepaid expenses and other current assets 2,510 3,810 Deferred income taxes 11,510 10,716 Total current assets 142,307 151,855 Property, plant and equipment, net 69,829 71,755 Other assets 5,075 5,521 Total assets $217,211 $229,131 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 240 $ 536 Accounts payable 9,436 9,720 Accrued liabilities 30,168 29,805 Total current liabilities 39,844 40,061 Long-term debt 517 757 Deferred income taxes 2,869 3,040 Employee benefit plan liabilities 15,167 13,275 Commitments - - Shareholders' equity Preferred stock, par value $.01 per share: Authorized - 1,000,000 shares; Issued and outstanding - None - - Common stock, par value $.01 per share: Class A, authorized - 30,000,000 shares; Issued and outstanding - 12,233,787 shares in 1994, 13,280,572 shares in 1993 122 133 Class B, authorized - 3,750,000 shares; Issued and outstanding - 1,267,713 shares in 1994, 1,305,228 shares in 1993 13 13 Additional paid-in capital - 2,971 Retained earnings 158,933 169,182 Cumulative foreign currency translation adjustments (254) (301) Total shareholders' equity 158,814 171,998 Total liabilities and shareholders' equity $217,211 $229,131 See notes to consolidated financial statements. 18 Consolidated Statements of Income OshKosh B'Gosh, Inc. (Dollars and shares in thousands, except per share amounts) and Subsidiaries Year Ended December 31, 1994 1993 1992 Net sales $363,363 $340,186 $346,206 Cost of products sold 259,416 244,926 259,344 Gross profit 103,947 95,260 86,862 Selling, general and administrative expenses 94,988 78,492 66,414 Restructuring - 10,836 (2,800) Operating income 8,959 5,932 23,248 Other income (expense): Interest expense (1,034) (626) (797) Interest income 1,048 1,114 1,022 Royalty income, net of expenses 3,442 3,417 2,562 Miscellaneous 543 (545) 91 Other income - net 3,999 3,360 2,878 Income before income taxes and cumulative effect of accounting change 12,958 9,292 26,126 Income taxes 5,919 4,769 10,390 Income before cumulative effect of accounting change 7,039 4,523 15,736 Cumulative effect of change in accounting for nonpension postretirement benefits - - (601) Net income $ 7,039 $ 4,523 $ 15,135 Weighted average common shares outstanding 14,144 14,586 14,586 Income per share before cumulative effect of accounting change $.50 $.31 $1.08 Change in accounting for nonpension postretirement benefits - - (.04) Net income per common share $.50 $.31 $1.04 See notes to consolidated financial statements. 19 Consolidated Statements of Changes in Shareholders' Equity Oshkosh B'Gosh, Inc. (Dollars and shares in thousands, except per share amounts) and Subsidiaries Cumulative Foreign Common Stock Additional Currency Class A Class B Paid-In Retained Translation Shares Amount Shares Amount Capital Earnings Adjustments Balance - December 31, 1991 12,777 $128 1,809 $18 $2,971 $164,263 $ - Net income - - - - - 15,135 - Dividends - Class A ($.5125 per share) - - - - - (6,548) - - Class B ($.45 per share) - - - - - (814) - Balance - December 31, 1992 12,777 128 1,809 18 2,971 172,036 - Net income - - - - - 4,523 - Dividends - Class A ($.5125 per share) - - - - - (6,667) - - Class B ($.45 per share) - - - - - (710) - Foreign currency translation adjustments - - - - - - (301) Conversions of common shares 504 5 (504) (5) - - - Balance - December 31, 1993 13,281 133 1,305 13 2,971 169,182 (301) Net income - - - - - 7,039 - Dividends - Class A ($.3775 per share) - - - - - (4,886) - - Class B ($.33 per share) - - - - - (425) - Foreign currency translation adjustments - - - - - - 47 Conversions of common shares 37 - (37) - - - - Repurchase of common shares (1,084) (11) - - (2,971) (11,977) - Balance - December 31, 1994 12,234 $122 1,268 $13 $ - $158,933 $(254) See notes to consolidated financial statements. 20 Consolidated Statements of Cash Flows OshKosh B'Gosh, Inc. (Dollars in thousands) and Subsidiaries Year Ended December 31, 1994 1993 1992 Cash flows from operating activities Net income $ 7,039 $ 4,523 $15,135 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,692 9,233 8,375 (Gain) loss on disposal of assets (185) 63 85 Minority interest in loss of consolidated subsidiary - - (108) Provision for deferred income taxes (965) (5,537) 35 Pension expense, net of contributions 979 1,852 1,753 Cumulative effect of accounting change - - 1,001 Restructuring - 10,836 (2,800) Changes in operating assets and liabilities: Accounts receivable (4,380) 4,948 (643) Inventories 6,083 (7,247) 1,478 Prepaid expenses and other current assets1,300 (1,624) (252) Accounts payable (284) (1,376) (2,522) Accrued liabilities 1,863 5,940 1,313 Net cash provided by operating activities 22,142 21,611 22,850 Cash flows from investing activities Additions to property, plant and equipment (9,914) (8,990) (12,563) Proceeds from disposal of assets 1,425 1,159 625 Investments in subsidiaries - - (900) Additions to other assets (186) (1,783) (1,602) Net cash used in investing activities (8,675) (9,614) (14,440) Cash flows from financing activities Proceeds from long-term borrowings - - 7,000 Payments of long-term debt (536) (7,896) (1,270) Dividends paid (5,311) (7,377) (7,362) Repurchase of common stock (14,959) - - Net cash used in financing activities (20,806) (15,273) (1,632) Net increase (decrease) in cash and cash equivalents (7,339) (3,276) 6,778 Cash and cash equivalents at beginning of year 17,853 21,129 14,351 Cash and cash equivalents at end of year $10,514 $17,853 $21,129 Supplementary disclosures Cash paid for interest $ 638 $ 1,030 $ 823 Cash paid for income taxes $ 3,937 $12,194 $ 9,877 See notes to consolidated financial statements. 21 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except share and per share amounts) Note 1. Significant accounting policies Business - OshKosh B'Gosh, Inc. and its wholly-owned subsidiaries (the Company) are engaged primarily in the design, manufacture and marketing of apparel to wholesale customers and through Company owned retail stores. Principles of consolidation - The consolidated financial statements include the accounts of all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash equivalents - Cash equivalents consist of highly liquid debt instruments such as money market accounts and commercial paper with original maturities of three months or less. The Company's policy is to invest cash in conservative instruments as part of its cash management program and to evaluate the credit exposure of any investment. Cash and cash equivalents are stated at cost, which approximates market value. Inventories - Inventories are stated at the lower of cost or market. Inventories stated on the last-in, first-out (LIFO) basis represent 95.7% of total 1994 and 90.6% of total 1993 inventories. Remaining inventories are valued using the first-in, first-out (FIFO) method. Property, plant and equipment - Property, plant and equipment are carried at cost. Depreciation and amortization for financial reporting purposes is calculated using the straight line method based on the following useful lives: Years Land improvements 10 to 15 Buildings 10 to 40 Leasehold improvements 5 to 10 Machinery and equipment 5 to 10 Income taxes - Effective January 1, 1992, the Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". This Statement requires recognition of deferred tax assets and liabilities for all temporary differences between the financial reporting and income tax basis of the Company's assets and liabilities. The effect of this accounting change at January 1, 1992 was not material. Foreign currency translation - The functional currency for certain foreign subsidiaries is the local currency. Accordingly, assets and liabilities are translated at year end exchange rates, and income statement items are translated at average exchange rates prevailing during the year. Such translation adjustments are recorded as a separate component of shareholders' equity. Revenue recognition - Revenue within wholesale operations is recognized at the time merchandise is shipped to customers. Retail store revenues are recognized at the time of sale. 22 Income per common share - Income per common share amounts are computed by dividing income by the weighted average number of shares of common stock outstanding. There are no common stock equivalents. Advertising - Advertising costs are expensed as incurred and totaled $9,858, $11,209, and $10,180 in 1994, 1993, and 1992, respectively. Note 2. Restructuring During 1993, the Company recorded a pretax restructuring charge of $10,836. The restructuring charge included approximately $3,300 for facility closings, write-down of the related assets and severance costs pertaining to work force reductions. The restructuring charge also reflected the Company's decision to market its Trader Kids line of children's apparel under the new name Genuine Kids and the resulting costs of the Company's decision not to renew its Boston Trader license arrangement beyond 1994, as well as expenses to consolidate its retail operations. Accordingly, the restructuring charge included approximately $7,500 for write-off of unamortized trademark rights and expenses related to consolidating the Company's retail operations. Restructuring costs (net of income tax benefit) reduced net income by $7,100 ($.49 per share) in 1993. During 1994, the Company implemented its restructuring plan. The Company closed its McKenzie, Tennessee facility, and announced plans to close its Dover, Tennessee facility, which was completed in early 1995. The Company was able to sell both operating facilities, and reached satisfactory agreements with all affected workforce concerning severance arrangements. The Company also began to market a portion of its childrenswear line under the Genuine Kids label, discontinuing the Trader Kids line of childrens' apparel. The Company also successfully consolidated the operations of its retail business into its OshKosh office. As of December 31, 1994, the Company estimates that remaining restructuring costs are sufficiently provided for in the residual restructuring liability. Remaining costs include charges for facility closings, including disposal of the real estate and severance costs pertaining to workforce reductions. This plan should be substantially completed in early 1995. During 1992, the Company reduced its estimate of the Absorba line restructuring costs originally recorded in 1991 by $2,800, due to the efficient and orderly wind down of operations and favorable settlement of lease obligations. This adjustment to restructuring costs (net of income taxes) increased 1992 net income by $1,800 ($.12 per share). Note 3. Inventories A summary of inventories follows: December 31, 1994 1993 Finished goods $75,187 $82,737 Work in process 7,410 5,008 Raw materials 11,319 12,254 Total $93,916 $99,999 The replacement cost of inventory exceeds the above LIFO costs by $16,122 and $14,716 at December 31, 1994 and 1993, respectively. Note 4. Property, plant and equipment A summary of property, plant and equipment follows: December 31, 1994 1993 Land and improvements $ 4,139 $ 4,172 Buildings 37,442 37,640 Leasehold improvements 7,862 5,268 Machinery and equipment 70,498 67,026 Construction in progress 9 291 Total 119,950 114,397 Less: accumulated depreciation and amortization 50,121 42,642 Property, plant and equipment, net $69,829 $71,755 Depreciation and amortization expense on property, plant and equipment for the years ended December 31, 1994, 1993, and 1992 amounted to approximately $9,972, $8,425, and $7,909, respectively. Note 5. Lines of Credit In June 1994, the Company entered into a credit agreement with a number of banks which provides a $60,000 three year revolving credit facility and a $40,000 revocable demand line of credit for cash borrowings, issuance of commercial paper, and letters of credit. The agreement expires in June 1997. Under the terms of the agreement, interest rates are determined at the time of borrowing and are based on London Interbank Offered Rates plus .625% or the prime rate. Commitment fees of .125% are required on the $100,000 credit facilities. The Company is required to maintain certain financial ratios in connection with this agreement. The Company also has a $12,500 unsecured credit facility available at December 31, 1994 for issuance of letters of credit. There were no outstanding borrowings against these credit arrangements at December 31, 1994. Letters of credit of approximately $26,150 were outstanding at December 31, 1994, with $23,774 of the unused revocable demand line of credit available for borrowing. Note 6. Accrued liabilities A summary of accrued liabilities follows: December 31, 1994 1993 Compensation $ 8,491 $ 4,701 Group health insurance - 1,700 Worker's compensation 10,800 8,600 Income taxes 1,729 640 Restructuring costs 2,381 8,186 Other 6,767 5,978 Total $30,168 $29,805 Note 7. Long-term debt The Company's long-term debt is summarized as follows: December 31, 1994 1993 Obligation under industrial development revenue bonds $200 $ 666 Other mortgage notes and loans with interest at varying rates 557 627 Total 757 1,293 Less current maturities 240 536 Total long-term debt $517 $757 The final payment on the industrial development revenue bond is due October 1, 1995. The interest rate on the bond is approximately 80% of prime rate (prime rate was 8.5% at December 31, 1994). Annual total maturities of principal on long-term debt are as follows: Year ending December 31, 1995 $240 1996 42 1997 43 1998 45 1999 47 Thereafter 340 Total $757 Note 8. Leases The Company leases certain property and equipment including retail sales facilities and regional sales offices under operating leases. Certain leases provide the Company with renewal options. Leases for retail sales facilities provide for minimum rentals plus contingent rentals based on sales volume. Minimum future rental payments under noncancellable operating leases are as follows: Year ending December 31, 1995 $10,202 1996 9,148 1997 8,452 1998 7,608 1999 6,151 Thereafter 17,034 Total minimum lease payments $58,595 Total rent expense charged to operations for all operating leases is as follows: Year Ended December 31, 1994 1993 1992 Minimum rentals $11,139 $7,718 $5,921 Contingent rentals 196 167 179 Total rent expense $11,335 $7,885 $6,100 Note 9. Income taxes Income tax expense (credit) is comprised of the following: Year Ended December 31, 1994 1993 1992 Current: Federal $5,653 $ 8,571 $ 8,155 State and local 1,231 1,735 1,800 6,884 10,306 9,955 Deferred (965) (5,537) 435 Total $5,919 $4,769 $10,390 The components of the Company's deferred tax asset and deferred tax liability include: December 31, 1994 1993 [Assets (Liabilities)] Current deferred taxes: Accounts receivable allowances $ 1,402 $ 1,272 Inventory valuation 2,835 2,129 Accrued liabilities 5,994 3,714 Restructuring costs 834 3,204 Other 445 397 Total net current deferred tax asset $11,510 $10,716 Non-current deferred taxes: Depreciation $(8,497) $(8,266) Deferred employee benefits 5,234 4,419 Trademark 394 807 Foreign loss carryforwards 2,418 1,807 Valuation allowance (2,418) (1,807) Total net long-term deferred tax liability $(2,869) $(3,040) For financial reporting purposes, income before income taxes and cumulative effect of accounting change includes the following components: Year Ended December 31, 1994 1993 1992 Pretax income (loss): United States $14,319 $11,704 $27,574 Foreign (1,361) (2,412) (1,448) Total $12,958 $9,292 $26,126 A reconciliation of the federal statutory income tax rate to the effective tax rates reflected in the consolidated statements of income follows: Year Ended December 31, 1994 1993 1992 Federal statutory tax rate 35.0% 35.0% 34.0% Differences resulting from: State and local income taxes, net of federal income tax benefit 4.5 4.1 4.2 Foreign losses with no tax benefit 3.7 9.1 1.9 Other 2.5 3.1 (.3) Total 45.7% 51.3% 39.8% Note 10. Retirement plans The Company has defined contribution and defined benefit pension plans covering substantially all employees. Charges to operations by the Company for these pension plans totaled $4,309, $4,621, and $4,477 for 1994, 1993 and 1992, respectively. Defined benefit pension plans - The Company sponsors several qualified defined benefit pension plans covering certain hourly and salaried employees. In addition, the Company maintains a supplemental unfunded salaried pension plan to provide those benefits otherwise due employees under the salaried plan's benefit formulas, but which are in excess of benefits permitted by the Internal Revenue Service. The benefits provided are based primarily on years of service and average compensation. The pension plans' assets are comprised primarily of listed securities, bonds, treasury securities, commingled equity and fixed income investment funds and cash equivalents. Plan assets included 7,000 shares of OshKosh B'Gosh, Inc. Class A common stock at December 31, 1993 and 9,500 and 5,000 shares of OshKosh B'Gosh, Inc. Class B common stock at December 31, 1994 and 1993, respectively, with a total market value of approximately $128 and $236 at December 31, 1994 and 1993, respectively. The Company's funding policy for qualified plans is to contribute amounts which are actuarially determined to provide the plans with sufficient assets to meet future benefit payment requirements consistent with the funding requirements of federal laws and regulations. The actuarial computations utilized the following assumptions. December 31, 1994 1993 1992 Discount rate 7.5% 7.0% 7.0-7.5% Expected long-term rate of return on assets 8.0% 7.0% 7.5-8.0% Rates of increase in compensation levels 0-4.5% 0-4.5% 0-5.5% Net periodic pension cost was comprised of: December 31, 1994 1993 1992 Service cost - benefits earned during the period $2,212 $2,318 $2,309 Interest cost on projected benefit obligations 1,888 1,808 1,601 Actual return on plan assets (1,118) (1,708) (1,037) Net amortization and deferral 552 1,259 636 Net periodic pension cost $3,534 $3,677 $3,509 The following table sets forth the funded status of the Company's defined benefit plans and the amount recognized in the Company's consolidated balance sheets. The funded status of plans with assets exceeding the accumulated benefit obligation (ABO) is segregated by column from that of plans with the ABO exceeding assets. December 31, 1994 1993 Assets ABO Assets ABO Exceed Exceeds Exceed Exceeds ABO Assets ABO Assets Actuarial present value of benefit obligations: Vested benefits $ 9,365 $ 6,599 $ 9,051 $ 6,308 Nonvested benefits 916 313 1,604 449 Total accumulated benefit obligation $10,281 $ 6,912 $10,655 $ 6,757 Projected benefit obligation $19,334 $ 7,244 $22,299 $ 6,835 Plan net assets at fair value 12,451 2,980 12,070 2,777 Projected benefit obligation in excess of plan net assets (6,883) (4,264) (10,229) (4,058) Unamortized transition asset (1,382) (20) (1,535) (23) Unrecognized prior service cost 2,586 3,022 2,821 2,867 Unrecognized net (gain) loss (604) (679) 3,546 (592) Adjustment to recognize minimum liability - (2,000) - (2,200) Accrued pension liability at December 31 $(6,283) $(3,941) $(5,397) $(4,006) Defined contribution plan - The Company maintains a defined contribution retirement plan covering certain salaried employees. Annual contributions are discretionary and are determined by the Company's Executive Committee. Charges to operations by the Company for contributions under this plan totaled $531, $565 and $658 for 1994, 1993 and 1992, respectively. The Company also has a supplemental retirement program for designated employees. Annual provisions to this unfunded plan are discretionary and are determined by the Company's Executive Committee. Charges to operations by the Company for additions to this plan totaled $244, $379 and $310 for 1994, 1993 and 1992, respectively. Deferred employee benefit plans - The Company has deferred compensation and supplemental retirement arrangements with certain key officers. Postretirement health and life insurance plan - The Company sponsors an unfunded defined benefit postretirement health insurance plan that covers eligible salaried employees. Life insurance benefits are provided under the plan to qualifying retired employees. The postretirement health insurance plan is offered, on a shared cost basis, only to employees electing early retirement. This coverage ceases when the employee reaches age 65 and becomes eligible for medicare. Retiree contributions are adjusted periodically. In 1992, the Company adopted the provisions of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." In applying this pronouncement, the Company elected to immediately recognize the accumulated postretirement benefit obligation as of the beginning of 1992 of approximately $1 million in the first quarter of 1992 as a change in accounting principle. The charge, net of an income tax benefit of $400, was $601 or $.04 per share. The following table sets forth the funded status of the plan and the postretirement benefit cost recognized in the Company's consolidated balance sheets: December 31, 1994 1993 Accumulated postretirement benefit obligation: Retirees $ 159 $ 119 Fully eligible active plan participants 169 216 Other active plan participants 523 670 851 1,005 Plan assets - - Unrecognized net gain 497 281 Accrued postretirement benefit cost $1,348 $1,286 Net periodic postretirement benefit cost was comprised of: Year Ended December 31, 1994 1993 1992 Service cost - benefits attributed to employee service during the year $ 67 $ 98 $119 Interest cost on accumulated postretirement benefit obligation 53 61 75 Net amortization and deferral (38) (18) - Net periodic postretirement benefit cost $82 $141 $194 The discount rate used in determining the accumulated postretirement benefit obligation was 7% in 1994 and 1993. The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 12%, declining gradually to 6% by 2012 and then declining further to an ultimate rate of 4% by 2022. The health care cost trend rate assumption has a significant impact on the amounts reported. Increasing the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation at December 31, 1994 by approximately $108 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for 1994 by approximately $13. Note 11. Common stock In May, 1993 shareholders of the Company approved a stock conversion plan whereby shares of Class B common stock may be converted to an equal number of Class A common shares. The Company's common stock authorization provides that dividends be paid on both the Class A and Class B common stock at any time that dividends are paid on either. Whenever dividends (other than dividends of Company stock) are paid on the common stock, each share of Class A common stock is entitled to receive 115% of the dividend paid on each share of Class B common stock. The Class A common stock shareholders are entitled to receive a liquidation preference of $7.50 per share before any payment or distribution to holders of the Class B common stock. Thereafter, holders of the Class B common stock are entitled to receive $7.50 per share before any further payment or distribution to holders of the Class A common stock. Thereafter, holders of the Class A common stock and Class B common stock share on a pro-rata basis in all payments or distributions upon liquidation, dissolution or winding up of the Company. Note 12. Business and credit concentrations The Company provides credit, in the normal course of business, to department and specialty stores. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses. The Company's customers are not concentrated in any specific geographic region. In 1993, sales to a customer, as a percentage of total sales, amounted to approximately 10%. In 1992, sales to two customers, as a percentage of total sales, amounted to approximately 12% each. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 1995. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to the definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to be held on May 5, 1995. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements Financial statements for OshKosh B'Gosh, Inc. listed in the Index to Financial Statements and Supplementary Data on page 17 are filed as part of this Annual Report. (2) Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts F-1 Schedules not included have been omitted because they are not applicable or the required information is included in the consolidated financial statements and notes thereto. (3) Index to Exhibits (b) Reports on Form 8-K None. 34 (3) Exhibits 3.1 Certificate of Incorporation of OshKosh B'Gosh, Inc., as restated, October 20, 1988, previously filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, Commission File Number 0-13365, is incorporated herein by reference. 3.2 By-laws of OshKosh B'Gosh, Inc., as amended through the date hereof. *10.1 Employment Agreement dated July 7, 1980, between OshKosh B'Gosh, Inc. and Charles F. Hyde as extended by "Request For Later Retirement" dated April 15, 1986 and accepted by Board of Directors' resolution on May 2, 1986, previously filed as Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1986, Commission File Number 0-13365, is incorporated herein by reference. *10.2 Employment Agreement dated July 7, 1980, between OshKosh B'Gosh, Inc. and Thomas R. Wyman, previously filed as Exhibit 10.2 to the Registrant's Registration Statement No. 2-96586 on Form S-1, is incorporated herein by reference. *10.3 OshKosh B'Gosh, Inc. Pension Plan as amended, previously filed as Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 0-13365, is incorporated herein by reference. *10.4 OshKosh B'Gosh, Inc. Profit Sharing Plan, as amended on August 5, 1985, previously filed as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission File Number 0-13365, is incorporated herein by reference. *10.5 OshKosh B'Gosh, Inc. Restated Excess Benefit Plan as amended, previously filed as Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 0-13365, is incorporated herein by reference. *10.6 OshKosh B'Gosh, Inc. Executive Deferred Compensation Plan as amended, previously filed as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, Commission File Number 0-13365, is incorporated herein by reference. *10.7 OshKosh B'Gosh, Inc. Officers Medical and Dental Reimbursement Plan, as amended. 10.8 Lease Agreement between OshKosh B'Gosh, Inc. and City of Oshkosh, Wisconsin, dated as of March 1, 1975, previously filed as Exhibit 10.13 to the Registrant's Registration Statement No. 2-96586 on Form S-1, is incorporated herein by reference. *Represents a plan that covers compensation, benefits and/or related arrangements for executive management. 35 10.9 Acknowledgement and Guaranty Agreement between City of Liberty, Casey County, Kentucky and OshKosh B'Gosh, Inc., dated October 4, 1984, and related Contract of Lease and Rent dated as of November 26, 1968, previously filed as Exhibit 10.14 to the Registrant's Registration Statement No. 2-96586 on Form S-1, is incorporated herein by reference. 10.10 Loan Agreement between OshKosh B'Gosh, Inc. and City of Oshkosh, Wisconsin, dated as of October 1, 1985, previously filed as Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, Commission File Number 0-13365, is incorporated herein by reference. 10.11 Indemnity Agreement between OshKosh B'Gosh, Inc. and William P. Jacobsen (Vice President and Treasurer of OshKosh B'Gosh, Inc.) dated as of June 8, 1987, previously filed as Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, Commission File Number 0-13365, is incorporated herein by reference. (Note: Identical agreements have been entered into by the Company with each of the following officers: Charles F. Hyde, Thomas R. Wyman, John F. Beckman, Anthony S. Giordano, Douglas W. Hyde, Michael D. Wachtel, and Kenneth H. Masters). *10.12 Employment agreement dated December 14, 1989 and effective February 1, 1990, between OshKosh B'Gosh, Inc. and Harry M. Krogh, previously filed as Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, Commission File Number 0-13365, is incorporated herein by reference. *10.13 OshKosh B'Gosh, Inc. Executive Non-Qualified Profit Sharing Plan effective as of January 1, 1989, previously filed as Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, Commission File Number 0-13365, is incorporated herein by reference. 10.14 Employment agreement dated and effective May 1, 1994, by and among OshKosh B'Gosh, Inc., Essex Outfitters, Inc. and Barbara Widder-Lowry. 10.15 Employment agreement dated and effective May 1, 1994 by and among OshKosh B'Gosh, Inc., Essex Outfitters, Inc. and Paul A. Lowry. 10.16 Credit agreement between Oshkosh B'Gosh, Inc. and Firstar Bank Milwaukee, N.A. and participating banks as amended, dated as of June 24, 1994. *10.17 OshKosh B'Gosh, Inc. 1994 Incentive Stock Plan. 10.18 OshKosh B'Gosh, Inc. 1995 Outside Directors' Stock Option Plan. *Represents a plan that covers compensation, benefits and/or related arrangements for executive management. 36 21. The following is a list of the subsidiaries of the Company as of December 31, 1994. The consolidated financial statements reflect the operations of all subsidiaries as they existed on December 31, 1994. State or Other Jurisdiction of Name of Incorporation or Subsidiary Organization Term Co. (formerly Absorba, Inc.) Delaware Grove Industries, Inc. Delaware Manufacturera International Apparel, S.A. Honduras OshKosh B'Gosh Europe, S.A. France OshKosh B'Gosh International Sales, Inc. Virgin Islands OshKosh B'Gosh Asia/Pacific Ltd. Hong Kong OshKosh B'Gosh U.K. Ltd. United Kingdom OshKosh B'Gosh Deutschland GmbH Germany 27. Financial Data Schedule 37 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OSHKOSH B'GOSH, INC. By: /s/ DOUGLAS W. HYDE Chairman of the Board, President and Chief Executive Officer By: /s/ DAVID L. OMACHINSKI Vice President, Treasurer and Chief Financial Officer 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 dates indicated. Signature Title /S/ DOUGLAS W. HYDE Chairman of the Board, President, Chief Executive Officer and Director /S/ MICHAEL D. WACHTEL Executive Vice President, Chief Operating Officer and Director /S/ DAVID L. OMACHINSKI Vice President, Treasurer, Chief Financial Officer and Director /S/ STEVEN R. DUBACK Secretary and Director /S/ THOMAS R. WYMAN Director 38 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts (Dollars in Thousands) Years Ended December 31, 1994 1993 1992 Accounts Receivable - Allowances: Balance at Beginning of Period $ 3,310 $2,265 $2,335 Charged to Costs and Expenses 6,508 5,979 4,500 Deductions - Bad Debts Written off, Net of Recoveries and Other Allowances (6,118) (4,934) (4,570) Balance at End of Period $ 3,700 $3,310 $2,265 Years Ended December 31, 1994 1993 1992 Restructuring Costs - Allowances: Balance at Beginning of Period $ 8,186 $ 422 $ 5,600 Charged to Cost and Expenses - 10,836 (2,800) Actual Restructuring Costs Incurred (5,805) (3,072) (2,378) Balance at End of Period $ 2,381 $ 8,186 $ 422 39 EX-3.2 2 EXHIBIT 3.2 BYLAWS OF OSHKOSH B'GOSH, INC. APPROVALS/AMENDMENTS 11/04/85 First Approval of Amended and Restated Bylaws 02/03/86 Final Approval of Amended and Restated Bylaws 05/08/87 New Section 49 Adopted - (Indemnification) 02/01/88 Amended Section 11 - (Increase in Number of Directors) 02/01/90 Repealed old Sections 23-34 and created new Sections 23.01-23.16 08/03/90 Amended Section 41 [formerly Section 30] 05/03/91 Amended Section 15 to create Sections 15.01 - 15.06 07/01/91 Amended Sections 23.01, 23.05, 23.07 and 23.09 05/01/92 Amended Sections 23.05, 23.07, 23.08 and 23.10 02/20/95 Amended Section 15.03 40 BYLAWS OF OSHKOSH B'GOSH, INC. STATED TO INCLUDE ALL AMENDMENTS ADOPTED THROUGH FEBRUARY 20, 1995 QB1\225399.1 TABLE OF CONTENTS Page OFFICES 1 SEAL 1 STOCKHOLDERS' MEETING 1 Place of Meeting 1 Annual Meeting 1 Notice of Annual Meeting 1 Quorum 2 Voting of Shares 2 Special Meetings 2 Notice of Special Meeting 3 DIRECTORS 3 General Powers 3 Number 3 Office 3 Vacancies 3 Removal 4 COMMITTEES 4 Executive Committee 4 Audit Committee 4 Nominating Committee 5 Retirement Plan Committee 6 Compensation Committee 6 Other Committees 6 COMPENSATION OF DIRECTORS 6 MEETINGS OF DIRECTORS 7 Annual Meeting 7 Regular Meetings 7 Special Meetings 7 Quorum 7 Action By Written Consent of Directors 8 Participation By Conference Telephone 8 OFFICERS 8 Number 8 Election and Term of Office 8 Removal 8 Vacancies 9 Chairman of the Board 9 Vice-Chairman of the Board 9 President 9 Executive Vice President 9 The Vice Presidents 10 Shared Functions 10 The Secretary 10 The Treasurer 10 Assistant Secretaries and Assistant Treasurers 11 Other Assistants and Acting Officers 11 Additional Officers 11 Salaries 11 CERTIFICATES OF STOCK AND THEIR TRANSFER 11 Certificates 11 Facsimile Signatures 12 Transfers of Stock 12 CLOSING OF TRANSFER BOOKS 12 In General 12 List of Stockholders Available for Inspection 13 REGISTERED STOCKHOLDERS 13 LOST CERTIFICATES 13 CHECKS 14 FISCAL YEAR 14 DIVIDENDS 14 DIRECTORS' ANNUAL STATEMENT 14 NOTICES 14 Notice 14 Waiver of Notice 15 AMENDMENTS 15 INDEMNIFICATION OF OFFICERS AND DIRECTORS 15 Mandatory Indemnification 15 Right to Indemnification: How Determined 18 Termination of an Action is Nonconclusive 21 Advance Payment 21 Partial Indemnification: Interest 21 Nonexclusivity of Section 49 22 Insurance 23 Witness Expenses 23 Contribution 23 Severability 24 Amendment 24 BYLAWS OF OSHKOSH B'GOSH, INC. OFFICES 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof is the Corporation Trust Company. The corporation may also have an office in the City of Oshkosh, State of Wisconsin, and also offices at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require. SEAL 2. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. STOCKHOLDERS' MEETINGS 3. Place of Meeting. All meetings of the stockholders for the election of directors shall be held at such place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of shareholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in duly executed waiver of notice thereof. 4. Annual Meeting. Annual meetings of stockholders shall be held on the first Friday of May if not a legal holiday, and if a legal holiday, then on the next business day following, at 2:00 p.m., local time, or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which the stockholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. 5. Notice of Annual Meeting. Written notice stating the date, place and hour of the annual meeting shall be mailed to each stockholder entitled to vote thereat at such address as appears on the records of the corporation, at least fifteen days prior to the meeting. 6. Quorum. The holders of a majority of the shares of stock issued and outstanding and entitled to vote at a meeting of stockholders on a particular matter, present in person or represented by proxy, shall constitute a quorum for the decision with respect to such matter except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 7. Voting of Shares. At every meeting of the stockholders, each stockholder having the right to vote on a particular matter shall be entitled to vote on such matter in person, or by proxy, appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than three years prior to said meeting, unless such proxy provides for a longer period. Each stockholder shall have one vote on a particular matter for each share of stock having voting power with respect to such matter, registered in his or her name on the books of the corporation, except that no share of stock shall be voted at any election for directors which has been transferred on the books of the corporation within twenty days next preceding such election. The vote for directors, and, upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. When a quorum of stockholders entitled to vote on a particular matter brought before any meeting is present at such meeting, the vote of the holders of a majority of the shares of stock having voting power with respect to such matter, present in person or represented by proxy, shall decide such matter, unless the matter is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such matter. 8. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 9. Notice of Special Meetings. Written notice stating the time and place of a special meeting of stockholders, and the purpose or purposes for which the meeting is called, shall be mailed, postage prepaid, at least ten (10) but not more than sixty (60) days before the date of such meeting, to each stockholder entitled to vote thereat at such address as appears on the records of the corporation. Business transacted at any special meeting of stockholders shall be confined to the purposes stated in the notice. DIRECTORS 10. General Powers. The business of the corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these bylaws directed or required to be exercised or done by the stockholders or by others. 11. Number. The number of directors which shall constitute the whole board shall be nine (9). The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 13 of these Bylaws, and each director elected shall hold office until his or her successor is elected and qualified. The number of directors may be increased or decreased from time to time by amendment to this Section, adopted by the stockholders or Board of Directors, but no decrease shall have the effect of shortening the term of an incumbent director. 12. Office. The directors may hold their meetings and have one or more offices outside of Delaware, at the office of the corporation in the City of Oshkosh, Wisconsin, or at such other places as they may from time to time determine. 13. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. 14. Removal. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. The provisions of this Section 14 shall apply, in respect to the removal without cause of a director or directors elected by the holders of any class of stock voting as a separate class, to the vote of the holders of the outstanding shares of that class and not to the vote of the outstanding shares as a whole. COMMITTEES 15.01 Executive Committee. The Board of Directors, by resolution passed by a majority of the whole board, shall elect the Executive Committee, composed of five (5) or more members, all of whom shall be directors of the corporation. The board may designate one or more directors as alternate members, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. The Executive Committee shall have and may exercise all powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation, if any, to be affixed to all papers which may require it, except that the Executive Committee shall not have the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the shareholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless a resolution of the Board of Directors adopted within the preceding 12 months shall expressly so provide, the Executive Committee shall not have the power or authority to declare a dividend or to authorize the issuance of stock. 15.02 Audit Committee. The Board of Directors, by resolution passed by a majority of the whole board, shall elect the Audit Committee, composed of three (3) members, all of whom shall be directors, and at least two (2) of whom shall be persons who are not officers or employees of the corporation and who are free of any relationship that, in the opinion of the Board of Directors, would interfere with the exercise of their independent judgment as members of the Audit Committee. A majority of the members of the Audit Committee shall constitute a quorum for the transaction of all business of the committee. The Audit Committee shall provide assistance to the directors in fulfilling their responsibilities relating to corporate accounting, reporting practices of the corporation, and the quality and integrity of the financial reports of the corporation. In assisting the directors in carrying out these responsibilities, the Audit Committee shall have the following powers, duties and functions: (a) To review the corporation's accounting functions, operations and management; (b) To consider and review the adequacy and effectiveness of the corporation's internal controls, record keeping and internal auditing methods and procedures; (c) To consider and recommend to the board of directors for appointment independent auditors for the corporation; (d) To meet and consult with the independent auditors and with the corporation's financial and accounting personnel and internal auditors; (e) To review and approve the scope of the annual independent audit and the budget for independent audit fees; (f) To review with the independent auditors their report of the audit; and (g) To report, from time to time, to the board of directors on the activities and findings of the Audit Committee and to make recommendations to the board based on such findings. 15.03 Nominating Committee. The Board of Directors, by resolution passed by a majority of the whole board, shall elect the Nominating Committee, composed of at least five (5) members, all of whom shall be directors and at least two (2) of whom shall be persons who are not officers or employees of the corporation. A majority of the members of the Nominating Committee shall constitute a quorum for the transaction of all business of the committee. The Nominating Committee shall have the following powers, duties and functions: (a) To seek out and consider individuals to serve as directors of the corporation; (b) To make recommendations to the Board of Directors regarding the total size and frequency of meetings of the Board of Directors; (c) To recommend to the Board of Directors candidates for election to the board and to fill any vacancies that occur between annual meetings; and (d) To make recommendations to the Board of Directors regarding compensation of board members for serving on the board and for board and committee meetings attended. 15.04 Retirement Plan Committee. The Board of Directors, by resolution passed by a majority of the whole board, shall elect the Retirement Plan Committee, composed of at least three (3) members, all of whom shall be directors of the corporation. A majority of the members of the Retirement Plan Committee shall constitute a quorum for the transaction of all business of the committee. The Retirement Plan Committee shall have general oversight responsibilities with respect to (a) the administration of all employee welfare benefit plans and all employee pension and profit sharing retirement benefit plans of this Corporation (the "Welfare and Pension Plans"), and (b) the investment management of all funded Welfare and Pension Plans. 15.05 Compensation Committee. The Board of Directors, by resolution passed by a majority of the whole board, shall elect the Compensation Committee, composed of at least three (3) members, all of whom shall be directors and at least a majority of whom shall be persons who are not employees of the corporation. A majority of the members of the Compensation Committee shall constitute a quorum for the transaction of all business of the committee. The Compensation Committee shall make recommenda- tions to the Board of Directors concerning the compensation of officers and corporate department directors. 15.06 Other Committees. The Board of Directors, by resolution passed by a majority of the whole board, may designate other committees, each committee to consist of three (3) or more directors of the corporation and to have such duties and powers as the resolution may specify. COMPENSATION OF DIRECTORS 16. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. MEETINGS OF DIRECTORS 17. Annual Meeting. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. 18. Regular Meetings. Regular meetings of the Board of Directors may be held within or without the State of Delaware, without notice, at such time and place as shall from time to time be determined by the board. 19. Special Meetings. Special meetings of the board may be held within or without the State of Delaware and may be called by the president on forty-eight (48) hours notice to each director, either personally or by mail or by telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. 20. Quorum. At all meetings of the board, a majority of the number of the directors elected in accordance with these bylaws shall be necessary and sufficient to constitute a quorum for the transaction of business at such meeting, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate or incorporation or by these bylaws. If a quorum shall not be present at any meeting of the Board, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. 21. Action By Written Consent of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writings are filed with the minutes of proceedings of the board or committee. 22. Participation By Conference Telephone. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. OFFICERS 23.01 Number. The principal officers of the corporation shall be a Chairman of the Board, a Vice-Chairman of the Board, a President, an Executive Vice President, one or more other Vice Presidents (the number thereof to be determined by the Board of Directors), a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. The Board of Directors may designate one or more of the Vice Presidents as Senior Vice Presidents. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person unless the certificate of incorporation or these Bylaws otherwise provide. 23.02 Election and Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until his successor shall have been duly elected or until his prior death, resignation or removal. 23.03 Removal. Any officer or agent may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appoint- ment shall not of itself create contract rights. 23.04 Vacancies. A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. 23.05 Chairman of the Board. The Chairman of the Board shall call meetings of the Board of Directors, and he shall, when present, preside at all meetings of the shareholders and of the Board of Directors. Specifically, he shall have the power to supervise the activities of and to prescribe the powers and duties of the Vice Chairman of the Board, he shall be responsible for providing high-level support to the President and the Executive Vice President as and when requested, and he shall perform such other duties as may be prescribed by the Board of Directors from time to time. 23.06 Vice-Chairman of the Board. The Vice-Chairman of the Board shall preside at all meetings of the Board of Directors when the Chairman of the Board is absent. In addition he shall be responsible for providing high- level support for special projects and activities, he shall represent the corporation in various civic and trade organizations, and shall perform such other duties as may from time to time be assigned to him by the Chairman of the Board and the Board of Directors. 23.07 President. The President shall be the chief executive officer of the corporation and subject to the control and direction of the Board of Directors, shall have general direction and control over the policies and affairs of the corporation. Specifically, he shall have the power to supervise the activities of and to prescribe the powers and duties of the Executive Vice President (except as the Executive Vice President's powers and duties are hereinafter specifically defined), the Vice President of Finance, the Vice President of International Sales and Marketing, the Director of Licensed Products, the Director of Retail Operations, the Director of Corporate Marketing and Planning, the President of Essex Outfitters, Inc. and Vice President and General Manager of Absorba, Inc. He shall report to the Board and keep the Board informed concerning the affairs and conditions of the corporation's business. He shall, in the absence or incapacity of the Chairman of the Board, perform the functions of the Chairman of the Board except those functions assigned to the Vice Chairman of the Board by these Bylaws. 23.08 Executive Vice President. The Executive Vice President shall be the chief operating officer of the corporation. He shall report directly to the President. Specifically, he shall have the power to supervise the activities and to prescribe the powers and duties of the Vice President of Manufacturing, the Vice President of Sales, the Vice President of Human Resources, the Vice President of Management Information Systems, and the Directors of Distribution and Finishing Services, Manufacturing Support, Quality, and Merchandising. He shall be primarily responsible for achieving the short-term and operational objectives of the corporation. He shall also perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors. He shall, in the absence or incapacity of the President, perform all duties and functions and exercise all powers of the President. 23.09 The Vice Presidents. Each Vice President shall perform such duties as from time to time may be assigned to him by that officer who has supervisory power over him. Vice Presidents may by their election have charge and supervision of designated divisions, departments or portions of the corporation's business. 23.10 Shared Functions. Except in cases where the signing and execution thereof is expressly delegated by the Board of Directors or these Bylaws to some other officer or agent of the corporation, or is required by law to be otherwise signed or executed, the President and the Executive Vice President shall each have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, each of them acting alone may authorize any Vice President or other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his place and stead. 23.11 The Secretary. The Secretary shall: (a) keep the minutes of the shareholders' and of the Board of Directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents, the execution of which on behalf of the corporation under its seal is duly authorized; (d) sign with another appropriate officer, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; and (e) in general perform all duties incident to the office of the Secretary and such other duties as from time to time may be assigned to him by the Chairman of the Board, the President or the Board of Directors. 23.12 The Treasurer. The Treasurer shall: (a) have charge and custody of and be responsible for funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation, and deposit such monies in the name of the corporation in such banks, trust companies or other depositories as shall have been duly selected; and (c) in general perform all of the duties incident to the office of Treasurer. The Treasurer shall also perform such other duties and exercise such other authority as from time to time may be assigned to him by the Chairman of the Board or the President or by the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. 23.13 Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries, when authorized by the Board of Directors, may sign with another appropriate officer, certificates for shares of the corporation the issuance of which shall have been authorized by resolution of the Board of Directors. The Assistant Treasurers shall, respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the Chairman of the Board, the President or the Board of Directors. 23.14 Other Assistants and Acting Officers. The Board of Directors shall have the power to appoint any person to act as assistant to any officer, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer so appointed by the Board of Directors shall have the power to perform all the duties of the office to which he is so appointed to be assistant, or as to which he is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors. 23.15 Additional Officers. Any additional officers not specified above shall have only such authority, duties and responsibilities as shall be specifically authorized and designated by the Board of Directors. 23.16 Salaries. The salaries of the principal officers shall be fixed from time to time by the Board of Directors or by a committee of the Board of Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. [Sections 24-34 are intentionally omitted.] CERTIFICATES OF STOCK AND THEIR TRANSFER 35. Certificates. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by, the chairman or vice-chairman of the Board of Directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, representing the number of shares owned by him or her in the corporation. The powers, designations, preferences and relative, participating, optional or other special rights of the various classes of stock or series thereof and the qualifications, limitations or restrictions of such rights shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue to represent such stock, provided that, except as otherwise provided by statute, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests, the power, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions on such preferences and/or rights. 36. Facsimile Signatures. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. 37. Transfers of Stock. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. CLOSING OF TRANSFER BOOKS 38. In General. The Board of Directors shall have power to close the stock transfer books of the corporation for a period not exceeding sixty days preceding the date of any meeting of stockholders, or adjournment thereof, or to express consent to corporate action in writing without a meeting, or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect; provided, however, that in lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding sixty days preceding the date of any meeting or adjournment or action by consent of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. 39. List of Stockholders Available for Inspection. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares regis- tered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. REGISTERED STOCKHOLDERS 40. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. LOST CERTIFICATES 41. The corporation, acting by its President or any Senior Vice President or its Vice President of Finance may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the corporation, acting by its President or any Senior Vice President or its Vice President of Finance may, as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as the corporation shall require and/or to give the corporation a bond in such sum as the corporation may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. CHECKS 42. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR 43. The fiscal year shall begin the first day of January in each year. DIVIDENDS 44. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation; and the directors may modify or abolish any such reserve in the manner in which it was created. DIRECTORS' ANNUAL STATEMENT 45. The Board of Directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. NOTICES 46. Notice. Whenever, under the provisions of the Delaware Statutes or of the certificate of incorporation or these bylaws, notice is required to be given to any director, officer or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, by depositing the same in the United States mail with postage prepaid thereon, addressed to such stockholder, officer or director at such address as appears on the records of the corporation, or in default of other address, to such director, officer or stockholder at the General Post Office in the City of Wilmington, Delaware, and such notice shall be deemed to be given at the time when the same shall be thus mailed. Notice to directors may also be given by telegram. 47. Waiver of Notice. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. AMENDMENTS 48. These by-laws may be altered, amended or repealed or new by- laws may be adopted by the shareholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the certificate of incorporation at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new by-laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the Board of Directors by the certificate of incorporation it shall not divest or limit the power of the shareholders to adopt, amend or repeal by-laws. INDEMNIFICATION OF OFFICERS AND DIRECTORS 49. Mandatory Indemnification (1) Subject to the conditions and limitations set forth hereinafter in this Section 49 and the corporation's certificate of incorporation, the corporation shall, to the fullest extent permitted by the Delaware General Corporation Law as it may then be in effect, indemnify and hold harmless any person who is or was a party, or is threatened to be made a party, to any threatened, pending or completed action, claim, litigation, suit or proceeding, whether civil, criminal, administrative or investigative, whether predicated on foreign, federal, state or local law and whether formal or informal (collectively, "action(s)"), by reason of his status as, or the fact that he is, was or has agreed to become, a director and/or an executive officer (collectively, "executive(s)") of the corporation, and/or is or was serving or has agreed to serve as an executive of another corporation, partnership, joint venture, employee benefit plan, trust or other similar enterprise affiliated with the corporation, except with respect to any executive who is serving or has agreed to serve as an executive of any subsidiary of the corporation which is excluded from this Section 49 from time to time or at any time by the board of directors of the corporation (any and/or all of which are referred to in this Section 49 as an "affiliate"), and as to acts performed in the course of such executive's duty to the corporation and/or to an affiliate, against: (i) expenses, fees, costs and charges including, without limitation, attorneys' fees and disbursements (collectively, "expenses") reasonably incurred by or on behalf of an executive in connection with any action (including, without limitation, in connection with the investigation, defense, settlement or appeal of such action:), no matter by whom brought, including, without limitation, actions brought under and/or predicated upon the Securities Act of 1933, as amended, and/or the Securities Exchange Act of 1934, as amended, and/or their respective state counterparts and/or any rule or regulation promulgated thereunder (collectively, "securities law action(s)"); provided, that it is not determined pursuant to Paragraph B of this Section 49, or by the court before which such action was brought, that: (A) the executive engaged in criminal, fraudulent or intentional misconduct in the performance of his duty to the corporation, (B) with respect to criminal actions, the executive had reasonable cause to believe his conduct was unlawful, and (C) with respect to securities law action, the executive did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and its stockholders; (ii) subject to the restrictions set forth in Subparagraph (3) hereof, amounts incurred by an executive in settlement of any action, no matter by whom brought, including, without limitation, securities law actions; provided, that it is not determined pursuant to Paragraph B of this Section 49, or by the court before which such action was brought, that: (A) such settlement was not in the best interests of the corporation and its stockholders, (B) the amount incurred by the executive in such settlement was unreasonable (to a material extent) in light of all of the circumstances of such action, or intentional misconduct in the performance of his duty to the corporation, and (C) the executive engaged in criminal, fraudulent or intentional misconduct in the performance of his duty to the corporation, and (D) with respect to securities law action, the executive did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and its stockholders; and (iii) subject to the restrictions set forth in Subparagraph (3) hereof, judgments, fines, penalties or other amounts incurred by an executive pursuant to an adjudication of liability in connection with any action, including, without limitation, securities law action; provided, that it is not determined pursuant to Paragraph B of this Section 49, or by the court before which such action was brought, that: (A) the executive engaged in criminal, a fraudulent or intentional misconduct in the performance of his duty to the corporation, (B) with respect to securities law actions, the executive did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and its stockholders, and (C) with respect to criminal actions, the executive had reasonable cause to believe his conduct was unlawful and that he otherwise did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and its stockholders (2) To the extent an executive of the corporation and/or of an affiliate has been successful on the merits or otherwise in connection with any action, no matter by whom brought (including, without limitation, the settlement, dismissal, abandonment or withdrawal of any such action where the executive does not pay, incur or assume any material liability) or in connection with any claim, issue or matter therein, he shall be indemnified by the corporation against expenses reasonably incurred by or on behalf of him in connection therewith. The corporation shall pay such amounts (net of all amounts, if any, previously advanced to the executive pursuant to Paragraph D) to the executive (or to such other person or entity as such executive may designate in writing to the corporation) upon the executive's written request therefor without regard to the provisions of Paragraph B. (3) Notwithstanding the provisions of Subparagraph (1) hereof, no indemnification shall be made to an executive by the corporation for monetary damages incurred by the executive pursuant to an action brought by or in the right of the corporation to procure a judgment in its favor (sometimes hereinafter referred to as "derivative action(s)") or an action brought by a stockholder of the corporation if it is determined pursuant to Paragraph B of this Section 49, or by the court before which such action was brought, that: (i) The executive breached his duty of loyalty to the corporation or its stockholders; (ii) The executive committed acts or omissions in bad faith or which involve intentional misconduct or a knowing violation of the law; (iii) The executive engaged in any willful or negligent conduct in paying dividends or repurchasing stock of the corp- oration out of other than lawfully available funds; or (iv) The executive derived any improper personal benefit from any transaction, unless such improper personal benefit is determined to be immaterial in light of all the circumstances of such action. (4) In the event an executive is or was serving as an executive, trustee, fiduciary, administrator, employee or agent of an employee benefit plan sponsored by or otherwise associated with the corporation and incurs expenses, amounts in settlement or judgments, fines, penalties or other amounts, including, without limitation, any excise tax or penalty assessed with respect to the employee benefit plan by reason of an action having been brought, or having been threatened, against such executive because of his status as such an executive, trustee, fiduciary, administrator, employee or agent of such plan or by reason of his performing duties in any such capacity, the corporation shall indemnify and hold harmless the executive against any and all of such reasonable amounts; provided, it is not determined pursuant to Paragraph B of this Section 49, or by the court before which such action was brought, that the executive's conduct with respect to such employee benefit plan was for a purpose he did not reasonably believe to be in the interests of the participants in and beneficiaries of such plan. B. Right to Indemnification: How Determined. (1) Except as otherwise set forth in this Paragraph B, any indemnification to be provided to an executive by the corporation under Paragraph A of this Section 49 upon the final disposition or conclusion of an action (or a claim, issue or matter associated with such an action), unless otherwise ordered by the court before which such action was brought, shall be paid by the corporation (net of all amounts, if any, previously advanced to the executive pursuant to Paragraph D) to the executive (or to such other person or entity as the executive may designate in writing to the corporation) within sixty (60) days after the receipt of the executive's written request therefor, which request shall include a comprehensive accounting of amounts for which indemnification is being sought and shall reference the provision(s) of this Section 49 pursuant to which such claim is being made. Notwithstanding the foregoing, the payment of such requested amounts may be denied by the corporation in the event: (i) the Board of Directors of the corporation by a majority vote thereof determines that such payment, in whole or in part, would not be in the best interests of the corp- oration and its stockholders and would contravene the terms and conditions of this Section 49, or (ii) a majority of the directors of the corporation are a party in interest to such an action. In either of such events, the Board of Directors of the corporation shall immediately authorize and direct, by resolution, that an independent determination be made as to whether the executive has met the applicable standard(s) of conduct under Paragraph A of this Section 49 and, therefore, whether indemnification of the executive is proper pursuant to this Section 49. Such independent determination shall be made by a panel of three arbitrators in Oshkosh, Wisconsin, in accordance with the rules then prevailing of the American Arbitration Association, or, at the option of the executive, by an independent legal counsel mutually selected by the Board of Directors of the corporation and the executive (such panel of arbitrators and/or independent legal counsel being hereinafter referred to as "authority"). In any such determination there shall exist a rebuttable presumption that the executive has met such standard(s) of conduct and is therefore entitled to indemnification hereunder. The burden of rebutting such presumption by clear and convincing evidence shall be on the corporation. If a panel of arbitrators is to be employed hereunder, one of such arbitrators shall be selected by the Board of Directors of the corporation by a majority vote of a quorum thereof consisting of directors who were not parties in interest to such action (or, if such a quorum is not obtainable, by an independent legal counsel chosen by the Board of Directors of the corporation), the second by the executive(s) who claim entitlement to indemnification under this Section 49 and the third by the previous two arbitrators. The authority shall make its determination within sixty (60) days of being selected and shall simultaneously submit a written opinion of its conclusions to both the corporation and the executive and, in the event the authority determines that the executive is entitled to be indemnified for any amounts pursuant to this Section 49, the corporation shall pay such amounts (net of all amounts, if any, previously advanced to the executive pursuant to Paragraph D), including interest thereon as provided in Paragraph E, to the executive (or to such other person or entity as the executive may designate in writing to the corporation), within ten (10) days of receipt of such opinion. (2) An executive may, either before or within two years after a determination, if any, has been made by the authority petition any court of competent jurisdiction to determine whether the executive is entitled to indemnification under this Section 49 and such court shall thereupon have the exclusive authority to make such determination unless and until such court dismisses or otherwise terminates such proceeding without having made such determination. The court shall make an independent determination of whether the executive is entitled to indemnification as provided under this Section 49, irrespective of any prior determination made by the authority; provided, however, that there shall exist a rebuttable presumption that the executive has met the applicable standard(s) of conduct and is therefore entitled to indemnification hereunder. The burden of rebutting such presumption by clear and convincing evidence shall be on the corporation. In the event the court determines that the executive is entitled to be indemnified for any amounts pursuant to the terms and conditions of this Section 49, unless otherwise ordered by such court, the corporation shall pay such amounts (net of all amounts, if any, previously advanced to the executive pursuant to Paragraph D), including interest thereon as provided in Paragraph E, to the executive (or to such other person or entity as the executive may designate in writing to the corporation) within ten (10) days of the rendering of such determination. The executive shall pay all expenses incurred by such executive in connection with the judicial determination provided in this Subparagraph (2), unless it shall ultimately be determined by the court that he is entitled to be indemnified, in whole or in part, by the corporation as authorized in this Section 49. All expenses incurred by the executive in connection with any subsequent appeal of the judicial determination provided for in this Subparagraph (2) shall be paid by the executive regardless of the disposition of such appeal. (3) Except as otherwise set forth in this Paragraph B, the expenses associated with the indemnification process set forth in this Paragraph B, including, without limitation, the expenses of the authority selected hereunder, shall be paid by the corporation. C. Termination of an Action is Nonconclusive. The termination of any action, no matter by whom brought, including, without limitation, securities law actions, by judgment, order, settlement, conviction, or upon a plea of no contest or its equivalent, shall not, of itself, create a presumption that the executive has not met the applicable standard(s) of conduct set forth in Paragraph A. D. Advance Payment. (1) Expenses reasonably incurred by or on behalf of an executive in connection with any action (or claim, issue or matter associated with such action), no matter by whom brought, including, without limitation, securities law actions, shall be paid by the corporation to the executive (or to such other person or entity as the executive may designate in writing to the corpo- ration) in advance of the final disposition or conclusion of such action (or claim, issue or matter associated with such action) upon the receipt of the executive's written request therefor; provided, the following conditions are satisfied: (i) the executive has first requested in advance of such expenses in writing (and delivered a copy of such request to the corporation) from the insurance carrier(s) to whom a claim has been reported under an insurance policy purchased by the corp- oration, if any, as provided under Paragraph G of this Section 49 and each such insurance carrier has declined to make such an advance; (ii) the executive furnishes to the corporation an executed written certificate affirming his good faith belief that he has met the applicable standard(s) of conduct set forth in Paragraph A of this Section 49; (iii) the executive furnishes to the corporation an executed written agreement to repay any advances made under this Paragraph D if it is ultimately determined that such executive is not entitled to be indemnified by the corporation for such amounts pursuant to this Section 49. (2) In the event the corporation makes an advance of expenses to an executive pursuant to this Paragraph D, the corporation shall be subrogated to every right of recovery the executive may have against any insurance carrier from whom the corporation has purchased insurance for such purpose. E. Partial Indemnification: Interest. (1) In the event it is determined by the authority pursuant to Paragraph B of this Section 49, or by the court before which such action was brought, that an executive is entitled to indemnification as to some claims, issues or matters, but not as to other claims, issues or matters, involved in any action, no matter by whom brought, including, without limitation, securities law actions, the authority (or the court) shall authorize the reasonable proration (and payment by the corporation) of such expenses, judgments, penalties, fines and/or amounts incurred in settlement with respect to which indemnification is sought by the executive, among such claims, issues or matters as the authority (or the court) shall deem appropriate in light of all of the circumstances of such action. (2) In the event it is determined by the authority, or by the court before which such action was brought pursuant to Paragraph B of this Section 49, that certain amounts incurred by or on behalf of an executive are for whatever reason unreasonable in amount, the authority (or the court) shall authorize indemnification to be paid by the corporation to the executive for only such amounts as the authority (or the court) shall deem reasonable in light of all of the circumstances of such action. (3) To the extent deemed appropriate by the authority pursuant to Paragraph B, or by the court before which such action was brought, interest shall be paid by the corporation to an executive, at a reasonable interest rate, for amounts for which the corporation indemnifies the executive. F. Nonexclusivity of Section 49. The right to indemnification provided to an executive by this Section 49 shall not be deemed exclusive of any other rights to indemnification or the advancement of expenses to which any executive may be entitled under any charter provision, by-law, agreement, resolution, vote of stockholders or disinterested directors of the corporation or otherwise, including, without limitation, under Delaware General Corporation Law Section 145 as it may then be in effect, both as to acts in his official capacity as such executive or other employee or agent of the corporation or of an affiliate or as to acts in any other capacity while holding such office or position, and the terms and provisions of this Section 49 shall continue as to any executive who has ceased to be an executive or other employee or agent of the corporation and/or of an affiliate, and such terms and provisions shall inure to the benefit of the heirs executors and administrators of such executive. G. Insurance. (1) The corporation may purchase and maintain insurance on behalf of an executive, against any liability asserted against him and/or incurred by or on behalf of him, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Section 49 or under Delaware General Corporation Law Section 145 as it may then be in effect. The purchase and maintenance of such insurance shall not in any way limit or affect the rights and obligations of the corporation or any executive under this Section 49. Such insurance may, but need not, be for the benefit of all executives of the corporation and those serving as an executive of an affiliate. (2) In the event an executive shall receive payment from any insurance carrier or from the plaintiff in any action against such executive in respect of indemnified amounts after payments on account of all or part of such indemnified amounts have been made by the corporation pursuant to this Section 49, such executive shall promptly reimburse the corporation for the amount, if any, by which the sum of such payment by such insurance carrier or such plaintiff and payments by the corporation to such executive exceeds such indemnified amounts; provided, however, that such portions, if any, of such insurance proceeds that are required to be reimbursed to the insurance carrier under the terms of its insurance policy, such as deductible or co-insurance payments, shall not be deemed to be payments to such executive hereunder. In addition, upon payment of indemnified amounts under this Section 49, the corporation shall be subrogated to such executive's rights against any insurance carrier in respect of such indemnified amounts and the executive shall execute and deliver any and all instruments and/or documents and perform any and all other acts or deeds which the corporation shall deem necessary or advisable to secure such rights. The executive shall do nothing to prejudice such rights of recovery or subrogation. H. Witness Expenses. Upon an executive's written request, the corporation shall pay (in advance or otherwise) or reimburse any and all expenses reasonably incurred by an executive in connection with his appearance as a witness in any action at a time when he has not been formally named a defendant or respondent to such an action. I. Contribution. (1) In the event the indemnity provided for in Paragraph A of this Section 49 is unavailable to an executive for any reason whatsoever, the corporation, in lieu of indemnifying the executive, shall contribute to the amount reasonably incurred by or on behalf of the executive, whether for judgments, fines, penalties, amounts incurred in settlement and/or for expenses, in connection with any action, no matter by whom brought, including without limitation, securities law actions, in such proportion as deemed fair and reasonable by the authority pursuant to Paragraph B hereof, or by the court before which such action was brought, taking into account all of the circumstances of such action, in order to reflect: (i) the relative benefits received by the corporation and the executive as a result of the event(s) and/or transaction(s) giving cause to such action, and/or (ii) the relative fault of the corporation (and its other executives, employees and/or agents) and the executive in connection with such event(s) and/or transaction(s). (2) An executive shall not be entitled to contribution from the corporation under this Paragraph I in the event it is determined by the authority pursuant to Paragraph B, or by the court before which such action was brought, that the executive engaged in criminal, fraudulent or intentional misconduct in the performance of his duty to the corporation or otherwise violated the provisions of Paragraph A(3) of this Section 49. (3) The corporation's payment of, and an executive's right to, contribution under this Paragraph I shall be made and determined in accordance with the provisions in Paragraph B of this Section 49 relating to the corporation's payment of, and the executive's right to, indemnification under this Section 49. J. Severability. If any provision of this Section 49 shall be deemed invalid or inoperative, or in the event a court of competent jurisdiction determines that any of the provisions of this Section 49 contravene public policy, this Section 49 shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such provisions which are invalid or inoperative or which contravene public policy shall be deemed, without further action or deed by or on behalf of the corporation, be modified, amended and/or limited, but only to the extent necessary to render the same valid and enforceable, and the corporation shall indemnify an executive as to reasonable expenses, judgments, fines and amounts incurred in settlement with respect to any action, no matter by whom brought, including securities law actions, to the full extent permitted by an applicable provision of this Section 49 that shall not have been invalidated and to the full extent otherwise permitted by the Delaware General Corporation Law as it may then be in effect. K. Amendment. This Section 49 may only be altered or repealed by the affirmative vote of not less than two-thirds of the stockholders of the corporation so entitled to vote; provided, however, that stockholder approval shall not be required if any such alteration or amendment; (1) is made in order to conform to any amendment or revision of the Delaware General Corporation Law which expands an executive's rights to indemnification thereunder or is otherwise beneficial to the executive, or (2) in the sole judgment and discretion of the board of directors, does not materially adversely affect the rights and protections of the stockholders of the corporation. EX-10.7 3 EXHIBIT 10.7 OSHKOSH B'GOSH, INC. Officers Medical and Dental Reimbursement Plan (including Amendments through November 7, 1994) OSHKOSH B'GOSH, INC., a Delaware corporation (hereinafter referred to as the "Corporation") hereby establishes this Officers Medical and Dental Reimbursement Plan (hereinafter referred to as the "Plan") for the benefit of certain of its officer-employees as more fully set forth below. 1. Purpose. The purpose of this Plan is to encourage and insure full and complete health care for the welfare of each covered employee, his or her spouse and dependents. 2. Coverage. This Plan is for the benefit of those employees of the Corporation who from time to time hold any of the following elective offices: Chairman of the Board, President, Executive Vice President and Vice President of Finance; provided such officer/employee is not eligible for hospital or medical insurance benefits under the Medicare provisions of the federal social security laws. 3. Reimbursement for Expenses. a) Effective March 1, 1978, and as to certain employees, January 1, 1978, the Corporation will pay the entire cost of each covered employee's premium under the Corporation's group medical insurance, including that portion of the premium attributable to the group term life insurance provided thereunder (not to exceed $50,000 of life insurance). b) Effective May 1, 1978, the Corporation will reimburse the covered employees of the Corporation for all expenses incurred by such employees of the Corporation for dental care, psychiatric care, optometric expenses, hospital charges, nursing care, drugs and prescriptions, medical related transportation expense, health and accident insurance, as well as other medical care, (to the extent allowable under and as defined in Section 213 of the Internal Revenue Code of 1954, as amended) of such employees, their spouse, and dependents (as defined in Section 152 of the Internal Revenue Code of 1954, as amended) to the extent that such expenses are not reimbursable or payable under any other plan in effect on such date. c) The Corporation may, in its discretion, pay any or all of the above-described expenses directly in lieu of making reimbursement therefore. In such event, the Corporation shall be relieved of all further responsibility with respect to that particular expense. d) The reimbursement to, or the payment on behalf of any one covered employee, including his spouse and his dependents, shall be subject to an annual aggregate limit of $10,000. e) Each covered employee who applies for reimbursement under this Plan shall submit to the Corporation all hospitalization, doctor, dental or other medical bills, including premium notices for accident or health insurance, for verification by the Corporation prior to payment. A failure to comply herewith may, at the discretion of the Corporation, terminate the right to reimbursement of such covered employee. 4. Other Insurance. Reimbursement under this Plan shall be made by the Corporation only in the event and to the extent that such reimbursement or payment is not provided for under any insurance policy or policies, whether owned by the Corporation or the covered employee, or under any other health and accident plan. In the event that there is such a policy or plan in effect providing for reimbursement or payment in whole or in part, then to the extent of the coverage under such policy or plan the Corporation shall be relieved of any liability hereunder. 5. Termination. This Plan shall be subject to termination at any time hereafter by action of the Board of Directors of the Corporation; provided, that such termination shall not affect any right to claim reimbursement for medical and dental expenses under the provisions of this Plan arising prior to such termination. 6. ERISA Information. This Plan document shall constitute the summary plan description required by the Employee Retirement Income Security Act of 1974 ("ERISA"). Pursuant to the requirements of such law, the following information is provided: a) The sponsor and plan administrator of this Plan is the Corporation, 112 Otter Avenue, Oshkosh, Wisconsin 54901 (phone: 414-231-8800). The Corporation's federal tax identification number is 39- 0519915. The Corporation is the agent for service of legal process. The Plan is operated on a calendar year basis. b) Paragraph 3(e) of this Plan describes the procedure for claiming benefits. If a claim is denied, the Corporation will provide, on written request, a notice containing specific reasons for the denial, references to the pertinent Plan provisions, a description of any additional information needed to perfect the claim and an explanation of the claim review procedure. If a participant wishes to appeal a denial of benefits, he must submit a written request for review to the Corporation within 60 days of his receipt of the notice of denial. Such request should include any comments and data the participant believes are relevant to the review. The Corporation will make a written decision on the appeal, including the reasons for the decision and references to the pertinent Plan provisions, and a copy will be sent to the participant. c) A participant in the Plan is entitled to certain rights under ERISA. He may obtain copies of all plan documents and other plan information upon written request to the Corporation. The Corporation may make a reasonable charge for the copies. He may file suit in federal court if any materials requested to which he is entitled are not received within 30 days, unless the same were not sent because of matters beyond the control of the Corporation. The court has the discretion to require the Corporation to pay up to $100 for each day's delay until the materials are received. In addition to creating rights for Plan participants, ERISA imposes obligations on the persons responsible for the operation of a plan ("fiduciaries"). Fiduciaries must act solely in the interest of Plan participants and must act prudently. Fiduciaries who violate ERISA may be removed and required to make good any losses they caused the Plan. The Corporation may not discriminate against a participant to prevent him from obtaining a benefit or exercising his rights under ERISA. If a participant is improperly denied a benefit, he may file suit in state or federal court. If he wins his case, the court may order the other party to pay the costs and legal fees. If he loses, the court may order him to pay such items, for example, if it finds his claim frivolous. If a participant has questions about a plan or his rights under ERISA, he should contact the nearest area office of the U.S. Labor-Management Services Administration, Department of Labor. EX-10.14 4 EXHIBIT 10.14 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into as of the 1st day of May, 1994, by and among OSHKOSH B'GOSH, INC., a Delaware corporation ("OshKosh"), ESSEX OUTFITTERS, INC., a Delaware corporation ("Essex") (OshKosh and Essex collectively referred to herein as the "Companies"), and BARBARA WIDDER-LOWRY, an individual ("Employee"). R E C I T A L S: A. Essex is a wholly-owned subsidiary of OshKosh. B. OshKosh and Essex are engaged in the business of designing, manufacturing or having manufactured, marketing and selling clothing; C. The Companies desire to employ Employee and Employee desires to be employed by the Companies pursuant to the terms and conditions set forth herein; D. OshKosh presently contemplates that at some time in the near future it may cause Essex to be liquidated or merged into OshKosh in which case Employee's services would be rendered solely to OshKosh but that in the meantime Employee would render her services to both Essex and OshKosh; and E. The Companies and Employee desire to reduce their agreement concerning the terms and conditions of Employee's employment to written form. NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Employment Duties. During the Employment Period (as hereinafter defined): (a) The Companies will employ Employee and Employee will perform services as the President of Essex and as the Vice President - Children's Wear Product Development of OshKosh. At such time, if any, as OshKosh determines to liquidate or merge Essex into OshKosh, Employee will no longer be employed as the President of Essex but solely as the Vice President - Children's Wear Product Development of OshKosh. Employee will have the following duties and responsibilities: (i) responsibility for all phases of the management of children's wear product design, develop- ment, Asian package sourcing and shared responsibility for other sourcing decisions and planning; (ii) planning complete seasonal product offer- ings; (iii) management of the budget for children's wear product develop- ment, design, art and sourcing functions; (iv) assistance in costing and pricing all children's wear products; and (v) assistance to "Genuine Kids" wholesale staff in meeting sales targets and budgets. (b) The parties understand and agree that the division of Employee's services as between Essex and OshKosh is presently difficult to determine and may from time to time change depending upon a number of factors which cannot presently be determined including whether and when Essex is liquidated or merged into OshKosh, the nature of future business operations which OshKosh determines should be conducted by OshKosh as opposed to Essex (including business operations presently being carried on by Essex but which may at some time in the future be determined to be best carried on by OshKosh). For these reasons, Employee agrees to perform her services hereunder for Essex and OshKosh in such proportions as may be determined by the President of OshKosh after reasonable consultation with Employee. (c) Employee will perform her services hereunder faithfully and to the best of her abilities, and will devote her best efforts and all of her working time, attention and skill to the business and affairs of the Companies during regular business hours, except for temporary illness, vacation periods and reasonable leaves of absences or as agreed by the parties hereto. If Employee is elected as an officer of any of OshKosh's affiliates in addition to Essex during the term of this Agreement, Employee will serve in such capacities without further compensation. Notwithstanding the foregoing, Employer acknowledges that the performance of Employee's duties will include extensive communications with firms and individuals in different time zones, including without limitation the Far East. Such communications will likely occur outside of regular business hours. As a result, the term "regular business hours" shall not be strictly construed. (d) Employee will act with loyalty, honesty and in good faith in all dealings with the Companies and their businesses. (e) Nothing contained herein shall preclude Employee from serving as a director or member of a committee of any business organi- zation which does not conflict with the Companies or their businesses, and from engaging in charitable and community activities, provided that such services and activities do not interfere with the regular performance of her duties and responsibilities under this Agreement and provided that such services and activities have first been approved by the President of OshKosh. (f) The services which are to be performed by Employee hereunder are to be rendered primarily in OshKosh, Wisconsin, to a lesser extent in New York, New York, and to some extent in other places, including outside the United States. Employee presently resides in New York, but promises to change her residence to the Oshkosh, Wisconsin area by no later than August 31, 1994. After such change Employee will not be required to again change her place of residence without her consent. (g) The Companies will provide to Employee adequate resources to permit Employee to perform the duties described above. In addition, the Companies will grant to Employee customary authority over employees, agents, suppliers and others reporting to Employee. 2. Compensation; Benefits. (a) In consideration of the services to be performed by Employee during the Employment Period pursuant to Section 1 hereof and Employee's compliance with the other provisions of this Agreement, the Companies will pay Employee (in such proportions as the Companies may determine except that notwithstanding such proportionate allocation, for the purposes of pension and profit sharing plan computations, all compensation shall be deemed to have been paid by Oshkosh.) (i) a base salary at the annual rate of $205,000.00 increased for each calendar year beginning with 1995 at the rate of 5% per annum over the prior year's salary or such greater amount as may from time to time be approved by OshKosh's Board of Directors, in its sole discretion, payable in accordance with the Company's normal pay- roll practices from time to time in effect for its executive employees, and (ii) an annual performance bonus for each year during the Employment Period in accordance with the Company's Management Incentive Compensation Plan for its officers, the design specifications for which are described in Exhibit 1 attached hereto. (b) (i) For purposes of the calculation of the performance bonus referred to in Section 2(a)(ii) hereof for the period May 1, 1994 - December 31, 1994, the specific bonus award composition; minimum, target and maximum awarded percentages of 20%/40%/60% (i.e. bonus award as a percentage of base salary); and the minimum, target and maximum performance measures, as set forth and described in Exhibit 2 attached hereto, shall be utilized; provided, however, that the performance bonus for such period shall be two thirds ( ) of the amount indicated by such calculation. (ii) For purposes of the calculation of the annual performance bonus for calendar years 1995, 1996, 1997, 1998 and the first four (4) months of 1999, the same bonus award composition, the same award percentages (i.e. awards as a percent of base salary), and the same performance measures as set forth in Exhibit 2 shall be used; provided, however, that (A) OshKosh may at its option reduce the "Corporate (Consolidated Except Essex Retail)" component of the bonus award composition from 45% to 35% and add another bonus award component reasonably related to Employee's duties and responsibilities equalling 10% of the total; (B) the target amount for Net Sales and Net Income for the "Essex Retail" component, shall be the same as the budgeted amounts for 1995, 1996, 1997, 1998 and 1999, respectively, as approved by the Oshkosh board of directors, with the minimum amount to be 90% and the maximum amount 120% of the target amount; (C) the target amount for Net Sales and Net Income for the "Corporate (Consolidated Except Essex Retail)" component, shall be the same as the budgeted amounts for 1995, 1996, 1997, 1998 and 1999, respectively, as approved by the OshKosh board of directors, with the Minimum Net Sales amount, the Maximum Net Sales amount, the Minimum Net Income amount, and the Maximum Net Income amount to be such percentages of target amounts as are approved for other executive officers of OshKosh for each such year respectively; and (D) the performance bonus for the first four (4) months of 1999 shall be one-third ( ) of the amount indicated by the bonus calculation for the full year 1999. (iii) Each annual performance bonus shall be computed and paid within seventy-five (75) days after the end of the fiscal year of OshKosh to which such bonus relates. (c) Employee shall also be entitled to participate in any employee benefits which generally are made available by OshKosh to its executives during the Employment Period, including those benefits listed on Exhibit 3 hereto. During the Employment Period, Employee will be en- titled to participate in any life, health, dental, accident, sickness and disability plans (whether or not insured), and in any qualified or non- qualified pension or profit sharing plan, savings plan, stock option plan, deferred compensation plan or any other fringe benefit plan or program which the Company may from time to time make available to its executives. Employee acknowledges that she shall have no vested rights in any such plan or program except as expressly provided under the terms thereof and that such plans or programs may be amended or terminated as well as supplemented. Notwithstanding the foregoing, Employee shall receive four (4) weeks of vacation for each complete year of the Employment Period, including 1994. The vacation period for 1994 shall include a two (2) week period to accomplish the move to Oshkosh described elsewhere herein. (d) The amounts payable to Employee under this Section 2 are before any deductions therefrom for any taxes required to be withheld by federal, state and local governments. 3. Term and Termination. (a) The term of this Agreement during which Employee will provide services to the Companies hereunder (the "Employment Period") will commence on May 1, 1994 and end on April 30, 1999, unless earlier terminated as follows: (i) The Employment Period will terminate upon the written agreement of the parties; (ii) The Employment Period will terminate upon the death or permanent disability of Employee. The term "permanent disability" of Employee means the inability of Employee to effectively perform her duties hereunder on a full-time basis by reason of physical or mental illness, disability or incapacity for a continuous period of sixty (60) working days. Physical or mental illness, disability or incapacity will be deemed to exist if a licensed physician opines in writing that Employee for medical reasons should terminate or substantially reduce her services to the Company. If there is any dispute as to whether Employee is permanently disabled within the meaning of this Section 3(a)(ii), such dispute shall be submitted to a licensed physician agreeable to the parties who shall conduct an examination of Employee for the purpose of resolving such dispute; provided, however, that if the parties cannot agree upon a physician within ten (10) days after written notice by either Employee or OshKosh to the other, a physician designated by the then President of the Medical Society of Winnebago County, Wisconsin shall conduct such examination. Employee shall submit to such examination, and the determination of such physician as to whether Employee is permanently disabled within the meaning of this Section 3(a)(ii) shall be binding and conclusive on the parties. (iii) Oshkosh may terminate the Employment Period for cause upon (a) written notice to Employee stating in reasonable detail the facts constituting such cause ("Written Notice"), and (b) the expiration of (10) days following receipt by Employee of Written Notice, during which ten (10) day period, Employee shall be permitted to cure, if curable, the conduct constituting the alleged cause. For purposes of this Section 3(a)(iii), the term "cause" means the diversion or attempted diversion by Employee of business from either of the Companies for Employee's personal gain or benefit; the commission by Employee of an act of dishonesty or moral turpitude involving either of the Companies; gross incompetence in the performance by Employee of her services hereunder; gross negligence by Employee involving either of the Companies; habitual use by Employee of alcohol or narcotics; commission by Employee of a felony or serious misdemeanor offense or pleading guilty or nolo contendere to same; willful misconduct by Employee as determined in good faith by the Board of Directors of OshKosh which results in a demonstrably material injury to the Companies; the willful and persistent failure of Employee to follow a specific directive of the Board of Directors or the President of OshKosh provided that the directive is consistent with the terms of this Agreement; or a material breach by Employee of any provision of this Agreement, including without limitation any provision contained in Section 4 hereof. (b) Upon termination of the Employment Period, the Company will pay to Employee: (i) The full amount of any unpaid salary earned by Employee pursuant to Section 2 of this Agreement through and including the termination date and prorated as appropriate, and neither Essex nor OshKosh will be obligated to make any further salary payments to Employee; (ii) If the termination is for cause, no further bonus shall be payable other than a bonus which is awardable pursuant to Section 2 hereof with respect to a calendar year that has already ended prior to such termination for cause but which has not yet been paid; (iii) If the termination is because of death or permanent disability, a bonus pursuant to Section 2 hereof shall be payable for the year during which such event occurs, but the bonus shall be prorated based on the number of whole months worked in such year prior to such event divided by twelve (12) and such prorated bonus shall not be payable until such time as it would otherwise have been payable had such death or disability not occurred. (c) Notwithstanding anything to the contrary herein, if for any reason other than cause or Employee's death or disability, Employee's employment is terminated by Essex and/or OshKosh before April 30, 1999, Employee shall be entitled to receive from the date of such termination through April 30, 1999, in lieu of all other amounts payable hereunder, a monthly amount of $23,917, and the obligations set forth in Sections 4 and 5 hereof shall survive such termination. In the event Employee continues to receive payments pursuant to this Section 3(c) following termination of the Employment Period, Employee shall have no obligation to seek other employment or to otherwise mitigate damages hereunder, provided, however, that if Employee obtains full-time or substantially full-time employment (i.e. more than thirty (30) hours a week), whether by another employer or through self-employment, the amounts she receives from such other employer or earned pursuant to such self-employment shall be offset, dollar for dollar, against any payments owing to Employee under this Section 3(c). 4. Noncompetition. (a) During the Employment Period and for one (1) full year thereafter and without regard to the early termination thereof or whether such early termination is or is not for cause, Employee will not directly or indirectly: (i) own, operate, manage, join, finance, control, participate in the ownership, management, operation or control of, or be paid or employed by, consult with or acquire any securities of, or otherwise become associated with or provide assistance to, any entity, firm, business, activity or enterprise ("Enterprise") which is engaged in the business of manufacturing, having manufactured, designing, developing and/or selling products which are the same as or are similar to the products of the Companies as of the date of termination of employment hereunder or other apparel products sold by the Companies during such one (1) year period ("Competing Products") in the same geographic market in which the Companies operate as of the date of termination of employment hereunder during such one (1) year period; (ii) contact, sell or solicit to sell Competing Products to any entity to whom either Company is selling its products at the time of the termination of employment hereunder or has sold its products during the prior twelve (12) months; (iii) solicit, cause or seek to cause any customer, supplier or employee (with the exception of Paul Lowry) of either of the Companies to terminate, curtail or otherwise modify any customer, supplier or employment relationship with either of the Companies for the purpose of entering into a customer, supplier, employment or other relationship with Employee or with any Enterprise with which Employee is directly or indirectly affiliated. (b) Notwithstanding the provisions of Section 4(a) hereof, Employee may acquire securities of any entity the securities of which are publicly traded, provided that the value of the securities of such entity held directly or indirectly by Employee following such acquisition is less than 5% of the total value of the then outstanding class or type of securities acquired. (c) Employee acknowledges and agrees that the restrictions set forth in Section 4(a) hereof are founded on valuable consideration and are reasonable in duration and geographic area in view of the circum- stances under which this Agreement is executed and that such restrictions are necessary to protect the legitimate interests of the Companies. In the event that any provision of Section 4(a) hereof is determined to be invalid by any court of competent jurisdiction, the provisions of Section 4(a) shall be deemed to have been amended and the parties will execute any documents and take whatever action is necessary to evidence such amendment, so as to eliminate or modify any such invalid provision and to carry out the intent of Section 4(a) so to render the terms of Section 4(a) enforceable in all respects as so modified. Employee ack- nowledges and agrees that irreparable injury will result to the Companies in the event she breaches any covenant contained in Section 4(a) and that the remedy at law for such breach will be inadequate. Therefore, if Employee engages in any act in violation of the provisions of Section 4(a), the Companies, and each of them, shall be entitled, in addition to such other remedies and damages as may be available to them by law or under this Agreement, to injunctive or other equitable relief to enforce the provisions of Section 4(a). 5. Unauthorized Disclosure; Inventions and Improvements. (a) Employee will not knowingly disclose to any person or entity, other than employees of the Companies or other persons to whom disclosure is reasonably necessary or appropriate in connection with the performance by Employee of her services hereunder, any Confidential Information obtained by Employee during the Employment Period. Employee also will not use in any manner any Confidential Information for Employee's own purposes or for the benefit of any person or entity ex- cept the Companies, whether such use consists of duplication, removal, oral communication, disclosure, transfer or other unauthorized use thereof. As used herein, the term "Confidential Information" refers to all information and materials belonging to, used by or in the possession of the Companies relating to their business strategies, products, pricing, customers, technology, programs, costs, employee compensation, marketing plans, developmental plans, computer programs, computer systems, inventions, developments, formulae, processes, designs, draw- ings and trade secrets of every kind and character. "Confidential Information" also includes confidential information belonging to other companies and disclosed to Employee by the Companies. In addition, the Companies acknowledge that Employee has been employed for many years in the apparel business and that as such, has acquired sub- stantial knowledge as to the manufacture, marketing, financing, design and other aspects of the clothing business. Thus, the information that shall be subject to this paragraph shall be information that is truly proprietary with the Companies or any subsidiary or affiliate; that is, information that could only have been acquired by Employee as the result of her having been employed by the Companies. Examples of such con- fidential information are strategic marketing plans unique to the Companies, proposed new product lines, and new retailing initiatives. (b) Employee will disclose to the Companies and upon the Companies' request, assign to them or either of them, without charge, all of Employee's right, title and interest, if any, in and to any and all ideas, inventions, discoveries and improvements pertaining in any manner to the business of the Companies which Employee may make or con- ceive, solely or jointly with others, during the Employment Period (collectively, the "New Developments"). Upon request by the Companies, or either of them, during or within one (1) year subsequent to the Employment Period, Employee will do any and all acts and execute and deliver such documents as may be deemed by the Companies or either of them or their counsel to be necessary or advisable to vest in the Companies or either of them all of Employee's right, title and interest in and to such New Developments and to apply and obtain domestic or foreign patents, provided that the expenses incurred in connection with the foregoing shall be borne by the Companies. 6. Common Law of Torts or Trade Secrets. Nothing in this Agreement shall be construed to limit or negate the common law of torts or trade secrets where such common law provides the Companies with broader pro- tection than the protection provided by this Agreement. 7. Expense Reimbursement. The Companies will reimburse Employee for her out-of-pocket expenses reasonably incurred by her in connection with the performance of her services hereunder, subject to compliance with OshKosh's written policy, if any, regarding expense reimbursement. 8. No Conflict with Other Agreements. Employee hereby represents and warrants that she is not a party to any agreement (whether written or oral) with any employer other than the Companies, or subject to any obligations or restrictions under any such prior agreement, including, without limitation, any obligations and restrictions relating to non- competition, nonsolicitation, new developments or the like, which are in conflict with or are violated by this Agreement. 9. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect or impair the validity or enforce- ability of any other provision and this Agreement shall be construed as if such invalid or unenforceable provision were not contained herein. Notwithstanding the preceding sentence, if any court of competent juris- diction shall determine that any geographic or time restraint provided in this Agreement is too broad as to the area or time covered, such res- traint may be reduced to whatever extent the court deems reasonable and such restraint may be enforced as reduced. 10. Notice. All notices under this Agreement shall be in writing and a notice shall be considered to be given and received in all respects on the day it is personally delivered, faxed or mailed by certified mail, postage prepaid, addressed as follows or to such other address as may be designated by one party to the other by notice duly given: If to OshKosh or Essex: OshKosh B'Gosh, Inc. P.O. Box 300 Oshkosh, WI 54902-0300 Attn: President FAX: (414) 231-3261 If to Employee: Barbara Widder-Lowry c/o Theodore C. Widder, III Mohs, MacDonald, Widder & Paradise 20 North Carroll Street Madison, Wisconsin 53703 FAX: (608) 257-1106 11. Litigation; Attorney's Fees. Any controversy or claim arising out of or related to this Agreement shall be finally settled by binding arbitration in the City of Milwaukee, Wisconsin in accordance with the then prevailing Commercial Arbitration Rules of the American Arbitra- tion Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, and the rules of the American Arbitra- tion Association, civil discovery as provided for in Chapter 804 of the Wisconsin Statutes shall be available to either party in the arbitra- tion proceeding. Each party shall be reimbursed by the other party for all reasonable legal fees and expenses, if any, reasonably incurred by it in the enforcement of its or her rights under any provision of this Agreement. 12. Waiver. A waiver by a party of any breach by the other party of any provision of this Agreement shall not be deemed to be a waiver by such first party of any subsequent breach. 13. Assignment. This Agreement may not be assigned by either Essex or OshKosh without the written consent of Employee, except that if either OshKosh or Essex shall merge or consolidate with or into, or transfer substantially all of its business or the assets thereof to another corporation or other form of business or other entity, this Agreement shall be assigned to such a successor and this Agreement shall be expressly assumed, and it shall be binding upon and inure to its benefit. Employee may not assign, pledge or encumber this Agreement or any interest herein. 14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, Essex's and OshKosh's successors and permitted assigns and Employee's heirs and legal representatives. 15. Complete Agreement; Amendment. This Agreement constitutes the complete agreement of the parties concerning its subject matter, and may be amended only by a written instrument executed by the parties hereto or their respective successors, assigns, heirs or legal rep- resentatives, as applicable. 16. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OSHKOSH B'GOSH, INC. By /s/ DOUGLAS W. HYDE Douglas W. Hyde, President ESSEX OUTFITTERS, INC. By /s/ PAUL A. LOWRY Paul A. Lowry, Vice President /s/ BARBARA WIDDER-LOWRY Management Incentive Compensation Plan - Design Specifications Exhibit 1 Management Incentive Compensation Plan - Design Specifications Plan Purposes . Focus the efforts of all key management employees on the maximization of annual profits, while growing aggressively by offering quality products and services. . Provide a meaningful incentive geared to the achievement of specific Company and Responsibility Area goals. . Encourage teamwork and cooperation in the achievement of Company and Responsibility Area goals. . Recognize differences in the performance of individual participants. Plan Year The fiscal year (January through December) Participants . Will be selected by the President/Chief Executive Officer and the Executive Vice President/Chief Operating Officer. . Selection normally will take place, and will be communicated to each participant, prior to the pertinent plan year. Participation for the 1994 plan year is projected to be around 50 key contributors. . In those cases when participation begins during a plan year: - Participation will be communicated as soon as possible following selection. - Newly hired or promoted employees will participate on a pro-rata basis for the remainder of the first plan year of their employment or tenure in a participating position. - If a participant changes positions during a plan year, whether due to a promotion, demotion, or lateral move, that individual's award will be based on factors such as the individual's overall contribution, and the portion of the year the individual actually spent in each position. Award . Participating positions are grouped by Opportunities incentive award categories. . Each incentive category has a target award level assigned to it. - The target award is paid if a stated performance goal(s) is achieved. - Minimum and maximum performance/award levels are built around the target performance/award levels. . This plan's award opportunities will provide 65th percentile total cash compensation (base plus bonus) levels if stated target performance goals are achieved. Target goal levels will be selected to represent aggressive, but achievable, performance. The following award opportunities should permit Oshkosh to attain its performance and compensation objectives. Award Opportunity (as % of Incentive Beginning of Year Salary) Category Minimum Target Maximum A (CEO, COO) 24% 47% 71% B (Other Officers) 20% 35% 53% C (Director-level) 13% 25% 35% D (Plant Mgrs.) 11% 21% 32% The award schedule as set forth above, minimum at approximately 50% of target and maximum at approximately 150% of target, is typical. Award interpolation will take place between "minimum," "target," and "maximum." (For example, if actual performance falls exactly midway between the minimum and target goals, the award would be approximately 75% of the target award opportunity.) Based on preliminary estimates, incentive Category B will include nine participants, Category C will include 15 participants, and Category D will include 22 participants. Performance/ . Each participant's award opportunity is Award Components segmented into one or more components as follows: Weighting of Award Opportunity/Perf Factors (Total 100%) Position Title Responsibility Individual (Incumbent) Corporate Area Evaluation Example: Vice 35% 50% 15% President Manufacturing See Appendix A for individual participant weightings. . One component's performance will not directly affect the portion of the award opportunity earnable from another one. . A participant's final award amount will be determined as the sum of the awards earned based on the performance of his pertinent award components. Performance . Normally one to three performance criteria Criteria will be established for each performance/award component (e.g. Corporate component: Net income before taxes and profit sharing, and Net Sales). . Target, minimum, and maximum performance levels will be established for each of the performance criteria. These performance levels will coincide with the target, minimum, and maximum award levels referred to previously. Interpolated performance/reward levels will be established on a straight-line basis between each of the above performance/reward levels. If actual performance falls below the minimum level set forth for the particular performance criterion, the portion of the award related to that performance criterion will be forfeited in its entirety. . The Corporate Performance component will be measured as a combination of Net Income (70%) and Net Sales (30%). "Corporate," for the purposes of calculating the foregoing, will be defined at the beginning of the plan year and administered according to such defini- tion for such year's duration. The definition may differ for various participant groupings if such diff- erence is appropriate to accomplish the motivational purposes of the plan. (See Appendix A.) . The Responsibility Area component will be embodied in the Responsibility Area performance criteria that are impacted by the particular B, C, or D Category participant. The performance criteria should focus on quality, delivery, and/or cost. . Each participant's immediate manager will be responsible for recommending how much of the Individual Evaluation component of a participant's award opportunity has been earned. Each such manager will be guided by the following: % of Individual Individual Portion of Target Performance Rating Incentive Award Earned Outstanding 120%-150% Excellent 100%-120% Good 80%-100% Satisfactory 50%- 80% Unsatisfactory 0% The Chief Executive Officer and Chief Operating Officer will review these recommendations and finalize the Individual Evaluation "performance score." Final Award The final incentive award is determined as the sum of the awards earned based on Corporate, Responsibility Area, and/or Individual Evaluation performance. See Appendix B for award calculation examples. Termination . If the participant's employment is terminated during a plan year for reason of death, disability, or normal or early retirement, a tentative award will be calculated (at year- end) as if the participant had remained employed as of the end of the plan year. The final award will be calculated by multiplying the tentative award by a proration factor. The proration factor will be equal to the number of full weeks of employment divided by 52. . If a participant's employment is terminated during a plan year for any other reason, an incentive award normally will not be paid. However, the Chief Executive Officer and the Chief Operating Officer may exercise discretion in this matter. Form and Payments will be made in cash as soon as Timing of practicable following the release of audited Payments results for the plan year. Appendix A - Incentive Compensation Plan Award Components Appendix A Oshkosh B'Gosh, Inc. Incentive Compensation Plan Award Components Incentive Responsibility Individual Category Name Corporate Area Evaluation A Doug Hyde 85* 15 A Mike Wachtel 85 15 B Mike Donabauer 65* 20 15 B Dave Omachinski 50* 35 15 B Tony Giordano 35 50 15 B Jon Dell'Antonia 35 50 15 B Don Carlson 35 50 15 B Bill Wyman 35 50 15 B Ken Masters 35 50 15 B Chips Wood 25 60 15 B Pat Garvey 25 60 15 C Larry Habeck 35 50 15 C Greg Spaeth 35 50 15 C Marty Smith 35 50 15 C Mark Greenspan 25 60 15 C Gary Brock 25 60 15 C D. Hursh 25 60 15 C Harold Brown 25 60 15 C Bobby Morrison 25 60 15 C Don Hess 25 60 15 C Eddie White 25 60 15 C Aaron Poore 25 60 15 C Lee Tiegen 25 60 15 C Steve Fischer 25 60 15 C Janell Cleveland 25 60 15 C Larry Delk 25 60 15 D All Plant Managers 20 65 15 *Denotes Corporate responsibility defined as total consolidated performance of all corporate entities (exclusive of Rio Sportswear, Inc. for 1994). All others - Corporate component is defined as the aggregate performance of all entities that market product under the Oshkosh B'Gosh name. Appendix B - Award Calculation - Examples Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Incentive Category Award Opportunity (As % of Salary) Minimum Target Maximum A (CEO, COO) 24% 47% 71% B (Other Officers) 20% 35% 53% C (Directors and 13% 25% 35% Regional Sales Mgrs) D (Plant Mgrs) 11% 21% 32% Minimum Target Maximum The above as a percent 50% (approx) 100% 150% (approx) of the target opportunity Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Vice President, Manufacturing Target = 35% of Salary Overall Award Structure Award Composition (at target) Performance Measure Goals 35% Corporate: . Sales (30%) . Income (70%) 50% Responsibility Area (Weighting): . Quality (30%) Irregulars (% of): 3.0% Minimum 2.0% Target 1.5% Maximum . Delivery (40%) Work Order Completion: 92% Minimum 95% Target 97% Maximum . Cost (30%) Cost per Minute: +10% Minimum Current: Target -10% Maximum 15% Individual . Succession Plan TBD . Manufacturing TBD Effectiveness . Service Task Force TBD Participation Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Example #1 All Goals Attained at Target Sales: At Target Income: At Target Irregular Levels: 2% Work Order Completion: 95% Cost Per Minute: Current Levels Succession Planning Manufacturing Effectiveness At Target Service Task Force Participation VP - Manufacturing: Target Award 35% Score = 35% Corporate Measures 10.5% = (10.5% x 100%) Sales (30% x 35% = 10.5%) 24.5% = (24.5% x 100%) Net Income (70% x 35% = 24.5%) 50% Responsibility Area 15% = (15% x 100%) Quality (30% x 50% = 15%) 15% = (15% x 100%) Cost (30% x 50% = 15%) 20% = (20% x 100%) Delivery (40% x 50% = 20%) 15% Individual Evaluation 100% Payout = Performance Target Score X Opportunity 100% X 35% = 35% Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Example #2 Mixed Goal Attainment Sales: Midway Between Minimum and Target Income: Midway Between Minimum and Target Irregular Levels: 1.5% (Maximum) Work Order Completion: 97% (Maximum) Cost Per Minute: -10% (Maximum) Succession Planning Manufacturing Effectiveness Excellent (Maximum) Service Task Force Participation VP - Manufacturing: Target Award 35% Score = 26.3% Corporate Measures 7.9% = (10.5% x 75%) Sales (30% x 35% = 10.5%) 18.4% = (24.5% x 75%) Net Income (70% x 35% = 24.5%) 75% Responsibility Area 22.5% = (15% x 150%) Quality (30% x 50% = 15%) 22.5% = (15% x 150%) Cost (30% x 50% = 15%) 30% = (20% x 150%) Delivery (40% x 50% = 20%) 22.5%Individual Goals (15% x 150%) 123.8% Payout = Performance Target Score X Opportunity 123.8% X 35% = 43.33% Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Example #3 Mixed Goal Attainment Sales: Below Minimum Income: Below Minimum Irregular Levels: 1.5% (Maximum) Work Order Completion: 95% (Target) Cost Per Minute: +10% (Minimum) Succession Planning Manufacturing Effectiveness At Target Service Task Force Participation VP - Manufacturing: Target Award 35% Score = 0% Corporate Measures 0% = (10.5% x 0%) Sales (30% x 35% = 10.5%) 0% = (24.5% x 0%) Net Income (70% x 35% = 24.5%) 50% Responsibility Area 22.5% = (15% x 150%) Quality (30% x 50% = 15%) 7.5% = (15% x 50%) Cost (30% x 50% = 15%) 20% = (20% x 100%) Delivery (40% x 50% = 20%) 15% Individual Goals (15% x 150%) 65.0% Payout = Performance Target Score X Opportunity 65.0% X 35% = 22.75% Barbara Widder Lowry Minimum Award 20% of Salary/Target Award 40% of Salary*/ Maximum Award 60% of Salary *Base Salary $180,000 Award Composition Performance (at Target) Measure Specifics Target Range 45% Corporate(Consolidated Except Essex Retail) .(30%) Sales Net Sales $314,277,000 Minimum $349,197,000 Target $419,036,000 Maximum .(70%) Income Net Income before Profit $23,205,000 Minimum Sharing Contribution, $30,940,000 Target Incentive Compensation, $37,128,000 Maximum Extraordinary Items, Franchise and Income Taxes 40% Essex Retail Net Income before Profit $2,253,000 Minimum .(70%) Income Sharing Contribution, $2,503,000 Target Incentive Compensation, $3,004,000 Maximum Extraordinary Items, Franchise and Income Taxes* .(30%) Sales Net Sales $34,650,000 Minimum $38,500,000 Target $46,200,000 Maximum 15% Individual Review by CEO Satisfactory:Minimum Evaluation Good: Target Outstanding: Maximum 100% *Extraordinary items are defined as non-recurring unusual expense or income items such as license agreement termination, plant closures, or the effects of litigation. BENEFIT SUMMARY FOR VICE PRESIDENT - CORPORATE OFFICE INCENTIVE COMPENSATION PLAN The amount of the bonus is dependent upon the level of performance in achieving company, departmental, and individual goals. The bonus is usually payable in February for the prior year's performance and is taxable in the year in which it is paid. DEFERRED COMPENSATION The employee can defer a percentage of income each pay period. The money earns interest equal to the prime rate. The money is not taxable until withdrawn. PERSONAL AUTOMOBILE The company provides an automobile (with a value of up to $30,000) for personal use by the officer. PROFIT SHARING An employee who has completed one year of service and is at least 21 years of age automatically become a participant in the Oshkosh B'Gosh, Inc. non- qualified Profit Sharing Plan. The percentage of gross earnings contributed to the plan annually is determined by the Board of Directors and can vary from 0% to 15%. Each participant in the plan receives the same percentage of their gross earnings. Upon entry into the profit sharing plan, the employee is 100% vested. The Profit Sharing Plan is intended to supplement retirement benefits, therefore, the funds in an employee's account are unavailable until retirement, death or termination of employment. Upon termination, the entire account balance is payable. The benefit payment does not qualify for a rollover to defer taxes. PENSION PLAN The Pension Plan is designed to provide an employee with income upon retirement. As an employee works for OshKosh B'Gosh the pension benefit continues to accumulate. An employee who has completed one year of service and is at least 21 years of age automatically becomes a participant in the 100% company-funded Pension Plan. An employee becomes fully vested in the pension plan upon completing 5 vested years of service. A vested year is one in which the employee has been credited with at least 1,000 hours of service. The employee does not have any vested interest in the plan until completing 5 vested years. The formula for calculating the age 65 monthly benefit is: 5 consecutive years of earnings which produce the highest monthly average, multiplied by 1%, multiplied by years of service. A vested employee can request early reduced retirement benefits after reaching age 60 or full benefits after reaching age 65. An employee leaving the company who is not yet retirement age leaves with a deferred vested benefit and can apply for the benefit upon reaching retirement age. If the benefit has a present day value of less than $3,500, it will be automatically paid in a lump sum to the employee, generally within three months after termination. HEALTH CARE COVERAGE In order to provide protection to employees and their dependents in the event of illness or injury, OshKosh B'Gosh offers health care coverage. Employees are eligible for health care coverage from the first day of employment and may elect either single or family coverage. Employees have three plans to choose from: HMO of Wisconsin, Network Health Plan, or OshKosh B'Gosh, Inc., self- funded plan. Once employees choose coverage, they may change their election only once per year during January. Employees have 30 days from date of hire to enroll in the health plan. An employee making late application must first be approved by the insurance company and could be denied coverage. OshKosh B'Gosh pays 100% of the premium cost. SICK LEAVE/SALARY CONTINUATION OshKosh B'Gosh provides salary continuation for a period of time during which an employee is ill or injured. The amount of time allowed is subject to the discretion of the C.O.O. LONG-TERM DISABILITY The long-term disability program is designed to provide a benefit of 60% of an employee's regular monthly pay up to a maximum of $5,000 per month when the employee is unable to work due to a serious debilitating illness or injury. The monthly payments begin after a 180 day waiting period and are paid for total or partial disability until the employee is able to return to work. If the disability qualifies an employee for social security or workers' compensation benefits, the long-term disability benefit would be reduced by the amounts received. The company pays 100% of the premium for the employee and adds the premium cost to the employee's earnings at the end of the year. The employee pays taxes on the premium, but under current tax law, benefits paid are non-taxable. LIFE INSURANCE Life insurance helps provide financial assistance to family members in the event of the employee's death. The level of term life insurance provided by OshKosh B'Gosh, Inc., is $50,000. The employee will need to name a beneficiary upon enrollment, which may be changed in writing at any time. Employees also have an additional $100,000 of coverage for accidental death 24 hours per day, 7 days per week. The company pays for 100% of both premiums. SUPPLEMENTAL LIFE INSURANCE OshKosh B'Gosh provides supplemental life insurance in the amount of $150,000. The premium is paid by the company but the amount of the premium is added to the employee's W-2 form as additional taxable income. FLEXIBLE SPENDING PLAN (SECTION 125) OshKosh B'Gosh, Inc., offers a benefit which allows certain expenses to be deducted from the employee's pay check before taxes. Depending on the employee's federal tax bracket, between 28% - 40% in taxes can be saved (including social security and state taxes) on allowable expenses, thereby providing more disposable income for other things. Allowable expenses include: group insurance premiums, and two Flexible Spending Accounts -- non-reimbursed medical and dependent care. Employees can participate in one or all three portions of the plan after meeting the eligibility requirements. All employees are eligible for before-tax payment of group insurance premiums at the time of insurance enrollment. Full-time employees are eligible to enroll in one or both Flexible Spending Accounts. Enrollment takes place prior to January and July of each year, after the employee completes six months of employment. VACATION SCHEDULE Employees need to relax and take time off work to pursue their outside interests. Paid vacations are provided for this purpose. Vacation will available for use according to the following schedule: Employed less than 1 year Two weeks Employed 1 through 4 years Three weeks per year Employed 5 or more years Four weeks per year Although vacation is earned during an anniversary year, it is available for use on a calendar year basis. Vacation time must be used by the end of the calendar year or it is forfeited. When an employee terminates, unused earned vacation will be paid on a prorated basis. If an employee used more vacation than earned, this amount will be deducted from the employee's final check. PAID HOLIDAYS Eligibility for paid holidays begins upon date of hire. Specific dates for holiday observation are published each year. The 10 paid holidays are as follows: New Years Day Fourth of July Day after Thanksgiving New Years Eve Day Good Friday Labor Day Christmas Eve Day Memorial Day Thanksgiving Day Christmas Day JURY DUTY OshKosh B'Gosh believes it is the civic responsibility of its employees to accept jury duty service. A full-time employee serving on jury duty shall be allowed to serve without a loss of income. To be eligible for excused absence for jury duty, the employee notifies their supervisor upon receipt of the notice to serve. The employee presents the jury duty pay receipt to the Human Resources Department. The employee will be compensated by OshKosh B'Gosh for the difference between regular pay and jury duty pay, thus maintaining normal income. BEREAVEMENT PAY OshKosh B'Gosh recognizes a time of bereavement is very difficult for an employee. Every effort will be made to insure an employee is able to attend to family matters prior to making the transition back to the normal work routine. Therefore, an employee is eligible for up to three days excused absence with pay in the event of a death in the immediate family. Immediate family consists of parents, spouse, children, brothers, sisters, grandparents, grandchildren, spouse's parents, spouse's grandparents, step-parents, step-sister, step- brother and step-children. LEAVES OF ABSENCE Under the Family Medical Leave Act all employers with 50 or more permanent employees within a 75-mile radius must allow employees of either sex, who have met the eligibility requirements, a leave of absence for: (1) the birth or adoption of the employee's child; (2) the care of the employee's child, spouse, or parent with a serious health condition; (3) the employee's own serious health condition. OshKosh B'Gosh recognizes that occasionally employees will need time away from work to attend to critical personal matters that do not fit in the category of Family Medical Leave. It is the company's intent to grant personal leaves on a case-by-case basis based upon both the company and employee needs. TUITION REIMBURSEMENT OshKosh B'Gosh recognizes the value of continuing education both to the employee and to the company. In support of this, the company reimburses the employee for tuition and text book costs for pre-approved business related courses. Reimbursement will be made upon successful completion of the course and proof of payment. Tuition reimbursement is limited to $1,500 per calendar year. GARMENT/PROMOTIONAL ITEM PURCHASES In order to identify with the company products and promote the company image within the community, employees may purchase up to four garments per week from an OshKosh B'Gosh wholesale catalog at cost plus sales tax. "Garment Requisition" forms are completed and deposited in a drop box located within the facility. Garments are available for pick up according to the schedule posted at each facility. Garments must be paid for at the time of pick up. An unlimited amount of promotional items are also available for purchase through this system, using a separate Requisition form. An employee and their immediate family (same household) are also entitled to a 20% discount off the regular ticket price at the OshKosh B'Gosh Factory Outlet Store located closest to their facility. OSHKOSH COUNTRY CLUB The annual social membership of this association is 100% paid for by OshKosh B'Gosh. The employee is responsible for monthly fees and charges. YMCA MEMBERSHIP OshKosh B'Gosh pays 100% of an annual membership at the Appleton, Oshkosh or Fond du Lac YMCA. Fees for YMCA classes or programs attended by the employee and their immediate family are the responsibility of the employee. Employees who want to become a member should contact the accounting department for a membership application card for completion and forward it to the YMCA Membership Office. OSHKOSH POWER AND BOAT MEMBERSHIP The annual social membership of this association is 100% paid by OshKosh B'Gosh. The employee is responsible for monthly fees and charges. PAYPERIOD The employee is paid monthly on the 15th which covers the payperiod from the 1st of the month through the last day of the month. CASUAL DAY For the comfort and enjoyment of employees, Casual Day is observed every Friday! This summary is not intended to be a complete description of benefits and is subject to change. Please refer to summary plan descriptions and to policies and procedures for detailed descriptions of benefits. In the case of a misunderstanding, official plan documents and company policies and procedures will rule. EX-10.15 5 EXHIBIT 10.15 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into as of the 1st day of May, 1994, by and among OSHKOSH B'GOSH, INC., a Delaware corporation ("OshKosh"), ESSEX OUTFITTERS, INC., a Delaware corporation ("Essex") (OshKosh and Essex collectively referred to herein as the "Companies"), and PAUL A. LOWRY, an individual ("Employee"). R E C I T A L S: A. Essex is a wholly-owned subsidiary of OshKosh. B. OshKosh and Essex are engaged in the business of designing, manufacturing or having manufactured, marketing and selling clothing; C. The Companies desire to employ Employee and Employee desires to be employed by the Companies pursuant to the terms and conditions set forth herein; D. OshKosh presently contemplates that at some time in the near future it may cause Essex to be liquidated or merged into OshKosh in which case Employee's services would be rendered solely to OshKosh but that in the meantime Employee would render his services to both Essex and OshKosh; and E. The Companies and Employee desire to reduce their agreement concerning the terms and conditions of Employee's employment to written form. NOW, THEREFORE, in consideration of the premises set forth above, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Employment Duties. During the Employment Period (as hereinafter defined): (a) The Companies will employ Employee and Employee will perform services as a Vice-President of Essex and as the Vice President - Corporate Retail of OshKosh. At such time, if any, as OshKosh determines to liquidate or merge Essex into OshKosh, Employee will no longer be employed as a Vice-President of Essex but solely as the Vice President - Corporate Retail of OshKosh. Employee will have respons- ibility for all phases of the management of domestic retail stores and corporate retail support staff including the following: (i) assisting in planning, forecasting and reviewing of financial and strategic budget and performance relating to retail operations; (ii) site selection, lease execution, store design and construction; (iii) planning, selection, pricing and distribution of merchandise for the retail stores; (iv) creation and execution of store procedures for operations, customer service, and merchandising; (v) all phases of human resource develop- ment; and (vi) assisting in the direction and execution of promo- tional, advertising, and marketing strategies relating to retail operations. (b) The parties understand and agree that the division of Employee's services as between Essex and OshKosh is presently difficult to determine and may from time to time change depending upon a number of factors which cannot presently be determined including whether and when Essex is liquidated or merged into OshKosh, the nature of future business operations which OshKosh determines should be conducted by OshKosh as opposed to Essex (including business operations presently being carried on by Essex but which may at some time in the future be determined to be best carried on by OshKosh). For these reasons, Employee agrees to perform his services hereunder for Essex and OshKosh in such proportions as may be determined by the President of OshKosh after reasonable consultation with Employee. (c) Employee will perform his services hereunder faithfully and to the best of his abilities, and will devote his best efforts and all of his working time, attention and skill to the business and affairs of the Companies during regular business hours, except for temporary ill- ness, vacation periods and reasonable leaves of absences or as agreed by the parties hereto. If Employee is elected as an officer of any of OshKosh's affiliates in addition to Essex during the term of this Agree- ment, Employee will serve in such capacities without further compensation (d) Employee will act with loyalty, honesty and in good faith in all dealings with the Companies and their businesses. (e) Nothing contained herein shall preclude Employee from serving as a director or member of a committee of any business organization which does not conflict with the Companies or their businesses, and from engaging in charitable and community activities, provided that such services and activities do not interfere with the regular per- formance of his duties and responsibilities under this Agreement and provided that such services and activities have first been approved by the President of OshKosh. (f) The services which are to be performed by Employee hereunder are to be rendered primarily in OshKosh, Wisconsin. Employee presently resides in New York, but promises to change his residence to the Oshkosh, Wisconsin area by no later than August 31, 1994. After such change Employee will not be required to again change his place of residence without his consent. (g) The Companies will provide to Employee adequate resources to permit Employee to perform the duties described above. In addition, the Companies will grant to Employee customary authority over employees, agents, suppliers and others reporting to Employee. 2. Compensation; Benefits. (a) In consideration of the services to be performed by Employee during the Employment Period pursuant to Section 1 hereof and Employee's compliance with the other provisions of this Agreement, the Companies will pay Employee (in such proportions as the Companies may determine except that notwithstanding such proportionate allo- cation, for the purposes of pension and profit sharing plan computations, all compensation shall be deemed to have been paid by Oshkosh.) (i) a base salary at the annual rate of $150,000.00 increased for each calendar year beginning with 1995 at the rate of 5% per annum over the prior year's salary or such greater amount as may from time to time be approved by OshKosh's Board of Directors, in its sole discretion, payable in accordance with the Company's normal payroll practices from time to time in effect for its executive employees, and (ii) an annual per- formance bonus for each year during the Employment Period in accord- ance with the Company's Management Incentive Compensation Plan for its officers, the design specifications for which are described in Exhibit 1 attached hereto. (b) (i) For purposes of the calculation of the performance bonus referred to in Section 2(a)(ii) hereof for the period May 1, 1994 - December 31, 1994, the specific bonus award composition; minimum, target and maximum awarded percentages of 20%/40%/60% (i.e. bonus award as a percentage of base salary); and the minimum, target and maximum performance measures, as set forth and described in Exhibit 2 attached hereto, shall be utilized; provided, however, that the performance bonus for such period shall be two thirds ( ) of the amount indicated by such calculation. (ii) For purposes of the calculation of the annual performance bonus for calendar years 1995, 1996, 1997, 1998 and the first four (4) months of 1999, the same bonus award composition, the same award percentages (i.e. awards as a percent of base salary), and the same performance measures as set forth in Exhibit 2 shall be used; provided, however, that (A) OshKosh may at its option reduce the "Corporate (Consolidated Except Essex and Oshkosh Retail)" component of the bonus award composition from 35% to 25% and add another bonus award component reasonably related to Employee's duties and responsibilities equalling 10% of the total; (B) the target amount for Net Sales and Net Income for the "Essex Retail" component, shall be the same as the budgeted amounts for 1995, 1996, 1997, 1998 and 1999, respectively, as approved by the Oshkosh board of directors, with the minimum amount to be 90% and the maximum amount 120% of the target amount; (C) the target amount for Net sales and Net Income for the "Corporate (Consolidated Except Essex and Oshkosh Retail)" component, and the target amount for the Net Sales and Net Income components, respectively, for Oshkosh B'Gosh Factory Stores, shall be the same as the budgeted amounts for 1995, 1996, 1997, 1998 and 1999, respectively, as approved by the OshKosh board of directors, with the Minimum Net Sales amounts, the Maximum Net Sales amounts, the Minimum Net Income amounts, and the Maximum Net Income amounts to be such percentages of target amount as are approved for other executive officers of OshKosh for each such year respectively; and (D) the performance bonus for the first four (4) months of 1999 shall be one-third ( ) of the amount indicated by the bonus calculation for the full year 1999. (iii) Each annual performance bonus shall be computed and paid within seventy-five (75) days after the end of the fiscal year of OshKosh to which such bonus relates. (c) Employee shall also be entitled to participate in any employee benefits which generally are made available by OshKosh to its executives during the Employment Period, including those benefits listed on Exhibit 3 hereto. During the Employment Period, Employee will be entitled to participate in any life, health, dental, accident, sickness and disability plans (whether or not insured), and in any qualified or non-qualified pension or profit sharing plan, savings plan, stock option plan, deferred compensation plan or any other fringe benefit plan or program which the Company may from time to time make available to its executives. Employee acknowledges that he shall have no vested rights in any such plan or program except as expressly provided under the terms thereof and that such plans or programs may be amended or terminated as well as supple- mented. Notwithstanding the foregoing, Employee shall receive four (4) weeks of vacation for each complete year of the Employment Period, including 1994. The vacation period for 1994 shall include a two (2) week period to accomplish the move to Oshkosh described elsewhere herein. (d) The amounts payable to Employee under this Section 2 are before any deductions therefrom for any taxes required to be with held by federal, state and local governments. 3. Term and Termination. (a) The term of this Agreement during which Employee will provide services to the Companies hereunder (the "Employment Period") will commence on May 1, 1994 and end on April 30, 1999, unless earlier term- inated as follows: (i) The Employment Period will terminate upon the written agreement of the parties; (ii) The Employment Period will terminate upon the death or permanent disability of Employee. The term "permanent disability" of Employee means the inability of Employee to effectively perform his duties hereunder on a full-time basis by reason of physical or mental illness, disability or incapacity for a continuous period of sixty (60) working days. Physical or mental illness, disability or incapacity will be deemed to exist if a licensed physician opines in writing that Employee for medical reasons should terminate or substantially reduce his services to the Company. If there is any dispute as to whether Employee is permanently disabled within the meaning of this Section 3(a)(ii), such dispute shall be submitted to a licensed physician agreeable to the parties who shall conduct an examination of Employee for the purpose of resolving such dispute; provided, however, that if the parties cannot agree upon a physician within ten (10) days after written notice by either Employee or OshKosh to the other, a physician designated by the then President of the Medical Society of Winnebago County, Wisconsin shall conduct such examination. Employee shall submit to such examination, and the determination of such physician as to whether Employee is permanently disabled within the meaning of this Section 3(a)(ii) shall be binding and conclusive on the parties. (iii) Oshkosh may terminate the Employment Period for cause upon (a) written notice to Employee stating in reasonable detail the facts constituting such cause("Written Notice"), and (b) the expiration of (10) days following receipt by Employee of Written Notice, during which ten (10) day period, Employee shall be permitted to cure, if curable, the conduct constituting the alleged cause. For purposes of this Section 3(a)(iii), the term "cause" means the diversion or attempted diversion by Employee of business from either of the Companies for Employee's personal gain or benefit; the commission by Employee of an act of dishonesty or moral turpitude involving either of the Companies; gross incompetence in the performance by Employee of his services hereunder; gross negligence by Employee involving either of the Companies; habitual use by Employee of alcohol or narcotics; commission by Employee of a felony or serious mis- demeanor offense or pleading guilty or nolo contendere to same; willful misconduct by Employee as determined in good faith by the Board of Directors of OshKosh which results in a demonstrably material injury to the Companies; the willful and persistent failure of Employee to follow a specific directive of the Board of Directors or the President of OshKosh provided that the directive is consistent with the terms of this Agreement; or a material breach by Employee of any provision of this Agreement, including without limitation any provision contained in Section 4 hereof. (b) Upon termination of the Employment Period, the Company will pay to Employee: (i) The full amount of any unpaid salary earned by Employee pursuant to Section 2 of this Agreement through and including the termination date and prorated as appropriate, and neither Essex nor OshKosh will be obligated to make any further salary payments to Employee; (ii) If the termination is for cause, no further bonus shall be payable other than a bonus which is awardable pursuant to Section 2 hereof with respect to a calendar year that has already ended prior to such termination for cause but which has not yet been paid; (iii) If the termination is because of death or permanent dis- ability, a bonus pursuant to Section 2 hereof shall be payable for the year during which such event occurs, but the bonus shall be prorated based on the number of whole months worked in such year prior to such event divided by twelve (12) and such prorated bonus shall not be pay- able until such time as it would otherwise have been payable had such death or disability not occurred. (c) Notwithstanding anything to the contrary herein, if for any reason other than cause or Employee's death or disability, Employee's employment is terminated by Essex and/or OshKosh before April 30, 1999, Employee shall be entitled to receive from the date of such termination through April 30, 1999, in lieu of all other amounts payable hereunder, a monthly amount of $17,500, and the obligations set forth in Sections 4 and 5 hereof shall survive such termination. In the event Employee continues to receive payments pursuant to this Section 3(c) following termination of the Employment Period, Employee shall have no obligation to seek other employment or to otherwise mitigate damages hereunder, provided, however, that if Employee obtains full-time or substantially full-time employment (i.e. more than thirty (30) hours a week), whether by another employer or through self-employment, the amounts he receives from such other employer or earned pursuant to such self-employment shall be offset, dollar for dollar, against any payments owing to Employee under this Section 3(c). 4. Noncompetition. (a) During the Employment Period and for one (1) full year thereafter and without regard to the early termination thereof or whether such early termination is or is not for cause, Employee will not directly or indirectly: (i) own, operate, manage, join, finance, control, participate in the ownership, management, operation or control of, or be paid or employed by, consult with or acquire any securities of, or otherwise become associated with or provide assistance to, any entity, firm, business, activity or enterprise ("Enterprise") which is engaged in the business of manufacturing, having manufactured, designing, developing and/or selling products which are the same as or are similar to the products of the Companies as of the date of termination of employment hereunder or other apparel products sold by the Companies during such one (1) year period ("Competing Products") in the same geographic market in which the Companies operate as of the date of termination of employment hereunder during such one (1) year period; (ii) contact, sell or solicit to sell Competing Products to any entity to whom either Company is selling its products at the time of the termination of employment hereunder or has sold its products during the prior twelve (12) months; (iii) solicit, cause or seek to cause any customer, supplier or employee (with the exception of Paul Lowry) of either of the Companies to terminate, curtail or otherwise modify any customer, supplier or employment relationship with either of the Companies for the purpose of entering into a customer, supplier, employment or other relationship with Employee or with any Enterprise with which Employee is directly or indirectly affiliated. (b) Notwithstanding the provisions of Section 4(a) hereof, Employee may acquire securities of any entity the securities of which are publicly traded, provided that the value of the securities of such entity held directly or indirectly by Employee following such acquisition is less than 5% of the total value of the then outstanding class or type of securities acquired. (c) Employee acknowledges and agrees that the restrictions set forth in Section 4(a) hereof are founded on valuable consideration and are reasonable in duration and geographic area in view of the circumstances under which this Agreement is executed and that such restrictions are necessary to protect the legitimate interests of the Companies. In the event that any provision of Section 4(a) hereof is determined to be invalid by any court of competent jurisdiction, the provisions of Section 4(a) shall be deemed to have been amended and the parties will execute any documents and take whatever action is necessary to evidence such amendment, so as to eliminate or modify any such invalid provision and to carry out the intent of Section 4(a) so to render the terms of Section 4(a) enforceable in all respects as so modified. Employee acknowledges and agrees that irreparable injury will result to the Companies in the event he breaches any covenant contained in Section 4(a) and that the remedy at law for such breach will be inadequate. Therefore, if Employee engages in any act in violation of the provisions of Section 4(a), the Companies, and each of them, shall be entitled, in addition to such other remedies and damages as may be available to them by law or under this Agreement, to injunctive or other equitable relief to enforce the provisions of Section 4(a). 5. Unauthorized Disclosure; Inventions and Improvements. (a) Employee will not knowingly disclose to any person or entity, other than employees of the Companies or other persons to whom dis- closure is reasonably necessary or appropriate in connection with the performance by Employee of his services hereunder, any Confidential Information obtained by Employee during the Employment Period. Employee also will not use in any manner any Confidential Information for Employee's own purposes or for the benefit of any person or entity except the Companies, whether such use consists of duplication, removal, oral communication, disclosure, transfer or other unauthorized use thereof. As used herein, the term "Confidential Information" refers to all information and materials belonging to, used by or in the possession of the Companies relating to their business strategies, products, pricing, customers, technology, programs, costs, employee compensation, marketing plans, developmental plans, computer programs, computer systems, inventions, developments, formulae, processes, designs, drawings and trade secrets of every kind and character. "Confidential Information" also includes confidential information belonging to other companies and disclosed to Employee by the Companies. In addition, the Companies acknowledge that Employee has been employed for many years in the apparel business and that as such, has acquired substantial knowledge as to the man- ufacture, marketing, financing, design and other aspects of the clothing business. Thus, the information that shall be subject to this paragraph shall be information that is truly proprietary with the Companies or any subsidiary or affiliate; that is, information that could only have been acquired by Employee as the result of his having been employed by the Companies. Examples of such con- fidential information are strategic marketing plans unique to the Companies, proposed new product lines, and new retailing initiatives. (b) Employee will disclose to the Companies and upon the Companies' request, assign to them or either of them, without charge, all of Employee's right, title and interest, if any, in and to any and all ideas, inventions, discoveries and improvements pertaining in any manner to the business of the Companies which Employee may make or conceive, solely or jointly with others, during the Employment Period (collectively, the "New Developments"). Upon request by the Companies, or either of them, during or within one (1) year subsequent to the Employment Period, Employee will do any and all acts and execute and deliver such documents as may be deemed by the Companies or either of them or their counsel to be necessary or advisable to vest in the Companies or either of them all of Employee's right, title and interest in and to such New Developments and to apply and obtain domestic or foreign patents, provided that the expenses incurred in connection with the foregoing shall be borne by the Companies. 6. Common Law of Torts or Trade Secrets. Nothing in this Agreement shall be construed to limit or negate the common law of torts or trade secrets where such common law provides the Companies with broader protection than the protection provided by this Agreement. 7. Expense Reimbursement. The Companies will reimburse Employee for his out-of-pocket expenses reasonably incurred by his in connection with the performance of his services hereunder, subject to compliance with OshKosh's written policy, if any, regarding expense reimbursement. 8. No Conflict with Other Agreements. Employee hereby represents and warrants that he is not a party to any agreement (whether written or oral) with any employer other than the Companies, or subject to any obligations or restrictions under any such prior agreement, including, without limitation, any obligations and restrictions relating to non- competition, nonsolicitation, new developments or the like, which are in conflict with or are violated by this Agreement. 9. Severability. The invalidity or unenforceability of any pro- vision of this Agreement shall not affect or impair the validity or enforceability of any other provision and this Agreement shall be con- strued as if such invalid or unenforceable provision were not contained herein. Notwithstanding the preceding sentence, if any court of com- petent jurisdiction shall determine that any geographic or time restraint provided in this Agreement is too broad as to the area or time covered, such restraint may be reduced to whatever extent the court deems reasonable and such restraint may be enforced as reduced. 10. Notice. All notices under this Agreement shall be in writing and a notice shall be considered to be given and received in all respects on the day it is personally delivered, faxed or mailed by certified mail, postage prepaid, addressed as follows or to such other address as may be designated by one party to the other by notice duly given: If to OshKosh or Essex: OshKosh B'Gosh, Inc. P.O. Box 300 Oshkosh, WI 54902-0300 Attn: President FAX: (414) 231-3261 If to Employee: Paul A. Lowry c/o Theodore C. Widder, III Mohs, MacDonald, Widder & Paradise 20 North Carroll Street Madison, Wisconsin 53703 FAX: (608) 257-1106 11. Litigation; Attorney's Fees. Any controversy or claim arising out of or related to this Agreement shall be finally settled by binding arbitration in the City of Milwaukee, Wisconsin in accordance with the then prevailing Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, and the rules of the American Arbitration Association, civil discovery as provided for in Chapter 804 of the Wisconsin Statutes shall be available to either party in the arbitration proceeding. Each party shall be reimbursed by the other party for all reasonable legal fees and expenses, if any, reasonably incurred by it in the enforcement of its or his rights under any pro- vision of this Agreement. 12. Waiver. A waiver by a party of any breach by the other party of any provision of this Agreement shall not be deemed to be a waiver by such first party of any subsequent breach. 13. Assignment. This Agreement may not be assigned by either Essex or OshKosh without the written consent of Employee, except that if either OshKosh or Essex shall merge or consolidate with or into, or transfer substantially all of its business or the assets thereof to another corporation or other form of business or other entity, this Agreement shall be assigned to such a successor and this Agreement shall be expressly assumed, and it shall be binding upon and inure to its benefit. Employee may not assign, pledge or encumber this Agreement or any interest herein. 14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto, Essex's and OshKosh's successors and permitted assigns and Employee's heirs and legal rep- resentatives. 15. Complete Agreement; Amendment. This Agreement constitutes the complete agreement of the parties concerning its subject matter, and may be amended only by a written instrument executed by the parties hereto or their respective successors, assigns, heirs or legal representatives, as applicable. 16. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OSHKOSH B'GOSH, INC. By /s/ DOUGLAS W. HYDE Douglas W. Hyde, President ESSEX OUTFITTERS, INC. By /s/ BARBARA WIDDER LOWRY Barbara Widder-Lowry, President /s/ PAUL A. LOWRY Management Incentive Compensation Plan - Design Specifications Exhibit 1 Management Incentive Compensation Plan - Design Specifications Plan Purposes . Focus the efforts of all key management employees on the maximization of annual profits, while growing aggressively by offering quality products and services. . Provide a meaningful incentive geared to the achievement of specific Company and Responsibility Area goals. . Encourage teamwork and cooperation in the achievement of Company and Responsibility Area goals. . Recognize differences in the performance of individual participants. Plan Year The fiscal year (January through December) Participants . Will be selected by the President/Chief Executive Officer and the Executive Vice President/Chief Operating Officer. . Selection normally will take place, and will be communicated to each participant, prior to the pertinent plan year. Participation for the 1994 plan year is projected to be around 50 key contributors. . In those cases when participation begins during a plan year: - Participation will be communicated as soon as possible following selection. - Newly hired or promoted employees will participate on a pro-rata basis for the remainder of the first plan year of their employment or tenure in a participating position. - If a participant changes positions during a plan year, whether due to a promotion, demotion, or lateral move, that individual's award will be based on factors such as the individual's overall contribution, and the portion of the year the individual actually spent in each position. Award . Participating positions are grouped by Opportunities incentive award categories. . Each incentive category has a target award level assigned to it. - The target award is paid if a stated performance goal(s) is achieved. - Minimum and maximum performance/award levels are built around the target performance/award levels. . This plan's award opportunities will provide 65th percentile total cash compensation (base plus bonus) levels if stated target performance goals are achieved. Target goal levels will be selected to represent aggressive, but achievable, performance. The following award opportunities should permit Oshkosh to attain its performance and compensation objectives. Award Opportunity (as % of Incentive Beginning of Year Salary) Category Minimum Target Maximum A (CEO, COO) 24% 47% 71% B (Other Officers) 20% 35% 53% C (Director-level) 13% 25% 35% D (Plant Mgrs.) 11% 21% 32% The award schedule as set forth above, minimum at approximately 50% of target and maximum at approximately 150% of target, is typical. Award interpolation will take place between "minimum," "target," and "maximum." (For example, if actual performance falls exactly midway between the minimum and target goals, the award would be approximately 75% of the target award opportunity.) Based on preliminary estimates, incentive Category B will include nine participants, Category C will include 15 participants, and Category D will include 22 participants. Performance/ . Each participant's award opportunity is Award Components segmented into one or more components as follows: Weighting of Award Opportunity/Perf Factors (Total 100%) Position Title Responsibility Individual (Incumbent) Corporate Area Evaluation Example: Vice 35% 50% 15% President Manufacturing See Appendix A for individual participant weightings. . One component's performance will not directly affect the portion of the award opportunity earnable from another one. . A participant's final award amount will be determined as the sum of the awards earned based on the performance of his pertinent award components. Performance . Normally one to three performance criteria Criteria will be established for each performance/award component (e.g. Corporate component: Net income before taxes and profit sharing, and Net Sales). . Target, minimum, and maximum performance levels will be established for each of the performance criteria. These performance levels will coincide with the target, minimum, and maximum award levels referred to previously. Interpolated performance/reward levels will be established on a straight-line basis between each of the above performance/reward levels. If actual performance falls below the minimum level set forth for the particular performance criterion, the portion of the award related to that performance criterion will be forfeited in its entirety. . The Corporate Performance component will be measured as a combination of Net Income (70%) and Net Sales (30%). "Corporate," for the purposes of calculating the foregoing, will be defined at the beginning of the plan year and administered according to such definition for such year's duration. The definition may differ for various participant groupings if such difference is appropriate to accomplish the motivational purposes of the plan. (See Appendix A.) . The Responsibility Area component will be embodied in the Responsibility Area performance criteria that are impacted by the particular B, C, or D Category participant. The performance criteria should focus on quality, delivery, and/or cost. . Each participant's immediate manager will be responsible for recommending how much of the Individual Evaluation component of a participant's award opportunity has been earned. Each such manager will be guided by the following: % of Individual Individual Portion of Target Performance Rating Incentive Award Earned Outstanding 120%-150% Excellent 100%-120% Good 80%-100% Satisfactory 50%- 80% Unsatisfactory 0% The Chief Executive Officer and Chief Operating Officer will review these recommendations and finalize the Individual Evaluation "performance score." Final Award . The final incentive award is determined as the sum of the awards earned based on Corporate, Responsibility Area, and/or Individual Evaluation performance. See Appendix B for award calculation examples. Termination . If the participant's employment is terminated during a plan year for reason of death, disability, or normal or early retirement, a tentative award will be calculated (at year-end) as if the participant had remained employed as of the end of the plan year. The final award will be calculated by multiplying the tentative award by a proration factor. The proration factor will be equal to the number of full weeks of employment divided by 52. . If a participant's employment is terminated during a plan year for any other reason, an incentive award normally will not be paid. However, the Chief Executive Officer and the Chief Operating Officer may exercise discretion in this matter. Form and . Payments will be made in cash as soon as Timing of practicable following the release of audited Payments results for the plan year. Appendix A - Incentive Compensation Plan Award Components Appendix A Oshkosh B'Gosh, Inc. Incentive Compensation Plan Award Components Incentive Responsibility Individual Category Name Corporate Area Evaluation A Doug Hyde 85* 15 A Mike Wachtel 85 15 B Mike Donabauer 65* 20 15 B Dave Omachinski 50* 35 15 B Tony Giordano 35 50 15 B Jon Dell'Antonia 35 50 15 B Don Carlson 35 50 15 B Bill Wyman 35 50 15 B Ken Masters 35 50 15 B Chips Wood 25 60 15 B Pat Garvey 25 60 15 C Larry Habeck 35 50 15 C Greg Spaeth 35 50 15 C Marty Smith 35 50 15 C Mark Greenspan 25 60 15 C Gary Brock 25 60 15 C D. Hursh 25 60 15 C Harold Brown 25 60 15 C Bobby Morrison 25 60 15 C Don Hess 25 60 15 C Eddie White 25 60 15 C Aaron Poore 25 60 15 C Lee Tiegen 25 60 15 C Steve Fischer 25 60 15 C Janell Cleveland 25 60 15 C Larry Delk 25 60 15 D All Plant Managers 20 65 15 *Denotes Corporate responsibility defined as total consolidated performance of all corporate entities (exclusive of Rio Sportswear, Inc. for 1994). All others - Corporate component is defined as the aggregate performance of all entities that market product under the Oshkosh B'Gosh name. Appendix B - Award Calculation - Examples Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Incentive Category Award Opportunity (As % of Salary) Minimum Target Maximum A (CEO, COO) 24% 47% 71% B (Other Officers) 20% 35% 53% C (Directors and 13% 25% 35% Regional Sales Mgrs) D (Plant Mgrs) 11% 21% 32% Minimum Target Maximum The above as a percent 50% (approx) 100% 150% (approx) of the target opportunity Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Vice President, Manufacturing Target = 35% of Salary Overall Award Structure Award Composition (at target) Performance Measure Goals 35% Corporate: . Sales (30%) . Income (70%) 50% Responsibility Area (Weighting): . Quality (30%) Irregulars (% of): 3.0% Minimum 2.0% Target 1.5% Maximum . Delivery (40%) Work Order Completion: 92% Minimum 95% Target 97% Maximum . Cost (30%) Cost per Minute: +10% Minimum Current: Target -10% Maximum 15% Individual . Succession Plan TBD . Manufacturing TBD Effectiveness . Service Task Force TBD Participation Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Example #1 All Goals Attained at Target Sales: At Target Income: At Target Irregular Levels: 2% Work Order Completion: 95% Cost Per Minute: Current Levels Succession Planning Manufacturing Effectiveness At Target Service Task Force Participation VP - Manufacturing: Target Award 35% Score = 35% Corporate Measures 10.5% = (10.5% x 100%) Sales (30% x 35% = 10.5%) 24.5% = (24.5% x 100%) Net Income (70% x 35% = 24.5%) 50% Responsibility Area 15% = (15% x 100%) Quality (30% x 50% = 15%) 15% = (15% x 100%) Cost (30% x 50% = 15%) 20% = (20% x 100%) Delivery (40% x 50% = 20%) 15% Individual Evaluation 100% Payout = Performance Target Score X Opportunity 100% X 35% = 35% Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Example #2 Mixed Goal Attainment Sales: Midway Between Minimum and Target Income: Midway Between Minimum and Target Irregular Levels: 1.5% (Maximum) Work Order Completion: 97% (Maximum) Cost Per Minute: -10% (Maximum) Succession Planning Manufacturing Effectiveness Excellent (Maximum) Service Task Force Participation VP - Manufacturing: Target Award 35% Score = 26.3% Corporate Measures 7.9% = (10.5% x 75%) Sales (30% x 35% = 10.5%) 18.4% = (24.5% x 75%) Net Income (70% x 35% = 24.5%) 75% Responsibility Area 22.5% = (15% x 150%) Quality (30% x 50% = 15%) 22.5% = (15% x 150%) Cost (30% x 50% = 15%) 30% = (20% x 150%) Delivery (40% x 50% = 20%) 22.5%Individual Goals (15% x 150%) 123.8% Payout = Performance Target Score X Opportunity 123.8% X 35% = 43.33% Appendix B Oshkosh B'Gosh, Inc. Award Calculation - Examples Example #3 Mixed Goal Attainment Sales: Below Minimum Income: Below Minimum Irregular Levels: 1.5% (Maximum) Work Order Completion: 95% (Target) Cost Per Minute: +10% (Minimum) Succession Planning Manufacturing Effectiveness At Target Service Task Force Participation VP - Manufacturing: Target Award 35% Score = 0% Corporate Measures 0% = (10.5% x 0%) Sales (30% x 35% = 10.5%) 0% = (24.5% x 0%) Net Income (70% x 35% = 24.5%) 50% Responsibility Area 22.5% = (15% x 150%) Quality (30% x 50% = 15%) 7.5% = (15% x 50%) Cost (30% x 50% = 15%) 20% = (20% x 100%) Delivery (40% x 50% = 20%) 15% Individual Goals (15% x 150%) 65.0% Payout = Performance Target Score X Opportunity 65.0% X 35% = 22.75% Paul Lowry Minimum Award 20% of Salary/Target Award 40% of Salary*/ Maximum Award 60% of Salary *Base Salary $150,000 Award Composition Performance (at Target) Measure Specifics Target Range 35% Corporate(Consolidated Except Essex and Oshkosh Retail) .(30%) Sales Net Sales $253,108,000 Minimum $281,231,000 Target $337,477,000 Maximum .(70%) Income Net Income before Profit $17,748,000 Minimum Sharing Contribution, $23,664,000 Target Incentive Compensation, $28,397,000 Maximum Extraordinary Items, Franchise and Income Taxes 50% Responsibility Area (Retail) For Essex Retail .(70%) Income Net Income before Profit $7,710,000 Minimum Sharing Contribution, $9,779,000 Target Incentive Compensation, $11,735,000 Maximum Extraordinary Items, Franchise and Income Taxes* PLUS For Oshkosh B'Gosh Factory Stores Net Income before Corporate Allocations .(30%) Sales Net Sales $95,819,000 Minimum $106,466,000 Target $127,759,000 Maximum 15% Individual Review by CEO Satisfactory:Minimum Evaluation Good: Target Outstanding: Maximum 100% *Extraordinary items are defined as non-recurring unusual expense or income items such as license agreement terminations, plant closures, or the effect of litigation. BENEFIT SUMMARY FOR VICE PRESIDENT - CORPORATE OFFICE INCENTIVE COMPENSATION PLAN The amount of the bonus is dependent upon the level of performance in achieving company, departmental, and individual goals. The bonus is usually payable in February for the prior year's performance and is taxable in the year in which it is paid. DEFERRED COMPENSATION The employee can defer a percentage of income each pay period. The money earns interest equal to the prime rate. The money is not taxable until withdrawn. PERSONAL AUTOMOBILE The company provides an automobile (with a value of up to $30,000) for personal use by the officer. PROFIT SHARING An employee who has completed one year of service and is at least 21 years of age automatically become a participant in the Oshkosh B'Gosh, Inc. non- qualified Profit Sharing Plan. The percentage of gross earnings contributed to the plan annually is determined by the Board of Directors and can vary from 0% to 15%. Each participant in the plan receives the same percentage of their gross earnings. Upon entry into the profit sharing plan, the employee is 100% vested. The Profit Sharing Plan is intended to supplement retirement benefits, therefore, the funds in an employee's account are unavailable until retirement, death or termination of employment. Upon termination, the entire account balance is payable. The benefit payment does not qualify for a rollover to defer taxes. PENSION PLAN The Pension Plan is designed to provide an employee with income upon retirement. As an employee works for OshKosh B'Gosh the pension benefit continues to accumulate. An employee who has completed one year of service and is at least 21 years of age automatically becomes a participant in the 100% company-funded Pension Plan. An employee becomes fully vested in the pension plan upon completing 5 vested years of service. A vested year is one in which the employee has been credited with at least 1,000 hours of service. The employee does not have any vested interest in the plan until completing 5 vested years. The formula for calculating the age 65 monthly benefit is: 5 consecutive years of earnings which produce the highest monthly average, multiplied by 1%, multiplied by years of service. A vested employee can request early reduced retirement benefits after reaching age 60 or full benefits after reaching age 65. An employee leaving the company who is not yet retirement age leaves with a deferred vested benefit and can apply for the benefit upon reaching retirement age. If the benefit has a present day value of less than $3,500, it will be automatically paid in a lump sum to the employee, generally within three months after termination. HEALTH CARE COVERAGE In order to provide protection to employees and their dependents in the event of illness or injury, OshKosh B'Gosh offers health care coverage. Employees are eligible for health care coverage from the first day of employment and may elect either single or family coverage. Employees have three plans to choose from: HMO of Wisconsin, Network Health Plan, or OshKosh B'Gosh, Inc., self- funded plan. Once employees choose coverage, they may change their election only once per year during January. Employees have 30 days from date of hire to enroll in the health plan. An employee making late application must first be approved by the insurance company and could be denied coverage. OshKosh B'Gosh pays 100% of the premium cost. SICK LEAVE/SALARY CONTINUATION OshKosh B'Gosh provides salary continuation for a period of time during which an employee is ill or injured. The amount of time allowed is subject to the discretion of the C.O.O. LONG-TERM DISABILITY The long-term disability program is designed to provide a benefit of 60% of an employee's regular monthly pay up to a maximum of $5,000 per month when the employee is unable to work due to a serious debilitating illness or injury. The monthly payments begin after a 180 day waiting period and are paid for total or partial disability until the employee is able to return to work. If the disability qualifies an employee for social security or workers' compensation benefits, the long-term disability benefit would be reduced by the amounts received. The company pays 100% of the premium for the employee and adds the premium cost to the employee's earnings at the end of the year. The employee pays taxes on the premium, but under current tax law, benefits paid are non-taxable. LIFE INSURANCE Life insurance helps provide financial assistance to family members in the event of the employee's death. The level of term life insurance provided by OshKosh B'Gosh, Inc., is $50,000. The employee will need to name a beneficiary upon enrollment, which may be changed in writing at any time. Employees also have an additional $100,000 of coverage for accidental death 24 hours per day, 7 days per week. The company pays for 100% of both premiums. SUPPLEMENTAL LIFE INSURANCE OshKosh B'Gosh provides supplemental life insurance in the amount of $150,000. The premium is paid by the company but the amount of the premium is added to the employee's W-2 form as additional taxable income. FLEXIBLE SPENDING PLAN (SECTION 125) OshKosh B'Gosh, Inc., offers a benefit which allows certain expenses to be deducted from the employee's pay check before taxes. Depending on the employee's federal tax bracket, between 28% - 40% in taxes can be saved (including social security and state taxes) on allowable expenses, thereby providing more disposable income for other things. Allowable expenses include: group insurance premiums, and two Flexible Spending Accounts -- non-reimbursed medical and dependent care. Employees can participate in one or all three portions of the plan after meeting the eligibility requirements. All employees are eligible for before-tax payment of group insurance premiums at the time of insurance enrollment. Full-time employees are eligible to enroll in one or both Flexible Spending Accounts. Enrollment takes place prior to January and July of each year, after the employee completes six months of employment. VACATION SCHEDULE Employees need to relax and take time off work to pursue their outside interests. Paid vacations are provided for this purpose. Vacation will available for use according to the following schedule: Employed less than 1 year Two weeks Employed 1 through 4 years Three weeks per year Employed 5 or more years Four weeks per year Although vacation is earned during an anniversary year, it is available for use on a calendar year basis. Vacation time must be used by the end of the calendar year or it is forfeited. When an employee terminates, unused earned vacation will be paid on a prorated basis. If an employee used more vacation than earned, this amount will be deducted from the employee's final check. PAID HOLIDAYS Eligibility for paid holidays begins upon date of hire. Specific dates for holiday observation are published each year. The 10 paid holidays are as follows: New Years Day Fourth of July Day after Thanksgiving New Years Eve Day Good Friday Labor Day Christmas Eve Day Memorial Day Thanksgiving Day Christmas Day JURY DUTY OshKosh B'Gosh believes it is the civic responsibility of its employees to accept jury duty service. A full-time employee serving on jury duty shall be allowed to serve without a loss of income. To be eligible for excused absence for jury duty, the employee notifies their supervisor upon receipt of the notice to serve. The employee presents the jury duty pay receipt to the Human Resources Department. The employee will be compensated by OshKosh B'Gosh for the difference between regular pay and jury duty pay, thus maintaining normal income. BEREAVEMENT PAY OshKosh B'Gosh recognizes a time of bereavement is very difficult for an employee. Every effort will be made to insure an employee is able to attend to family matters prior to making the transition back to the normal work routine. Therefore, an employee is eligible for up to three days excused absence with pay in the event of a death in the immediate family. Immediate family consists of parents, spouse, children, brothers, sisters, grandparents, grandchildren, spouse's parents, spouse's grandparents, step-parents, step-sister, step- brother and step-children. LEAVES OF ABSENCE Under the Family Medical Leave Act all employers with 50 or more permanent employees within a 75-mile radius must allow employees of either sex, who have met the eligibility requirements, a leave of absence for: (1) the birth or adoption of the employee's child; (2) the care of the employee's child, spouse, or parent with a serious health condition; (3) the employee's own serious health condition. OshKosh B'Gosh recognizes that occasionally employees will need time away from work to attend to critical personal matters that do not fit in the category of Family Medical Leave. It is the company's intent to grant personal leaves on a case-by-case basis based upon both the company and employee needs. TUITION REIMBURSEMENT OshKosh B'Gosh recognizes the value of continuing education both to the employee and to the company. In support of this, the company reimburses the employee for tuition and text book costs for pre-approved business related courses. Reimbursement will be made upon successful completion of the course and proof of payment. Tuition reimbursement is limited to $1,500 per calendar year. GARMENT/PROMOTIONAL ITEM PURCHASES In order to identify with the company products and promote the company image within the community, employees may purchase up to four garments per week from an OshKosh B'Gosh wholesale catalog at cost plus sales tax. "Garment Requisition" forms are completed and deposited in a drop box located within the facility. Garments are available for pick up according to the schedule posted at each facility. Garments must be paid for at the time of pick up. An unlimited amount of promotional items are also available for purchase through this system, using a separate Requisition form. An employee and their immediate family (same household) are also entitled to a 20% discount off the regular ticket price at the OshKosh B'Gosh Factory Outlet Store located closest to their facility. OSHKOSH COUNTRY CLUB The annual social membership of this association is 100% paid for by OshKosh B'Gosh. The employee is responsible for monthly fees and charges. YMCA MEMBERSHIP OshKosh B'Gosh pays 100% of an annual membership at the Appleton, Oshkosh or Fond du Lac YMCA. Fees for YMCA classes or programs attended by the employee and their immediate family are the responsibility of the employee. Employees who want to become a member should contact the accounting department for a membership application card for completion and forward it to the YMCA Membership Office. OSHKOSH POWER AND BOAT MEMBERSHIP The annual social membership of this association is 100% paid by OshKosh B'Gosh. The employee is responsible for monthly fees and charges. PAYPERIOD The employee is paid monthly on the 15th which covers the payperiod from the 1st of the month through the last day of the month. CASUAL DAY For the comfort and enjoyment of employees, Casual Day is observed every Friday! This summary is not intended to be a complete description of benefits and is subject to change. Please refer to summary plan descriptions and to policies and procedures for detailed descriptions of benefits. In the case of a misunderstanding, official plan documents and company policies and procedures will rule. EX-10.16 6 EXHIBIT 10.16 OshKosh B'Gosh, Inc. 112 Otter Avenue Oshkosh, Wisconsin 54901-5008 CREDIT AGREEMENT June 24, 1994 Firstar Bank Milwaukee, National Association 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Bank One, Milwaukee, NA 111 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60603 Norwest Bank Wisconsin, National Association 100 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Gentlemen: OshKosh B'Gosh, Inc., a Delaware corporation with its principal offices located in the City of Oshkosh, Wisconsin (the "Company"), hereby requests that each of you (collectively the "Banks" and individually a "Bank") severally agree to make loans to the Company from time to time on the terms and conditions set forth below: ARTICLE I LOANS AND NOTES 1.1 Revolving Credit. From time to time prior to June 24, 1997 or the earlier termination in full of the Commitments (in either case the "Termination Date"), the Company may obtain loans from each of the Banks, pro rata according to each Bank's Percentage Interest, up to an aggregate principal amount equal to the amount by which (i) $60,000,000 (the "Aggregate Commitment" and as to each Bank's respective Percentage Interest thereof, its "Commitment"), as terminated or reduced pursuant to section 1.7, exceeds (ii) the sum of (A) the aggregate amount of Letter of Credit Obligations (as defined in section 10.1(o) below), and (B) the aggregate face amount of outstanding Commercial Paper (as defined in section 10.1(d) below), including for this purpose all Nicolet Funding Corp. Loans (as defined in section 1.9(e) below). The Commitment and Percentage Interest of each Bank is set forth in the table below: Percentage Name of Bank Commitment Interest Firstar Bank Milwaukee, $19,500,000 32.5% National Association Bank One, Milwaukee, NA $16,500,000 27.5% Harris Trust and Savings Bank $12,000,000 20.0% Norwest Bank Wisconsin, $12,000,000 20.0% National Association Total: $60,000,000 100% The failure of any one or more of the Banks to lend in accordance with its Commitment shall not relieve the other Banks of their several obligations hereunder, but no Bank shall be liable in respect to the obligation of any other Bank hereunder or be obligated in any event to lend in excess of its Commitment. Subject to the limitations of section 2.2(d)(3) the Company may repay such loans and reborrow hereunder from time to time prior to the Termination Date. Each loan hereunder from the Banks collectively shall be in a multiple of $100,000 (except that any such loan subject to a LIBOR Pricing Option shall be in an amount of $1,000,000 or any multiple of $100,000 in excess of such amount). The loans from each Bank advanced under this section 1.1 shall be evidenced by a single promissory note of the Company (each a "Revolving Credit Note", and collectively with the Demand Notes (as defined in section 1.2 below), sometimes called the "Notes") in the form of Exhibit 1.1 annexed hereto, payable to the order of the lending Bank. 1.2 Demand Line of Credit. There is hereby established a revocable line of credit in the aggregate principal amount of $40,000,000 (the "Demand Line") for the current use of the Company. The amount of the Demand Line provided by each Bank is set forth in the table below: Name of Bank Demand Line Firstar Bank Milwaukee, $13,000,000 National Association Bank One, Milwaukee, NA $11,000,000 Harris Trust and Savings Bank $8,000,000 Norwest Bank Wisconsin, National Association $8,000,000 Total: $40,000,000 Each Bank in its sole discretion may decline to make advances under the Demand Line at any time without having made demand for payment. Any Bank so declining to make advances shall immediately give written notice of such declination to the Company and the Agent, but failure to give such notice shall not affect the validity or effectiveness of such declination. Any loans under the Demand Line shall be made pro rata according to the participating Banks' respective shares of the Demand Line from time to time in effect, up to an aggregate principal amount equal to (i) $40,000,000 minus (ii) the amount by which (A) the sum of (1) the outstanding principal amount of all revolving credit loans made pursuant to section 1.1, (2) the aggregate amount of Letter of Credit Obligations, and (3) the aggregate face amount of outstanding Commercial Paper, including for this purpose all Nicolet Funding Corp. Loans, exceeds (B) the Aggregate Commitment. The Demand Line shall be unused for at least 90 consecutive days during each twelve-month period commencing July 1 of a given year and ending June 30 the following year. Each advance under the Demand Line from the Banks collectively shall be in a multiple of $100,000 (except that any such advance subject to a LIBOR Pricing Option shall be in an amount of $1,000,000 or any multiple of $100,000 in excess of such amount). The advances under the Demand Line from each Bank shall be evidenced by a single promissory note of the Company (each a "Demand Note", and collectively with the Revolving Credit Notes, sometimes called the "Notes"), payable on demand to the order of the lending Bank in the form of Exhibit 1.2 attached hereto. The Company acknowledges that all amounts due under the Demand Notes are payable on demand, regardless of whether the Company has breached any of the terms, covenants and conditions set forth in this Agreement, the Notes, any Collateral Document or any other document or agreement applicable to the loans described herein. 1.3 Notes. The Notes shall be executed by the Company and delivered to the Banks prior to the initial loans. Although the Notes shall be expressed to be payable in the full amounts specified above, the Company shall be obligated to pay only the amounts actually disbursed to or for the account of the Company, together with interest on the unpaid balance of sums so disbursed which remains outstanding from time to time, at the rates and on the dates specified in the Notes, together with the other amounts provided therein. 1.4 Letters of Credit. (a) Firstar Bank Milwaukee, N.A. and such other Bank or Banks as the Company may from time to time designate with the consent of the Agent (each an "LOC Bank") shall from time to time when so requested by the Company issue standby and import letters of credit, respectively (each a "Letter of Credit" and collectively the "Letters of Credit") for the account of the Company up to an aggregate face amount equal to the amount by which (i) the sum of (A) the Aggregate Commitment and (B) the Demand Line from time to time in effect exceeds (ii) the sum of (A) the outstanding principal amount of loans made pursuant to sections 1.1 and 1.2, (B) the aggregate amount of all unpaid Reimbursement Obligations (as defined in section 10.1(r) below) and (C) the aggregate face amount of outstanding Commercial Paper, including for this purpose all Nicolet Funding Corp. Loans. In addition to the foregoing aggregate limitation on Letters of Credit, standby Letters of Credit shall not exceed $25,000,000 in aggregate face amount at any time outstanding and import Letters of Credit shall not exceed $35,000,000 in aggregate face amount at any time outstanding. Each LOC Bank hereby grants to each other Bank, and each other Bank hereby agrees to take, a pro rata participation in each Letter of Credit issued hereunder and all rights (including rights to reimbursement from the Company under paragraph (c) below) and obligations associated therewith in accordance with the Percentage Interest of each Bank. In the event of any drawing on a Letter of Credit which is not reimbursed by or on behalf of the Company, each Bank shall pay to the appropriate LOC Bank a proportionate amount of such drawing equal to its Percentage Interest therein. Each LOC Bank shall divide the proceeds of any reimbursement of a drawing on a Letter of Credit with the other Banks that have made payment to the LOC Bank pursuant to the foregoing sentence, pro rata according to the respective contributions of such other Banks. (b) The Company agrees to pay to the Agent for the pro rata benefit of the Banks a letter of credit fee in respect of each standby Letter of Credit in the amount of three quarters of one percent (3/4%) per annum of the face amount of such standby Letter of Credit. Such fees shall be payable quarterly in arrears on the first day of each calendar quarter. (c) The Company hereby unconditionally promises to pay to the appropriate LOC Bank upon demand, without defense, setoff or counterclaim, the amount of each drawing under Letters of Credit issued by such LOC Bank plus interest on the foregoing from the date due at the Prime Rate (as defined in section 2.2(b)(2)). (d) Reliance on Documents. Delivery to the LOC Banks of any documents strictly complying on their face with the requirements of any Letter of Credit shall be sufficient evidence of the validity, genuineness and sufficiency thereof and of the good faith and proper performance of drawers and users of such Letter of Credit, their agents and assignees; and the LOC Banks may rely thereon without liability or responsibility with respect thereto, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged. (e) Non-Liability for Other Matters. The LOC Banks shall not be liable to the Company for (i) honoring any requests for payment under any Letter of Credit which strictly comply on their face with the terms of such Letter of Credit, (ii) any delay in giving or failing to give any notice, (iii) errors, delays, misdeliveries or losses in transmission of telegrams, cables, letters or other communications or documents or items forwarded in connection with any Letter of Credit or any draft, (iv) accepting and relying upon the name, signature or act of any party who is or purports to be acting in strict compliance with the terms of any Letter of Credit; or (v) any other action taken or omitted by the LOC Banks in good faith in connection with any Letter of Credit or any draft; except only that the Company shall have a claim against an LOC Bank, and such LOC Bank shall be liable to the Company, to the extent of damages suffered by the Company which the Company proves were caused by (A) the LOC Bank's willful misconduct or gross negligence or (B) the LOC Bank's willful and wrongful failure to pay under any Letter of Credit after the presentation to it of documents strictly complying with the terms and conditions of the Letter of Credit. 1.5 Use of Proceeds. The Company represents, warrants and agrees that: (a) The proceeds of the loans made hereunder will be used solely for the following purposes: (i) contemporaneously with the making of the initial loan hereunder, the proceeds of such initial loan shall be used to the extent necessary to pay all indebtedness of Company outstanding under its demand lines of credit with Firstar Bank Milwaukee, N.A. and Norwest Bank Wisconsin; and (ii) all other proceeds shall be used (A) for the repayment at maturity of outstanding Commercial Paper (to the extent necessary), and (B) for working capital and other lawful corporate purposes. (b) No part of the proceeds of any loan made hereunder will be used to "purchase" or "carry" any "margin stock" or to extend credit to others for the purpose of "purchasing" or "carrying" any "margin stock" (as such terms are defined in the Regulation U of the Board of Governors of the Federal Reserve System), and the assets of the Company and its Subsidiaries do not include, and neither the Company nor any Subsidiary has any present intention of acquiring, any such security. 1.6 Commitment Fee. The Company shall pay to the Agent for the account of the Banks, pro rata according to their respective Percentage Interests, a commitment fee computed at the rate of one-eighth of one percent (1/8%) per annum on the Aggregate Commitment (as reduced pursuant to section 1.7). Such commitment fees shall accrue during the period from the date of this Agreement to and including the Termination Date and be payable quarterly in advance on the date of the initial loan and on the first day of each calendar quarter thereafter. 1.7 Termination or Reduction. (a) The Company shall have the right, upon five business days' prior written notice to each Bank, to ratably reduce in part the Commitments, provided, however, that (i) each partial reduction of the Aggregate Commitment shall be in the amount of $100,000 or an integral multiple thereof, and (ii) no reduction shall reduce the Aggregate Commitment to an amount less than the sum of (A) the aggregate principal amount of outstanding revolving credit loans made under Section 1.1, (B) the aggregate amount of Letter of Credit Obligations, and (C) the aggregate face amount of outstanding Commercial Paper, including for this purpose all Nicolet Funding Corp. Loans. Subject to the limitations of the preceding sentence, the entire Commitments of all of the Banks may be terminated in whole at any time upon five Business Days' prior written notice to each Bank. (b) Each Bank in its sole discretion may at any time reduce or terminate its individual Demand Line by giving written notice of such reduction or termination to the Agent and the Company. If any Bank shall decline to make additional advances pursuant to the Demand Line or shall demand payment of any amount outstanding under its Demand Note, the aggregate Demand Line shall automatically be reduced by an amount equal to such Bank's individual Demand Line. 1.8 Optional Prepayment. The Notes may be prepaid in whole or in part at the option of the Company at any time without premium or penalty except as otherwise provided in section 2.2(d)(3). All prepayments shall be applied as set forth in section 2.4(b) pro rata among the Banks in accordance with their respective Percentage Interests. All prepayments shall be accompanied by interest accrued on the amount prepaid through the date of prepayment. 1.9 Commercial Paper. (a) The Company may issue Commercial Paper from time to time, including sales of Commercial Paper through one or more of the Banks acting as placement agent pursuant to separate agreements between the Company and such Bank or Banks. The aggregate face amount of all outstanding Commercial Paper (but not including for this purpose any Nicolet Funding Corp. Loans) shall not at any time exceed the lesser of (i) $60,000,000 and (ii) the amount by which (A) the sum of (1) the Aggregate Commitment and (2) the Demand Line in effect from time to time, exceeds (B) the sum of (1) the outstanding principal amount of loans made pursuant to sections 1.1 and 1.2, (2) the aggregate amount of Letter of Credit Obligations and (3) the outstanding principal amount of all Nicolet Funding Corp. Loans. No Commercial Paper shall have a term to maturity greater than 100 days. (b) The Company shall pay a Commercial Paper placement fee in respect of Commercial Paper placed by any of the Banks computed at a rate of one-quarter of one percent (1/4%) per annum of the aggregate face amount of such Commercial Paper, payable at the time such Commercial Paper is issued as follows: (i) one-eighth of one percent (1/8%) to the Bank acting as placement agent for the sale of such Commercial Paper and (ii) one-eighth of one percent (1/8%) to the Agent for the pro rata benefit of the Banks. (c) The Company will give written notice to the Agent in the form of Part 1 to Exhibit 2.1 hereto on each Business Day on which there is any change in the aggregate outstanding face amount of Commercial Paper and Nicolet Funding Corp. Loans, setting forth the aggregate principal amount of all Commercial Paper and Nicolet Funding Corp. Loans then outstanding after giving effect to the issuance or repayment of Commercial Paper and Nicolet Funding Corp. Loans (as the case may be) taking place on such Business Day. (d) For all purposes of this Agreement, the outstanding face amount of all Commercial Paper (but not including for this purpose any Nicolet Funding Corp. Loans) shall be deemed to be use of the Aggregate Commitment. The principal amount of outstanding loans (including Nicolet Funding Corp. Loans) and the face amount of outstanding Letters of Credit shall be deemed to be use of the Aggregate Commitment to the extent that the Aggregate Commitment exceeds the face amount of outstanding Commercial Paper (but not including for this purpose any Nicolet Funding Corp. Loans) from time to time, and otherwise shall be deemed to be use of the Demand Line. (e) The Company may also obtain direct loans from Nicolet Funding Corp. ("Nicolet Funding Corp. Loans") from time to time. The aggregate principal amount of such loans at any time outstanding shall not exceed the lesser of (i) $20,000,000 and (ii) the sum of (A) the amount by which the Aggregate Commitment exceeds the aggregate principal amount of Commercial Paper from time to time outstanding, plus (B) the amount available to be borrowed from time to time under the Demand Line provided by Norwest Bank Wisconsin, National Association. Such loans shall have maturities not exceeding 100 days, and shall bear interest at rates to be agreed upon by the Company and Nicolet Funding Corp. ARTICLE II ADMINISTRATION OF CREDIT 2.1 Borrowing Procedure. Loans hereunder shall be made at the principal banking office of the Agent in Milwaukee, Wisconsin, on written or telephonic notice from the Company to the Agent received not later than 10:30 a.m. on the date of the proposed borrowing (subject to the notice requirement of section 2.2(c)(2) if the Company wishes to elect a LIBOR Pricing Option with respect to such loan), which notice shall specify the date and the aggregate principal amount of such borrowing. Each written request for a borrowing hereunder shall be given in the form of Part 2 to Exhibit 2.1 hereto; each telephonic request for a borrowing hereunder shall be confirmed within three (3) Business Days of the borrowing date by delivery of a written request in such form. Upon its receipt of such notice from the Company, the Agent shall promptly give notice to the other Banks, each of which shall have its respective portion of the loans available to the Agent in Milwaukee in immediately available funds not later than 2:00 p.m. on the date of the borrowing. Out of the funds received from the Banks for the making of the loans hereunder, the Agent will make a loan to the Company in such amount on behalf of such Banks. Notes and other required documents delivered to the Agent for the account of each Bank shall be promptly delivered to such Bank, or in accordance with instructions received from it, together with copies of such other documents received in connection with the borrowing as such Bank shall request. 2.2 Interest Calculation. (a) Interest. The principal amount of the indebtedness from time to time evidenced by the Notes shall accrue and bear interest at a rate per annum which shall at all times equal the Applicable Rate (as defined in section 2.2(b)). To the extent that any portion of the indebtedness evidenced by the Notes bears interest at the Prime Rate (defined below), the Company will pay such interest monthly in arrears on the last day of each month. On the last day of each LIBOR Interest Period or on any earlier termination of any LIBOR Pricing Option, the Company will pay the accrued and unpaid interest on the indebtedness evidenced by the Notes which was subject to the LIBOR Pricing Option which expired or terminated on such date. On any stated or accelerated maturity of the indebtedness evidenced by the Notes all accrued and unpaid interest on such indebtedness shall be forthwith due and payable, including without limitation any accrued and unpaid interest on such indebtedness which is subject to a LIBOR Pricing Option. In addition, the Company will, on demand, pay interest on any overdue installments of principal and pay interest during the continuance of any Event of Default both at a rate per annum which is at all times equal to the sum of (a) the Applicable Rate (or, if more than one Applicable Rate is then in effect, the weighted average of the Applicable Rates then in effect), plus (b) 2% per annum. (b) Applicable Rate. The term "Applicable Rate" shall mean: (1) With respect to any portion of the indebtedness evidenced by the Notes which is at the time subject to an effective LIBOR Pricing Option, the applicable LIBOR Rate set forth in section 2.2(c)(1)(D). (2) With respect to any portion of the indebtedness evidenced by the Notes which is not at the time subject to an effective LIBOR Pricing Option, the rate announced by Firstar Bank Milwaukee, N.A. from time to time as its prime rate (changing as and when such prime rate changes) (the "Prime Rate"). (c) The LIBOR Pricing Options. The following provisions shall apply to the LIBOR Pricing Options: (1) Certain Definitions. For purposes of this Agreement: (A) The term "Basic LIBOR Rate" as applied to any LIBOR Interest Period shall mean the per annum rate of interest determined by the Agent (which shall be applicable to all of the Banks) to be the average (rounded up, if necessary, to the nearest 1/16 of 1%) of the offered rates for deposits in U.S. dollars for the applicable LIBOR Interest Period which appear on the Reuters Screen LIBO Page (or such other page on which the appropriate information may be displayed), on the electronic communications terminals in the Agent's money center as of 11:00 a.m. (London time) on the day which is two Business Days prior to the first day of such LIBOR Interest Period ("Calculation Date"), except as provided below. If fewer than two offered rates appear for the applicable LIBOR Interest Period or if the appropriate screen is not accessible as of such time, the term "Basic LIBOR Rate" shall mean the per annum rate of interest determined by the Agent (but which shall be applicable to all of the Banks) to be the average (rounded up, if necessary, to the nearest 1/16 of 1%) of the rates at which deposits in U.S. dollars are offered to the Agent by four major banks in the London interbank market, as selected by the Agent ("Reference Banks"), at approximately 11 a.m., London time, on the Calculation Date for the applicable LIBOR Interest Period and in an amount equal to the principal amount of the loans subject to the applicable LIBOR Pricing Option. The Agent will request the principal London office of each of the Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, the applicable rate will be the mean of the quotations. If fewer than two quotations are provided as requested, the applicable rate will be the mean of the rates quoted by major banks in New York City, selected by the Agent, at approximately 11 a.m., New York City time, on the Calculation Date for loans in U.S. dollars to leading European banks for the applicable LIBOR Interest Period and in an amount equal to the principal amount of the loans subject to the applicable LIBOR Pricing Option. (B) The term "LIBOR Interest Period" shall mean any period, selected as provided below in this section 2.2(c) of one, two or three months, each commencing on any Business Day. Such LIBOR Interest Period shall end on the day in the succeeding calendar month which corresponds numerically to the beginning day of such LIBOR Interest Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such LIBOR Interest Period shall end on the last Business Day of such succeeding month. If any LIBOR Interest Period so selected would otherwise end on a date which is not a Business Day, such LIBOR Interest Period shall instead end on the immediately succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new month, such LIBOR Interest Period shall end on the immediately preceding Business Day. (C) The term "LIBOR Pricing Options" shall mean the options granted pursuant to this section 2.2(c) to have the interest on all or any portion of the principal amount of indebtedness evidenced by the Notes computed with reference to a LIBOR Rate. (D) The term "LIBOR Rate" for any LIBOR Interest Period shall mean a rate per annum equal to the sum of (i) the quotient of (A) the Basic LIBOR Rate applicable to that LIBOR Interest Period divided by (B) one minus the LIBOR Reserve Requirement (expressed as a decimal) applicable to that LIBOR Interest Period, plus (ii) five-eighths of one percent (5/8%). The LIBOR Rate shall be rounded, if necessary, to the next higher 1/16 of 1%. (E) The term "LIBOR Reserve Requirement" shall mean, with respect to each LIBOR Interest Period, the stated rate of all reserve requirements (including all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements during such LIBOR Interest Period) that is specified on the first day of such LIBOR Interest Period by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board of Governors) applicable to the Agent. (F) The term "Regulatory Change" means any change enacted or issued after the date of this Agreement of any (or the adoption after the date of this Agreement of any new) federal or state law, regulation, interpretation, direction, policy or guideline, or any court decision, which in any case has general application to banks of the class of which any Bank is a member and which affects the treatment of any loans of such Bank, all as set forth below. (2) Election of LIBOR Pricing Options. Subject to all the terms and conditions hereof, the Company may, by notice to the Agent received not later than 10:30 a.m. (Milwaukee time) on the day which is three Business Days prior to the first day of the LIBOR Interest Period selected in such notice, elect to have all or such portion of the principal amount of indebtedness then evidenced (or to be evidenced at the commencement of such LIBOR Interest Period) by the Notes as the Company may specify in such notice (in the minimum amount of $1,000,000 or any multiple of $100,000 in excess of such amount) accrue and bear daily interest during the LIBOR Interest Period so selected at a per annum rate equal to the LIBOR Rate for such LIBOR Interest Period; provided, however, that no such election shall become effective if the Agent determines (which determination shall be binding and conclusive on all parties) that (i) by reason of circumstances affecting the London interbank market adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate; (ii) the LIBOR Rate does not accurately reflect the cost to the Banks of making or maintaining LIBOR-based loans in general; or (iii) any Default or Event of Default has occurred and is continuing. Each notice of election of a LIBOR Pricing Option shall be irrevocable. (d) Special Provisions. (1) Increased Costs. If any Regulatory Change, (A) shall subject any Bank to any tax, duty or other charge with respect to any of its loans, Letters of Credit or participations therein, or Reimbursement Obligations owed to it hereunder, or shall change the basis of taxation of payments to any Bank of the principal of or interest on its loans hereunder or Reimbursement Obligations owed to it, or any other amounts due under this Agreement in respect of such loans or Reimbursement Obligations, or its obligation to make loans hereunder or issue Letters of Credit or participate therein (except for changes in the rate of tax on the overall net income of such Bank); (B) shall impose, modify or make applicable any reserve (including, without limitation, any reserve imposed by the Board of Governors of the Federal Reserve System, but excluding any reserve included in the determination of the LIBOR Rate), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank; or (C) shall impose on any Bank any other condition affecting its loans, Letters of Credit or participations therein, or any Reimbursement Obligation owed to it hereunder; and the result of any of the foregoing is to increase the cost to (or in the case of Regulation D or any other analogous law, rule or regulation, to impose a cost on) such Bank of making or maintaining any loans, issuing or maintaining any Letter of Credit, or participating therein, or to reduce the amount of any sum received or receivable by such Bank under this Agreement and any document or instrument related hereto, then after 30 days' notice from such Bank (which notice shall be sent to the Agent and the Company and shall be accompanied by a statement setting forth in reasonable detail the basis of such increased cost or other effect on the loans, Letters of Credit or Reimbursement Obligations), the Company shall pay directly to such Bank, on demand, such additional amount or amounts as will compensate such Bank for such increased cost or such reduction incurred on or after the date of the giving of such notice to the Agent and the Company. Each of the Banks represents to the Company that, as of the date hereof, it is not aware of any fact or circumstance that would give rise to any increased cost under this section 2.2(d)(1). Each Bank further agrees that, for purposes of this section 2.2(d)(1), it will not treat the Company in a manner different from its other commercial loan customers having similar loan relationships with the Bank. (2) Changes in Law Rendering Certain Loans Unlawful. In the event that any Regulatory Change should make it (or, in the good faith judgment of a Bank, should raise substantial questions as to whether it is) unlawful for a Bank to make, maintain or fund a loan subject to a LIBOR Rate, then (i) such Bank shall promptly notify each of the other parties hereto, (ii) the obligation of all Banks to make such loan shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness, and (iii) to the extent that it is unlawful for such Bank to maintain an outstanding loan subject to a LIBOR Rate, such loan shall thereafter bear interest at the Prime Rate or such other lower rate as may be agreed upon by the Company and the Bank. (3) Funding Losses. The Company hereby agrees that upon demand by any Bank (which demand shall be sent to the Agent and the Company and shall be accompanied by a statement setting forth in reasonable detail the basis for the calculations of the amount being claimed) the Company will indemnify such Bank against any net loss or expense which such Bank may sustain or incur (including, without limitation, any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Bank to fund or maintain loans hereunder), as reasonably determined by such Bank, as a result of (i) any payment or prepayment of any loan subject to a LIBOR Rate of such Bank on a date other than the last day of a LIBOR Interest Period for such loan whether or not required by any other provision of this Agreement, or (ii) any failure of the Company to borrow any loans on a date specified therefor in a notice of borrowing pursuant to this Agreement. (4) Discretion of Banks as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Bank shall be entitled to fund and maintain its funding of all or any part of its loans hereunder in any manner it sees fit. (5) Capital Adequacy. If any Regulatory Change affects the treatment of any loan, Letter of Credit or participation therein of a Bank as an asset or other item included for the purpose of calculating the appropriate amount of capital to be maintained by such Bank or any corporation controlling such Bank and has the effect of reducing the rate of return on such Bank's or such corporation's capital as a consequence of the obligations of such Bank hereunder to a level below that which such Bank or such corporation could have achieved but for such Regulatory Change (taking into account such Bank's or such corporation's policies with respect to capital adequacy) by an amount deemed in good faith by such Bank to be material, then after 30 days' notice from such Bank to the Company and the Agent of such Regulatory Change, the Company shall pay to such Bank, on demand, such additional amount or amounts as will compensate such Bank or such corporation, as the case may be, for such reduction incurred on or after the date of the giving of such notice to the Agent and the Company. Such Bank shall submit, to the Agent and the Company, a statement as to the amount of such compensation, prepared in good faith and in reasonable detail. Each of the Banks represents to the Company that, as of the date hereof, it is not aware of any fact or circumstance that would give rise to a claim for compensation under this section 2.2(d)(5). (6) Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Bank pursuant to sections 2.2(d)(1), (2), (3) and (5) shall be rebuttably presumptive evidence of the correctness of the determinations and statements and shall be conclusive absent manifest error if the Company fails to deliver written notice to the Agent within 30 days of (i) the date of mailing of such statement or (ii) the giving of notice of such determination if no such statement is mailed. The provisions of section 2.2(d)(1), (3) and (5) shall survive the obligation of the Banks to extend credit under this Agreement and the repayment of the loans and Reimbursement Obligations. 2.3 Computations; Non-Business Days. All fees, and all interest payable on the Notes, shall be computed for the actual number of days elapsed using a daily rate determined by dividing the annual rate by 360. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a non-Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest under the Notes, or fees payable hereunder, as the case may be. 2.4 Application of Payments. (a) All payments of principal, interest and fees under this Agreement and the Notes shall be made to the Agent in immediately available funds for the ratable account of the Banks and the holders of the Notes then outstanding, as appropriate, in respect of amounts then due hereunder. The Agent shall promptly distribute to each such Bank or holder pro rata the amount of principal, interest or fees received by the Agent for the account of such holder. Any payment to the Agent for the account of a Bank or a holder of a Note under this Agreement shall constitute a payment by the Company to such Bank or holder of the amount so paid to the Agent, and any Notes or portions thereof so paid shall not be considered outstanding for any purpose after the date of such payment to the Agent. (b) All payments received by the Agent under this Agreement from any source shall be applied to the obligations of the Company hereunder in the following order of priority: (i) First, to the payment of all unreimbursed fees and expenses due hereunder; (ii) Second, to the repayment of all outstanding loans under the Demand Line and all accrued interest thereon; (iii) Third, to the payment of all outstanding loans under the Aggregate Commitment, to the extent then due and payable, and all accrued interest thereon; (iv) Fourth, to secure reimbursement of the outstanding face amount of all Letters of Credit issued against the Demand Line; (v) Fifth, to secure reimbursement of the outstanding face amount of all Letters of Credit issued against the Aggregate Commitment; and (vi) Sixth, to secure payment at maturity of all outstanding Commercial Paper, including for this purpose all Nicolet Funding Corp. Loans. 2.5 Pro Rata Treatment. All payments or prepayments of principal, interest or fees shall be made pro rata in accordance with the amounts of the Notes then due. In the event that any Bank shall receive from the Company or any other source (other than the sale of a participation to another commercial lender pursuant to section 10.10) any payment of, on account of, or for any obligation of the Company hereunder or under the Notes (whether pursuant to the exercise of any right of set off, banker's lien, realization upon any security held for or appropriated to such obligation, counterclaim or otherwise) other than as above provided, then such Bank shall immediately purchase, without recourse and for cash, an interest in the obligations of the same nature held by the other Banks so that each Bank shall thereafter have a percentage interest in all of such obligations equal to the percentage interest which such Bank held in the Notes outstanding immediately before such payment; provided, that if any payment so received shall be recovered in whole or in part from such purchasing Bank, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. The Company specifically acknowledges and consents to the preceding sentence. 2.6 Set Off. In the event that the unpaid principal balance of the Notes or any other amount becomes immediately due and payable pursuant to section 7.2, each Bank may offset and apply any monies, balances, accounts and deposits (including certificates of deposit) of the Company then at such Bank toward the payment of the Note or Notes held by such Bank or other amounts owed to it hereunder. Promptly upon its charging any account of the Company pursuant to this section, the Bank shall give the Company notice thereof, provided that failure to give such notice shall not affect the obligations of the Company hereunder. ARTICLE III CONDITIONS OF BORROWING Without limiting any of the other terms of this Agreement, none of the Banks shall be required to make any loan to the Company hereunder or issue any Letter of Credit unless each of the following conditions has been satisfied: 3.1 Representations. The representations and warranties contained in Article IV hereof continue to be true and correct on the date of such loan and no Default or Event of Default hereunder shall have occurred and be continuing. 3.2 Insurance Certificate. Prior to the initial loan the Banks shall have received satisfactory evidence that the Company maintains hazard and liability insurance coverage reasonably satisfactory to the Banks. 3.3 Form U-1. Prior to the initial loan the Company shall have executed and delivered to the Banks a Federal Reserve Form U-1 provided for in Regulation U of the Board of Governors of the Federal Reserve System, and the statements made therein shall be such, in the reasonable opinion of the Banks, as to permit the transactions contemplated hereby without violation of Regulation U. 3.4 Counsel Opinion. Prior to the initial loan the Banks shall have received from their special counsel and from Company's counsel, satisfactory opinions as to such matters relating to the Company and its Subsidiaries, the validity and enforceability of this Agreement, the loans to be made hereunder and the other documents required by this Article III as the Banks shall reasonably require. The Company shall execute and/or deliver to the Banks or their respective counsel such documents concerning its corporate status and the authorization of such transactions as may be requested. 3.5 Proceedings Satisfactory. All proceedings taken in connection with the transactions contemplated by this Agreement, and all instruments, authorizations and other documents applicable thereto, shall be satisfactory in form and substance to the Banks and their respective counsel. 3.6 Violation of Environmental Laws. In the reasonable opinion of the Banks there shall not exist any uncorrected violation by the Company or any Subsidiary of an Environmental Law or any condition which requires, or may require, a cleanup, removal or other remedial action by the Company or any Subsidiary under any Environmental Laws costing $2,500,000 or more in the aggregate. ARTICLE IV REPRESENTATIONS AND WARRANTIES In order to induce the Banks to make the loans as provided herein, the Company represents and warrants to the Banks as follows, except as set forth in a letter (the "Information and Exceptions Letter") delivered to the Banks not later than three (3) Business Days prior to the date of this Agreement. 4.1 Organization. The Company and each of its Subsidiaries is a corporation duly organized and existing in good standing under the laws of the jurisdiction under which it was incorporated, and has all requisite power and authority, corporate or otherwise, to conduct its business and to own its properties. Set forth in the Information and Exceptions Letter is a complete and accurate list of all of its Subsidiaries, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, the percentage of the outstanding shares of each class of capital stock owned (directly or indirectly) by the Company and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase, and similar rights. All of the outstanding stock of all of the Subsidiaries has been legally and validly issued, is fully paid and non-assessable except as provided by section 180.0622(2)(b) of the Wisconsin Business Corporation Law and its predecessor statute, as judicially interpreted, and is owned by the Company or one or more other Subsidiaries free and clear of all pledges, liens, security interests and other charges or encumbrances. The Company is duly licensed or qualified to do business in all jurisdictions in which such qualification is required, and failure to so qualify could have a material adverse effect on the property, financial condition or business operations of the Company. 4.2 Authority. The execution, delivery and performance of this Agreement, the Notes and the documents required by Article III (the "Collateral Documents") are within the corporate powers of the Company, have been duly authorized by all necessary corporate action and do not and will not (i) require any consent or approval of the stockholders of the Company, (ii) violate any provision of the articles of incorporation or by-laws of the Company or of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Company or any Subsidiary; (iii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iv) result in a breach of or constitute a default under, or result in the imposition of any lien, charge or encumbrance upon any property of the Company or any Subsidiary pursuant to, any indenture or other agreement or instrument under which the Company or any Subsidiary is a party or by which it or its properties may be bound or affected. This Agreement constitutes, and each of the Notes and each of the Collateral Documents when executed and delivered hereunder will constitute, legal, valid and binding obligations of the Company or other signatory enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy or similar laws affecting the enforceability of creditors' rights generally. 4.3 Investment Company Act of 1940. Neither the Company nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 4.4 Employee Retirement Income Security Act. All Plans are in compliance in all material respects with the applicable provisions of ERISA. Neither the Company nor any Subsidiary has incurred any material "accumulated funding deficiency" within the meaning of section 302(a)(2) of ERISA in connection with any Plan. There has been no Reportable Event for any Plan, the occurrence of which would have a materially adverse effect on the Company or any Subsidiary, nor has the Company or any Subsidiary incurred any material liability to the Pension Benefit Guaranty Corporation under section 4062 of ERISA in connection with any Plan. The Unfunded Liabilities of all Plans do not in the aggregate exceed $2,500,000. 4.5 Financial Statements. The consolidated and consolidating balance sheets of the Company and its Subsidiaries as of December 31, 1993, and the consolidated and consolidating statements of profit and loss and surplus of the Company and its Subsidiaries for the year ended on that date, as prepared by the Company and certified by Ernst & Young and heretofore furnished to the Banks, present fairly the financial condition of the Company and such Subsidiaries as of that date, and the results of their operations for the fiscal year ended on that date. Since December 31, 1993, there has been no material adverse change in the property, financial condition or business operations of the Company or any Subsidiary. 4.6 Liens. The Company and each Subsidiary has good and marketable title to all of its assets, real and personal, free and clear of all liens, security interests, mortgages and encumbrances of any kind, except Permitted Liens. To the best of the Company's knowledge and belief, all owned and leased buildings and equipment of the Company and its Subsidiaries are in good condition, repair and working order in all material respects and conform in all material respects to all applicable laws, regulations and ordinances. 4.7 Contingent Liabilities. Neither the Company nor any Subsidiary has any guarantees or other contingent liabilities outstanding (including, without limitation, liabilities by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss), except those permitted by section 5.7 hereof. 4.8 Taxes. Except as expressly disclosed in the financial statements referred to in section 4.5 above, neither the Company nor any Subsidiary has any material outstanding unpaid tax liability (except for taxes which are currently accruing from current operations and ownership of property, which are not delinquent), and no tax deficiencies have been proposed or assessed against the Company or any Subsidiary. The most recent completed audit of the Company's federal income tax returns was for the Company's income tax year ending December 31, 1989, and all taxes shown by such returns (together with any adjustments arising out of such audit, if any) have been paid. 4.9 Absence of Litigation. Neither the Company nor any Subsidiary is a party to any litigation or administrative proceeding, nor so far as is known by the Company is any litigation or administrative proceeding threatened against it or any Subsidiary, which in either case (i) relates to the execution, delivery or performance of this Agreement, the Notes, or any of the Collateral Documents, (ii) could, if adversely determined, cause any material adverse change in the property, financial condition or the conduct of the business of the Company and its Subsidiaries taken as a whole, (iii) asserts or alleges the Company or any Subsidiary violated Environmental Laws, (iv) asserts or alleges that Company or any Subsidiary is required to cleanup, remove, or take remedial or other response action due to the disposal, depositing, discharge, leaking or other release of any hazardous substances or materials, or (v) asserts or alleges that Company or any Subsidiary is required to pay all or a portion of the cost of any past, present or future cleanup, removal or remedial or other response action which arises out of or is related to the disposal, depositing, discharge, leaking or other release of any hazardous substances or materials by Company or any Subsidiary, except with respect to violations, cleanups, removals and other remedial and response actions referred to clauses (iii), (iv) and (v) above which will cost the Company and its Subsidiaries less than $2,500,000 in the aggregate. 4.10 Absence of Default. No event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company or any Subsidiary the right to accelerate the maturity of any indebtedness of the Company or any Subsidiary for borrowed money. Neither the Company nor any Subsidiary is in default under any other lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance with which could materially adversely affect its property, financial condition or business operations. 4.11 No Burdensome Agreements. Neither the Company nor any Subsidiary is a party to any agreement, instrument or undertaking, or subject to any other restriction, (i) which materially adversely affects the property, financial condition or business operations of the Company and its Subsidiaries taken as a whole, or (ii) under or pursuant to which the Company or any Subsidiary is or will be required to place (or under which any other person may place) a lien upon any of its properties securing indebtedness either upon demand or upon the happening of a condition, with or without such demand, other than Permitted Liens. 4.12 Trademarks, etc. The Company and its Subsidiaries possess adequate trademarks, trade names, copyrights, patents, permits, service marks and licenses, or rights thereto, for the present and planned future conduct of their respective businesses substantially as now conducted, without any known conflict with the rights of others which might result in a material adverse effect on the Company and its Subsidiaries taken as a whole. 4.13 Partnerships; Joint Ventures. Neither the Company nor any Subsidiary is a member of any partnership or joint venture except as permitted under section 5.4. 4.14 Full Disclosure. No information, exhibit or report furnished by the Company or any Subsidiary to any Bank in connection with the negotiation or execution of this Agreement contained any material misstatement of fact as of the date when made or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading as of the date when made. 4.15 Fiscal Year. The fiscal year of the Company and each Subsidiary ends on December 31 of each year. 4.16 Environmental Conditions. To the Company's knowledge after reasonable investigation, there are no conditions existing currently or likely to exist during the term of this Agreement which would subject the Company or any Subsidiary to damages, penalties, injunctive relief or cleanup costs under any Environmental Laws or which require or are likely to require cleanup, removal, remedial action or other response pursuant to Environmental Laws by the Company or any Subsidiary, except for such matters which will cost the Company and its Subsidiaries less than $2,500,000 in the aggregate. 4.17 Environmental Judgments, Decrees and Orders. Neither the Company nor any Subsidiary is subject to any judgment, decree, order or citation related to or arising out of Environmental Laws and neither the Company nor any Subsidiary has been named or listed as a potentially responsible party by any governmental body or agency in a matter arising under any Environmental Laws, except for such matters which will cost the Company and its Subsidiaries less than $2,500,000 in the aggregate. ARTICLE V NEGATIVE COVENANTS While any part of the credit granted to the Company is available and while any part of the principal of or interest on any Note remains unpaid or any Letter of Credit Obligation remains outstanding, the Company shall not do any of the following, or permit any Subsidiary to do any of the following, without the prior written consent of the Required Banks: 5.1 Restriction of Indebtedness. Create, incur, assume or have outstanding any indebtedness for borrowed money or the deferred purchase price of any asset (including obligations under Capitalized Leases), except: (a) the Notes issued under this Agreement; (b) outstanding indebtedness in respect of industrial revenue bond financing shown on the financial statements referred to in section 4.5 above, provided that such indebtedness shall not be renewed, extended or increased; (c) additional long-term indebtedness incurred pursuant to an offering of long-term notes, bonds or similar obligations of the Company; provided that, simultaneously with the closing of such debt offering, the Aggregate Commitment shall be reduced by an amount equal to the net proceeds to the Company of such long- term indebtedness; (d) indebtedness described in section 10.1(p)(iv), provided such indebtedness does not exceed an aggregate of $5,000,000 outstanding at any one time; (e) Commercial Paper in an aggregate face amount of not more than the amount permitted by section 1.9(a); (f) Nicolet Funding Corp. Loans in aggregate principal amount of not more than the amount permitted by section 1.9(e); (g) unsecured indebtedness which is subordinated to the prior payment of the Company's obligations under this Agreement in a manner satisfactory to the Banks; (h) indebtedness in respect of Capitalized Leases, provided that the aggregate lease payments thereunder do not exceed $1,000,000 in any fiscal year of the Company; and (i) other indebtedness not exceeding $5,000,000 in aggregate principal amount at any time outstanding. 5.2 Restriction on Liens. Create or permit to be created or allow to exist any mortgage, pledge, encumbrance or other lien upon or security interest in any property or asset now owned or hereafter acquired by the Company or any Subsidiary, except Permitted Liens. 5.3 Sale and Leaseback. Enter into any agreement providing for the leasing by the Company or a Subsidiary of property which has been or is to be sold or transferred by the Company or a Subsidiary to the lessor thereof, or which is substantially similar in purpose to property so sold or transferred, except for agreements relating to sales of property not exceeding $5,000,000 (in gross sales proceeds to the Company) in the aggregate. 5.4 Acquisitions and Investments. Acquire any other business or make any loan, advance or extension of credit to, or investment in, any other person, corporation or other entity (including without limitation Subsidiaries, partnerships and joint ventures), including investments acquired in exchange for stock or other securities or obligations of any nature of the Company or any Subsidiary, except: (a) investments in (i) bank repurchase agreements; (ii) savings accounts or certificates of deposit in a financial institution of recognized standing; (iii) obligations issued or fully guaranteed by the United States; and (iv) prime commercial paper maturing within 90 days of the date of acquisition by the Company or a Subsidiary; (b) loans and advances made to employees and agents in the ordinary course of business, such as travel and entertainment advances and similar items; (c) investments in the Company by a Subsidiary; (d) credit extended to customers in the ordinary course of business; (e) other investments outstanding on December 31, 1993, and shown on the financial statements referred to in section 4.5 above, provided that such investments shall not be increased; and (f) additional acquisitions and investments in present and future Subsidiaries and joint ventures, provided that all such acquisitions and investments (valued at original cost without regard to subsequent increases or decreases in the value thereof) shall not exceed (i) $15,000,000 in the aggregate and (ii) $5,000,000 with respect to any single entity. 5.5 Liquidation; Merger; Disposition of Assets. Liquidate or dissolve; or merge with or into or consolidate with or into any other corporation or entity except a merger of a wholly-owned Subsidiary into the Company or another wholly-owned Subsidiary; or sell, lease, transfer or otherwise dispose of all or any substantial part of its property, assets or business (other than sales made in the ordinary course of business), or any stock of any Subsidiary. 5.6 Accounts Receivable. Discount or sell with recourse, or sell for less than the face amount thereof, any of its notes or accounts receivable, whether now owned or hereafter acquired. 5.7 Contingent Liabilities. Guarantee or become a surety or otherwise contingently liable (including, without limitation, liable by way of agreement, contingent or otherwise, to purchase, to provide funds for payment, to supply funds to or otherwise invest in the debtor or otherwise to assure the creditor against loss) for any obligations of others, except (i) pursuant to the deposit and collection of checks and similar items in the ordinary course of business, (ii) in connection with letters of credit issued for the account of the Company from time to time by Republic National Bank of New York, provided that (A) such letters of credit shall not exceed $10,000,000 in aggregate face amount at any time outstanding and (B) none of such letters of credit shall remain outstanding on or after June 1, 1995, and (iii) other contingent liabilities in respect of third party obligations not exceeding an aggregate of $5,000,000 outstanding at any one time. 5.8 Affiliates. Suffer or permit any transaction with any Affiliate, except on terms not less favorable to the Company or Subsidiary than would be usual and customary in similar transactions with non-affiliated persons. ARTICLE VI AFFIRMATIVE COVENANTS While any part of the credit granted to the Company is available and while any part of the principal of or interest on any Note remains unpaid or any Letter of Credit Obligation is outstanding, and unless waived in writing by the Required Banks, the Company shall: 6.1 Financial Status. Maintain: (a) At all times a Consolidated Current Ratio of at least 2.00 to 1.00; (b) A ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth of (i) not more than 1.00 to 1.00 at all times prior to January 1, 1996 and (ii) not more than 0.85 to 1.00 at all times after December 31, 1995; and (c) At the end of each fiscal quarter a Consolidated Fixed Charge Coverage Ratio for the four consecutive fiscal quarters then ended of at least 3.00 to 1.00. 6.2 Insurance. Maintain insurance in such amounts and against such risks as is customary by companies engaged in the same or similar businesses and similarly situated. 6.3 Corporate Existence; Obligations. Do, and cause each Subsidiary to do, all things necessary to: (i) maintain its corporate existence (except for mergers permitted by section 5.5) and all rights and franchises necessary or desirable for the conduct of its business; (ii) comply in all material respects with all applicable laws, rules, regulations and ordinances, and all restrictions imposed by governmental authorities, including those relating to environmental standards and controls; and (iii) pay, before the same become delinquent and before penalties accrue thereon, all taxes, assessments and other governmental charges against it or its property, and all of its other liabilities, except to the extent and so long as the same are being contested in good faith by appropriate proceedings in such manner as not to cause any material adverse effect upon its property, financial condition or business operations, with adequate reserves provided for such payments. 6.4 Business Activities. Continue to carry on its business activities in substantially the manner such activities are conducted on the date of this Agreement and not make any material change in the nature of its business. 6.5 Properties. Keep and cause each Subsidiary to keep its properties (whether owned or leased) in good condition, repair and working order, ordinary wear and tear and obsolescence excepted, and make or cause to be made from time to time all necessary repairs thereto (including external or structural repairs) and renewals and replacements thereof consistent with the exercise of its reasonable business judgment. 6.6 Accounting Records; Reports. Maintain and cause each Subsidiary to maintain a standard and modern system for accounting in accordance with generally accepted principles of accounting consistently applied throughout all accounting periods and consistent with those applied in the preparation of the financial statements referred to in section 4.5; and furnish to the Agent such information respecting the business, assets and financial condition of the Company and its Subsidiaries as any Bank may reasonably request and, without request, furnish to the Agent: (a) Within 45 days after the end of each of the first three quarters of each fiscal year of the Company (i) consolidated and consolidating balance sheets of the Company and all of its Subsidiaries as of the close of such quarter and of the comparable quarter in the preceding fiscal year; and (ii) consolidated and consolidating statements of income and surplus of the Company and all of its Subsidiaries for such quarter and for that part of the fiscal year ending with such quarter and for the corresponding periods of the preceding fiscal year; all in reasonable detail and certified as true and correct (subject to audit and normal year- end adjustments) by the chief financial officer of the Company; and (b) As soon as available, and in any event within 90 days after the close of each fiscal year of the Company, a copy of the audit report for such year and accompanying consolidated and consolidating financial statements of the Company and its Subsidiaries, as prepared by independent public accountants of recognized standing selected by the Company and reasonably satisfactory to the Required Banks, which audit report shall be accompanied by an opinion of such accountants, in form reasonably satisfactory to the Required Banks, to the effect that the same fairly present the financial condition of the Company and its Subsidiaries and the results of its and their operations as of the relevant dates thereof; and (c) As soon as available, copies of all reports or materials submitted or distributed to shareholders of the Company or filed with the Securities and Exchange Commission or other governmental agency having regulatory authority over the Company or any Subsidiary or with any national securities exchange; and (d) Promptly, and in any event within 10 days after an officer of the Company has actual knowledge thereof a statement of the chief financial officer of the Company describing: (i) any Default or Event of Default hereunder, or any other event which, either of itself or with the lapse of time or the giving of notice or both, would constitute a default under any other material agreement to which the Company or any Subsidiary is a party, together with a statement of the actions which the Company proposes to take with respect thereto; (ii) any pending or threatened litigation or administrative proceeding of the type described in section 4.9; and (iii) any fact or circumstance which is materially adverse to the property, financial condition or business operations of the Company and its Subsidiaries taken as a whole; and (e)(i) Promptly, and in any event within 30 days, after an officer of the Company acquires actual knowledge that any Reportable Event with respect to any Plan has occurred, a statement of the chief financial officer of the Company setting forth details as to such Reportable Event and the action which the Company proposes to take with respect thereto, together with a copy of any notice of such Reportable Event given to the Pension Benefit Guaranty Corporation if a copy of such notice is available to the Company, (ii) promptly after the filing thereof with the Internal Revenue Service, copies of each annual report with respect to each Plan administered by the Company and (iii) promptly after receipt thereof, a copy of any notice (other than a notice of general application) the Company, any Subsidiary or any member of the Controlled Group may receive from the Pension Benefit Guaranty Corporation or the Internal Revenue Service with respect to any Plan administered by the Company. The financial statements referred to in (a) and (b) above shall be accompanied by a certificate by the chief financial officer of the Company demonstrating compliance with the covenants in section 6.1 during the relevant period and stating that, as of the close of the last period covered in such financial statements, no condition or event had occurred which constitutes a Default hereunder or which, after notice or lapse of time or both, would constitute a Default hereunder (or if there was such a condition or event, specifying the same). The audit report referred to in (b) above shall be accompanied by a certificate by the accountants who prepared the audit report, as of the date of such audit report, stating that in the course of their audit, nothing has come to their attention suggesting that a condition or event has occurred which constitutes a Default hereunder or which, after notice or lapse of time or both, would constitute a Default hereunder (or if there was such a condition or event, specifying the same); but such accountants shall not be liable for any failure to obtain knowledge of any such condition or event. The Agent shall promptly furnish to each of the Banks (i) copies of the certificates delivered to the Agent pursuant to this paragraph, and (ii) copies of any statements delivered to the Agent pursuant to section 6.6(d) or (e) above. 6.7 Inspection of Records. Permit representatives of the Banks at their own expense to visit and inspect any of the properties and examine any of the books and records of the Company and its Subsidiaries at any reasonable time and as often as may be reasonably desired. 6.8 Compliance with Environmental Laws. Timely comply in all material respects, and cause each Subsidiary to comply in all material respects, with all applicable Environmental Laws. 6.9 Environmental Audit. Permit, at its expense, at the request of the Required Banks, an Environmental Audit solely for the benefit of the Banks, to be conducted by the Banks or an independent agent selected by the Banks, but only in the event of a circumstance or condition of the nature described in section 6.10 below which, in the reasonable judgment of the Required Banks, will cost the Company $2,500,000 or more in the aggregate. This provision shall not relieve the Company or any Subsidiary from conducting its own Environmental Audits or taking any other steps necessary to comply with Environmental Laws. 6.10 Orders, Decrees and Other Documents. Provide to the Agent, immediately upon receipt, copies of any correspondence, notice, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a circumstance or condition which requires or may require a financial contribution by the Company or any Subsidiary or a cleanup, removal, remedial action, or other response by or on the part of the Company or any Subsidiary under Environmental Laws or which seeks damages or civil, criminal or punitive penalties from the Company or any Subsidiary for an alleged violation of Environmental Laws; provided, however, such documentation need not be delivered to the Agent unless and until the circumstances or conditions referred to therein will, individually or in the aggregate with any other such matters, likely result in costs to the Company and its Subsidiaries of $1,000,000 or more. ARTICLE VII DEFAULTS 7.1 Defaults. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) The Company shall fail to pay (i) any interest due on any Revolving Credit Note, or any other amount payable hereunder (other than a principal payment on any Note or a Reimbursement Obligation) by five days after the same becomes due; or (ii) any principal amount due on any Revolving Credit Note or any Reimbursement Obligation when due; (b) The Company shall default in the performance or observance of any agreement, covenant, condition, provision or term contained in Article V (other than section 5.8) or section 6.1 of this Agreement; (c) The Company shall default in the performance or observance of any of the other agreements, covenants, conditions, provisions or terms in this Agreement or any Collateral Document and such default continues for a period of thirty days after written notice thereof is given to the Company by any of the Banks; (d) Any representation or warranty made by the Company herein or any certificate delivered pursuant hereto, or any financial statement delivered to any Bank hereunder, shall prove to have been false in any material respect as of the time when made or given; (e) The Company or any Subsidiary shall fail to pay as and when due and payable (whether at maturity, by acceleration or otherwise) all or any part of the principal of or interest on any indebtedness of or assumed by it (including without limitation the Demand Notes), or of the rentals due under any lease or sublease, or of any other obligation for the payment of money, in each case where such payments aggregate $1,000,000 or more, and such default shall not be cured within the period or periods of grace, if any, specified in the instruments governing such obligations; or default shall occur under any evidence of, or any indenture, lease, sublease, agreement or other instrument governing such obligations, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such indebtedness or other obligation or the termination of such lease or sublease, unless the Company or such Subsidiary shall be contesting such default in good faith by appropriate proceedings; (f) A final judgment which, together with all other outstanding final judgments against the Company and its Subsidiaries, or any of them, exceeds an aggregate of $100,000 shall be entered against the Company or any Subsidiary and shall remain outstanding and unsatisfied, unbonded, unstayed or uninsured after 60 days from the date of entry thereof; (g) The Company or any Subsidiary shall: (i) become insolvent; or (ii) be unable, or admit in writing its inability to pay its debts as they mature; or (iii) make a general assignment for the benefit of creditors or to an agent authorized to liquidate any substantial amount of its property; or (iv) become the subject of an "order for relief" within the meaning of the United States Bankruptcy Code; or (v) become the subject of a creditor's petition for liquidation, reorganization or to effect a plan or other arrangement with creditors; or (vi) apply to a court for the appointment of a custodian or receiver for any of its assets; or (vii) have a custodian or receiver appointed for any of its assets (with or without its consent); or (viii) otherwise become the subject of any insolvency proceedings or propose or enter into any formal or informal composition or arrangement with its creditors; (h) This Agreement, any Note or any Collateral Document shall, at any time after their respective execution and delivery, and for any reason, cease to be in full force and effect or be declared null and void, or be revoked or terminated, or the validity or enforceability thereof or hereof shall be contested by the Company, or the Company shall deny that it has any or further liability or obligation thereunder or hereunder, as the case may be; or (i) Any Reportable Event, which the Required Banks determine in good faith to constitute grounds for the termination of any Plan by the Pension Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court of a trustee to administer any Plan, shall have occurred, or any Plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate United States District Court to administer any Plan, or the Pension Benefit Guaranty Corporation shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan, and in case of any event described in the preceding provisions of this subsection (i) the Required Banks determine in good faith that the aggregate amount of the Company's liability to the Pension Benefit Guaranty Corporation under ERISA shall exceed $1,000,000 and such liability is not covered, for the benefit of the Company, by insurance. 7.2 Termination of Aggregate Commitment and Acceleration of Obligations. Upon the occurrence of any Event of Default: (a) As to any Event of Default under section 7.1(a) and at any time thereafter, and in each case, the Required Banks (or the Agent with the written consent of the Required Banks) may, by written notice to the Company, immediately terminate the obligation of the Banks to make revolving credit loans and issue Letters of Credit hereunder and declare the unpaid principal balance of the Revolving Credit Notes, together with all interest accrued thereon, to be immediately due and payable; and the unpaid principal balance of such Notes and all unreimbursed amounts drawn on Letters of Credit, together with all interest accrued thereon, shall thereupon be due and payable without further notice of any kind, all of which are hereby waived, and notwithstanding anything to the contrary herein or in the Notes contained; (b) As to any Event of Default under section 7.1(g), the obligation of the Banks to make revolving credit loans and issue Letters of Credit hereunder shall immediately terminate and the unpaid principal balance of all Revolving Credit Notes and all unreimbursed amounts drawn on Letters of Credit, together with all interest accrued thereon, shall immediately and forthwith be due and payable, all without presentment, demand, protest, or further notice of any kind, all of which are hereby waived, notwithstanding anything to the contrary herein or in the Notes contained; (c) As to any Event of Default other than an Event of Default under section 7.1(a) or section 7.1(g) and at any time thereafter, and in each case, the Required Banks, with the written consent of all Banks that have acted as placement agent in the sale of any Commercial Paper then outstanding (or the Agent with the written consent of such Banks) may take the actions and exercise the remedies provided by this section 7.2. (d) As to each Event of Default, subject to the limitations set forth in section 7.2(c) above, the Banks shall have all the remedies for default provided by the Collateral Documents, as well as applicable law. (e) In the event that the unpaid principal balance of the Revolving Credit Notes becomes immediately due and payable pursuant to this section 7.2, the Company shall pay (i) to the appropriate LOC Bank the sum of the largest drafts which could then or thereafter be drawn under all outstanding Letters of Credit, which sum the LOC Bank may hold for the account of the Company, without interest, for the purpose of paying any draft presented, with the excess, if any, to be returned to the Company upon termination or expiration of such Letters of Credit, and (ii) to the Agent the aggregate face amount of all Commercial Paper (including for this purpose all Nicolet Funding Corp. Loans) then outstanding, which amount may be held by the Agent, without interest, to secure the payment in full of all such Commercial Paper at maturity, with the excess, if any, to be returned to the Company upon payment in full of all such Commercial Paper. ARTICLE VIII DEMAND NOTES 8.1 Right of each Bank to Demand Payment. All amounts outstanding under each of the Demand Notes are due ON DEMAND by the holder thereof in its sole discretion; provided that such holder shall give at least three Business Days' prior written notice of its intention to make such demand to the Company and the Agent. Notwithstanding the foregoing, the unpaid principal balance of the Demand Notes, together with all interest accrued thereon, shall automatically become immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby waived, if an Event of Default under section 7.1(g) shall occur. Notwithstanding reference to any Event of Default or termination in this Agreement or any Collateral Document (except for automatic acceleration provisions referred to above), such provisions shall have no application to, or otherwise restrict, each Bank's right to demand payment under its Demand Note at any time. 8.2 Cash Collateral. If at any time when demand for payment is made on any Demand Note, the aggregate outstanding face amount of all Letters of Credit shall exceed the Aggregate Commitment (net of all outstanding Commercial Paper and Nicolet Funding Corp. Loans issued by the Company thereunder), the Company shall immediately pay the amount of such excess to the Agent, which amount (together with all accrued interest thereon) may be held by the Agent in an interest-bearing account as cash collateral for the purpose of securing the repayment of any draft presented in respect of outstanding Letters of Credit, with the excess, if any, to be returned to the Company as and when such Letters of Credit terminate or expire. ARTICLE IX THE AGENT 9.1 Appointment and Powers. Each of the Banks hereby appoints Firstar Bank Milwaukee, National Association as Agent for the Banks hereunder, and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers as are specifically delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The duties of the Agent shall be entirely ministerial; the Agent shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement, the Notes or any related document, or to enforce such performance, or to inspect the property (including the books and records) of the Company or any of its subsidiaries; and the Agent shall not be required to take any action which exposes the Agent to personal liability (unless indemnification with respect to such action satisfactory to the Agent in its sole discretion is provided to the Agent by the Required Banks) or which is contrary to this Agreement or the Notes or applicable law. Firstar Bank Milwaukee, National Association agrees to act as Agent upon the express terms and conditions contained in this Article IX. 9.2 Responsibility. The Agent (i) makes no representation or warranty to any Bank and shall not be responsible to any Bank for any oral or written recitals, reports, statements, warranties or representations made in or in connection with this Agreement or any Note; (ii) shall not be responsible for the due execution, legality, validity, enforceability, genuineness, sufficiency, collectibility or value of this Agreement or any Note or any other instrument or document furnished pursuant thereto; (iii) may treat the payee of any Note as the owner thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent; (iv) may execute any of its duties under this Agreement by or through employees, agents and attorneys in fact and shall not be answerable for the default or misconduct of any such employee, agent or attorney in fact selected by it with reasonable care; (v) may (but shall not be required to) consult with legal counsel (including counsel for the Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with advice of such counsel, accountants or experts; (vi) shall be entitled to rely upon any note, notice, consent, waiver, amendment, certificate, affidavit, letter, telegram, telex, cable or other document or communication believed by it to be genuine and signed or sent by the proper party or parties, and may rely on statements contained therein without further inquiry or investigation. Neither the Agent nor any of its directors, officers, agents, or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the Notes, except for its or their own gross negligence or willful misconduct. 9.3 Agent's Indemnification. The Banks agree to indemnify and reimburse the Agent (to the extent not reimbursed by the Company), ratably from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent as such in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of- pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, administration or enforcement of, or the preservation of any rights under, this Agreement to the extent that the Agent is not reimbursed for such expenses by the Company. 9.4 Rights as a Lender. With respect to its Commitment and the Notes issued to it, Firstar Bank Milwaukee, National Association, in its individual capacity as a Bank, shall have, and may exercise, the same rights and powers under this Agreement and the Notes payable to it as any other Bank has under this Agreement and Notes, and the terms "Bank" and "Banks", unless the context otherwise requires, shall include Firstar Bank Milwaukee, National Association in its individual capacity as a Bank. Firstar Bank Milwaukee, National Association and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of banking or trust business with, the Company or any of its subsidiaries and any person, firm or corporation who may do business with or own securities of the Company or any subsidiary, all as if it were not the Agent, and without any duty to account therefor to the Banks. 9.5 Credit Investigation. Each of the Banks severally represents and warrants to each of the other Banks and to the Agent that it has made its own independent investigation and evaluation of the financial condition and affairs of the Company and its Subsidiaries in connection with such Bank's execution and delivery of this Agreement and the making of its loans and has not relied on any information or evaluation provided by any other Bank or the Agent in connection with any of the foregoing (other than information provided by the Company to the Agent for transmittal to the Banks in connection with the foregoing); and each Bank represents and warrants to each other Bank and to the Agent that it shall continue to make its own independent investigation and evaluation of the credit-worthiness of the Company and its Subsidiaries while the Commitments and/or the Notes are outstanding. 9.6 Compensation. The Agent shall receive such compensation for its services as Agent under this Agreement as may be agreed from time to time by the Company and the Agent. ARTICLE X MISCELLANEOUS 10.1 Accounting Terms; Definitions. Except as otherwise provided, all accounting terms shall be construed in accordance with generally accepted accounting principles consistently applied and consistent with those applied in the preparation of the financial statements referred to in section 4.5, and financial data submitted pursuant to this Agreement shall be prepared in accordance with such principles. As used herein: (a) the term "Affiliate" means any person, firm or corporation, which, directly or indirectly, controls, is controlled by, or is under common control with, the Company or a Subsidiary. (b) the term "Business Day" means any day other than a Saturday or Sunday on which banks in the States of Wisconsin and Illinois are open for the transaction of substantially all of their banking functions; provided, however, that for purposes of calculating the Basic LIBOR Rate, the LIBOR Interest Periods, and the election of LIBOR Pricing Options, the term "Business Day" shall mean in addition only those days on which dealings in U.S. dollar deposits are carried out by U.S. financial institutions in the London interbank market. (c) the term "Capitalized Lease" means any lease which is capitalized on the books of the lessee, or should be so capitalized under generally accepted accounting principles. (d) the term "Commercial Paper" means (i) all commercial paper issued by the Company from time to time, including sales of commercial paper through one or more of the Banks acting as placement agent pursuant to separate agreements between the Company and such Bank or Banks, and (ii) where expressly so included by the terms of this Agreement, all Nicolet Funding Corp. Loans described in section 1.9(e). (e) the term "Consolidated Current Ratio" means the relationship, expressed as a numerical ratio, between: (i) the amount of all assets which under generally accepted principles of accounting would appear as current assets on the consolidated balance sheet of the Company and its Subsidiaries, excluding prepaid expenses which are not refundable on the date the determination is made, And (ii) the amount of all liabilities which under generally accepted principles of accounting would appear as current liabilities on such balance sheet, including all indebtedness payable on demand or maturing (whether by reason of specified maturity, fixed prepayments, sinking funds or accruals of any kind, or otherwise) within 12 months or less from the date of the relevant statement, including all lease and rental obligations due in 12 months or less under leases, whether or not Capitalized Leases, and including customers' advances and progress billings on contracts. (f) the term "Consolidated Fixed Charge Coverage Ratio" means, for any period, the relationship, expressed as a numerical ratio, between: (i) the Consolidated Net Earnings of the Company for such period plus the sum of (A) depreciation, amortization and all other non-cash deductions arising in the normal course of operations and shown on the Company's financial statements for such period, (B) net interest expense on indebtedness of the Company (including the interest component of Capitalized Leases) for such period and (C) rental expense under leases other than Capitalized Leases for such period; and (ii) the sum of (A) net interest expense on indebtedness of the Company (including the interest component of Capitalized Leases) for such period, (B) scheduled principal payments on indebtedness of the Company during such period, (C) the principal component of required payments in respect of Capitalized Leases during such period and (D) rental expense under leases other than Capitalized Leases for such period. (g) the term "Consolidated Total Liabilities" means all liabilities of the Company and its Subsidiaries properly appearing on a consolidated balance sheet of the Company and its Subsidiaries in accordance with generally accepted accounting principles. (h) the term "Consolidated Net Earnings" means the excess of: (i) all revenues and income derived from operation in the ordinary course of business (excluding extraordinary gains and profits upon the disposition of investments and fixed assets), Over: (ii) all expenses and other proper charges against income (including payment or provision for all applicable income and other taxes, but excluding extra- ordinary losses and losses upon the disposition of invest- ments and fixed assets), all as determined in accordance with generally accepted accounting principles as applied on a consolidated basis to the Company and its Subsidiaries. (i) the term "Consolidated Tangible Net Worth" means the total of all assets properly appearing on the consolidated balance sheet of the Company and its Subsidiaries in accordance with generally accepted accounting principles, less the sum of the following: (i) the book amount of all such assets which would be treated as intangibles under generally accepted accounting principles, including, without limitation, all such items as good will, trademarks, trademark rights, trade names, tradename rights, brands, copyrights, patents, patent rights, licenses and unamortized debt discount and expense; (ii) any write-up in the book value of any such assets resulting from a revaluation thereof subsequent to December 31, 1993; (iii) all reserves, including reserves for depreciation, obsolescence, depletion, insurance, and inventory valuation, but excluding contingency reserves not allocated for any particular purpose and not deducted from assets; (iv) the amount, if any, at which any shares of stock of the Company or any Subsidiary appear on the asset side of such consolidated balance sheet; (v) all liabilities of the Company and its Subsidiaries shown on such balance sheet; and (vi) all investments in foreign affiliates and nonconsolidated domestic affiliates. (j) the term "Controlled Group" means a controlled group of corporations as defined in section 1563 of the Internal Revenue Code of 1986, as amended, of which the Company is a part. (k) The term "Default" means any event or condition which with the passage of time, the giving of notice or both would constitute an Event of Default. (l) The term "Environmental Audit" means a review for the purpose of determining whether the Company and each Subsidiary complies with Environmental Laws and whether there exists any condition or circumstance which requires or will require a cleanup, removal, or other remedial action under Environmental Laws on the part of the Company or any Subsidiary including, but not limited to, some or all of the following: (i) on site inspection including review of site geology, hydrogeology, demography, land use and population; (ii) taking and analyzing soil borings and installing water monitoring wells and analyzing samples taken from such wells; (iii) taking and analyzing of air samples and testing of underground tanks; (iv) reviewing plant permits, compliance records and regulatory correspondence, and interviewing enforcement staff at regulatory agencies; (v) reviewing the operations, procedures and documentation of the Company and its Subsidiaries; and (vi) interviewing past and present employees of the Company and its Subsidiaries. (m) The term "Environmental Laws" means all federal, state and local laws including statutes, regulations, ordinances, codes, rules and other governmental restrictions and requirements relating to the discharge of air pollutants, water pollutants or process waste water or otherwise relating to the environment or hazardous substances including, but not limited to, the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Responsibility Cleanup and Liability Act of 1980, regulations of the Environmental Protection Agency, regulations of the Nuclear Regulatory Agency, and regulations of any state department of natural resources or state environmental protection agency now or at any time hereafter in effect. (n) the term "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be in effect from time to time. (o) the term "Letter of Credit Obligations" means the aggregate undrawn face amounts of all outstanding Letters of Credit and all unpaid Reimbursement Obligations. (p) the term "Permitted Liens" means: (i) liens on property financed with the proceeds of industrial revenue bonds permitted by section 5.1(b) given to secure indebtedness evidenced by such bonds and other obligations of the Company directly relating thereto; (ii) liens for taxes, assessments or governmental charges, and liens incident to construction, which are either not delinquent or are being contested in good faith by the Company or a Subsidiary by appropriate proceedings which will prevent foreclosure of such liens, and against which adequate reserves have been provided; and easements, restrictions, minor title irregularities and similar matters which have no adverse effect as a practical matter upon the ownership and use of the affected property by the Company or any Subsidiary; (iii) liens or deposits in connection with worker's compensation or other insurance or to secure customs' duties, public or statutory obligations in lieu of surety, stay or appeal bonds, or to secure performance of contracts or bids (other than contracts for the payment of money borrowed), or deposits required by law or governmental regulations or by any court order, decree, judgment or rule as a condition to the transaction of business or the exercise of any right, privilege or license; or other liens or deposits of a like nature made in the ordinary course of business; provided that the aggregate amount of liabilities (including interest and penalties, if any) of the Company secured by any stay or appeal bond shall not exceed $10,000,000 at any one time outstanding; and (iv) purchase money liens on property acquired in the ordinary course of business, to finance or secure a portion of the purchase price thereof, and liens on property acquired existing at the time of acquisition; provided that in each case such lien shall be limited to the property so acquired, the liability secured by such lien does not exceed either the purchase price or the fair market value of the asset acquired, and the indebtedness secured by such lien is permitted by section 5.1. (q) the term "Plan" means any employee pension benefit plan subject to Title IV of ERISA maintained by the Company, any of its Subsidiaries, or any member of the Controlled Group, or any such plan to which the Company, any of its Subsidiaries, or any member of the Controlled Group is required to contribute on behalf of any of its employees. (r) the term "Reimbursement Obligations" means all obligations of the Company to reimburse each LOC Bank for all drawings under Letters of Credit. (s) the term "Reportable Event" means a reportable event as that term is defined in Title IV of ERISA. (t) The term "Required Banks" means Banks holding at least 66 2/3% of the Aggregate Commitment, or if the Aggregate Commitment has been terminated, Banks holding at least 66 2/3% in aggregate principal amount of the loans and Letter of Credit Obligations outstanding hereunder. (u) the term "Subsidiary" means a corporation of which the Company owns, directly or through another Subsidiary, at the date of determination, more than 50% of the outstanding stock having ordinary voting power for the election of directors, irrespective of whether or not at such time stock of any other class or classes might have voting power by reason of the happening of any contingency. (v) The term "Unfunded Liabilities" means, with regard to any Plan, the excess of the current value of the Plan's benefits guaranteed under ERISA over the current value of the Plan's assets allocable to such benefits. 10.2 Amendments, Etc. No waiver, amendment, settlement or compromise of any of the rights of any Bank under this Agreement, any Note or any of the Collateral Documents shall be effective for any purpose unless it is in a written instrument executed and delivered by the parties authorized to act by this section 10.2. Subject to the provisions of this section 10.2, the Required Banks (or the Agent with the written consent of the Required Banks) and the Company may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to this Agreement, the Notes, or the Collateral Documents or changing in any manner the rights of the Banks or the Company hereunder or thereunder or waiving any Event of Default hereunder; provided, however, that no such supplemental agreement shall, without the consent of all of the Banks: (a) Extend the maturity of any Note or reduce the principal amount thereof, or reduce the rate or amount or change the time of payment of interest or fees payable on any Note or otherwise under this Agreement. (b) Amend the definition of Required Banks. (c) Extend the Termination Date, or increase the amount of the Commitment of any Bank hereunder, or permit the Company to assign its rights under this Agreement. (d) Alter the provisions of section 2.5 of this Agreement. (e) Amend any provision of this Agreement requiring a pro rata sharing among the Banks. (f) Amend this section 10.2. No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent. 10.3 Expenses; Indemnity. (a) The Company shall pay, or reimburse each Bank for (i) all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) paid or incurred by such Bank in connection with the negotiation, preparation, execution, delivery, and administration of this Agreement, the Notes, the Collateral Documents and any other document required hereunder or thereunder, including without limitation any amendment, supplement, modification or waiver of or to any of the foregoing; provided that such costs and expenses of each Bank (other than the Agent) in connection with the negotiation, preparation, execution and delivery of this Agreement, the Notes and the Collateral Documents shall not exceed $2,500; (ii) all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) paid or incurred by such Bank after Default, before and after judgment, in enforcing, protecting or preserving its rights under this Agreement, the Notes, the Collateral Documents and any other document required hereunder or thereunder, including without limitation the enforcement of rights against, or realization on, any collateral or security therefor; and (iii) any and all recording and filing fees and any and all stamp, excise, intangibles and other taxes, if any, (including, without limitation, any sales, occupation, excise, gross receipts, franchise, general corporation, personal property, privilege or license taxes, but not including taxes levied upon the net income of such Bank by the federal government or the state (or political subdivision of a state) where such Bank's principal office is located), which may be payable or determined to be payable in connection with the negotiation, preparation, execution, delivery, administration or enforcement of this Agreement, the Notes, the Collateral Documents or any other document required hereunder or thereunder or any amendment, supplement, modification or waiver of or to any of the foregoing, or consummation of any of the transactions contemplated hereby or thereby, including all costs and expenses incurred in contesting the imposition of any such tax, and any and all liability with respect to or resulting from any delay in paying the same, whether such taxes are levied upon such Bank, the Company or otherwise. (b) The Company agrees to indemnify each Bank against any and all losses, claims, damages, liabilities and expenses, (including, without limitation, reasonable attorneys' fees and expenses) incurred by such Bank arising out of, in any way connected with, or as a result of (i) any acquisition or attempted acquisition of stock or assets of another person or entity by the Company or any subsidiary, (ii) the use of any of the proceeds of any loans made hereunder by the Company or any subsidiary for the making or furtherance of any such acquisition or attempted acquisition, (iii) the construction or operation of any facility owned or operated by the Company or any Subsidiary, or resulting from any pollution or other environmental condition on the site of, or caused by, any such facility, (iv) the negotiation, preparation, execution, delivery, administration, and enforcement of this Agreement, the Note, the Collateral Documents and any other document required hereunder or thereunder, including without limitation any amendment, supplement, modification or waiver of or to any of the foregoing or the consummation or failure to consummate the transactions contemplated hereby or thereby, or the performance by the parties of their obligations hereunder or thereunder, (v) any claim, litigation, investigation or proceedings related to any of the foregoing, whether or not any Bank is a party thereto; provided, however, that such indemnity shall not apply to any such losses, claims, damages, liabilities or related expenses arising from (A) any unexcused breach by such Bank of its obligations under this Agreement or any Collateral Document, (B) any commitment made by such Bank to a person other than the Company or any Subsidiary which would be breached by the performance of such Bank's obligations under this Agreement or (C) gross negligence or willful misconduct of such Bank. (c) The foregoing agreements and indemnities shall remain operative and in full force and effect regardless of termination of this Agreement, the consummation of or failure to consummate either the transactions contemplated by this Agreement or any amendment, supplement, modification or waiver, the repayment of any loans made hereunder, the termination of the Letter of Credit Obligations, the invalidity or unenforceability of any term or provision of this Agreement or any of the Notes or any Collateral Document, or any other document required hereunder or thereunder, any investigation made by or on behalf of any Bank, the Company or any Subsidiary, or the content or accuracy of any representation or warranty made under this Agreement, any Collateral Document or any other document required hereunder or thereunder. (d) The foregoing indemnities shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated by this Agreement, the repayment of the loans made hereunder, the invalidity or unenforceability of any term or provision of this Agreement or any of the Notes, any investigation made by or on behalf of the Bank or the Company, and the content of accuracy of any representation or warranty made under this Agreement. 10.4 Securities Act of 1933. Each Bank represents that it is acquiring the Notes payable to it without any present intention of making a sale or other distribution of such Notes, provided each Bank reserves the right to sell its Notes or participations therein. 10.5 No Agency. Except as expressly provided herein, nothing in this Agreement and no action taken pursuant hereto shall cause any Bank to be treated as the agent of any other Bank, or shall be deemed to constitute the Banks a partnership, association, joint venture or other entity. 10.6 Successors. The provisions of this Agreement shall inure to the benefit of any holder of one or more of the Notes, and shall inure to the benefit of and be binding upon any successor to any of the parties hereto. This Agreement shall not create any rights in favor of any other party (including without limitation any holder of Commercial Paper, including for this purpose Nicolet Funding Corp. Loans) and the Banks shall have no liability whatsoever to any holder of Commercial Paper as a result of this Agreement. No delay on the part of any Bank or any holder of any of the Notes in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein specified are cumulative and are not exclusive of any rights or remedies which the Banks or the holder of any of the Notes would otherwise have. 10.7 Survival. All agreements, representations and warranties made herein shall survive the execution of this Agreement, the making of the loans hereunder and the execution and delivery of the Notes. 10.8 Wisconsin Law. This Agreement and the Notes issued hereunder shall be governed by and construed in accordance with the internal laws of the State of Wisconsin, except to the extent superseded by federal law. 10.9 Counterparts. This agreement may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. 10.10 Notices. All communications or notices required under this Agreement shall be deemed to have been given on the date when deposited in the United States mail, postage prepaid, and addressed as follows (unless and until any of such parties advises the other in writing of a change in such address): (a) if to the Company, with the full name and address of the Company as shown on this Agreement below; and (b) if to any of the Banks with the full name and address of such Bank as shown on this Agreement above, to the attention of the officer of the Bank executing the form of acceptance of this Agreement. 10.11 Participations. With the prior written consent of the Company and the Agent, each Bank may sell to another financial institution or institutions interests in its Notes (except that each Bank may sell such interests without such consent to other financial institutions owned directly or indirectly by it or by its controlling corporation) and, in connection with each such sale, and thereafter, disclose to any purchaser or potential purchaser of such interest any financial information such Bank may have concerning the Company and its Subsidiaries. 10.12 Entire Agreement; No Agency. This Agreement and the other documents referred to herein contain the entire agreement between the Banks and the Company with respect to the subject matter hereof, superseding all previous communications and negotiations, and no representation, undertaking, promise or condition concerning the subject matter hereof shall be binding upon the Banks unless clearly expressed in this Agreement or in the other documents referred to herein. Nothing in this Agreement or in the other documents referred to herein and no action taken pursuant hereto shall cause the Company to be treated as an agent of any Bank, or shall be deemed to constitute the Banks and the Company a partnership, association, joint venture or other entity. 10.13 Consent to Jurisdiction. The Company hereby consents to the jurisdiction of any state or federal court situated in Milwaukee County, Wisconsin, and waives any objection based on lack of personal jurisdiction, improper venue or forum non conveniens, with regard to any actions, claims, disputes or proceedings relating to this Agreement, any Note, any of the Collateral Documents, or any other document delivered hereunder or in connection herewith, or any transaction arising from or connected to any of the foregoing. Nothing herein shall affect the right of the Banks, or any of them, to serve process in any manner permitted by law, or limit the right of any Banks, or any of them, to bring proceedings against the Company or its property or assets in the competent courts of any other jurisdiction or jurisdictions. If the foregoing is satisfactory to you, please sign the form of acceptance below and return a signed counterpart hereof to the Company. When this instrument has been executed and delivered by all of the Banks, it will evidence a binding agreement between the Banks and the Company. Very truly yours, OSHKOSH B'GOSH, INC. Address: 112 Otter Avenue Oshkosh, WI 54901-5008 By: /s/ DAVID L. OMACHINSKI (CORPORATE SEAL) Vice President of Finance The foregoing Agreement is hereby confirmed and accepted as of the date thereof. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION, as the Agent and as a Bank By: ______________________________ Title: ______________________ BANK ONE, MILWAUKEE, NA By: ______________________________ Title: ______________________ HARRIS TRUST AND SAVINGS BANK By: ______________________________ Title: ______________________ NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: ______________________________ Title: ______________________ EXHIBIT 1.1 REVOLVING CREDIT NOTE $____________ _____________, 19__ FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Wisconsin corporation, promises to pay to the order of ____________________ ________________________, the principal sum of __________________ Dollars ($____________) at the Main Office of Firstar Bank Milwaukee, National Association in Milwaukee, Wisconsin, on June 24, 1997. The unpaid principal balance hereof shall bear interest, payable on the dates specified in the Credit Agreement referred to below, computed at the Applicable Rate as defined in such Credit Agreement. Principal amounts unpaid at the maturity hereof (whether by fixed maturity or acceleration) shall bear interest from and after maturity until paid computed at a rate equal to 2% per annum plus the rate otherwise payable hereunder. Principal of and interest on this Note shall be payable in lawful money of the United States of America. This Note constitutes one of the Revolving Credit Notes issued under a Credit Agreement dated as of June 24, 1994, among the undersigned and Firstar Bank Milwaukee, National Association, for itself and as Agent, and the other banks party thereto, to which Agreement reference is hereby made for a statement of the terms and conditions on which loans in part evidenced hereby were or may be made, and for a description of the conditions upon which this Note may be prepaid, in whole or in part, or its maturity accelerated. OSHKOSH B'GOSH, INC. By: ______________________________ Vice President of Finance (CORPORATE SEAL) EXHIBIT 1.2 DEMAND NOTE $_______________ _________, 19__ FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Wisconsin corporation, promises to pay to the order of ___________________ __________________________________________ the principal sum of _____________________________ Dollars ($_______________), at the Main Office of Firstar Bank Milwaukee, National Association, in Milwaukee, Wisconsin, ON DEMAND. The unpaid principal balance hereof shall bear interest, payable on the dates specified in the Credit Agreement referred to below, computed at the Applicable Rate as defined in such Credit Agreement. Principal amounts unpaid at the maturity thereof (whether by fixed maturity or acceleration) shall bear interest from and after demand until paid computed at a rate equal to 2% per annum plus the rate otherwise payable hereunder. Principal of and interest on this Note shall be payable in lawful money of the United States. This Note constitutes one of the Demand Notes issued under a Credit Agreement dated as of June 24, 1994 among the undersigned and Firstar Bank Milwaukee, National Association, for itself and as Agent, and the other banks party thereto, to which Agreement reference is hereby made for a statement of the terms and conditions on which loans in part evidenced hereby were made and for a description of the terms and conditions upon which this Note may be prepaid, in whole or in part, or its maturity accelerated. OSHKOSH B'GOSH, INC. By: ______________________________ Vice President of Finance (CORPORATE SEAL) EXHIBIT 2.1 COMMERCIAL PAPER REPORT/LOAN REQUEST _______________, 19__ Memorandum to: Firstar Bank Milwaukee, National Association, as Agent 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Re: Credit Agreement Dated as of June 24, 1994 (the "Credit Agreement") Part 1: Commercial Paper Report The aggregate principal amount of all Commercial Paper (including for this purpose all Nicolet Funding Corp. Loans) of the Company now outstanding is $____________. Part 2: Loan Request The Company hereby applies to the Agent for a loan under the Credit Agreement to be made on ____________, 19__ in the principal amount of $__________________. If such loan is to be subject to a LIBOR Pricing Option, the LIBOR Interest Period is _______ months. The Company hereby certifies as follows: (a) All of the representations and warranties set forth in Article IV of the Credit Agreement continue to be true on the date hereof, except that the financial statements referred to in section 4.5 of the Credit Agreement shall be deemed to be the most recent consolidated financial statements of the Company delivered pursuant to section 6.6(a) or (b) of the Credit Agreement. (b) At the date hereof, no Default or Event of Default under the Credit Agreement has occurred and is continuing. OSHKOSH B'GOSH, INC. By: _________________________________ Title: AMENDMENT NO. 1 TO CREDIT AGREEMENT As of June 30, 1994 Firstar Bank Milwaukee, National Association 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Bank One, Milwaukee, NA 111 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60603 Norwest Bank Wisconsin, National Association 100 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Gentlemen: Please refer to that certain Credit Agreement dated as of June 24, 1994 (the "Credit Agreement") between the undersigned Oshkosh B'Gosh, Inc., a Delaware corporation (the "Company") and you (the "Banks"). All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement. 1. Amendments to Credit Agreement. The Company requests that the Banks agree to amend the Consolidated Fixed Charge Coverage Ratio covenant set forth in section 6.1(c) of the Credit Agreement as set forth below. Subject to all of the terms and conditions hereof, the Banks agree to amend such covenant as set forth below. Therefore, subject to the terms and conditions set forth herein, the Credit Agreement shall be amended, as of the date first written above, as follows: (a) All references to the Credit Agreement in the Credit Agreement and in any of the Collateral Documents shall refer to the Credit Agreement as amended hereby. (b) Section 6.1(c) of the Credit Agreement is amended to read in its entirety as follows: (c) At the end of each fiscal quarter set forth in the table below, a Consolidated Fixed Charge Coverage Ratio for the four consecutive fiscal quarters then ended of at least the amount set forth opposite such fiscal quarter: Consolidated Fixed Fiscal Quarter Ending Charge Coverage Ratio 1. June 30, 1994 and 1.5:1.0 September 30, 1994 2. December 31, 1994, 2.0:1.0 March 31, 1995, June 30, 1995 and September 30, 1995 3. December 31, 1995, 2.5:1.0 March 31, 1996, June 30, 1996 and September 30, 1996 4. December 31, 1996 3.0:1.0 and thereafter 2. Representations. The Company repeats and reaffirms the representations and warranties set forth in Article IV of the Credit Agreement. The Company also represents and warrants that the execution, delivery and performance of this Amendment are within the corporate powers of the Company, have been duly authorized by all necessary corporate action and do not and will not (i) violate any provision of the certificate of incorporation or by-laws of the Company or of any law, regulation, order, or judgment presently in effect having applicability to the Company or (ii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iii) result in any breach of or constitute a default under any indenture or other agreement or instrument under which the Company is a party. 3. Confirmation of Credit Agreement. Except as expressly provided above, the Credit Agreement shall remain in full force and effect. 4. Fees and Expenses. The Company shall be responsible for the payment of all fees and out-of-pocket disbursements incurred by the Banks in connection with the preparation, execution, delivery, administration and enforcement of this Amendment and including without limitation the reasonable fees and disbursements of counsel for the Agent. 5. Miscellaneous. The provisions of this Amendment shall inure to the benefit of and be binding upon any successor to any of the parties hereto. All agreements, representations and warranties made herein shall survive the execution of this Amendment and the extension of credit under the Credit Agreement, as so amended. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. This Amendment may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. If the foregoing is satisfactory to you, please sign the form of acceptance below and return a signed counterpart hereof to the Company. Very truly yours, OSHKOSH B'GOSH, INC. By: ______________________________ Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: ______________________________ Title: ______________________ BANK ONE, MILWAUKEE, NA By: ______________________________ Title: ______________________ HARRIS TRUST AND SAVINGS BANK By: ______________________________ Title: ______________________ NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: ______________________________ Title: ______________________ AMENDMENT NO. 2 TO CREDIT AGREEMENT As of December 31, 1994 Firstar Bank Milwaukee, National Association 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Bank One, Milwaukee, NA 111 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60603 Norwest Bank Wisconsin, National Association 100 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Gentlemen: Please refer to that certain Credit Agreement dated as of June 24, 1994, as amended by Amendment No. 1 thereto dated as of June 30, 1994 (the "Credit Agreement") between the undersigned Oshkosh B'Gosh, Inc., a Delaware corporation (the "Company") and you (the "Banks"). All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement. 1. Amendments to Credit Agreement. The Company requests that the Banks agree to amend clause (ii) of section 5.7 of the Credit Agreement (Contingent Liabilities) permitting certain outstanding letters of credit issued for the account of the Company by Republic National Bank of New York. Subject to all of the terms and conditions hereof,the Banks agree toamend such covenant as setforth below. Therefore, subject to the terms and conditions set forth herein, the Credit Agreement shall be amended, as of the date first written above, as follows: (a) All references to the Credit Agreement in the Credit Agreement and in any of the Collateral Documents shall refer to the Credit Agreement as amended hereby. (b) Clause (ii) of section 5.7 of the Credit Agreement is amended to read in its entirety as follows: (ii) in connection with letters of credit issued for the account of the Company from time to time by Republic National Bank of New York, provided that (A) such letters of credit shall not exceed $15,000,000 in aggregate face amount at any time outstanding and (B) none of such letters of credit shall remain outstanding on or after October 1, 1995, and 2.Representations. The Company repeats and reaffirms the representations and warranties set forth in Article IV of the Credit Agreement as if made on and as of the date hereof. The Company also represents and warrants that the execution, delivery and performance of this Amendment are within the corp- orate powers of the Company, have been duly authorized by all necessary corporate action and do not and will not (i) violate any provision of the certificate of incorporation or by-laws of the Company or of any law, regulation, order, or judgment presently in effect having applicability to the Company or (ii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iii) result in any breach of or constitute a default under any indenture or other agreement or instrument under which the Company is a party. 3.Confirmation of Credit Agreement. Except as expressly provided above, the Credit Agreement shall remain in full force and effect. 4.Fees and Expenses. The Company shall be responsible for the payment of all fees and out-of-pocket disbursements incurred by the Banks in connection with the preparation, execution, delivery, administration and enforcement of this Amendment and including without limitation the reasonable fees and disbursements of counsel for the Agent. 5.Miscellaneous. The provisions of this Amendment shall inure to the benefit of and be binding upon any successor to any of the parties hereto. All agree- ments, representations and warranties made herein shall survive the execution of this Amendment and the extension of credit under the Credit Agreement, as so amended. This Amendment shall be governed by and construed in accordance with the internal laws of the State of Wisconsin. This Amendment may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. If the foregoing is satisfactory to you, please sign the form of acceptance below and return a signed counterpart hereof to the Company. Very truly yours, OSHKOSH B'GOSH, INC. By: ______________________________ Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: ______________________________ Title: ______________________ BANK ONE, MILWAUKEE, NA By: ______________________________ Title: ______________________ HARRIS TRUST AND SAVINGS BANK By: ______________________________ Title: ______________________ NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: ______________________________ Title: ______________________ EX-10.17 7 EXHIBIT 10.17 OSHKOSH B'GOSH, INC. 1994 INCENTIVE STOCK PLAN I. INTRODUCTION 1.01 Purpose. This plan shall be known as the Oshkosh B'Gosh, Inc. 1994 Incentive Stock Plan (the "Plan"). The purpose of the Plan is to provide an incentive for key employees of Oshkosh B'Gosh, Inc. and its Subsidiaries to improve corporate performance on a long-term basis, and to attract and retain key employees. It is intended that the Plan and its operation comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule). 1.02 Effective Date. The effective date of the Plan shall be August 8, 1994, subject to approval of the Plan by shareholders of the Company. Any Award granted prior to such shareholder approval shall be expressly conditioned upon shareholder approval of the Plan. II. PLAN DEFINITIONS 2.01 Definitions. For Plan purposes, except where the context clearly indicates otherwise, the following terms shall have the meanings set forth below: (a) "Award" shall mean the grant of any form of stock option or restricted stock. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" shall mean the Committee described in Section 4.01. (e) "Company" shall mean Oshkosh B'Gosh, Inc., a Wisconsin corporation. (f) "Company Stock" shall mean the Company's Class A Common Stock and such other stock and securities as may be substituted therefor pursuant to Section 3.02. (g) "Eligible Employee" shall mean any regular salaried employee of the Company or a Subsidiary who satisfies the requirements of Section 5.01. (h) "Fair Market Value" on any date shall mean, with respect to Company Stock, if the stock is then listed and traded on a registered national securities exchange, or is quoted in the NASDAQ National Market System, the mean of the high and low sale prices recorded in composite transactions as reported in the Wall Street Journal (Midwest Edition) for such date or the preceding business day if such date is not a business day. In the absence of reported sales or if the stock is not so listed or quoted, but is traded in the over-the-counter market, Fair Market Value shall be the mean of the closing bid and asked prices for such shares on the relevant date. (i) "Grantee" shall mean any person who has been granted an Award under the Plan. (j) "Option Period" shall mean the period of time provided pursuant to Section 6.04 within which a stock option may be exercised. (k) "Subsidiary" shall mean any corporation now or hereafter in existence in which the Company owns, directly or indirectly, a voting stock interest of more than fifty percent (50%). III. SHARES SUBJECT TO AWARD 3.01 Available Shares. The total number of shares of Company Stock that may be issued under the Plan shall not exceed one million four hundred thousand (1,400,000) shares. Shares subject to and not issued under an option which expires, terminates, is canceled or forfeited for any reason under the Plan and shares of restricted Company Stock which have been forfeited before the Grantee has received any benefits of ownership, such as dividends from the forfeited shares, shall again become available for the granting of Awards. 3.02 Changes in Common Stock. If any stock dividend is declared upon the Company Stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the Company Stock, resulting in a split or combination or exchange of shares, the aggregate number and kind of shares which may thereafter be granted under the Plan shall be proportionately and appropriately adjusted and the number and kind of shares then subject to options granted to employees under the Plan and the per share option price therefor shall be proportionately and appropriately adjusted, without any change in the aggregate purchase prices to be paid therefor. IV. ADMINISTRATION 4.01 Administration by the Committee. The Plan shall be administered by a committee designated by the Board to administer the Plan and shall initially be the Compensation Committee of the Board. The Committee shall be constituted to permit the Plan to comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule). A majority of the members of the Committee shall constitute a quorum. The approval of such a quorum, expressed by a vote at a meeting held either in person or by conference telephone call, or the unanimous consent of all members in writing without a meeting, shall constitute the action of the Committee and shall be valid and effective for all purposes of the Plan. 4.02 Committee Powers. The Committee is empowered to adopt such rules, regulations and procedures and take such other action as it shall deem necessary or proper for the administration of the Plan and, in its discretion, may modify, extend or renew any Award theretofore granted. The Committee shall also have authority to interpret the Plan, and the decision of the Committee on any questions concerning the interpretation of the Plan shall be final and conclusive. The Committee may consult with counsel, who may be counsel for the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. Subject to the provisions of the Plan, the Committee shall have full and final authority to: (a) designate the persons to whom Awards shall be granted; (b) grant Awards in such form and amount as the Committee shall determine; (c) impose such limitations, restrictions and conditions upon any such Award as the Committee shall deem appropriate, and (d) waive in whole or in part any limitations, restrictions or conditions imposed upon any such Award as the Committee shall deem appropriate. V. PARTICIPATION 5.01 Eligibility. Key employees of the Company and its Subsidiaries (including officers and employees who may be members of the Board) who, in the sole opinion of the Committee, contribute significantly to the growth and success of the Company or a Subsidiary shall be eligible for Awards under the Plan. From among all such Eligible Employees, the Committee shall determine from time to time those Eligible Employees to whom Awards shall be granted. No eligible employees shall be granted an Award or Awards covering more than 50,000 shares of Company Stock in any calendar year. No Eligible Employee shall have any right whatsoever to receive an Award unless so determined by the Committee. 5.02 No Employment Rights. The Plan shall not be construed as conferring any rights upon any person for a continuation of employment, nor shall it interfere with the rights of the Company or any Subsidiary to terminate the employment of any person or to take any other action affecting such person. VI. STOCK OPTIONS 6.01 General. Stock options granted under the Plan may be in the form of incentive stock options (within the meaning of Code Section 422) or nonqualified stock options. Each option granted under the Plan shall be evidenced by a stock option agreement between the Company and the Grantee which shall contain the terms and conditions required by this Article VI, and such other terms and conditions, not inconsistent herewith, as the Committee may deem appropriate in each case. The holder of an option shall not have any rights as a stockholder with respect to the shares covered by an option until such shares have been delivered to him or her. 6.02 Option Price. The price at which each share of Company Stock covered by an option may be purchased shall be determined in each case by the Committee and set forth in each stock option agreement. In no event shall such price be less than one hundred percent (100%) of the Fair Market Value of the Company Stock when the option is granted. Employees who own, directly or indirectly, within the meaning of Code Section 425(d), more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary corporation shall not be eligible to receive an incentive stock option hereunder unless the purchase price per share under such option is at least 110% of the Fair Market Value of the stock subject to the option and such option by its terms is not exercisable after the expiration of 5 years from the date such option is granted. 6.03 Date Option Granted. For purposes of the Plan, a stock option shall be considered as having been granted on the date on which the Committee authorized the grant of the option, except where the Committee has designated a later date, in which event the later date shall constitute the date of grant of the option; provided, however, that in either case notice of the grant of the option shall be given to the employee within a reasonable time. 6.04 Period for Exercise of Options. Each stock option agreement shall state the period or periods of time within which the option may be exercised by the Grantee, in whole or in part, which shall be the period or periods of time as may be determined by the Committee, provided that: (a) No option granted under this Plan may be exercised until at least six months from the later of (i) the date of grant or (ii) shareholder approval of the Plan, (b) No Option Period for an incentive stock option may exceed ten (10) years from the date the option is granted, and (c) No option may be treated as an incentive stock option unless the Grantee exercises the option while employed by the Company or a Subsidiary or within three months after termination of employment, or if termination is caused by death or disability, within one year after such termination. 6.05 Special Rule for Incentive Stock Options. For so long as Section 422 (or any successor provision) of the Code so provides, the aggregate Fair Market Value (determined as of the date the incentive stock option is granted) of the number of shares with respect to which incentive stock options are exercisable for the first time by a Grantee during any calendar year shall not exceed One Hundred Thousand Dollars ($100,000) or such other limit as may be required by the Code. 6.06 Method of Exercise. Subject to Section 6.04, each option may be exercised in whole or in part from time to time as specified in the stock option agreement. Each Grantee may exercise an option by giving written notice of the exercise to the Company, specifying the number of shares to be purchased, accompanied by payment in full of the purchase price therefor. The purchase price may be paid in cash, by check, or, with the approval of the Committee, by delivering shares of Company Stock which have been beneficially owned by the Grantee, the Grantee's spouse, or both of them for a period of at least six months prior to the time of exercise ("Delivered Stock) or a combination of cash and Delivered Stock. Delivered Stock shall be valued at its Fair Market Value determined as of the date of exercise of the option. No Grantee shall be under any obligation to exercise any option hereunder. 6.07 Merger, Consolidation or Reorganization. In the event of a merger, consolidation or reorganization with another corporation in which the Company is not the surviving corporation, the Committee shall, subject to the approval of the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, take action regarding each outstanding and unexercised option pursuant to either clause (a) or (b) below: (a) Appropriate provision may be made for the protection of such option by the substitution on an equitable basis of appropriate shares of the surviving corporation, provided that the excess of the aggregate Fair Market Value of the shares subject to such option immediately before such substitution over the exercise price thereof is not more than the excess of the aggregate fair market value of the substituted shares made subject to option immediately after such substitution over the exercise price thereof; or (b) The Committee may cancel such option. In such event, the Company, or the corporation assuming the obligations of the Company hereunder, shall pay the employee an amount of cash (less normal withholding taxes) equal to the excess of the highest Fair Market Value per share of the Company Stock during the 60-day period immediately preceding the merger, consolidation or reorganization over the option exercise price, multiplied by the number of shares subject to such option. 6.08 Dissolution or Liquidation. Anything contained herein to the contrary notwithstanding, on the effective date of any dissolution or liquidation of the Company, the holder of each then outstanding and unexercised option shall receive the cash amount described in 6.07(b) hereof and such option shall be cancelled. VII. RESTRICTED STOCK. 7.01 Administration. Shares of restricted stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the Eligible Employees to whom and the time or times at which grants of restricted stock will be made, the number of shares to be awarded, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards. The Committee may condition the grant of restricted stock upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine. The provisions of restricted stock Awards need not be the same with respect to each recipient. 7.02 Awards and Certificates. Each individual receiving a restricted stock Award shall be issued a certificate in respect of such shares of restricted stock. Such certificate shall be registered in the name of such individual and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Oshkosh B'Gosh, Inc. 1994 Incentive Stock Plan and a Restricted Stock Agreement. Copies of such Plan and Agreement are on file at the offices of Oshkosh B'Gosh, Inc." The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any restricted stock Award, the Grantee shall have delivered a stock power, endorsed in blank, relating to the Company Stock covered by such Award. 7.03 Terms and Conditions. Shares of restricted stock shall be subject to the following terms and conditions: (a) Until the applicable restrictions lapse, the Grantee shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of restricted stock. (b) The Grantee shall have, with respect to the shares of restricted stock, all of the rights of a stockholder of the Company, including the right to vote the shares and the right to receive any cash dividends. Unless otherwise determined by the Committee, cash dividends shall be automatically paid in cash and dividends payable in Company Stock shall be paid in the form of additional restricted stock. (c) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and (d) below, all shares still subject to restriction shall be forfeited by the Grantee upon termination of a Grantee's employment for any reason. (d) In the event of hardship or other special circumstances of a Grantee whose employment is involuntarily terminated (other than for cause), the Committee may waive in whole or in part any or all remaining restrictions with respect to such Grantee's shares of restricted stock. (e) If and when the applicable restrictions lapse, unlegended certificates for such shares shall be delivered to the Grantee. (f) Each Award shall be confirmed by, and be subject to the terms of, a Restricted Stock Agreement. VIII. WITHHOLDING TAXES. 8.01 General Rule. Pursuant to applicable federal and state laws, the Company is or may be required to collect withholding taxes upon the exercise of an option or the lapse of stock restrictions. The Company may require, as a condition to the exercise of an option or the issuance of a stock certificate, that the Grantee concurrently pay to the Company (either in cash or, at the request of Grantee but in the discretion of the Committee and subject to such rules and regulations as the Committee may adopt from time to time, in shares of Delivered Stock) the entire amount or a portion of any taxes which the Company is required to withhold by reason of such exercise or lapse of restrictions, in such amount as the Committee or the Company in its discretion may determine. 8.02 Withholding from Shares to be Issued. In lieu of part or all of any such payment, the Grantee may elect, subject to such rules and regulations as the Committee may adopt from time to time, or the Company may require that the Company withhold from the shares to be issued that number of shares having a Fair Market Value equal to the amount which the Company is required to withhold. 8.03 Special Rule for Insiders. Any such request or election (to satisfy a withholding obligation using shares) by an individual who is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 shall be made in accordance with the rules and regulations of the Securities and Exchange Commission promulgated thereunder. IX. GENERAL 9.01 Nontransferability. No Award granted under the Plan shall be transferable or assignable except by last will and testament or the laws of descent and distribution. During the Grantee's lifetime, options shall be exercisable only by the Grantee or by the Grantee's guardian or legal representative. 9.02 General Restriction. Each Award shall be subject to the requirement that if at any time the Board or the Committee shall determine, in its discretion, that the listing, registration, or qualification of securities upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or the issue or purchase of securities thereunder, such option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board or the Committee. 9.03 Expiration and Termination of the Plan. Awards may be granted under the Plan at any time and from time to time, prior to August 8, 2004, the date on which the Plan will expire, except as to Awards then outstanding under the Plan, which shall remain in effect until they have been exercised, the restrictions have lapsed or the Awards have expired or been forfeited. The Plan may be abandoned or terminated at any time by the Board of Directors of the Company, except with respect to any Awards then outstanding under the Plan. 9.04 Amendments. The Board may from time to time amend, modify, suspend or terminate the Plan; provided, however, that no such action shall (a) impair without the Grantee's consent any Award theretofore granted under the Plan or deprive any Grantee of any shares of Company Stock which he or she may have acquired through or as a result of the Plan or (b) be made without shareholder approval where such approval would be required as a condition of compliance with Rule 16b-3. 9.05 Construction. Except as otherwise required by applicable federal laws, the Plan shall be governed by, and construed in accordance with, the laws of the State of Wisconsin. EX-10.18 8 EXHIBIT 10.18 OSHKOSH B'GOSH, INC. 1995 OUTSIDE DIRECTORS' STOCK OPTION PLAN I. INTRODUCTION 1.01 Purpose. This plan shall be known as the Oshkosh B'Gosh, Inc. 1995 Outside Directors' Stock Option Plan. The purpose of the Plan is to provide an incentive for Outside Directors of Oshkosh B'Gosh, Inc. to improve corporate performance on a long-term basis. It is intended that the Plan and its operation comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor rule). 1.02 Effective Date. The Plan shall be effective upon its approval by shareholders at the Company's 1995 annual meeting. If the Plan is approved by shareholders, the first option grants will automatically be made at the Board meeting immediately following the 1995 annual meeting. II. PLAN DEFINITIONS 2.01 Definitions. For Plan purposes, except where the context clearly indicates otherwise, the following terms shall have the meanings set forth below: (a) "Board" shall mean the Board of Directors of the Company. (b) "Company" shall mean Oshkosh B'Gosh, Inc., a Wisconsin corporation. (c) "Company Stock" shall mean the Company's Class A Common Stock and such other stock and securities as may be substituted therefore pursuant to Section 3.02. (d) "Director" shall mean a director of the Company. (e) "Fair Market Value" on any date shall mean, with respect to Company Stock, if the stock is then listed and traded on a registered national securities exchange, or is quoted in the NASDAQ National Market System, the mean of the high and low sale prices recorded in composite transactions as reported in the Wall Street Journal (Midwest Edition) for such date or the preceding business day if such date is not a business day. In the absence of reported sales or if the stock is not so listed or quoted, but is traded in the over-the-counter market, Fair Market Value shall be the mean of the closing bid and asked prices for such shares on the relevant date. (f) "Grantee" shall mean any person who has been granted an option under the Plan. (g) "Outside Director" shall mean a Director who is not also an active full-time employee of the Company or a corporation in which the Company owns, directly or indirectly, a voting stock interest of more than fifty percent (50%). III. SHARES SUBJECT TO OPTION 3.01 Available Shares. The total number of shares of Company Stock that may be issued under the Plan shall not exceed Seventy Thousand (70,000) shares. Shares subject to and not issued under an option which expires, terminates, or is canceled for any reason under the Plan shall again become available for the granting of options. 3.02 Changes in Common Stock. If any stock dividend is declared upon the Company Stock, or if there is any stock split, stock distribution, or other recapitalization of the Company with respect to the Company Stock, resulting in a split or combination or exchange of shares, the aggregate number and kind of shares which may thereafter be granted under the Plan shall be proportionately and appropriately adjusted and the number and kind of shares then subject to options under the Plan and the per share option price therefore shall be proportionately and appropriately adjusted, without any change in the aggregate purchase prices to be paid therefor. IV. ADMINISTRATION 4.01 Administration by the Committee. The Plan shall be administered by the Compensation Committee of the Board which shall have the power, subject to and within the limits of the express provisions of the Plan, to exercise such powers and to perform such acts as are deemed necessary or expedient to promote the best interests of the Company with respect to the Plan. The Committee shall have no discretion as to the amount, price or timing of any option granted under this Plan. V. STOCK OPTIONS 5.01 Option Agreements. Each option granted under the Plan shall be evidenced by a stock option agreement between the Company and the Grantee which shall contain the terms and conditions required by this Article V, and such other terms and conditions, not inconsistent herewith, as the Committee may deem appropriate in each case. The holder of an option shall not have any rights as a stockholder with respect to the shares covered by an option until such shares have been delivered to him or her. 5.02 Option Grant Size and Grant Date. (a) Annual Grant. Each year, upon the first meeting of the Board following the Company's annual meeting of shareholders, each person then serving the Company as an Outside Director shall automatically be granted a nonqualified stock option to purchase One Thousand (1,000) shares, subject to adjustment under Section 3.02 hereof. (b) Special Rule. If at any time there are not sufficient available shares under the Plan to grant each Outside Director an option to purchase the number of shares identified above, each Outside Director shall receive an option to purchase an equal number of the remaining available shares, determined by dividing the remaining available shares by the number of Outside Directors. 5.03 Exercise Price. The price at which each share of Company Stock covered by an option may be purchased shall be one hundred percent (100%) of the Fair Market Value of the Company Stock on the date the option is granted. 5.04 Period for Exercise of Options. Each stock option granted under this Plan shall become exercisable six months from the date of grant, regardless of whether the Grantee is still a Director on such date. All rights to exercise an option shall terminate upon the earlier of (a) ten (10) years from the date the option is granted, or (b) two years from the date the Grantee ceases to be a Director. 5.05 Method of Exercise. Subject to Section 5.04, each option may be exercised in whole or in part from time to time as specified in the stock option agreement. Each Grantee may exercise an option by giving written notice of the exercise to the Company, specifying the number of shares to be purchased, accompanied by payment in full of the exercise price therefor. The exercise price may be paid in cash, by check, or by delivering shares of Company Stock which have been beneficially owned by the Grantee, the Grantee's spouse, or both of them for a period of at least six months prior to the time of exercise ("Delivered Stock") or a combination of cash and Delivered Stock. Delivered Stock shall be valued at its Fair Market Value determined as of the date of exercise of the option. No Grantee shall be under any obligation to exercise any option hereunder. 5.06 Merger, Consolidation or Reorganization. In the event of a merger, consolidation or reorganization with another corporation in which the Company is not the surviving corporation, the Committee shall, subject to the approval of the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company hereunder, take action regarding each outstanding and unexercised option to protect such option by the substitution on an equitable basis of appropriate shares of the surviving corporation, provided that the excess of the aggregate Fair Market Value of the shares subject to such option immediately before such substitution over the exercise price thereof is not more than the excess of the aggregate fair market value of the substituted shares made subject to option immediately after such substitution over the exercise price thereof. 5.07 Dissolution or Liquidation. Anything contained herein to the contrary notwithstanding, on the effective date of any dissolution or liquidation of the Company, the Company shall pay the holder of each then outstanding and unexercised option an amount of cash equal to the excess of the highest Fair Market Value per share of the Company Stock during the 60-day period immediately preceding the dissolution or liquidation over the option exercise price, multiplied by the number of shares subject to such option. Such option shall then be canceled. 5.08 Limitation on Plan Amendments. The option grants hereunder are intended to be formula awards under Rule 16b-3(c)(2)(ii) under the Securities Exchange Act of 1934. Accordingly, the provisions of this Article V may not be amended more than once every six months. VI. GENERAL 6.01 Nontransferability. No option granted under the Plan shall be transferable or assignable except by last will and testament or the laws of descent and distribution. During the Grantee's lifetime, options shall be exercisable only by the Grantee or by the Grantee's guardian or legal representative. In the event of the Grantee's death, the personal representative of the Grantee's estate or the person or persons to whom the option is transferred by will or the laws of descent and distribution may exercise the option in accordance with its terms. 6.02 General Restriction. Each option shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration, or qualification of securities upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or the issue or purchase of securities thereunder, such option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board. 6.03 Expiration and Termination of the Plan. Options may be granted under the Plan at any time and from time to time, prior to December 31, 2004, the date on which the Plan will expire, except as to options then outstanding under the Plan, which shall remain in effect until they have been exercised or have expired. The Plan may be abandoned or terminated at any time by the Board except with respect to any options then outstanding under the Plan. 6.04 Amendments. The Board may from time to time amend, modify, suspend or terminate the Plan; provided, however, that no such action shall (a) impair without the Grantee's consent any option theretofore granted under the Plan or (b) be made without shareholder approval where such approval would be required as a condition of compliance with Rule 16b-3 under the Securities Exchange Act of 1934. 6.05 Withholding Taxes. If the Company is required to collect withholding taxes upon exercise of an option, the Company may require, as a condition to such exercise, that the Grantee concurrently pay to the Company the entire amount or a portion of any taxes which the Company is required to withhold by reason of such exercise. In lieu of part or all of such payment, the Grantee may elect, subject to such rules as the Board may adopt from time to time, to have the Company withhold from the shares to be issued upon exercise of the option that number of shares having a Fair Market Value equal to the amount which the Company is required to withhold. 6.06 Construction. Except as otherwise required by applicable federal laws, the Plan shall be governed by, and construed in accordance with, the laws of the State of Wisconsin. EX-27 9
5 YEAR DEC-31-1994 DEC-31-1994 10514000 0 27557000 3700000 93916000 142307000 119950000 50121000 217211000 39844000 0 135000 0 0 158679000 217211000 363363000 363363000 259416000 354404000 0 0 1034000 12958000 5919000 7039000 0 0 0 7039000 .50 0