-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G3j9fSohtmQFOagtaXZ/nemFgI/zHtxn79ln9I7YBHaBK5l3rRfwQiB9NEiQ7Ee0 v3XNGRM5G9VjXk8rMb/HBw== 0000075042-99-000002.txt : 19990402 0000075042-99-000002.hdr.sgml : 19990402 ACCESSION NUMBER: 0000075042-99-000002 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990102 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSHKOSH B GOSH INC CENTRAL INDEX KEY: 0000075042 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 390519915 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-13365 FILM NUMBER: 99579385 BUSINESS ADDRESS: STREET 1: 112 OTTER AVE STREET 2: P O BOX 300 CITY: OSHKOSH STATE: WI ZIP: 54901 BUSINESS PHONE: 9202318800 MAIL ADDRESS: STREET 1: 112 OTTER AVE CITY: OSHKOSH STATE: WI ZIP: 54901 10-K405 1 10-K 1998 UNITED STATES 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 JANUARY 2, 1999 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 39-0519915 (I.R.S. ID) 112 Otter Avenue Oshkosh, Wisconsin 54901 Telephone number: (920) 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 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 definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 19, 1999, there were outstanding 15,685,346 shares of Class A Common Stock and 2,260,078 shares of Class B Common Stock, of which 14,996,585 shares and 1,162,140 shares, respectively, were held by non-affiliates of the registrant. Based upon the closing sales price as of March 19, 1999, the aggregate market value of the Class A Common Stock held by non- affiliates was $273,687,676. The Class B Common Stock is no longer listed or quoted on any established trading market, but it is convertible into Class A Common Stock on a share-for-share basis. Based on that conversion right, the value of Class B Common Stock held by non-affiliates was $21,209,055. DOCUMENTS INCORPORATED BY REFERENCE OshKosh B'Gosh, Inc. definitive Proxy Statement for its annual meeting to be held on May 7, 1999 (or such later date as the directors may determine), incorporated into Part III INDEX PART I PAGE Item 1. Business 5 (a) General Development of Business 5 (b) Financial Information About Industry Segments 6 (c) Narrative Description of Business 7 Products 7 Raw Materials, Manufacturing and Sourcing 8 Sales and Marketing 10 International Licensing and Distribution 11 Trademarks 11 Seasonality 11 Working Capital 12 Backlog 12 Competitive Conditions 12 Environmental Matters 13 Employees 13 Item 2. Properties 14 Item 3. Legal Proceedings 15 Item 4. Submission of Matters to a Vote of Security Holders 15 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 15 Item 6. Selected Financial Data 16 Item 7. Management's Discussion and Analysis of Results of Operations and Financial Conditions 17 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 26 Item 8. Financial Statements and Supplemenatary 27 Item 9. Disagreements on Accounting and Financial Disclosure 49 PART III Item 10. Directors and Executive Officers of the Registrant 49 Item 11. Executive Compensation 49 Item 12. Security Ownership of Certain Beneficial Owners and Management 49 Item 13. Certain Relationships and Related Transactions 49 PART IV Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 49 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 markets apparel primarily for the children's wear and youth wear markets. The Company also offers a children's footwear collection. While its heritage began in the men's work wear market, the Company is currently best known for its line of high quality children's wear. It is the Company's vision to become the dominant global marketer of branded products for children ages newborn to ten through leverage of the existing brand franchise in OshKosh B'Gosh and Baby B'Gosh and utilization of the Company's core competencies to supply the market with all appropriate product for children where quality, durability, and fashion innovation are important. The Company is also pursuing niche opportunities in adult apparel, where the Company's century old heritage can provide meaningful differential advantage to address the needs of the marketplace. 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 a market leader in the branded children's wear industry. The Company strategically extends the product line and also leverages the economic value of the OshKosh B'Gosh name via both domestic and international licensing agreements. In addition to the Company's wholesale business, the Company also operates a chain of 122 domestic OshKosh B'Gosh branded stores, including 117 factory outlet stores and five specialty stores. The Company operates an OshKosh B'Gosh showcase store in New York City to feature a full line of OshKosh product in a signature environment designed to reinforce brand awareness among consumers. During 1997, the Company expanded its retail product line in its OshKosh B'Gosh branded stores by offering youth wear sizes for girls and boys under the trade names Genuine Girl (girls sizes 7-16) and Genuine Blues (boys sizes 8-16). Based on the sales performance of the Genuine Girl line in the OshKosh B'Gosh operated retail stores, the Company expanded the distribution of this product line to wholesale customers beginning with the Spring 1998 season. The Company completed a comprehensive strategic planning initiative in 1996. As part of this initiative and combined with management's commitment to more efficient utilization of working capital, the Company continues to take steps to improve product marketability, streamline operations, reduce its capital base and cost structure and improve delivery performance. These actions included an analysis of product extensions, commitment to wholesale customer base, periodic review of significant licensee arrangements, and development of an effective sourcing strategy, which has resulted in the closing of certain domestic manufacturing facilities. The Company designs and arranges for the manufacture of substantially all of its apparel and footwear. Company designers develop fabrication, trim accessories, and detailed manufacturing specifications. The product is then manufactured according to detailed Company specifications and production schedules in Company-owned manufacturing facilities or at third party contractor locations worldwide. Product sourcing is based on manufacturing capacity, quality, and lead times, in addition to capabilities of specific manufacturing facilities. The Company leverages its name and brand equity into a wide variety of children's products including sleep wear, socks, eye wear, educational toys, bedding, and other juvenile products. The Company regularly reviews the seasonal offerings of all related products both locally and internationally for consistency, brand image and quality. The Company earns royalties for use of its name on children's and men's wear products throughout the world, and from related accessories distributed in the United States and worldwide. (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 Products The Company designs, manufactures, sources and markets a broad range of children's clothing as well as lines of youth wear and footwear under the OshKosh (copyright), OshKosh B'Gosh (copyright), Baby B'Gosh (copyright), Genuine Girl (copyright) and Genuine Blues (copyright) labels. The products are distributed primarily through better quality department and specialty stores, 122 Company owned domestic stores, and foreign retailers. The children's wear and youth wear business is targeted to reach the middle to upper middle segment of the sportswear market, through the use of innovative designs, quality fabrics and classic styling. The Company believes that its trade name is a valuable asset in the marketing of its apparel, signifying apparel that is classic in design and of high quality construction. The Company tradename and trademarks are generally displayed prominently on OshKosh product. Children's wear is marketed in size ranges from layette/newborn and infant/toddler to girls 6X and boys 7. Youth wear is in size ranges girls 7 to 16 and boys 8 to 16. The Company's children's wear and youth wear business includes a broad range of product categories, which are offered in two main groups: Fashion and Classics. The Fashion group is organized primarily in a collection format of seasonal themes, developed by an in-house product development staff. The products in a collection share a primary design theme which is carried out through fabric design and the distinctive use of colors, screenprint, embroidery, and trim applications. These collections are generally presented as three to five small groups within each merchandising season. The Company also offers a Classics product line, consisting primarily of staple denim products with multiple wash treatments. The Classics 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. This product line is developed to be relatively seasonless, with signature OshKosh B'Gosh classic styling. These styles are available to retail customers for replenishment throughout the year. Some Classics items are also designed to serve as a foundation for the Fashion group, with seasonal colors and styles to complement the Company's Fashion product offering. 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. While the Company's products are generally traditional in nature and not intended to be "designer" items, the Company attempts to incorporate current trends and consumer preferences in its designs. In selecting fabric 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, for a limited period of time, with some protection from imitation by competitors. Raw Materials, Manufacturing, and Sourcing All raw materials used in the manufacture of Company products are purchased from unaffiliated suppliers. The Company purchases its raw materials directly for its owned manufacturing facilities and may also procure and retain ownership of fabric related to garments cut and assembled by contract manufacturers. In other circumstances, fabric is procured by the contract manufacturer directly but in accordance with the Company's specifications. In 1998, approximately 77% of the Company's direct expenditures for raw materials (fabric) were from its five largest suppliers, with the largest such supplier accounting for approximately 63% of total raw material expenditures. Fabric and various non-fabric items, such as thread, zippers, rivets, buckles and snaps, are purchased from a variety of domestic and foreign sources, based on quality, pricing, and availability. 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. Product development and administration are primarily coordinated from the Company's headquarters facility in Oshkosh, WI or its design studio in New York City. The majority of the product engineering and sample making, allocation of production among plants and independent contractors, material purchases and invoice payments is done through the Company's Oshkosh headquarters. Substantially all designs and specifications utilized by independent manufacturers are provided by the Company. In 1998, approximately 42% of the Company's product line (excluding footwear) was produced at Company-owned facilities, with the remainder produced by numerous third party contractors throughout the world, in accordance with the Company's specifications. Most domestic production takes place in the Company's three Tennessee and two Kentucky plants. The Company also leases a sewing plant in Honduras, where cut apparel pieces are received from the United States and are reimported by OshKosh B'Gosh as finished goods under Section 9802 (previously Section 807). In 1997 and 1998, as part of the Company's review of manufacturing capacity and utilization, the Company completed the closure of certain domestic manufacturing facilities and continued to expand its use of offshore manufacturing capabilities. These actions were part of the Company's on-going effort to improve its product cost structure. The Company has established guidelines for each of its third party manufacturers in order to monitor product quality, labor practices and financial viability. It also employs agents, based in regional locations abroad, to monitor compliance with design specifications and quality standards. The Company believes that its overall global manufacturing strategy gives the Company maximum flexibility to properly balance the need for timely shipments, high quality products and competitive pricing. While no long-term, formal arrangements exist with its third- party manufacturers, the Company considers these relationships to be satisfactory. The Company believes it could, over a period of time, obtain adequate alternative production capacity if any of its independent manufacturers become unavailable. As part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia. If the current financial and related difficulties were to adversely impact the Company's contractors in Asia, it could disrupt the supply of products contracted for by the Company. A sustained disruption of such sources of supply could, particularly on a short-term basis, have an adverse impact on the Company's operations. Because higher quality apparel manufacturing is generally labor intensive (sewing, pressing, finishing and quality control), the Company has continually sought to take advantage of time saving 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 one of the Company's five plants, with all domestic 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. Sales and Marketing In order to meet the diverse needs of its broad customer base, the Company uses a wide variety of distribution channels to market its products. Wholesale distribution is made primarily through better quality department and specialty stores, although sales are also made through direct mail catalog companies, foreign retailers and other outlets. In 1998, the Company's products were sold to approximately 2,300 wholesale customers (approximately 7,500 stores) throughout the United States, and a sizable number of international accounts. Product sales to better quality department and specialty stores are made primarily by an employee sales force with the balance of sales made by manufacturer's representatives or through 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. In addition to its wholesale activities, OshKosh B'Gosh products are also sold through 122 Company-owned domestic retail stores, operating under two formats: factory outlet stores and mall-based specialty stores. The Company operates 117 domestic factory outlet stores, which carry a large selection of first quality Company branded apparel at a discount to conventional retail prices. The factory outlet stores also provide a means of distributing excess and out-of-season product, reducing the amount of such product sold to discounters at excessively low prices. In addition, the Company operates four regional mall- based stores and one showcase store. These full price, full service stores feature a full line of OshKosh B'Gosh product in a signature environment designed to convey the total OshKosh image and build brand recognition among customers. The stores are also used to test new styles and merchandising strategies. The Company's broad distribution base insulates the Company from reliance on any one customer. The Company's largest wholesale customer accounted for 12% of the Company's 1998 sales, while the Company's largest ten and largest 100 customers accounted for approximately 45% and 56% of 1998 sales, respectively. Domestic marketing programs are aimed at both the Company's retail accounts and ultimate consumers, with a main goal of increasing overall brand awareness. A national marketing program includes advertising in both consumer and trade publications, local cooperative advertising, promotions and in-store merchandising. The Company also offers a cooperative advertising program to its retail customers, paying a portion of its retail customers' advertising expenditures up to a maximum percentage of qualifying sales. International Licensing and Distribution The Company's products are distributed worldwide through approximately 40 licensees and distributors in over 80 countries. Licensing and distribution agreements allow the Company to develop international markets without the need to maintain a capital commitment in localized warehousing, offices, personnel and inventory. The Company provides design assistance to its licensees to insure products are appropriate to each foreign market and consistent with the Company's brand image. The licensees and distributors either purchase fabric or finished product directly from the Company, manufacture their own product, or contract the production of the product from third-party manufacturers. Each licensee and distributor is responsible for the marketing and distribution of specific product categories within defined regions specified in the licensing or distribution agreement. Distribution must be through marketing channels consistent with the Company's domestic operations and as approved by the Company. The Company also provides advertising guidelines and support in the development of localized marketing programs. Trademarks The Company utilizes the OshKoshr, OshKosh B'Goshr, Baby B'Goshr, Genuine Girlr or Genuine Bluesr trademarks on most of its products. Other significant trademarks include a white triangular patch on the back of bib garments and the Genuine Articler. The Company currently has approximately 43 trademark registrations and 1 pending trademark application in the United States and has trademark registrations in approximately 100 countries outside the U.S. These trademarks and universal awareness of the OshKosh B'Gosh name are significant in marketing the products. Therefore, it is the Company's policy to vigorously defend its trademarks against infringement under the laws of the U.S. and other countries. The Company is not aware of any material infringing uses. Seasonality Products are designed and marketed primarily for three principal selling seasons: PRIMARY RETAIL SALES SEASON 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 wholesale shipping period and a major retail selling season at its retail stores. The Company's second quarter sales and income are the lowest because of both relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 1999 quarterly sales and income. Working Capital Working capital needs are affected primarily by inventory levels, outstanding accounts receivable and trade payables. The Company maintains a credit agreement with a number of banks which provides a $60 million 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, 2001. There were no outstanding borrowings against these credit arrangements at January 2, 1999. Letters of credit of approximately $21 million were outstanding at January 2, 1999. 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 companies. 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 end is not material for an understanding of the business of the Company taken as a whole. 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 to a lesser extent on the basis of service and price. The Company is focusing attention on the issues 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. The Company believes that in its primary 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 January 2, 1999, the Company employed approximately 3,800 persons. Approximately 22% of the Company's personnel are covered by collective bargaining agreements with the United Garment Workers of America. ITEM 2. PROPERTIES Approximate Floor Area in Location Square Feet Principal Use Albany, KY 20,000 Manufacturing Byrdstown, TN 32,000 Manufacturing Celina, TN 38,250 Laundering/Pressing Dallas, TX (1) 1,995 Sales Offices/Showroom Gainesboro, TN 61,000 Sample Production Jamestown, TN 43,000 Manufacturing Liberty, KY 218,000 Manufacturing/Warehousing New York City, NY (2) 18,255 Sales Offices/Showroom/Design Studio Oshkosh, WI 99,000 Exec. & Operating Offices Oshkosh, WI 88,000 Leased to Outside Party Oshkosh, WI 128,000 Distribution/Warehousing Red Boiling Springs, TN 41,000 Leased to Outside Party White House, TN 284,000 Distribution/Warehousing All properties are owned by the Registrant with the exception of: (1) Lease expiration date--2001, (2) Lease expiration date--2007. The Company believes that its properties are well maintained and its manufacturing equipment is in good operating condition and adequate for current production. Substantially all of the Company's retail stores occupy leased premises, with lease terms generally in the range of 5 - 7 years. These leasehold interests are generally well suited for the Company's retail operations. For information regarding the terms of the leases and rental payments thereunder, refer to the "Leases" note to the consolidated financial statements on of this Form 10-K. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and lawsuits will not have a material adverse effect on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Quarterly Common Stock Data 1 1998 1997 Stock price Dividends Stock price Dividends High Low per share High Low per share Class A Common Stock 1st $20-1/4 $14-1/2 $0.035 $ 8-9/16 $ 6-7/8 $0.035 2nd 23 17-3/4 0.035 10-7/8 7-3/4 0.035 3rd 24-9/16 18-1/4 0.05 14-1/16 10-9/16 0.035 4th 24-1/4 17-7/8 0.05 17-13/16 13-3/8 0.035 Class B Common Stock 1st $--- $--- $0.03 $ 9-3/4 $ 9-9/16 $0.03 2nd --- --- 0.03 9-9/16 9-9/16 0.03 3rd --- --- 0.0425 --- --- 0.03 4th --- --- 0.0425 --- --- 0.03 1 Adjusted for the two-for-one stock split in September 1998. The Company's Class A common stock trades on the Over-The-Counter market and is quoted on NASDAQ under the symbol GOSHA. 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. Prior to June 30, 1997, the Company's Class B common stock traded on the Over-The- Counter market and was quoted on NASDAQ under the symbol GOSHB. As of February 10, 1999, there were 1,306 Class A common stock shareholders of record and 145 Class B common stock shareholders of record. ITEM 6. SELECTED FINANCIAL DATA Financial Highlights (Dollars in thousands, except per share amounts) For the Year Ended January 2, December 31, December 31, December 31, December 31, 1999 1997 1996 1995 1994 Financial results Net sales $423,232 $395,196 $444,766 $432,266 $363,363 Net income 29,335 22,558 1,119 10,947 7,039 Return on sales 6.9% 5.7% 0.3% 2.5% 1.9% Financial condition Working capital $ 76,876 $ 82,762 $104,641 $ 95,414 $101,946 Total assets 162,568 174,788 196,033 208,579 217,211 Shareholders' equity 103,017 113,157 138,077 150,078 158,814 Data per common share Net income Basic $ 1.54 $ 1.02 $ .05 $ .43 $ .25 Diluted 1.52 1.02 .05 .43 .25 Cash dividends declared Class A .17 .14 .14 .14 .19 Class B .145 .12 .12 .12 .17 Shareholders' equity 5.75 5.74 5.86 6.03 5.88 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales. As a Percentage of Net Sales for the Year Ended January 2,* December 31, 1999 1997 1996 Net sales 100.0% 100.0% 100.0% Cost of products sold 60.9% 63.5% 67.6% Gross profit 39.1% 36.5% 32.4% Selling, general and administrative expenses 29.5% 29.2% 27.4% Special charges -- -- 7.4% Royalty income, net (2.0%) (2.0%) (1.4%) Operating income (loss) 11.6% 9.3% (1.0%) Other income--net 0.1% 0.3% 0.1% Income (loss) before income taxes 11.7% 9.6% (0.9%) Income taxes (benefit) 4.8% 3.9% (1.2%) Net income 6.9% 5.7% 0.3% * Effective January 1, 1998, the Company changed its fiscal year to a 52/53 week period ending on the Saturday closest to December 31. Accordingly, the Company's fiscal year 1998 ended January 2, 1999. This change did not have a material impact on the comparability of the Company's 1998 results of operations with 1997 and 1996. 1998 Compared to 1997 Net Sales Net sales in 1998 were $423.2 million, a $28.0 million (7.1%) increase over 1997 net sales of $395.2 million. A summary of the Company's net sales for the years ended January 2, 1999 and December 31, 1997 follows: Net Sales (in millions) Domestic Wholesale Retail International Total 1998 $ 226.1 $ 191.4 $ 5.7 $ 423.2 1997 214.1 173.9 7.2 395.2 Increase (decrease) 12.0 17.5 (1.5) 28.0 Percent increase (decrease) 5.6% 10.1% (20.8%) 7.1% The Company's 1998 domestic wholesale unit shipments were up approximately 7.8% over 1997. The increases in unit shipments and sales dollars were the result of increased demand for the Company's fashion and classics product offerings. The Company currently anticipates relatively flat unit shipments for the first half of 1999 and a 3% to 5% increase in unit shipments for the remainder of the year. The Company's 1998 increased retail sales resulted from a combination of a 4.9% comparable store sales gain and sales volume from newly opened stores. Comparable store sales for 1998 were favorably impacted by increased sales of Genuine Girl and Genuine Blues branded products for the entire period. These bigger sizes were introduced during the first quarter of 1997. During 1998, the Company opened 10 factory outlet stores, closed 4 factory outlet stores, and closed 3 showcase stores. At January 2, 1999, the Company operated 122 domestic OshKosh B'Gosh retail stores, including 117 factory outlet stores and 5 showcase stores. Current Company plans for 1999 call for the addition of approximately 9 new OshKosh B'Gosh retail stores. For 1999, the Company currently anticipates low single digit comparable store sales gains. Gross Profit The Company's gross profit margin as a percent of net sales increased to 39.1% in 1998 compared with 36.5% in 1997. This gross profit margin improvement was due primarily to continued implementation and execution of the Company's global sourcing strategy, improved operating efficiencies at the Company's domestic sewing facilities, and the Company's continuing focus on product design and development activities. During 1998, approximately 42% of units sourced were in the Company's domestic facilities as compared to 47% in 1997. The Company's current 1999 sourcing plan indicates that approximately 36% of units will be produced at the Company's domestic facilities. Selling, General and Administrative Expenses (S,G&A) The Company's S,G&A expenses for 1998 of $124.8 million were $9.4 million over 1997 S,G&A expenses of $115.4 million. As a percent of net sales, S,G&A expenses were 29.5% in 1998 as compared to 29.2% in 1997. The primary reasons for these increased expenses relate to a combination of continued expansion of the Company's retail operations, increased volume of wholesale unit shipments, and expansion of the Company's brand enhancing activities. Special Charges The Company recorded special charges in 1996 related to the discontinuance of the Genuine Kids retail store chain, wind-down of the Company's European subsidiaries and transfer of the European business to a licensee, closing of three domestic sewing facilities, and the write-down of the Company's remaining manufacturing facilities and related assets to management's estimate of fair value. By January 2, 1999 the Company has substantially completed the execution of its plan to eliminate the underperforming elements of the Company's business and the adjustment of its domestic manufacturing capacity to improve efficiency. The reserve balance at January 2, 1999 is considered adequate for the remaining plans and related contingencies. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. The Company's net royalty income was $8.2 million in 1998, a $.3 million increase over 1997 net royalty income of $7.9 million. Royalty income from domestic licensees was approximately $2.8 million in 1998 as compared to $2.6 million in 1997. Royalty income from foreign licensees was approximately $5.4 million in 1998 as compared to $5.3 million in 1997. The Company's 1998 foreign licensee royalty income was negatively impacted by adverse economic conditions in Asia and the Company's decision not to renew its Japanese license arrangement (which ended in March 1998). These adverse conditions were offset by increased royalty income from the Company's Canadian and European licensees. The Company currently anticipates an increase in its net royalty income from licensees in 1999 of approximately 6 to 8%. Operating Income As a result of the factors described above, the Company's 1998 operating income improved to $48.9 million. This represents a 32.6% improvement over 1997 operating income of $36.9 million. Other Income-Net The Company's 1998 net other income decreased to $.4 million as compared to $1.3 million in 1997. The Company's interest income in 1998 was approximately $.9 million lower than in 1997 as a result of significantly lower cash and short-term investments carried by the Company in 1998. Income Taxes The Company's 1998 effective income tax rate was approximately 40.5% as compared to approximately 41% in 1997. The Company currently anticipates an effective income tax rate of approximately 39% for 1999. This anticipated reduction is due primarily to the implementation of certain planned income taxation strategies. Net Income Net income for the year ended January 2, 1999 of $29.3 million was a $6.7 million (30%) increase over net income for the year ended December 31, 1997 of $22.6 million. The Company's ongoing stock repurchase programs resulted in a reduction in its weighted-average diluted shares outstanding during 1998. This decrease, combined with the 30% increase in net income, resulted in a 49% increase in diluted earnings per share for 1998 of $1.52 as compared to $1.02 in 1997. 1997 Compared to 1996 Net Sales Net sales in 1997 were $395.2 million, a $49.6 million (11.2%) decrease as compared to 1996 net sales of $444.8 million. The Company's 1997 domestic wholesale business of approximately $214.1 million was $43.0 million (16.7%) less than 1996 sales of approximately $257.1 million. Wholesale unit shipments were down approximately 19.2% from 1996 unit shipments. This decrease in unit shipments for 1997 resulted primarily from a combination of the Company's strategic decision to reduce distribution and a significant reduction in unit shipments of close-out merchandise. Shipments of first quality garments during 1997 were down approximately 14.7% as compared to 1996. The Company's retail sales at its OshKosh B'Gosh stores of approximately $173.9 million increased $47.3 million (37.4%) over 1996 sales of $126.6 million. Retail sales in 1996 included $33.9 million from its Genuine Kids stores. The Company's 1997 increased retail sales at its OshKosh B'Gosh stores resulted from both the conversion and combination of a total of 22 Genuine Kids stores in early January 1997, as well as comparable store sales gains. The 24.5% comparable store sales gain reported in 1997 reflected both an increase in sales of OshKosh B'Gosh branded products, along with the introduction of an expanded retail product line to include bigger sizes under the labels Genuine Girl (girls sizes 7-16) and Genuine Blues (boys sizes 8-16). Net sales of Genuine labeled products were approximately $22.1 million during 1997, representing approximately 12.7% of total Company retail sales at Company operated stores. During 1997, the Company opened 10 OshKosh B'Gosh stores, converted 15 Genuine Kids stores to OshKosh stores, combined 7 Genuine Kids stores into an existing OshKosh store (the Genuine Kids store was immediately adjacent to the OshKosh store), closed 6 OshKosh stores and closed the remaining 36 Genuine Kids stores (all Genuine Kids stores were closed in early January). At December 31, 1997, the Company operated 119 domestic OshKosh retail stores, including 111 factory outlet stores and 8 showcase stores. Gross Profit The Company's gross profit margin as a percent of net sales increased to 36.5% in 1997 compared with 32.4% in 1996. This gross profit margin improvement was primarily due to continued implementation and execution of the Company's sourcing strategy, improved operating efficiencies at the Company's domestic sewing facilities, and a substantial reduction in the sale of close-out merchandise during 1997. During 1997, approximately 47% of units sourced were in the Company's domestic facilities as compared to 65% in 1996. Selling, General & Administrative Expenses (S,G&A) The Company's S,G&A expenses for 1997 of $115.4 million were $6.7 million less than 1996 S,G&A expenses of $122.1 million (excluding special charges). This decrease was directly attributable to the discontinuance of the Company's direct operations in Europe, elimination of the Genuine Kids retail store chain, and decreased volume in the Company's wholesale business. As a percent of net sales, S,G&A expenses were 29.2% in 1997 as compared to 27.4% in 1996 (excluding special charges). The primary reasons for the increased S,G&A expenses as a percent of net sales were the decrease in 1997 net sales without a proportionate decrease in the fixed element of the Company's S,G&A cost structure, combined with the impact of the Company's increased retail volume and related higher S,G&A costs as compared to the wholesale business. Special Charges During 1996, the Company recorded special charges related to the discontinuance of the Genuine Kids retail store chain, wind-down of the Company's European subsidiaries and transfer of the European business to a licensee, closing of three domestic sewing facilities, and write-down of the Company's remaining manufacturing facilities and related assets to management's estimate of fair value. During 1997, the Company continued to execute its plan to eliminate underperforming elements of the Company's business and to adjust its domestic manufacturing capacity to improve efficiency. Royalty Income The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. The Company's net royalty income was $7.9 million in 1997, a $1.8 million increase over 1996 net royalty income of $6.1 million. Royalty income from domestic licensees was approximately $2.6 million in 1997 as compared to $2.8 million in 1996. Royalty income from foreign licensees was approximately $5.3 million in 1997 as compared to $3.3 million in 1996. The Company's 1997 increase in royalty income related to foreign licensees was due primarily to the Company's conversion of its European business to a licensee, along with growth in other foreign markets. Operating Income The Company's 1997 operating income of $36.9 million compares to a 1996 operating loss of $4.6 million. Excluding the impact of the special charges recorded in 1996, the Company's operating income was $28.3 million in 1996. Other Income--Net The Company's 1997 interest expense decreased to $0.3 million as compared to $1.1 million in 1996. Interest income increased to $1.8 million in 1997 as compared to $1.3 million in 1996. The decrease in interest expense and increase in interest income both relate to the significantly higher level of cash and short-term investments carried by the Company throughout the first ten months of 1997 as compared to 1996. Income Taxes The Company's 1997 effective tax rate was approximately 41%. For 1996, the Company recorded a $5.2 million income tax benefit, which included an approximate $4.5 million income tax benefit resulting from the recognition of previously unrecorded U.S. tax benefits related to the discontinuance of the Company's European subsidiaries. The remaining 1996 tax benefit related to the Company's net loss from operations. Net Income Net income for the year ended December 31, 1997 of $22.6 million was a $21.5 million increase over net income for the year ended December 31, 1996 of $1.1 million. Excluding the special charges recorded by the Company in 1996, the Company's 1997 net income increase was $6.3 million (38.7%) over 1996. 1997 diluted earnings per share of $1.02 compares to $.05 per share in 1996. Seasonality of Business The Company's business is increasingly seasonal, with highest sales and income in the third quarter, which is the Company's peak wholesale shipping period and a major 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 1999 quarterly sales and income. Year 2000 Considerations General The Year 2000 issue involves computer programs and imbedded microprocessors in computer systems and other equipment that utilize two digits rather than four digits to define the applicable year. These systems need to be modified to process and properly recognize date sensitive information before, on, or after December 31, 1999. Without modification, these systems may not properly recognize date sensitive information when the year changes to 2000 and could generate erroneous data or a system failure. State of Readiness To assess the business risk associated with the Year 2000 issue, the Company has divided its review into four major areas. These areas include: 1. Computer hardware and application software programs that comprise the Company's primary business systems. 2. PC hardware and software, including LANS and servers that comprise various aspects of the Company's business. 3. Communications with what the Company believes to be all of its significant customers and vendors regarding the status of their Year 2000 compliance programs. 4. Other non-information technology aspects of the Company's business. The Company has identified three phases of its Year 2000 project applicable to various portions of the above major areas, which include a systems inventory of all hardware and programs, problem assessment, and remediation and testing. The Company has established a formal Year 2000 compliance project that addresses the Company's significant business systems. This project has an internal project leader to coordinate the inventory, problem assessment, and remediation and testing of the Year 2000 issues affecting the Company's information and other business systems. As of February 1999, the systems inventory, problem assessment, and approximately 90% of the remediation and testing have been completed as it relates to the Company's computer hardware and application software programs. We currently anticipate this portion of the project will be substantially completed and all of these systems will be Year 2000 compliant by April 1999. All the Company's personal computers have been inventoried and problem assessment has been completed. Based on this assessment, significant remediation is not necessary, as we do not anticipate any major problems with our PC based hardware or software as a result of the Year 2000. The Company has received confirmation from what it believes to be all of its significant vendors and customers as to their Year 2000 compliance status and has taken steps to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remedy their own Year 2000 issues. The Company has completed the systems inventory and problem assessment related to all other essential non-information technology systems, and has initiated appropriate remediation and testing which is expected to be completed by mid-1999. Costs The Company is executing the Year 2000 program primarily with existing internal resources and some outside consultants. The Company has and will spend an aggregate of approximately $1 million, of which approximately $.8 million has been incurred through January 2, 1999, on its remediation efforts. All costs associated with the Year 2000 compliance are being funded with cash flow generated from operations and are being expensed as incurred. These amounts do not have a material impact on the Company's business, operations, or financial condition. Risks At this time, the Company believes that it is adequately addressing the Year 2000 issues, but there can be no assurance that the Year 2000 issues will not have a material adverse affect on the business, financial condition, or results of operations of the Company. Additionally, disruptions in the economy generally resulting from the Year 2000 problem could have a material adverse effect on the Company. There can be no assurance that the systems of other companies with which the Company does business will be timely converted, or that any such failure to upgrade or convert would not have an adverse effect on the Company's systems and operations. If the vendors of the Company's most important goods and services, or suppliers of the Company's necessary energy, telecommunications and transportation needs fail to provide the Company with the materials and services which are necessary to produce, distribute, and sell its products, such failures could have a materially adverse effect on the result of operations, liquidity and financial condition of the Company. Contingency Plans The Company presently believes that the Year 2000 issue will not pose significant operational problems for its computer systems. The Company does plan to have its personnel "standing by" at the end of the year to resolve any potential problems as rapidly as possible. These problems are expected to be minimal. Financial Position, Capital Resources and Liquidity The Company's financial position remains strong, as demonstrated by its balance sheet. At January 2, 1999, the Company's cash, cash equivalents and short-term investments were $16.8 million, compared to $22.5 million at the end of 1997. This reduction is attributable to the Company's stock repurchases, offset in part by cash generated from operations. Net working capital at January 2, 1999 was $76.9 million compared to $82.8 million at December 31, 1997, and $104.6 million at December 31, 1996. Accounts receivable at January 2, 1999 were $24.0 million compared to $23.3 million at December 31, 1997. Inventories at January 2, 1999 were $65.6 million, compared to $68.2 million at the end of 1997. Management believes that January 2, 1999 inventory levels are generally appropriate for anticipated 1999 business activities. Cash provided by operations amounted to approximately $42.2 million in 1998, compared to $35.9 million in 1997 and $55.6 million in 1996. The increase in cash provided by operating activities in 1998 over 1997 is primarily attributable to improved net income. The decrease in cash provided by operating activities in 1997 compared to 1996 is primarily attributable to decreased inventory levels during 1996. Cash used in investing activities totaled $2.2 million in 1998, compared to $6.5 million in 1997, and $13.3 million in 1996. Capital expenditures were $11.4 million in 1998, compared with $6.6 million in 1997 and $7.3 million in 1996 and are currently budgeted at $9.6 million for 1999. The increase in capital expenditures in 1998 over 1997 and 1996 is primarily due to the Company's upgrade of its distribution systems and Whitehouse, Tennessee distribution facilities. These capital expenditures were offset by reductions in the levels of short-term investments. Depreciation and amortization are currently budgeted at $9.0 million for 1999. Cash used in financing activities totaled $39.5 million in 1998, compared to $46.9 million in 1997, and $13.5 million in 1996. The Company's primary financing activities consisted of stock repurchase transactions and dividends. On August 10, 1998, the Company's Board of Directors authorized a two-year, $60 million repurchase program of the Company's Class A common stock. During 1998, the Company repurchased 1,343,900 shares of its Class A common stock under this program for approximately $27.3 million. For all of 1998, the Company repurchased 1,888,500 shares of its Class A common stock under its current and prior repurchase programs for approximately $37.6 million. In August 1997 the Company purchased approximately 3,313,000 shares of its Class A common stock and approximately 84,000 shares of its Class B common stock under the terms of its Dutch auction tender offer for approximately $37.7 million. Under the terms of the Dutch auction tender offer, all shares were purchased at $11 per share. For all of 1997, the Company repurchased approximately 3,796,000 shares of its Class A common stock and approximately 84,000 shares of its Class B common stock under all of its authorized repurchase programs for approximately $44 million. On August 10, 1998 the Company's Board of Directors declared a two-for-one stock split for Class A and Class B common stock, effected in the form of a stock dividend. Dividends on the Company's Class A and Class B common stock totaled $.17 per share and $.145 per share, respectively, in 1998 and $.14 per share and $.12 per share, respectively, in 1997. The Company has a credit agreement with participating banks. This arrangement provides a $60 million revolving credit facility and a $40 million revocable demand line of credit for cash borrowings, issuance of commercial paper and letters of credit. The Company had no outstanding long-term debt at January 2, 1999 or December 31, 1997. The agreement expires in June, 2001. The Company believes that these credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs as well as its capital expenditures, remaining special charges, and business development needs. Inflation The effects of inflation on the Company's operating results and financial condition were not significant. FORWARD-LOOKING STATEMENTS This report contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, from time to time the Company may issue press releases and other written communications, and representatives of the Company may make oral statements, which contain forward-looking information. Except for historical information, matters discussed in such oral and written communications, including this report, are forward-looking statements. Such forward-looking statements are based on current assumptions and expectations that involve risks and uncertainties. Actual results may differ materially. The Company's future results of operations and financial position can be influenced by such factors as the level of consumer spending for apparel, particularly in the children's wear segment, overall consumer acceptance of the Company's product styling, the financial strength of the retail industry, including, but not limited to, business conditions and the general economy, natural disasters, competitive factors, risk of non-payment of accounts receivable, the unanticipated loss of a major customer, failure of Company suppliers to timely deliver needed raw materials, Year 2000 issues, particularly with respect to the Company's vendors and customers, as well as risk associated with foreign operations. In addition, the inability to ship Company products within agreed timeframes due to unanticipated manufacturing delays or the failure of Company contractors to deliver products within scheduled timeframes, are risk factors in ongoing business. As a part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia. If the current financial and related difficulties were to adversely impact the Company's contractors in the Asian region, it could disrupt the supply of products contracted for by the Company. The forward-looking statements included herein are only made as of the date of this report. The Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. ITEM 7A. Qualitative and Quantitative Disclosures about Market Risk The registrant does not believe it has material exposure to market risk with respect to any of its investments; the registrant does not utilize market rate sensitive instruments for trading or other purposes. For information regarding the Company's investments, refer to the "Cash equivalents" and "Short-term investments" notes to the consolidated financial statements of this Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Financial Statements: Report of Independent Auditors 27 Consolidated Balance Sheets - January 2, 1999 and December 31, 1997 28 Consolidated Statements of Income - year ended January 2, 1999 and years ended December 31, 1997 and 1996 29 Consolidated Statements of Changes in Shareholders' Equity - year ended January 2, 1999 and years ended December 31, 1997 and 1996 30 Consolidated Statements of Cash Flows - year ended January 2, 1999 and years ended December 31, 1997 and 1996 31 Notes to Consolidated Financial Statements 32 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 January 2, 1999 and December 31, 1997 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the three years in the period ended January 2, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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 the Company at January 2, 1999 and December 31, 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended January 2, 1999, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. ERNST & YOUNG LLP Milwaukee, Wisconsin January 29, 1999 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except per share amounts) January 2, 1999 December 31, 1997 ASSETS Current assets Cash and cash equivalents $ 14,308 $ 13,779 Short-term investments 2,500 8,700 Accounts receivable, less allowances of $4,240 in 1998 and $4,225 in 1997 24,008 23,278 Inventories 65,584 68,226 Prepaid expenses and other current assets 862 1,265 Deferred income taxes 16,700 15,800 Total current assets 123,962 131,048 Property, plant and equipment, net 32,380 32,955 Deferred income taxes 4,900 5,500 Other assets 1,326 5,285 Total assets $ 162,568 $ 174,788 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 7,638 $ 10,273 Accrued liabilities 39,448 38,013 Total current liabilities 47,086 48,286 Employee benefit plan liabilities 12,465 13,345 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- 15,668,859 shares in 1998, 17,345,806 shares in 1997 157 173 Class B, authorized-3,750,000 shares; Issued and outstanding- 2,260,522 shares in 1998, 2,364,564 shares in 1997 23 24 Retained earnings 102,837 112,960 Total shareholders' equity 103,017 113,157 Total liabilities and shareholders' equity $ 162,568 $ 174,788 See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Income (Dollars in thousands, except per share amounts) For the Year Ended January 2, December 31, December 31, 1999 1997 1996 Net sales $ 423,232 $ 395,196 $ 444,766 Cost of products sold 257,700 250,815 300,495 Gross profit 165,532 144,381 144,271 Selling, general and administrative expenses 124,798 115,439 122,055 Special charges and plant closings -- -- 32,900 Royalty income, net (8,186) (7,945) (6,100) Operating income (loss) 48,920 36,887 (4,584) Other income (expense): Interest expense (399) (305) (1,088) Interest income 871 1,797 1,326 Miscellaneous (67) (192) 249 Other income - net 405 1,300 487 Income (loss) before income taxes 49,325 38,187 (4,097) Income taxes (benefit) 19,990 15,629 (5,216) Net income $ 29,335 $ 22,558 $ 1,119 Net income per common share Basic $ 1.54 $ 1.02 $ .05 Diluted 1.52 1.02 .05 See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Shareholders' Equity (Dollars and shares in thousands, except per share amounts)
Accumulated Common Stock Additional Other Class A Class B Paid-In Retained Comprehensive Shares Amount Shares Amount Capital Earnings Income Balance - December 31, 1995 22,380 $224 2,532 $ 25 $ -- $ 149,596 $ 233 Net income -- -- -- -- -- 1,119 -- Dividends -Class A ($.14 per share) -- -- -- -- -- (3,091) -- -Class B ($.12 per share) -- -- -- -- -- (303) -- Foreign currency translation adjustments -- -- -- -- -- -- 377 Conversions of common shares 10 -- (10) -- -- -- -- Stock options exercised 6 -- -- -- 45 -- -- Repurchase and retirement of common shares,net (1,346) (13) -- -- (45) (10,090) -- Balance - December 31, 1996 21,050 211 2,522 25 -- 137,231 610 Net income -- -- -- -- -- 22,558 -- Dividends - Class A ($.14 per share) -- -- -- -- -- (2,698) -- - Class B ($.12 per share) -- -- -- -- -- (293) -- Foreign currency translation adjustments -- -- -- -- -- -- (610) Conversions of common shares 74 -- (74) -- -- -- -- Stock options exercised 18 -- -- -- 126 -- -- Repurchase and retirement of common shares (3,796) (38) (84) (1) (126) (43,838) -- Balance - December 31, 1997 17,346 173 2,364 24 -- 112,960 -- Net income -- -- -- -- -- 29,335 -- Dividends - Class A ($.17 per share) -- -- -- -- -- (2,850) -- - Class B ($.145 per share) -- -- -- -- -- (337) -- Conversions of common shares 104 1 (104) (1) -- -- -- Stock options exercised 110 1 -- -- 779 -- -- Income tax benefit from stock options exercised (2) -- -- -- 550 -- -- Repurchase and retirement of common shares (1,889) (18) -- -- (1,329) (36,271) -- Balance - January 2, 1999 15,669 $157 2,260 $ 23 $ -- $ 102,837 $ --
See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) For the Year Ended January 2, December 31, December 31, 1999 1997 1996 Cash flows from operating activities Net income $ 29,335 $ 22,558 $ 1,119 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,776 12,301 10,998 Amortization 630 707 712 Loss on disposal of assets 160 275 242 Deferred income taxes (300) 600 (13,200) Benefit plan expense, net of contributions (880) (318) 1,827 Special charges and plant closings -- -- 32,900 Changes in operating assets and liabilities: Accounts receivable (730) (2,774) 4,187 Inventories 2,642 (1,427) 28,944 Prepaid expenses and other current assets 403 625 1,237 Accounts payable (2,635) 4,865 (8,502) Accrued liabilities 4,840 (1,482) (4,847) Net cash provided by operating activities 42,241 35,930 55,617 Cash flows from investing activities Additions to property, plant and equipment (11,420) (6,602) (7,274) Proceeds from disposal of assets 3,054 2,853 3,246 Sale (purchase) of short-term investments, net 6,200 1,340 (10,040) Changes in other assets (71) (4,075) 731 Net cash used in investing activities (2,237) (6,484) (13,337) Cash flows from financing activities Dividends paid (3,187) (2,991) (3,394) Net proceeds from issuance of common shares 1,330 126 45 Repurchase of common shares (37,618) (44,003) (10,148) Net cash used in financing activities (39,475) (46,868) (13,497) Net increase (decrease) in cash and cash equivalents 529 (17,422) 28,783 Cash and cash equivalents at beginning of year 13,779 31,201 2,418 Cash and cash equivalents at end of year $ 14,308 $ 13,779 $ 31,201 Supplementary disclosures Cash paid for interest $ 224 $ 178 $ 948 Cash paid for income taxes $ 20,112 $ 13,565 $ 5,213 See notes to consolidated financial statements. OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollars in thousands, except 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, sourcing, 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 equivalents are stated at cost, which approximates market value. Short-term investments - Short-term investments are classified as available-for-sale securities and are highly liquid debt instruments. These securities have a put option feature that allows the Company to liquidate the investments at their discretion and are backed by a letter of credit from financial institutions. These investments 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 99.1% of total 1998 and 99.8% of total 1997 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 or at management's estimate of fair market value if considered impaired under the provisions of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of." Depreciation and amortization for financial reporting purposes are 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 3 to 10 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. Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Advertising - Advertising costs are expensed as incurred and totaled $12,377, $11,165, and $11,448, in 1998, 1997, and 1996, respectively. Earnings per share - The numerator for the calculation of basic and diluted earnings per share is net income. The denominator is computed as follows (in thousands): 1998 1997 1996 Denominator for basic earnings per share- weighted average shares 19,072 22,033 24,678 Employee stock options (treasury stock method) 289 151 16 Denominator for diluted earnings per share 19,361 22,184 24,694 Fiscal year - Beginning in 1998, the Company adopted a change in its fiscal year from a calendar year to a 52/53 week year ending on the Saturday closest to December 31. Fiscal 1998, which included 52 weeks and three days, ended on January 2, 1999. Fiscal 1997 and 1996 were calendar years ended on December 31. All references to years in this report refer to the fiscal years described above. Impact of recently issued accounting standards - In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" which revises employers' disclosures about pension and other postretirement benefit plans. SFAS No. 132 does not change the measurement or recognition of those plans. For the year ended January 2, 1999, the Company adopted SFAS No. 132 and its disclosures for all periods included herein. In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The Company has adopted SFAS No. 130 effective January 1, 1998. However, adoption of SFAS No. 130 had no impact on the Company's net income or shareholders' equity in 1998. Comprehensive income equaled net income in 1998. Comprehensive income totaled $21,948 and $1,496 in 1997 and 1996, respectively. The difference between net income and comprehensive income represents foreign currency translation adjustments. Reclassifications - Certain prior year amounts have been reclassified to conform with the current year presentation. Note 2. Special charges In 1996, the Company recorded special charges related to the discontinuance of the Company's Genuine Kids retail store chain, wind-down of the Company's European subsidiaries and transfer of the European business to a licensee, closing its Red Boiling Springs, Tennessee, Celina, Tennessee, and Columbia, Kentucky sewing facilities and asset impairments related to excess manufacturing capacity. These special charges totaled $32,900, which amounted to $15,200 ($.62 per share) net of tax benefits. These special charges include $6,400 in severance and related benefits for the 1,600 affected employees, $2,000 related to inventory disposals, $6,900 related to other exit costs including lease settlements and costs to dispose of other operating assets, and $17,600 in asset impairments related to unamortized retail leasehold improvements and excess manufacturing space. The Company has sold substantially all of its excess manufacturing space. The wind-down of the European entities permitted the recognition of certain U.S. tax deductions previously unrecognized, resulting in an approximate $4,500 income tax benefit. This income tax benefit, along with the $13,200 income tax benefit resulting from the special charges, reduced the net impact on Company earnings in 1996 by $17,700. Through 1998, approximately $10,900 of severance and other exit costs have been incurred to complete substantially all of the strategic changes related to these special charges. The reserve at January 2, 1999 is considered adequate for remaining plans and related contingencies. Note 3. Inventories A summary of inventories follows: January 2, December 31, 1999 1997 Finished goods $ 55,005 $ 49,400 Work in process 9,333 14,782 Raw materials 1,246 4,044 Total $ 65,584 $ 68,226 The replacement cost of inventory exceeds the above LIFO costs by $13,899 and $14,138 at January 2, 1999 and December 31, 1997, respectively. Partial liquidation of certain LIFO layers in 1998, 1997 and 1996 increased net income by approximately $391, $577 and $660, respectively. Note 4. Property, plant and equipment A summary of property, plant, and equipment follows: January 2, December 31, 1999 1997 Land and improvements $ 3,246 $ 3,677 Buildings 13,822 15,035 Leasehold improvements 14,659 14,036 Machinery and equipment 33,861 27,630 Construction in progress -- 1,814 Total 65,588 62,192 Less: accumulated depreciation and amortization 33,208 29,237 Property, plant and equipment, net $ 32,380 $ 32,955 Note 5. Lines of credit The Company maintains an unsecured credit agreement with a number of banks which provides a $60,000 revolving credit facility and a $40,000 revocable demand line of credit for cash borrowings, issuance of commercial paper, and letters of credit. All borrowing and commercial paper issues under this agreement are supported by the revolving credit facility which expires in June, 2001. 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 revolving credit facility. The Company is required to maintain certain financial ratios in connection with this agreement. There were no outstanding borrowings against these credit arrangements at January 2, 1999. Letters of credit of approximately $21,000 were outstanding at January 2, 1999, with $79,000 of the unused credit facilities available for borrowing. Note 6. Accrued liabilities A summary of accrued liabilities follows: January 2, December 31, 1999 1997 Compensation $ 5,051 $ 4,526 Workers' compensation 10,250 10,250 Income taxes 6,627 6,936 Restructuring costs 4,032 7,938 Other 13,488 8,363 Total $ 39,448 $ 38,013 Note 7. 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: Fiscal Year 1999 $ 11,458 2000 9,365 2001 6,869 2002 5,288 2003 3,632 Thereafter 4,129 Total minimum lease payments $ 40,741 Total rent expense charged to operations for all operating leases is as follows: 1998 1997 1996 Minimum rentals $ 16,352 $ 15,005 $ 17,691 Contingent rentals 961 800 493 Total rent expense $ 17,313 $ 15,805 $ 18,184 Note 8. Income taxes Income tax expense (benefit) is comprised of the following: 1998 1997 1996 Current: Federal $ 16,666 $ 12,396 $ 7,224 State and local 3,624 2,633 760 20,290 15,029 7,984 Deferred (300) 600 (13,200) Total $ 19,990 $ 15,629 $ (5,216) Deferred tax assets and liabilities relate to temporary differences between the financial reporting and income tax basis of Company assets and liabilities, and include the following components: January 2, December 31, 1999 1997 [Assets (Liabilities)] Current deferred taxes Accounts receivable allowances $ 1,225 $ 1,026 Inventory valuation 4,964 5,112 Accrued liabilities 6,584 5,412 Restructuring costs 2,052 3,670 Valuation reserves and other 1,875 580 Total net current deferred tax assets $ 16,700 $ 15,800 Non-current deferred taxes Depreciation $ 61 $ (115) Deferred employee benefits 4,940 5,259 Trademark 501 498 Other (602) (142) Total net non-current deferred tax assets $ 4,900 $ 5,500 For financial reporting purposes, income (loss) before income taxes includes the following components: 1998 1997 1996 Income (loss) before income taxes: United States $ 48,265 $ 37,263 $ 6,308 Foreign 1,060 924 (10,405) Total $ 49,325 $ 38,187 $ (4,097) A reconciliation of the federal statutory income tax rate to the effective tax rates reflected in the consolidated statements of income follows: 1998 1997 1996 Federal statutory tax rate 35.0% 35.0% (35.0)% Differences resulting from: State and local income taxes, net of federal income tax benefit 4.6 4.7 (4.6) Tax effect of foreign losses -- -- 13.6 U.S. tax deductions related to European subsidiaries -- -- (109.8) Other .9 1.2 8.5 Total 40.5% 40.9% (127.3)% As discussed in Note 2, the wind down of the Company's European subsidiaries permitted the recognition of certain U.S. tax deductions previously unrecognized, resulting in a 1996 income tax benefit of approximately $4,500. Note 9. Retirement plans The Company has defined contribution and defined benefit pension plans covering substantially all employees. Charges to operations by the Company for these plans totaled $3,017, $2,950, and $3,795 for 1998, 1997, and 1996, respectively. Defined benefit plans The Company sponsors several defined benefit pension plans covering certain hourly and salaried employees. The Company also sponsors an unfunded defined benefit postretirement health insurance plan that covers qualifying salaried employees. The actuarial computations utilized the following assumptions as applicable for each plan: 1998 1997 1996 Discount rate 6.5% 7.0% 7.5% Expected long-term rate of return on assets 9.0% 9.0% 8.0% Rates of increase in compensation levels 0-4.5% 0-4.5% 0-4.5% 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. Net periodic pension cost was comprised of: 1998 1997 1996 Service cost $ 2,052 $ 1,685 $ 2,315 Interest cost 2,006 2,004 2,230 Expected return on plan assets (2,531) (2,123) (1,950) Amortization of prior service cost 347 457 587 Amortization of transition obligation (156) (156) (164) Recognized actuarial (gain) loss (401) (165) 2 Net periodic pension cost $ 1,317 $ 1,702 $ 3,020 In conjunction with the special charges discussed in Note 2, the Company curtailed defined benefit plans for the affected plants in 1996 and settled the plan obligations in 1997. Curtailment and settlement costs of approximately $655 are included in the special charges originally recorded in 1996. Net periodic postretirement benefit cost was comprised of: 1998 1997 1996 Service cost $ 12 $ 117 $ 78 Interest cost 25 90 84 Net amortization and deferral (98) (4) (8) Net periodic postretirement (benefit) cost $ (61) $ 203 $ 154 A reconciliation of changes in benefit obligation and plan assets follows: Pension Benefits Postretirement Benefits 1998 1997 1998 1997 Change in benefit obligation Benefit obligation at beginning of year $ 31,252 $ 31,338 $ 1,448 $ 1,217 Service cost 2,052 1,685 12 117 Interest cost 2,006 2,004 25 90 Amendments 30 -- -- -- Actuarial (gain) loss 764 1,207 (1,068) 66 Pension settlement -- 455 -- -- Benefits paid (1,603) (5,437) (34) (42) Benefit obligation at end of year 34,501 31,252 383 1,448 Change in plan assets Fair value of plan assets at beginning of year 27,864 26,074 -- -- Actual return on plan assets 2,188 4,444 -- -- Company contributions 416 2,783 34 42 Benefits paid (1,603) (5,437) (34) (42) Fair value of plan assets at end of year 28,865 27,864 -- -- Funded status Funded status of plan (underfunded) (5,636) (3,388) (383) (1,448) Unrecognized net actuarial loss (4,599) (6,106) (1,149) (180) Unrecognized prior service cost 2,514 2,831 -- -- Unrecognized transition obligation (771) (927) -- -- Prepaid accrued benefit cost $ (8,492) $ (7,590) $ (1,532) $ (1,628) Amounts recognized in the consolidated balance sheets: Pension Benefits Postretirement Benefits 1998 1997 1998 1997 Accrued benefit liability $ (8,940) $ (8,684) $ (1,532) $ (1,628) Prepaid benefit cost 448 1,094 -- -- $ (8,492) $ (7,590) $ (1,532) $ (1,628) Amounts applicable to the Company's pension plans with projected benefit obligations in excess of plan assets are as follows: January 2, December 31, 1999 1997 Projected benefit obligations $ 33,244 $ 26,604 Accumulated benefit obligations $ 24,600 $ 16,604 Fair value of plan assets $ 27,582 $ 22,940 Amounts applicable to the Company's pension plans with accumulated benefit obligations in excess of plan assets are as follows: January 2, December 31, 1999 1997 Projected benefit obligations $ 6,744 $ 2,156 Accumulated benefit obligations $ 5,768 $ 1,247 Fair value of plan assets $ 4,134 $ -- The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects: 1-Percentage 1-Percentage Point Increase Point Decrease Effect on total of service and interest cost components for 1998 $ 229 $ (182) Effect on postretirement benefit obligation as of January 2, 1999 $ 1,438 $ (1,522) Defined contribution plans 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 $1,179, $828, and $627 for 1998, 1997, and 1996, respectively. In 1996, the Company initiated a profit-sharing plan covering certain salaried and hourly employees pursuant to Section 401(k) of the Internal Revenue Code, whereby participants may contribute a percentage of compensation, but not in excess of the maximum allowed under the Code. The plan provides for a matching contribution by the Company which amounted to approximately $413, $376 and $89 for 1998, 1997, and 1996, 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 $108, $44 and $59 for 1998, 1997, and 1996, respectively. Deferred employee benefit plans The Company has deferred compensation and supplemental retirement arrangements with certain key officers. Note 10. Common stock The Company maintains 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 $1.875 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 $1.875 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. The Class A common stock shareholders have the right to elect or remove, as a class, 25% of the entire board of directors of the Company. Class B common stock shareholders are entitled to elect or remove, as a class, the other 75% of the directors (subject to any rights granted to any series of preferred stock) and are entitled to one vote per share on all matters (including an increase or decrease in the unissued authorized capital stock of any class) presented to the shareholders for vote. On August 10, 1998, the Company's Board of Directors authorized a two-year, $60,000 repurchase program of the Company's Class A common stock. During 1998, the Company repurchased 1,343,900 shares of its Class A common stock under this program for approximately $27,300. For all of 1998, the Company repurchased 1,888,500 shares of its Class A common stock under its current and prior repurchase programs for approximately $37,600. In August, 1997 the Company purchased approximately 3,313,000 shares of its Class A common stock and approximately 84,000 shares of its Class B common stock under the terms of its Dutch auction tender offer for approximately $37,700. Under the terms of the Dutch auction tender offer, all shares were purchased at $11 per share. For all of 1997, the Company repurchased approximately 3,796,000 shares of its Class A common stock and approximately 84,000 shares of its Class B common stock under all of its authorized repurchase programs for approximately $44,000. For all of 1996, the Company repurchased approximately 1,346,000 shares of its Class A common stock under authorized repurchase programs for approximately $10,100. On August 10, 1998 the Company's Board of Directors declared a two-for-one stock split for Class A and Class B common stock, effected in the form of a stock dividend. Shareholders' equity and all share and per share data have been restated to reflect this dividend. The Company has elected to follow Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its employee stock options. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant and the number of shares granted is fixed, no compensation expense is recognized. The Company's 1994 Incentive Stock Option Plan has authorized the grant of options to management personnel and directors for up to 2,940,000 shares of the Company's Class A common stock. As of January 2, 1999, 1,605,400 shares are available for grant. Options granted generally have 10 year terms and vest ratably over a four year period following date of grant. The following pro forma information regarding net income and net income per share required by SFAS No. 123, "Accounting for Stock Based Compensation," has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1998, 1997, and 1996, respectively: risk- free interest rates of 5.57%, 6.42%, and 5.81%; dividends of $.20 in 1998 and $.14 in 1997 and 1996; volatility factors of the expected market price of the Company's common stock of .472, .406, and .409; and a weighted-average expected life of the option of approximately 8 years. Changes in these subjective assumptions can significantly affect the fair value calculations. The estimated fair value of the options is amortized to expense over the options' vesting period: 1998 1997 1996 Net income as reported $ 29,335 $ 22,558 $ 1,119 Pro forma net income 28,560 22,230 880 Net income per share as reported Basic 1.54 1.02 .05 Diluted 1.52 1.02 .05 Pro forma net income per share Basic 1.50 1.01 .04 Diluted 1.48 1.00 .04 A summary of the Company's stock option activity and related information follows: 1998 1997 1996 Options Weighted- Options Weighted- Options Weighted- (000) average (000) average (000) average exercise exercise exercise price price price Outstanding- beginning of year 864 $ 8 604 $ 7 312 $ 7 Granted 347 19 340 8 324 8 Exercised (110) 8 (18) 8 (6) 7 Forfeited (19) 13 (62) 8 (26) 7 Outstanding- end of year 1,082 $ 11 864 $ 8 604 $ 7 Exerciseable at end of year 370 $ 8 206 $ 8 90 $ 7 Weighted-average fair value of options granted during year $ 7.25 $ 2.47 $ 2.56 Options outstanding Options exerciseable Weighted- Weighted- Weighted- average average average Range of Number remaining exercise Number exercise exercise prices outstanding contract life price outstanding price $ 7 to $ 9 744 7.3 $ 8 370 $ 8 $ 18 to $ 20 338 9.1 19 -- -- 1,082 370 Note 11. Business and credit concentrations The Company operates principally in one segment: the design, sourcing, and marketing of apparel. Operations of the Company occur primarily within the United States and its customers are not concentrated in any geographic region. 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. In 1998 and 1997, sales to a wholesale customer, as a percentage of net sales, amounted to approximately 12% and 11%, respectively. Note 12. Litigation The Company is subject to various legal actions and proceedings in the normal course of business. Although litigation is subject to many uncertainties and the ultimate exposure with respect to these matters cannot be ascertained, management does not believe the final outcome will have a significant effect on the consolidated financial statements. 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 7, 1999. 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 7, 1999. 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 7, 1999. 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 7, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, 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 are filed as part of this Annual Report. (2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts Schedules not included have been omitted because they are not applicable, immaterial, or the required information is included in the consolidated financial statements or notes thereto. (3) Index to Exhibits (b) Reports on Form 8-K None (c) Exhibits 3.1 Certificate of Incorporation of OshKosh B'Gosh, Inc., as restated, May 7, 1993, previously filed as Exhibit 99.3 to the Registrant's Current Report on Form 8-K dated October 25, 1995, Commission File Number 0-13365, is incorporated herein by reference. 3.22 By-laws of OshKosh B'Gosh, Inc., as amended, previously filed as exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, Commission File Number 0-13365, is incorporated herein by reference. *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 the 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. Profit Sharing 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, 1997, is incorporated herein be reference. *10.4 OshKosh B'Gosh, Inc. Restated Excess Benefit Plan, as amended, previously filed as Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, is incorporated herein be reference. *10.5 OshKosh B'Gosh, Inc. Executive Deferred Compensation 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, 1997, is incorporated herein be reference. *10.6 OshKosh B'Gosh, Inc. Officers Medical and Dental Reimbursement Plan, as amended, previously filed as Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 0-13365, is incorporated herein by reference. 10.7 Acknowledgment of 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. 10.8 Indemnity Agreement between OshKosh B'Gosh, Inc. and William P. Jacobsen (former 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: Douglas W. Hyde, Michael D. Wachtel and Kenneth H. Masters). *10.9 OshKosh B'Gosh, Inc. Executive Non-Qualified Profit Sharing Plan, as amended, previously filed as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, is incorporated herein be reference. 10.10 Employment agreement dated and effective May 1, 1994, by and among OshKosh B'Gosh, Inc., Essex Outfitters, Inc. and Barbara Widder-Lowry previously filed as Exhibit 10.14 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 0-13365, is incorporated herein by reference. 10.11 Employment agreement dated and effective May 1, 1994 by and among OshKosh B'Gosh, Inc., Essex Outfitters, Inc. and Paul A. Lowry previously filed as Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 0-13365, is incorporated herein by reference. 10.12 Credit agreement between OshKosh B'Gosh, Inc. and Firstar Bank Milwaukee, N.A. and participating banks as amended, dated as of December 31, 1998. *10.13 OshKosh B'Gosh, Inc. 1994 Incentive Stock Plan previously filed as Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, Commission File Number 0-13365, is incorporated herein by reference. 10.14 OshKosh B'Gosh, Inc. 1995 Outside Director's Stock Option Plan, as amended, previously filed as Exhibit 10.14 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, is incorporated herein be reference. *10.15 OshKosh B'Gosh, Inc. Flexible Nonstandardized 401(k) Adoption Agreement and Smith Barney Prototype Defined Contribution Plan Document #05 previously filed as Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, Commission File Number 0-13365, is incorporated herein by reference. 21. The following is a list of subsidiaries of the Company as of January 2, 1999. The consolidated financial statements reflect the operations of all subsidiaries as they existed on January 2, 1999. State or Other Jurisdiction of Incorporation or Name of Subsidiary Organization Grove Industries, Inc. Delaware Manufacturera International Apparel, S.A. Honduras OshKosh B'Gosh International Sales, Inc. Virgin Islands OshKosh B'Gosh Asia/Pacific Ltd. (Inactive) Hong Kong OshKosh B'Gosh U.K. Ltd. (Inactive) United Kingdom OshKosh B'Gosh Deutschland GmbH (Inactive) Germany OshKosh B'Gosh Investments, Inc. Nevada 23. Consent of Ernst & Young LLP, Independent Auditors 27. Financial Data Schedule * Represents a plan that covers compensation, benefits and/or related arrangements for executive management. SIGNATURES Date: March 31, 1999 Pursuant to the requirements of Section 13 of 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-Finance, 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 and Chief Executive Officer /S/ MICHAEL D. WACHTEL Executive Vice President, Chief Operating Officer /S/ DAVID L. OMACHINSKI Vice President-Finance, Treasurer and Chief Financial Officer /S/ STEVEN R. DUBACK Secretary and Director /S/ WILLIAM F. WYMAN Vice President Domestic Licensing Date: March 31, 1999 OSHKOSH B'GOSH, INC. AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts (Dollars in Thousands) 1998 1997 1996 Accounts receivable - allowances: Balance at beginning of period $ 4,225 $ 5,474 $ 3,970 Charged to costs and expenses 15,997 11,836 10,392 Deductions - bad debts written off, net of recoveries and other allowances (15,982) (13,085) (8,888) Balance at end of period $ 4,240 $ 4,225 $ 5,474 1998 1997 1996 Restructuring costs - allowances: Balance at beginning of period $ 7,938 $ 10,694 $ 334 Charged to cost and expenses -- -- 15,300 Actual restructuring costs incurred (3,906) (2,756) (4,940) Balance at end of period $ 4,032 $ 7,938 $ 10,694 EXHIBIT 23 Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 333-01051 and No. 333-01053) of OshKosh B'Gosh, Inc. of our report dated January 29, 1999, with respect to the consolidated financial statements and schedule of OshKosh B'Gosh, Inc. and Subsidiaries included in this Annual Report (Form 10-K) for the year ended January 2, 1999. ERNST & YOUNG LLP Milwaukee, Wisconsin March 29, 1999 EX-10 2 EXHIBIT 10.12 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 Ave. 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 $12,000,000 20.0% Bank Norwest Bank Wisconsin, $12,000,000 20.0% National Association Total: $60,000,000 100.0% 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, $ 8,000,000 National Association 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 (E) the Aggregate Commitment. The Demand Line shall be unused for at least 90 consecutive days during each twelve-month period commencing July I 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 lo.l(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!k) 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 (1/8W) 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 he 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 thefunds 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%r 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 Agreementof 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 eclual 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 lo.l(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: 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 recfuire 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 noncash 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 extraordinary losses and losses upon the disposition of investments 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: 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; 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. (1) 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 ground 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 "ERISAII 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 ouch 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: /S/ STEVE CARLTON Title: Assistant Vice President BANK ONE, MILWAUKEE, NA By: /S/ A.F. MAGGORIE Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /S/ GEORGE M. DELUHY Title: Vice President NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: /S/ DANIEL G. FRAZIER Title: Vice President 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: /S/ DAVID L. OMACHINSKI Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: /S/STEVE CARLTON Title: Assistant Vice President BANK ONE, MILWAUKEE, NA By: /S/ A.F. MAGGIORE Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /S/GEORGE M. DELUHY Title: Vice President NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: /S/ DANIEL G. FRAZIER Title: Vice President 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. I. 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 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) 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 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: /S/ DAVID L. OMACHINSKI Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: /S/ STEVE CARLTON Title: Assistant Vice President BANK ONE, MILWAUKEE, NA By: /S/ A.F. MAGGORIE Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /S/ GEORGE M. DELUHY Title: Vice President NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: /S/ DANIEL G. FRAZIER Title: Vice President AMENDMENT NO. 3 TO CREDIT AGREEMENT As of December 21, 1995 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 through Amendment No. 2 thereto dated as of December 31, 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 during each period 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 period: Consolidated Fixed Period Charge Coverage Ratio 1. From December 31, 2.0:1.0 1994 through and including December 31, 1996 2. From January 1, 2.5:1.0 1997 through and including September 30, 1997 3. From October 1, 3.0:1.0 1997 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: /S/ DAVID L. OMACHINSKI Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: /S/STEVE CARLTON Title: Assistant Vice President BANK ONE, MILWAUKEE, NA By: /S/ A. F. MAGGORIE Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /S/ GEORGE M. DELUHY Title: Vice President NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: /S/ DANIEL G. FRAZIER Title: Vice President AMENDMENT NO. 4 TO CREDIT AGREEMENT As of January 30, 1996 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 The First National Bank of Boston 100 Federal Street Boston, Massachusetts 02110 Gentlemen: Oshkosh B,Gosh, Inc., a Delaware corporation (the "Company"), hereby agrees with each of you as follows: I. Definitions. Reference is made to that certain Credit Agreement dated as of June 24, 1994, as amended through Amendment No. 3 thereto dated as of December 21, 1995 (the "Credit Agreement") between the Company and each of you other than The First National Bank of Boston, pursuant to which the Company has issued (i) its Revolving Credit Notes to each of you other than The First National Bank of Boston in the aggregate principal amount of $60,000,000, and (ii) its Demand Notes to each of you other than The First National Bank of Boston in the aggregate principal amount of $40,000,000, each dated as of June 24, 1994 (collectively, the "Existing Notes"). All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement as amended hereby. 2. Addition of The First National Bank of Boston; New Notes. The Company has informed each of you that it wishes, and The First National Bank of Boston has informed the Company and each of you other than itself that it wishes, that The First National Bank of Boston become a party to the Credit Agreement on the terms and conditions herein and therein set forth. On the effective date of this Amendment, all loans made or continued pursuant to the Credit Agreement, including the unpaid balances of the Existing Notes, shall be evidenced by (i) new Revolving Credit Notes of the Company in the form of Exhibit 1.1 annexed hereto in the aggregate principal amount of $60,000,000, and (ii) new Demand Notes of the Company in the form of Exhibit 1.2 annexed hereto in the aggregate principal amount of $40,000,000, each to be dated as of the date hereof (collectively, the "New Notes"). The New Notes shall be executed by the Company and delivered to each of you on the date hereof against the return of the Existing Notes to the Company. Accrued interest on the Existing Notes outstanding on the date of issuance of the New Notes shall be included in the interest due on the New Notes issued in replacement of such Existing Notes on the first interest payment date specified therein. 3. Amendments to Credit Agreement. 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 in the Credit Agreement to the Notes issued thereunder and the loans evidenced thereby shall refer to the New Notes issued hereunder and the loans evidenced thereby (including the unpaid balances of the Existing Notes). (b) All references to the Credit Agreement in the Credit Agreement and in any other agreements relating thereto shall refer to the Credit Agreement as amended hereby. (c) The first page of the Credit Agreement is amended by adding The First National Bank of Boston, at its address set forth on the first page of this Amendment, as an additional addressee. The First National Bank of Boston shall be included as one of the Banks for all purposes of the Credit Agreement, and all references to the Banks in the Credit Agreement and all other agreements relating thereto shall hereafter be deemed to refer collectively to Firstar Bank Milwaukee, National Association, Bank One, Milwaukee, NA, Harris Trust and Savings Bank, Norwest Bank Wisconsin, National Association, and The First National Bank of Boston. (d) The table set forth in Section 1.1 of the Credit Agreement (Revolving Credit) is amended to read in its entirety as follows: Percentage Name of Bank Commitment Interest Firstar Bank Milwaukee, National Association $18,000,000 30.0% Bank one, Milwaukee, NA $12,000,000 20.0% Harris Trust and Savings Bank $10,500,000 17.5% Norwest Bank Wisconsin, National Association $10,500,000 17.5% The First National Bank of Boston $ 9,000,000 15.0% TOTAL $60,000,000 100.0% (e) The table set forth in Section 1.2 of the Credit Agreement (Demand Line of Credit)is amended to read in its entirety as follows: Name of Bank Demand Line Firstar Bank Milwaukee, National Association $12,000,000 Bank One, Milwaukee, NA $ 8,000,000 Harris Trust and Savings Bank $ 7,000,000 Norwest Bank Wisconsin, National Association $ 7,000,000 The First National Bank of Boston $ 6,000,000 TOTAL $40,000,000 (f) The first clause of the definition of "Business Day" prior to the semicolon) set forth in Section l0.l(b) of the Credit Agreement is hereby amended to read in its entirety as follows: (g) the term "Business Day" means any day other than a Saturday or Sunday on which banks in the States of Wisconsin, Illinois and Massachusetts are open for the transaction of substantially all of their banking functions; 4. 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. 5. Related Transactions; Computations. Upon issuance of the New Notes, (i) The First National Bank of Boston shall become a party to the Credit Agreement as amended hereby with the same force and effect as if a signatory thereto and shall have (a) the Commitment and Percentage Interest in the revolving credit loans to be made under the Credit Agreement set forth opposite its name in Section 1.1 of the Credit Agreement as amended hereby, and (b) its respective share of the Demand Line set forth in Section 1.2 of the Credit Agreement as amended hereby, (ii) each of you will make such adjustments among yourselves as are necessary so that after giving effect to such adjustments, the Percentage Interest of each of you in the revolving credit loans outstanding under the Credit Agreement will be the Percentage Interest set forth under Section 1.1 of the Credit Agreement as amended hereby, and your respective shares of the outstanding portion of the Demand Line will be as set forth under Section 1.2 of the Credit Agreement as amended hereby, and (iii) the obligations of the Company to The First National Bank of Boston under the Credit Agreement as amended hereby shall begin to accrue. The interest and commitment fees due each of you other than The First National Bank of Boston with respect to periods prior to the date hereof shall be determined in accordance with the Credit Agreement as in effect prior to the date hereof, and the interest and commitment fees due each of you with respect to the periods beginning on or after the date hereof shall be determined in accordance with the Percentage Interests in effect on and after the date hereof. 6. Conditions. Without limiting any of the other terms of the Credit Agreement as amended hereby, this Amendment shall not become effective, and the Banks shall not be required to make any further loans to the Company unless and until: (a) No Default or Event of Default shall have occurred and be continuing and neither the business nor the assets nor the financial condition of the Company shall have been materially adversely affected as the result of any event or development since December 31, 1994. (b) The Banks shall have received such documents concerning the corporate status of the Company and the authorization of the transactions contemplated hereby as may be reasonably requested, and such other matters as the Banks shall reasonably require; and (c) All proceedings taken in connection with the transactions contemplated by this Amendment and all instruments, authorizations and other documents applicable thereto shall be satisfactory in form and substance in the reasonable opinion of the Banks and their counsel. 7. Confirmation of Credit Agreement. Except as expressly provided above, the Credit Agreement shall remain in full force and effect. 8. 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. 9. 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: /S/ DAVID L. OMACHINSKI Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: /S/ STEVE CARLTON Title: Vice President BANK ONE, MILWAUKEE, NA By: /S/ A.F. MAGGORIE Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /S/ GEORGE M. DELUHY Title: Vice President NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: /S/ DANIEL G. FRAZIER Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /S/ PETER GRISWOLD Title: Director AMENDMENT NO. 5 TO CREDIT AGREEMENT As of June 28, 1996 Firstar Bank Milwaukee, NA 777 East Wisconsin Ave. Milwaukee, WI 53202 Bank One, Milwaukee, NA 111 East Wisconsin Ave. Milwaukee, WI 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, IL 60603 Norwest Bank Wisconsin, NA 100 East Wisconsin Ave. Milwaukee, WI 53202 The First National Bank of Boston 100 Federal Street Boston, MA 02110 Gentlemen: OshKosh B'Gosh, Inc., a Delaware corporation (the "Company"), hereby agrees with each of you as follows: 1. Definitions. Reference is made to that certain Credit Agreement dated as of June 24, 1994, as amended through Amendment No. 4 thereto dated as of January 30, 1996 (the "Credit Agreement") between the Company and each of you, pursuant to which the Company has issued its Revolving Credit Notes to each of you in the aggregate principal amount of $60,000,000, each dated as of January 20, 1996 (collectively, the "Existing Notes"). All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement as amended hereby. 2. New Notes. The Company has informed each of you that it wishes to (I) extend the Termination Date to June 24, 1999, (ii) incorporate Competitive Bid Loans (as defined below) into the Credit Agreement, and (iii) make certain other changes in the Credit Agreement as set forth below. Subject to all of the terms and conditions hereof, you have agreed to such amendments to the Credit Agreement as provided below. On the effective date of this Amendment, all loans made or continued pursuant to the Revolving Credit established pursuant to section 1.1 of the Credit Agreement, including the unpaid balances of the Existing Notes, shall be evidenced by new Revolving Credit Notes of the Company in the form of Exhibit 1.1 annexed hereto in the aggregate principal amount of $60,000,000, each to be dated as of the date hereof (collectively, the "New Notes"). The New Notes shall be executed by the Company and delivered to each of you on the date hereof against the return of the Existing Notes to the Company. Accrued interest on the Existing Notes outstanding on the date of issuance of the New Notes shall be included in the interest due on the New Notes issued in replacement of such Existing Notes on the first interest payment date specifed therein. 3. Amendments to Credit Agreement. 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 in the Credit Agreement to the Revolving Credit Notes issue thereunder and the loans evidenced thereby shall refer to the New Notes issued hereunder and the loans evidenced thereby (including the unpaid balances of the Existing Notes). (b) All references to the Credit Agreement in the Credit Agreement and in any other agreements relating thereto shall refer to the Credit Agreement as amended hereby. (c) The date of June 24, 1997 set forth in Section 1.1 of the Credit Agreement is amended to June 24, 1999. (d) The amount of $35,000,000 set forth in Section 1.4(a) of the Credit Agreement (relating to import Letters of Credit) is amended to $50,000,000. (e) The letter of credit fee of three-quarters of one percent (3/4%) per annum set forht in Section 1.4(b) of the Credit Agreement is amended to five-eighths of one percent (5/8%) per annum. (f) Section 1.9(e) is deleted from the Credit Agreement in its entirety. In addition, all references to "Nicolet Funding Corp. Loans" throughout the Credit Agreement are deleted and shall be of no further force or effect. (g) A new Section 1.10 is hereby added to the Credit Agreement reading in its entirety as follows: 1.10 Competitive Bid Loans. The Company may obtain loans under Sections 1.1 and 1.2 pursuant to the competitive bid procedures set forth in the Section 1.10 ("Competitive Bid Loans"), subject to the terms and conditions of Section 1.1 or 1.1 (as the case may be), except as otherwise provided in this Section 1.10. Each Bank may make such Competitive Bid Loans to the Company, subject to the terms and conditions hereof, in such amounts as such Bank, in its sole discretion, desires to make to the Company. Notwithstanding any contrary provision of Section 1.1, the aggregate outstanding amount of Competitive Bid Loans made against the Aggregate Commitment shall reduce each Bank's Commitment pro rata in accordance with its respective Percentage Interest, regardless of which Bank makes such Competitive Bid Loans. Any Competitive Bid Loan made under the Demand Line shall be due and payable upon demand in accordance with the terms of this Agreement, notwithstanding any of the terms of such Competitive Bid Loan. The procedure for making Competitive Bid Loans shall be as follows: (a) The Company may make requests for bids from the Banks to make Competitive Bid Loans ("Competitive Bids") not later than 9:00 a.m., Milwaukee time, on the proposed borrowing date for one or more Competitive Bid Loans. Each such request shall be given directly to each of the Banks, shall be given in writing (which may be a facsimile transmission) signed by the Company, and shall specify (I) the proposed borrowing date, which shall be a Business Day, (ii) the aggregate amount of the requested Competitive Bid Loans, which shall not be less than $1,000,000 or, for amounts in excess thereof, an integral multiple of $100,000, (iii) the interest period for each Competitive Bid Loan ("Loan Period"), which shall commence on the applicable borrowing date and end on a specified date thereafter not exceeding 180 days from such borrowing date (up to three (3) Loan Periods may be requested pursuant to each Competitive Bid), and the last day of each such Loan Period, and (iv) if more than one Loan Period is so specified, the principal amount allocable to each such Loan Period. (b) Each Bank in its sole discretion may (but is not obligated to) submit one or more Competitive Bids to the Company not later than 11:00 a.m., Milwaukee time, on the proposed borrowing date specified in such request for Competitive Bids (such 11:00 a.m. time being herein called the "Submission Deadline") by facsimile or in writing, and thereby irrevocably offer to make all or any part (any such part referred to as a "Portion") of any Competitive Bid Loan described in the relevant request for Competitive Bids at a fixed rate of interest per annum (each a "Bid Rate") specified therein, without reference to the LIBOR Rate or other basis for interest rates, in an aggregate principal amount of not less than $1,000,000 and, for amounts in excess thereof, an integral multiple of $100,000. Multiple Competitive Bids may be delivered by any Bank. (c) The Company shall, in its sole discretion but subject to paragraph (d) below, irrevocably accept or reject any such Competitive Bid (or any Portion thereof) not later than 12:00 noon on the proposed borrowing date by notice to the appropriate Bank by telephone (confirmed in writing promptly delivered to such Bank and the Agent the same day). If a Bank fails to receive notice from the Company of its acceptance or rejection of any Competitive Bids made by such Bank at or prior to 12:00 noon on such day, all such Competitive Bids shall be deemed to have been rejected by the Company. The Company's written acceptance of any Competitive Bid shall constitute a borrowing notice of the Company, and shall specify the amount, maturity date and Bid Rate for each Competitive Bid Loan. The Company will give written notice to the Agent in the form of Part 3 to Exhibit 2.1 hereto on each Business Day on which there is any change in the aggregate outstanding principal amount of Competitive Bid Loans, setting forth the aggregate principal amount of all Competitive Bid Loans then outstanding after giving effect to any Competitive Bid Loans made on such Business Day. (d) If the Company accepts a Portion of a proposed Competitive Bid Loan for a single Loan Period at the Bid Rate provided therefor in a Bank's Competitive Bid, such Portion shall be in a principal amount of $1,000,000 or, for amounts in excess thereof, an integral multiple of $100,000. If the Company accepts any Competitive Bid Loan or Portion offered in any Competitive Bid, the Company must accept Competitive Bids (and Competitive Bid Loans and Portions thereby offered) based exclusively upon the successively lowest Bid Rates within each Loan Period an no other criteria. If two (2) or more Banks submit Competitive Bids with identical Bid Rates for the same Loan Period and the Company accepts any thereof, the Company shall accept all such Competitive Bids as nearly as possible in proportion to the amounts of such Banks' respective Competitive Bids with identical Bid Rates for such Loan Period, provided, that if the amount of Competitive Bid Loans to be so allocated is not sufficient to enable each such Bank to make such Competitive Bid Loan (or Portions thereof) in an aggregate principal amount of $1,000,000, or for amounts in excess thereof, an integral multiple of $100,000, the Company shall round the Competitive Bid Loans (or Portions thereof) allocated to such Bank or Banks as the Company shall select as necessary to a minimum of $1,000,000 and, if greater than $1,000,000 the nearest multiple of $100,000, or select the Competitive Bid of only one of such Banks. (e) Not later than 1:30 p.m., Milwaukee time, on the relevant borrowing date, each Bank whose Competitive Bid was accepted by the Company shall make available to the Agent, in immediately available funds, the proceeds of such Bank's Competitive Bid Loan(s). Upon fulfillment of the applicable borrowing conditions, the Agent shall deposit in the Company's account maintained with the Agent or as the Company may otherwise direct in writing on the relevant borrowing date the proceeds of such Competitive Bid Loans, in immediately available funds. (h) Section 2.2(b) of the Credit Agreement is amended by adding an additional subparagraph (3) thereto, reading in its entirety as follows: (3) With respect to any portion of the indebtedness evidenced by the Notes which consists of Competitive Bid Loans made pursuant to Section 1.10, the applicable Bid Rate determined pursuant to the procedure set forth in Section 1.10. (i) Section 5.4 of the Credit Agreement is amended by adding an additional clause (v) at the end of subparagraph (a) thereor, reading in its entirety as follows: and (v) other short-term fixed income investments of high credit quality selected by the Company; (j) Section 6.1(c) of the Credit Agreement is amended to read in its entirety as follows: (k) At the end of each fiscal quarter during each period 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 period: Consolidated Fixed Charge Period Coverage Ratio From December 31, 1994 through and including December 31, 1997 2.0:1.0 From January 1, 1998 through and including December 31, 1998 2.5:1.0 From January 1, 1999 and thereafter 3.0:1.0 (1) Clause (i) of Section 10.1(f) of the Credit Agreement (definition of "Consolidated Fixed Charge Coverage Ratio") is amended to read in its entirety as follows: (i) the Consolidated Net Earnings of the Company for such period (without taking into account any effects of the $20.9 million pre-tax charge against income taken by the Company in the fiscal quarter ending June 30,1996) 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 (including the interest component of Capitalized Leases) for such period and (C) rental expense under leases other than Capitalized Leases for such period; and (m) Exhibit 2.1 to the Credit Agreement is amended to read as set forth in Exhibit 2.1 attached to this Amendment. 4. 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 of (ii) require 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. 5. Conditions. Without limiting any of the other terms of the Credit Agreement as amended hereby, this Amendment shall not become effective, and the Banks shall not be required to make any further loans to the Company unless and until: (a) No Default or Event of Default shall have occurred and be continuing and neither the business nor the assets nor the adversely affected as the result of any event or development since December 31, 1995. (b) The Banks shall have received such documents concerning the corporate status of the Company and the authorization of the transactions contemplated hereby as may be reasonably requested, and such other matters as the Banks shall reasonably require; and (c) All proceedings taken in condition with the transactions contemplated by this Amendment and all instruments, authorizations and other documents applicable thereto shall be satisfactory in form and substance in the reasonable opinion of the Banks and their counsel. 6. Confirmation of Credit Agreement. Except as expressly provided above, the Credit Agreement shall remain in full force and effect. 7. 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. 8. 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: /s/David L. Omachinski Vice President of Finance (Corporate Seal) Agreed to as of the date fist above written. FIRSTAR BANK MILWAUKEE, NA BY: /s/Stephen Carlton Title: Vice President BANK ONE, MILWAUKEE, NA BY: /s/A.F. Maggiore Title: Vice President HARRIS TRUST AND SAVINGS BANK BY: Title: Vice President NORWEST BANK WISCONSIN, NA BY: /s/Daniel Frazier Title: Vice President THE FIRST NATIONAL BANK OF BOSTON BY: Title: Director EXHIBIT 1.1 PROMISSORY NOTE $ , 19 FOR THE VALUE RECEIVED, OshKosh B'Gosh, Inc., a Delaware 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, Wisbonsin, on June 24, 1999. 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, as amended, 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 2.1 COMMERCIAL PAPER AND COMPETITIVE BID LOAN REPORT/LOAN REQUEST , 19 Memorandum to: Firstar Bank Milwaukee, NA, as Agent 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Re: Credit Agreement Dated as of June 24, 1994, as amended (the "Credit Agreement") Part 1: Commercial Paper Report The aggregate principal amount of all Commercial Paper 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. Part 3: Competitive Bid Loan Report The aggregate principal amount of all Competitive Bid Loans now outstanding is $ . The Portions of outstanding Competitive Bid Loans held by each of the Banks are as follows: Firstar Bank Milwaukee, NA $ Bank One, Milwaukee, NA $ Harris Trust and Savings Bank $ Norwest Bank Wisconsin, NA $ The First National Bank of Boston $ OSHKOSH B'GOSH, INC. By: Title: AMENDMENT NO. 6 TO CREDIT AGREEMENT As of November 21, 1997 Firstar Bank Milwaukee, National Association 777 East Wisconsin Avenue Milwaukee, WI 53202 Bank One, Wisconsin 111 East Wisconsin Avenue Milwaukee, WI 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, IL 60603 Norwest Bank Wisconsin, National Association 100 East Wisconsin Avenue Milwaukee, WI 53202 BankBoston, N.A. 100 Federal Street Boston, MA 02110 Gentlemen: OshKosh B'Gosh, Inc., a Delaware corporation (the "Company"), hereby agrees with each of you as follows: 1. Definitions. Reference is made to that certain Credit Agreement dated as of June 24, 1994, as amended through Amendment No. 5 thereto dated as of June 28, 1996 (the "Credit Agreement") between the Company and each of you, pursuant to which the Company has issued its Revolving Credit Notes to each of you in the aggregate principal amount of $60,000,000, each dated as of June 28, 1996 (collectively, the "Existing Notes"). All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement as amended hereby. 2. New Notes. The Company has informed each of you that it wishes to (I) extend the Termination Date to June 24, 2000, and (ii) make certain other changes in the Credit Agreement as set forth below. Subject to all of the terms and conditions hereof, you have agreed to such amendments to the Credit Agreement as provided below. On the effective date of this Amendment, all loans made or continued pursuant to the Revolving Credit established pursuant to Section 1.1 of the Credit Agreement, including the unpaid balances of the Existing Notes, shall be evidenced by new Revolving Credit Notes of the Company in the form of Exhibit 1.1 annexed hereto in the aggregate principal amount of $60,000,000, each to be dated as of the date hereof (collectively, the "New Notes"). The New Notes shall be executed by the Company and delivered to each of you on the date hereof against the return of the Existing Notes to the Company. Accrued interest on the Existing Notes outstanding on the date of issuance of the New Notes shall be included in the interest due on the New Notes issued in replacement of such Existing Notes on the first interest payment date specified therein. 3. Amendments to Credit Agreement. 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 in the Credit Agreement to the Revolving Credit Notes issued thereunder and the loans evidenced thereby shall refer to the New Notes issued hereunder and the loans evidenced thereby (including the unpaid balances of the Existing Notes). (b) All references to the Credit Agreement in the Credit Agreement and in any other agreements relating thereto shall refer to the Credit Agreement as amended hereby. (c) The date of June 24, 1999 set forth in Section 1.1 of the Credit Agreement is amended to June 24, 2000. (d) 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 during each period 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 period: Period Consolidated Fixed Charge Coverage Ratio 1. From December 31, 1994 2.0:1.0 through and including December 31, 1997. 2. From January 1, 1998 2.5:1.0 through and including December 31, 1999. 3. From January 1, 2000 and 2.75:1.0 thereafter. 4. 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. 5. Conditions. Without limiting any of the other terms of the Credit Agreement as amended hereby, this Amendment shall not become effective, and the Banks shall not be required to make any further loans to the Company unless and until: (a) No Default or Event of Default shall have occurred and be continuing and neither the business nor the assets nor the financial condition of the Company shall have been materially adversely affected as the result of any event or development since December 31, 1996. (b) The Banks shall have received such documents concerning the corporate status of the Company and the authorization of the transactions contemplated hereby as may be reasonably requested, and such other matters as the Banks shall reasonably require; and (c) All proceedings taken in conjunction with the transactions contemplated by this Amendment and all instruments, authorizations and other documents applicable thereto shall be satisfactory in form and substance in the reasonable opinion of the Banks and their counsel. 6. Confirmation of Credit Agreement. Except as expressly provided above, the Credit Agreement shall remain in full force and effect. 7. 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. 8. 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: /s/David L. Omachinski Vice President of Finance (Corporate Seal) Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, NATIONAL ASSOCIATION By: Title: BANK ONE, WISCONSIN By: Title: AMENDMENT NO. 7 TO CREDIT AGREEMENT As of December 31, 1998 Firstar Bank Milwaukee, National Association 777 East Wisconsin Avenue Milwaukee, WI 53202 Bank One, Wisconsin 111 East Wisconsin Avenue Milwaukee, WI 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, IL 60603 Norwest Bank Wisconsin, National Association 100 East Wisconsin Avenue Milwaukee, WI 53202 BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Gentlemen: OshKosh B'Gosh, Inc., a Delaware corporation (the "Company"), hereby agrees with each of you as follows: 1. Definitions. Reference is made to that certain Credit Agreement dated as of June 24, 1994, as amended through Amendment No. 6 thereto dated as of November 21, 1997 (the "Credit Agreement") between the Company and each of you, pursuant to which the Company has issued its Revolving Credit Notes to each of you in the aggregate principal amount of $60,000,000, each dated as of November 21, 1997 (collectively, the "Existing Notes"). All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Credit Agreement as amended hereby. 2. New Notes. The Company has informed each of you that it wishes to (i) extend the Termination Date to June 24, 2001, and (ii) make certain other changes in the Credit Agreement as set forth below. Subject to all of the terms and conditions hereof, you have agreed to such amendments to the Credit Agreement as provided below. On the effective date of this Amendment, all loans made or continued pursuant to the Revolving Credit established pursuant to Section 1.1 of the Credit Agreement, including the unpaid balances of the Existing Notes, shall be evidenced by new Revolving Credit Notes of the Company in the form of Exhibit 1.1 annexed hereto in the aggregate principal amount of $60,000,000 each to be dated as of the date hereof (collectively, the "New Notes"). The New Notes shall be executed by the Company and delivered to each of you on the date hereof against the return of the Existing Notes to the Company. Accrued interest on the Existing Notes outstanding on the date of issuance of the New Notes shall be included in the interest due on the New Notes issued in replacement of such Existing Notes on the first interest payment date specified therein. 3. Amendments to Credit Agreement. 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 in the Credit Agreement to the Revolving Credit Notes issued thereunder and the loans evidenced thereby shall refer to the New Notes issued hereunder and the loans evidenced thereby (including the unpaid balances of the Existing Notes). b) All references to the Credit Agreement in the Credit Agreement and in any other agreements relating thereto shall refer to the Credit Agreement as amended hereby. c) The date of June 24, 2000 set forth in Section 1.1 of the Credit Agreement is amended to June 24, 2001. d) Section 6.1(a) of the Credit Agreement is deleted in its entirety from the Credit Agreement. The Banks hereby waive all violations of Section 6.1(a) for all periods prior to the date of this Amendment. 4. 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. 5. Conditions. Without limiting any of the other terms of the Credit Agreement as amended hereby, this Amendment shall not become effective, and the Banks shall not be required to make any further loans to the Company unless and until: a) No Default or Event of Default shall have occurred and be continuing and neither the business nor the assets nor the financial condition of the Company shall have been materially adversely affected as the result of any event or development since December 31, 1997. b) The Banks shall have received such documents concerning the corporate status of the Company and the authorization of the transactions contemplated hereby as may be reasonably requested, and such other matters as the Banks shall reasonably require; and c) All proceedings taken in connection with the transactions contemplated by this Amendment and all instruments, authorizations and other documents applicable thereto shall be satisfactory in form and substance in the reasonable opinion of the Banks and their counsel. 6. Confirmation of Credit Agreement. Except as expressly provided above, the Credit Agreement shall remain in full force and effect. 7. 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. 8. 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: /s/ Jeffrey J. Janza Title: Assistant Vice President BANK ONE, WISCONSIN By: /s/ A.F. Maggiore Title: Vice President HARRIS TRUST AND SAVINGS BANK By: /s/ George M. Dluhy Title: Vice President NORWEST BANK WISCONSIN, NATIONAL ASSOCIATION By: /s/ Joan F. Kinate Title: Vice President BANKBOSTON, N.A. By: /s/ Kathleen Dimock Title: Vice President EXHIBIT 1.1 PROMISSORY NOTE $ , 19 FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Delaware 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 the Termination Date (as defined in the Credit Agreement referred to below). 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 of 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, as amended, 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) EX-27 3 FINANCIAL DATA SCHEDULE
5 YEAR JAN-2-1999 JAN-2-1999 14308000 2500000 28248000 4240000 65584000 123962000 65588000 33208000 162568000 47086000 0 0 0 180000 102837000 162568000 423232000 431418000 257700000 124798000 67000 0 399000 49325000 19990000 29335000 0 0 0 29335000 1.54 1.52
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