EXHIBIT 10.1
AMENDED AND RESTATED CREDIT AGREEMENT
     THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
September 8, 2006, by and between LACROSSE FOOTWEAR, INC., a Wisconsin
corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).
RECITALS
     Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.
     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
CREDIT TERMS
     SECTION 1.1. LINE OF CREDIT.
     (a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time under a
revolving line of credit (“Line of Credit”) up to and including June 30, 2009,
not to exceed (i) at any time (other than during each Reduction Period, as
defined below), the aggregate principal amount of Thirty Million Dollars
($30,000,000.00), and (ii) from and including each January 1 to and including
each May 31 (with each such period referred to as a “Reduction Period”), the
aggregate principal amount of Seventeen Million Five Hundred Thousand Dollars
($17,500,000.00), the proceeds of which shall be used to finance the working
capital requirements of Borrower and Danner, Inc., a Wisconsin corporation
(“Subsidiary”). Borrower’s obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note dated as of September 8, 2006 in the
form attached hereto as Exhibit A (“Line of Credit Note”), all terms of which
are incorporated herein by this reference. Bank represents and warrants to
Borrower that Bank has not assigned, endorsed or transferred the promissory note
dated as of $30,000,000.00 dated as of October 1, 2005 (the “Prior Note”) and
agrees that it shall not hereafter endorse, assign, endorse or transfer the
Prior Note.
     (b) Letter of Credit Subfeature. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue or cause an
affiliate to issue standby, sight commercial or usance commercial letters of
credit for the account of Borrower to finance the backing of imports and exports
(each, a “Letter of Credit” and collectively, “Letters of Credit”); provided
however, that the aggregate undrawn amount of all outstanding Letters of Credit
plus the face amount of all outstanding drafts created under usance commercial
Letter of Credit

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(“Usance Drafts”), shall not at any time exceed Five Million Dollars
($5,000,000.00). The form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion. No Letter of Credit shall
have an expiration date subsequent to the maturity date of the Line of Credit.
The undrawn amount of all Letters of Credit and the face amount of all
outstanding Usance Drafts shall be reserved under the Line of Credit and shall
not be available for borrowings thereunder. Each Letter of Credit shall be
subject to the additional terms and conditions of the Letter of Credit
agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement
applicable to such advances; provided however, that if advances under the Line
of Credit are not available, for any reason, at the time any drawing is paid,
then Borrower shall immediately pay to Bank the full amount drawn, together with
interest thereon from the date such drawing is paid to the date such amount is
fully repaid by Borrower, at the variable Prime Rate-based rate of interest
applicable to advances under the Line of Credit. In such event Borrower agrees
that Bank, in its sole discretion, may debit any account maintained by Borrower
with Bank for the amount of any such drawing. Notwithstanding the foregoing,
usance commercial Letters of Credit shall contain such provisions and be issued
in such manner for such purpose as to satisfy Bank that any bankers’ acceptance
created by Bank’s acceptance of a draft thereunder shall be eligible for
discount by a Federal Reserve Bank, will not result in a liability of Bank
subject to reserve requirements under any law, regulation or administrative
order, and will not cause Bank to violate any lending limit imposed upon Bank by
any law, regulation or administrative order. Usance commercial Letters of Credit
shall provide for drafts thereunder with terms which do not exceed the lesser of
90 days or such other period of time as may be necessary for the acceptance
created thereunder to be eligible for discount and otherwise comply with this
Agreement; provided however, that no usance commercial Letter of Credit shall
provide for drafts with a term which ends subsequent to the maturity of the Line
of Credit The amount of each matured Usance Draft shall be deemed an advance
under the Line of Credit and shall be repaid by Borrower in accordance with the
terms and conditions of this Agreement applicable to such advances; provided
however, that if the Line of Credit is not available, for any reason whatsoever,
at the time any such acceptance matures, or if advances are not available under
the Line of Credit at such time due to any limitation on borrowings set forth
herein, then Borrower shall immediately pay to Bank the full amount of such
Usance Draft, together with interest thereon from the date such acceptance
matures and is honored by Bank to the date such amount is fully paid by
Borrower, at the variable Prime Rate-based rate of interest applicable to
advances under the Line of Credit. In such event, Borrower agrees that Bank, at
Bank’s sole discretion, may debit Borrower’s deposit account with Bank for the
amount of any such Usance Draft.
     (c) Borrowing and Repayment. Borrower may from time to time during the term
of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings, Letters of Credit and Usance Drafts under
the Line of Credit shall not at any time exceed the applicable maximum principal
amount available thereunder, as set forth in Section 1.1(a) above. The
provisions of the Line of Credit Note (as modified, replaced, renewed, or
restated from time to time) are incorporated by this reference herein.

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     SECTION 1.2. INTEREST/FEES.
     (a) Interest. The outstanding principal balance of the Line of Credit shall
bear interest at the rate(s) of interest set forth in the Line of Credit Note.
The amount of each draft paid by Bank under any Letter of Credit shall bear
interest from the date such draft is paid to the date such amount is fully
repaid by Borrower at the variable Prime Rate-based rate of interest applicable
to the Line of Credit.
     (b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note or, as applicable, in the Letter of
Credit Agreement.
     (c) Annual Fee. Borrower shall pay to Bank an annual non-refundable
commitment fee for the Line of Credit equal to Ten Thousand Dollars
($10,000.00). Such fee shall be payable on each June 1 until Bank has no further
commitments to make Line of Credit Advances under the Loan Documents.
     (d) Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to 1.75% of the face amount thereof, and
(ii) fees upon the payment or negotiation of each drawing under any Letter of
Credit and upon the occurrence of any other activity with respect to any Letter
of Credit (including without limitation, the transfer, amendment or cancellation
of any Letter of Credit) determined in accordance with Bank’s standard fees and
charges then in effect for such activity.
     (e) Acceptance Fees. For any bankers’ acceptance created hereunder by
Bank’s acceptance of a draft presented under a usance commercial Letter of
Credit, Borrower shall pay to Bank, in addition to such processing and other
fees as may be due to Bank in connection with such Letter of Credit, an
acceptance fee for each such acceptance, payable on the date it is created,
determined in accordance with Bank’s standard fees and charges in effect at the
time such acceptance is created. Bank shall have no obligation to repay all or
any portion any acceptance fee in the event an acceptance is paid prior to
maturity, by acceleration or otherwise.
     SECTION 1.3. COLLATERAL.
     As security for all indebtedness of Borrower to Bank subject hereto,
Borrower shall grant, and shall cause Subsidiary to grant to Bank security
interests of first priority (subject to Permitted Encumbrances, as defined in
Section 5.8 below) in all Collateral (as defined in the Security Agreement and
Third Party Security Agreement attached hereto as Exhibits B and C, each, a
“Security Agreement”).
     Borrower shall reimburse Bank immediately upon demand for all reasonable
costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees.

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     Unless an Event of Default exists, Borrower and Subsidiary shall not be
obligated to perfect the Bank’s security interest under the Security Agreement
by any means other than the filing and continuation in the states in the United
States in which they are formed of a UCC-1 financing statement covering the
Collateral (as the term is defined in the Security Agreements), except that:
     (a) with respect to chattel paper or instruments, if the amount owing to
Borrower or Subsidiary thereunder exceeds $100,000.00, Borrower or Subsidiary
shall surrender possession thereof to the Bank; and
     (b) with respect to raw materials and inventory of finished goods that are
in transit to the United States, Borrower or Subsidiary shall either put Bank in
possession of the documents of title to such in-transit inventory, or there
shall be a duly filed UCC-1 financing statement of record with respect to the
Borrower or Subsidiary, as relevant, covering the documents of title to such
in-transit inventory.
     Upon the occurrence and during the continuance of an Event of Default,
Borrower and Subsidiary shall immediately execute, obtain from third parties,
deliver, file and record such documentation as Bank reasonably requires in order
to perfect the Bank’s security interest in all Collateral.
     Upon Borrower’s or Subsidiary’s request made in connection with sales or
transfers of equipment, fixtures or improvements permitted under Section 6(c) of
the Security Agreements, Bank shall release its security interest therein of
fact and record.
     SECTION 1.4. TERMS
References in this Agreement to fiscal quarters and fiscal years are to
Borrower’s fiscal quarters and fiscal years.
As used herein, “GAAP” means generally accepted accounting principles in effect
in the United States, consistently applied.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
     Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
     SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of Wisconsin, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all

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jurisdictions in which such qualification or licensing is required or in which
the failure to so qualify or to be so licensed could have a material adverse
effect on Borrower.
     SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the “Loan
Documents”) have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party (other than Bank) which
executes the same, enforceable in accordance with their respective terms.
     SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
     SECTION 2.4. LITIGATION. Other than as set forth in Schedule 2.4 hereto,
there are no pending, or to the best of Borrower’s knowledge material
threatened, actions, claims, investigations, suits or proceedings by or before
any governmental authority, arbitrator, court or administrative agency with
uninsured claim(s) in excess of $1,000,000.00, individually or, with respect to
the claims of any one claimant, in the aggregate, or which could reasonably
expected to have a material adverse effect on the operation of Borrower other
than those disclosed by Borrower to Bank in writing prior to the date hereof.
     SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated July 1, 2006, a true copy of which has been delivered by Borrower
to Bank prior to the date hereof, (a) is complete and correct and presents
fairly the financial condition of Borrower, (b) discloses all material
liabilities of Borrower that are required to be reflected or reserved against
under GAAP, whether liquidated or unliquidated, fixed or contingent, and (c) has
been prepared in accordance with GAAP, all subject to normal year-end audit
adjustments and the absence of footnotes. Since the date of such financial
statement there has been no material adverse change in the financial condition
of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in
or otherwise encumbered any of its assets or properties except in favor of Bank,
Permitted Encumbrances, or as set forth in Schedule 2.5 hereto.
     SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
     SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower’s
obligations subject to this Agreement to any other obligation of Borrower.

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     SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law, except to the extent that non-compliance with
the foregoing could not be reasonably expected to have a material adverse effect
of Borrower’s consolidated operations or financial condition.
     SECTION 2.9. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time (“ERISA”), and all provisions
of any defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrower (each, a “Plan”). No Reportable Event as defined in
ERISA has occurred and is continuing with respect to any Plan. Borrower has met
its minimum funding requirements under ERISA with respect to each Plan. Each
Plan will be able to fulfill its benefit obligations as they come due in
accordance with applicable provisions of the Plan.
     SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in material default on any
obligation for borrowed money or any purchase money obligation in excess of
$500,000.00 or any other material lease, commitment, contract, instrument or
obligation.
     SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 2.11
hereto, (a) Borrower is in compliance in all material respects with all
applicable federal or state environmental, hazardous waste, health and safety
statutes, and any rules or regulations adopted pursuant thereto, which govern or
affect any of Borrower’s operations and/or properties, including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act, as any of the same may be amended, modified or
supplemented from time to time, which, if not complied with, could reasonably be
expected to have a material adverse effect on Borrower, (b) none of the
operations of Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment and (c) Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or substance into
the environment. As used herein, the term “material” or “material adverse
effect” means an expenditure or liability of $1,000,000.00 or greater,
     SECTION 2.12. SUBSIDIARY. Subsidiary and Lacrosse International, Inc. are
the only entities in existence as of the date hereof in which Borrower owns all
or a majority or a controlling share of the equity interests.

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ARTICLE III
CONDITIONS
     SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank’s satisfaction of all of the following conditions:
     (a) Approval of Bank Counsel. Bank’s counsel shall be satisfied that the
Loan Documents have been duly authorized, executed and delivered, Borrower
exists and Bank’s security interests have been perfected with the priorities
required under the Loan Documents.
     (b) Documentation. Bank shall have received a fully executed copy of this
Agreement and, in form and substance satisfactory to Bank, each of the
following:
     (i) Line of Credit Note.
     (ii) Corporate Resolution: Borrowing.
     (iii) Resolution from Subsidiary.
     (iv) Certificates of Incumbency.
     (v) Continuing Security Agreement.
     (vi) Third Party Security Agreement.
     (vii) Agreement and Acknowledgment of Security Interest (5).
     (viii) UCC-1 Financing Statement.
     (c) Financial Condition. There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower, nor
any material decline, as determined by Bank, in the market value of any
collateral required hereunder or a substantial or material portion of the assets
of Borrower.
     (d) Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage on all Borrower’s and Subsidiary’s property, in form, substance,
amounts, covering risks and issued by companies reasonably satisfactory to Bank,
and as to insurance covering Collateral, with loss payable endorsements in favor
of Bank and Borrower, as their interests may appear. Bank agrees that as of the
date hereof, Borrower’s and Subsidiary’s insurance coverage is satisfactory to
Bank.
     SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank’s satisfaction of each of the following
conditions:
     (a) Compliance. The representations and warranties contained herein and in
each of the other Loan Documents shall be true in all material respects on and
as of the date of the signing of this Agreement and on the date of each
extension of credit by Bank pursuant hereto, with the same effect as though such
representations and warranties had been made on and as of each such

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date, and on each such date, no Event of Default as defined herein, and no
condition, event or act which with the giving of notice or the passage of time
or both would constitute such an Event of Default, shall have occurred and be
continuing or shall exist.
     (b) Letters of Credit. Bank shall have received a Letter of Credit
Agreement in form and content acceptable to Bank prior to the issuance of any
Letter of Credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
     Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall (and, with respect to Sections 4.2, 4.4, 4.5, 4.6
and 4.7, shall cause Subsidiary to), unless Bank otherwise consents in writing:
     SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.
     SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with GAAP, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower and/or Subsidiary.
     SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in
form and detail satisfactory to Bank:
     (a) not later than 90 days after and as of the end of each fiscal year, an
audited financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include balance sheet and income statement;
     (b) not later than 45 days after and as of the end of each fiscal quarter,
a financial statement of Borrower, prepared by Borrower, to include balance
sheet and income statement;
     (c) contemporaneously with each annual and quarterly financial statement of
Borrower required hereby, a certificate of the president or chief financial
officer of Borrower that (a) said financial statements are accurate fairly
present in all material respects the financial conditions, results of operations
and cash flows of Borrower (and in the case of financial statements presented
for the first, second and third fiscal quarters of the Borrower, subject to
subject to normal year-end audit adjustments and the absence of footnotes) and
(b) to the knowledge of such officer there exists no Event of Default nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute an Event of Default;

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     (d) concurrently with the annual reports provided to Lender under
Section 4.3(a), a copy of the Borrower’s Securities and Exchange Commission 10-K
filing covering the same fiscal year, and concurrently with the quarterly
reports provided to Lender under Section 4.3(b), a copy of the Borrower’s
Securities and Exchange Commission 10-Q filing covering the same fiscal quarter;
     (e) from time to time such other information as Bank may reasonably
request.
     SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its and Subsidiary’s business; and comply with the provisions of all
documents pursuant to which Borrower is organized and/or which govern Borrower’s
and Subsidiary’s continued existence and with the requirements of all laws,
rules, regulations and orders of any governmental authority applicable to
Borrower, Subsidiary and/or their business, except to the extent that
non-compliance with the foregoing could not be reasonably expected to have a
material adverse effect of Borrower’s consolidated operations or financial
condition.
     SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower and Subsidiary, including but not limited to fire, extended coverage,
public liability, flood, cargo, property damage and workers’ compensation, with
all such insurance carried with companies and in amounts reasonably satisfactory
to Bank, and deliver to Bank from time to time at Bank’s request schedules
setting forth all insurance then in effect. Notwithstanding any provision to the
contrary herein or in any other Loan Document, Borrower and Subsidiary may use
insurance proceeds paid by reason of damage to or destruction of Collateral or
for liabilities to repair or replace such Collateral or to discharge covered
liabilities (if no Event of Default then exists), (for which purpose Bank will
promptly execute the necessary pay orders or will release insurance proceeds)
provided, that any such proceeds not so used within 30 days after receipt
thereof by Borrower or Subsidiary shall be applied to reduce the outstanding
principal balance of the Line of Credit.
     SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower’s or Subsidiary’s business in good repair and condition, and from time
to time make necessary repairs, renewals and replacements thereto so that such
properties shall be fully and efficiently preserved and maintained, except to
the extent that non-compliance with the foregoing could not be reasonably
expected to have a material adverse effect of Borrower’s consolidated operations
or financial condition.
     SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower or Subsidiary may in
good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower or Subsidiary has made provision, in accordance with GAAP, for
eventual payment thereof in the event Borrower is obligated to make such
payment.

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     SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower or Subsidiary with a claim(s)
in excess of an aggregate of $1,000,000.00.
     SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s consolidated
financial condition as follows using GAAP (except to the extent modified by the
definitions herein):
     (a) Tangible Net Worth not less than $35,000,000.00 determined as of the
end of each fiscal quarter, with “Tangible Net Worth” defined as the aggregate
of total stockholders’ equity plus Subordinated Debt less any intangible assets,
and with “Subordinated Debt” defined as indebtedness subordinated in right of
payment to Borrower’s indebtedness to Bank pursuant to subordination agreements
satisfactory to Bank.
     (b) Total Liabilities divided by Tangible Net Worth not greater than 1.25
to 1.0 determined as of the end of each first fiscal quarter, 1.50 to 1.0
determined as of the end of each second fiscal quarter, 1.75 to 1.0 determined
as of the end of each third fiscal quarter and 1.50 to 1.0 determined as of the
end of each fiscal year, with “Total Liabilities” defined as the aggregate of
current and non-current liabilities less Subordinated Debt, and with “Tangible
Net Worth” as defined above. Borrower will not change its fiscal year.
     (c) Net income after taxes not less than $1.00 on a trailing four-quarter
basis, determined as of each fiscal quarter end.
     (d) Current Ratio not less than 1.75 to 1.0, determined as of the end of
each fiscal quarter end, with “Current Ratio” defined as the ratio of current
assets to total current liabilities, and with current liabilities hereby deemed
to include, without limitation, the then outstanding principal amount of all
liabilities, contingent or liquidated, under the Line of Credit.
     SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss of or damage to property in the amount
of $1,000,000.00 or more.
     SECTION 4.11. NEW SUBSIDIARY. Promptly notify Bank in the event that the
assets or revenues of Lacrosse International, Inc. (“New Subsidiary”) represent
5% or more of Borrower’s consolidated assets or consolidated revenues,
respectively, following which all affirmative and negative covenants and Events
of Default which at such time apply to Subsidiary shall be also made applicable
to New Subsidiary, on terms reasonably acceptable to Bank and Borrower.

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ARTICLE V
NEGATIVE COVENANTS
     Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not (and will not cause or permit
Subsidiary to) without Bank’s prior written consent:
     SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.
     SECTION 5.2. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower’s stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower’s stock now or hereafter outstanding in
excess of an aggregate of One Million Five Hundred Thousand Dollars
($1,500,000.00) in any fiscal year.
     SECTION 5.3. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $5,000,000.00.
     SECTION 5.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower and Subsidiary to Bank,
(b) purchase money indebtedness incurred and liens therefor in connection with
the purchase of equipment (including leases required to be capitalized under
GAAP) and/or real estate for an aggregate purchase price not to exceed
$1,000,000.00 in any fiscal year, (c) any other liabilities of Borrower existing
as of, and disclosed to Bank prior to, the date hereof, and (d) liabilities
secured by Permitted Encumbrances.
     SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity other than (a) the merger of Subsidiary into
Borrower, and (b) Permitted Transactions (as defined below); make any
substantial change in the nature of Borrower’s business as conducted as of the
date hereof; acquire all or substantially all of the assets of any other entity
other than Permitted Transactions; nor sell, lease, transfer or otherwise
dispose of all or a substantial or material portion of Borrower’s assets except
(w) in the ordinary course of its business, (y) the sale of bad or doubtful
accounts (provided that all net proceeds of such sales are promptly applied to
reduce the outstanding principal balance of the Line of Credit) or (z) as
permitted in the Security Agreements executed by Borrower and Subsidiary.
“Permitted Transactions” means (i) mergers with other entities whose businesses
are substantially similar to that of Borrower’s or Subsidiary’s so long as
Borrower or Subsidiary is the surviving entity, (ii) the acquisition by Borrower
or Subsidiary of all or substantially all of the assets of other entities or
divisions thereof, (iii) the acquisition by Borrower or Subsidiary of not less
than 50.1% of the

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outstanding ownership interests in other entities, and, with respect to all of
the foregoing, the aggregate consideration paid or payable (in whatever form,
including, cash notes, stock in Borrower or Subsidiary or other property) by
Borrower and Subsidiary in any fiscal year does not exceed $5,000,000.00. At the
time of the sales described in Section 5.5(a)(y) above Bank shall release in
fact and of record all of its security in the assets being sold.
     SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower or Subsidiary as
security for, any liabilities or obligations of any other person or entity,
except any of the foregoing in favor of Bank.
     SECTION 5.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Bank prior to, the date hereof, and additional loans or
advances to employees or officers of Borrower or Subsidiary, or to Subsidiary in
the ordinary course of business in amounts not to exceed an aggregate of
$1,000,000.00 outstanding at any time, and additional investments consisting of
Permitted Transactions and investments made in accordance with Borrower’s
Investment Policy in effect as of the date hereof, a copy of which has been
delivered to Bank. In the event that as a result of a Permitted Transaction
Borrower or Subsidiary acquire or form a new subsidiary, such subsidiary shall
be deemed to be included in the definition of Subsidiary as used in this
Agreement, provided, however, that the assets of such new subsidiary shall not
be included in the Borrowing Base unless and until (a) such assets are otherwise
eligible as determined in accordance of the terms of the Borrowing Base,
(b) Bank has performed a collateral audit, at Borrower’s expense, in form and
content acceptable to Bank, and (c) Bank is granted a first priority perfected
security interest in such assets pursuant to a Third Party Security Agreement
substantially similar to that executed by Subsidiary.
     SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower’s assets now
owned or hereafter acquired, except (i) any of the foregoing in favor of Bank or
disclosed in Schedule 5.8 hereto, (ii) purchase money liens in equipment and
real estate, as applicable, purchased with the proceeds of the indebtedness or
leased as described in Section 5.4(b), and (iii) Permitted Encumbrances. The
term “Permitted Encumbrances” is defined as any of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced, or that are contested in good faith and for which adequate
reserves are maintained: (a) liens for taxes, assessments and governmental
charges or levies; (b) materialmen’s, mechanics’, carriers’, landlords’,
laborers’ stevedores’ and repairmen’s liens that exist or arise in the ordinary
course of business; (c) warehousemen’s liens incurred by third parties for
temporary storage that is not arranged by Borrower or Subsidiary for goods while
in transit in the ordinary course of business; (d) maritime liens that attach to
the relevant property as cargo as a matter of law if the cargo is insured
against such liens under insurance that has a deductible clause not exceeding
$10,000 per occurrence; (e) purchase money security interest and leases required
to be capitalized under GAAP; (f) easements, rights of way and other
encumbrances on title to real property that do not render title to the property
encumbered thereby unmarketable or materially and adversely affect the use of
such property for its present purpose; (g) encumbrances against fixtures that
are not

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granted by Borrower or Subsidiary; (h) possession of or interests in security
deposits (including interest earned thereon) held by or for the benefit of
lessors under leases (including capital leases) of real property or equipment;
(i) the effect of provisions in leases and applicable law that give preference
to Borrower’s or Subsidiary’s landlords over proceeds of government takings and
condemnations; and (j) provisions of leases and applicable law that convey or
commit to the conveyance to landlords of fixtures and improvements to leased
premises.
ARTICLE VI
EVENTS OF DEFAULT
     SECTION 6.1. The occurrence of any of the following shall constitute an
“Event of Default” under this Agreement:
     (a) Borrower shall fail to pay when due any principal, interest, fees or
other amounts payable under any of the Loan Documents.
     (b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
     (c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue unremedied for a period of twenty (20) days from its occurrence.
     (d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower, Subsidiary or any
guarantor hereunder (with each such guarantor referred to herein as a “Third
Party Obligor”) has incurred any debt or other liability to any person or
entity, including Bank and with respect to any such default which by its nature
can be cured, such default shall continue unremedied for a period of twenty
(20) days from its occurrence, and, if such debt or liability is owed to a party
other than Bank, the amount thereof exceeds $1,000,000.00, and either, such debt
or liability is then due and payable in full, or the holder of such debt or
liability is entitled, by reason of such default, to declare the same due and
payable in full. As of the date hereof, there are no Third Party Obligors.
     (e) The filing of a judgment lien against Borrower, Subsidiary or any Third
Party Obligor; or the recording of any abstract of judgment against Borrower,
Subsidiary or any Third Party Obligor in any county in which Borrower,
Subsidiary or such Third Party Obligor has an interest in real property; or the
service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets of Borrower, Subsidiary or any Third
Party Obligor; or the entry of a judgment against Borrower, Subsidiary or any
Third Party Obligor; and with respect to each of the foregoing, the uninsured
amount in dispute exceeds $1,000,000.00

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and the filing, recording, service, or proceeding in question is not stayed,
dismissed, or released (as applicable) or security is not posted in a manner and
amount reasonably satisfactory to Bank or the applicable court within 60 days
after its occurrence.
     (f) Borrower or any Third Party Obligor shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Third Party Obligor shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time (“Bankruptcy Code”), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower, Subsidiary or any
Third Party Obligor (and the same is not dismissed within 60 days after its
commencement, or Borrower, Subsidiary or any Third Party Obligor shall file an
answer admitting the jurisdiction of the court and the material allegations of
any such involuntary petition; or Borrower, Subsidiary or any Third Party
Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered
against Borrower, Subsidiary or any Third Party Obligor by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors.
     (g) There shall exist or occur any material event or condition which Bank,
in its commercially reasonable discretion, believes impairs, or is substantially
likely to impair, the prospect of payment or performance by Borrower of its
obligations under any of the Loan Documents and the same is not remedied within
20 days after written notice from Bank to Borrower.
     (h) The dissolution or liquidation of any of Borrower, Subsidiary or Third
Party Obligor which is a corporation, partnership, joint venture or other type
of entity; or Borrower, Subsidiary or any such Third Party Obligor, or any of
their directors, stockholders or members, shall take action seeking to effect
the dissolution or liquidation of such Borrower, Subsidiary or Third Party
Obligor and such action is not dismissed or abandoned within 60 days after its
commencement.
     SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from

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time to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII
MISCELLANEOUS
     SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
     SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement or the Loan Documents must be in writing delivered to each party at
the following address:

     
BORROWER:
  LACROSSE FOOTWEAR, INC.
 
  17634 NE Airport Way
 
  Portland, OR 97230
 
   
 
  Attention: Chief Financial Officer or President
 
   
BANK:
  WELLS FARGO BANK, NATIONAL ASSOCIATION
 
  Portland Regional Commercial Banking Office
 
  1300 S.W. Fifth Avenue
 
  MAC P6101-133
 
  Portland OR, 97208
 
   
 
  Attention: James R. Bednark Vice-President

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
     SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all commercially reasonable
payments, advances, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all customary allocated costs of Bank’s
in-house counsel), expended or incurred by Bank in connection with the
negotiation and preparation of this Agreement and the other Loan Documents, and
the preparation of any amendments and waivers hereto and thereto, and

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including out of pocket expenses incurred in the Bank’s continued administration
of the Loan Documents. The non-prevailing party shall pay to the prevailing
party immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of in-house counsel), expended or
incurred by the non-prevailing party in connection with (a) the enforcement of
Bank’s rights and/or the collection of any amounts which become due to Bank
under any of the Loan Documents, and (b) the prosecution or defense of any
action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to any Borrower or Subsidiary.
     SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank’s prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank’s rights
and benefits under each of the Loan Documents, subject to Bank providing 30 days
prior written notice to Borrower, except in the event of an assignment by reason
of a merger of Bank. In connection therewith, Bank may disclose all documents
and information which Bank now has or may hereafter acquire relating to any
credit subject hereto, Borrower or its business, or any collateral required
hereunder, subject to a confidentiality agreement reasonably acceptable to Bank
and Borrower.
     SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto. This Agreement amends and restates in its entirety the Credit
Agreement dated of April 15, 2004. All references to a Credit Agreement in any
of the other Loan Documents shall be deemed to mean and refer to this Agreement.
     SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
     SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
     SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

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     SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
     SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon.
     SECTION 7.11. ARBITRATION.
     (a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them, whether in tort, contract or otherwise arising out of or relating to
in any way (i) the loan and related Loan Documents which are the subject of this
Agreement and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests by Borrower for additional
credit.
     (b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Oregon selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the “Rules”). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or
any similar applicable state law.
     (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

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     (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Oregon or a neutral retired judge of the state
or federal judiciary of Oregon, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Oregon and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Oregon Rules of Civil Procedure or other applicable law.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.
     (e) Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
dispute with the AAA. All requests for an extension of the discovery periods, or
any discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is
available.
     (f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding except for consolidations
with other disputes between the parties hereto arising out of or relating to
this Agreement, the other Loan Documents or the matters described in
Section 7.11(a)(i) or (ii).
     (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
     (h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a

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party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.

                      LACROSSE FOOTWEAR, INC.       WELLS FARGO BANK, NATIONAL
ASSOCIATION  
 
                   
By:
  /s/ Joseph P. Schneider       By:   /s/ James R. Bednark    
 
                   
 
  Joseph P. Schneider           James R. Bednark    
 
  President/Chief Executive Officer           Relationship Manager    
 
                   
By:
  /s/ David P. Carlson                
 
                   
 
  David P. Carlson                
 
  Executive Vice President/Chief                
 
  Financial Officer                

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Schedule 2.4
LITIGATION, CLAIMS, ETC.
NONE

 

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Schedule 2.5
ENCUMBRANCES
Security interest in company-owned racking fixtures and conveyor system used in
connection with the operation of the subject property located at 17634 NE
Airport Way, Portland, Oregon that secures a loan and other obligations to the
Portland Development Commission in a principal amount not exceeding $750,000.00.

 

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Schedule 2.11
ENVIRONMENTAL MATTERS
     Pursuant to an Agreement as to Environmental Matters dated May 9,1997,
between The Trane Company (“Trane”) and Borrower, Trane and Borrower
acknowledged the presence of contaminants (including volatile organic compounds
and hydraulic oil) on real property located at 1319 St. Andrews Street,
LaCrosse, Wisconsin, which property Trane was concurrently with such Agreement
selling to LaCrosse Industrial Park Corporation, which was in turn concurrently
leasing such property to Borrower. Borrower does not anticipate an adverse
impact on its leasehold interest in such property, or environmental liabilities
as to the leased property in excess of $1,000,000, due to the presence of such
contaminants. As described in the Agreement as to Environmental Matters, Trane
has indemnified Borrower from liabilities arising from these contaminants.

 

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Schedule 5.8
ENCUMBRANCES
Items listed in Schedule 2.5, if any, plus:
NONE

 

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EXHIBIT A
REVOLVING LINE OF CREDIT NOTE
$30,000,000.00
Portland, Oregon
September     , 2006
     FOR VALUE RECEIVED, the undersigned LaCrosse Footwear, Inc. (“Borrower”)
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”)
at its office at Portland RCBO, 1300 S.W. Fifth Avenue, Portland, OR 97201, or
at such other place as the holder hereof may designate, in lawful money of (he
United States of America and in immediately available funds, the principal sum
of $30,000,000.00, or so much thereof as may be advanced and be outstanding,
with interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
DEFINITIONS:
     As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
     (a) “Business Day” means any day except a Saturday, Sunday or any other day
on which commercial banks in Oregon are authorized or required by law to close.
     (b) “Fixed Rate Term” means a period commencing on a Business Day and
continuing for 1,2, 3 or 6 months, as designated by Borrower, during which all
or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than $250,000.00; and provided further,
that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof,
however, if any Fixed Rate Term would end on a day which is not a Business Day,
then such Fixed Rate Term shall be extended to the next succeeding Business Day.
     (c) “LIBOR” means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:

         
 
  LIBOR =                                  Base LIBOR
                              
 
                100% – LIBOR Reserve Percentage

     (i) “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Bank as the inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank to its borrowers (whose loans bear interest in
relation to such rate) generally for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the number of days in such Fixed Rate Term and in an amount approximately
equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market

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     (ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
     (d) “Prime Rate” means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank’s base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
     (a) Interest. The outstanding principal balance of this Note shall bear
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum equal to 0.50000% below the Prime Rate in
effect from time to time, or (ii) at a fixed rate per annum determined by Bank
to be 1,50000% above LIBOR in effect on the first day of the applicable Fixed
Rate Term. When interest is determined in relation to the Prime Rate, each
change in the rate of interest hereunder shall become effective on the date each
Prime Rate change is announced within Bank. With respect to each LIBOR selection
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank’s books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.
     (b) Selection of Interest Rate Options. At any time any portion of this
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone (or such other electronic
method as Bank may permit) so long as, with respect to each LIBOR selection,
(A) if requested by Bank, Borrower provides to Bank written confirmation thereof
not later than three (3) Business Days after such notice is given, and (B) such
notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate
Term, or at a later time during any Business Day if Bank, at it’s sole option
but without obligation to do so, accepts Borrower’s notice and quotes a fixed
rate to Borrower. If Borrower does not immediately accept a fixed rate when
quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request
from Borrower shall be subject to a redetermination by Bank of the applicable
fixed rate. If no specific designation of interest is made at the time any
advance is requested hereunder or at the end of any Fixed Rate Term, Borrower
shall be deemed to have made a Prime Rate interest selection for such advance or
the principal amount to which such Fixed Rate Term applied.

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     (c) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except Income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) costs
incurred by Bank as a result of future supplemental, emergency or other changes
in the LIBOR Reserve Percentage, increases in assessment rates imposed by the
Federal Deposit Insurance Corporation, or similar requirements or costs imposed
by any domestic or foreign governmental authority or resulting from compliance
by Bank with any future request or directive (whether or not having the force of
law) from any central bank or other governmental authority and related in any
manner to LIBOR to the extent they are not included in the calculation of LIBOR.
In determining which of the foregoing are attributable to any LIBOR option
available to Borrower hereunder, any reasonable allocation made by Bank among
its operations shall be conclusive and binding upon Borrower.
     (d) Payment of Interest. Interest accrued on this Note shall be payable on
the last day of each month, commencing September 30, 2006.
     (e) Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 2% above the Prime Rate
in effect from time to time.
BORROWING AND REPAYMENT:
     (a) Borrowing and Repayment. Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, mat the total outstanding borrowings under this Note shall not at any
time exceed the principal amount available at such time under the Line of Credit
as defined in and as set forth in the Credit Agreement (defined below). The
unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on June 30, 2009.
     (b) Advances. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of (i)
David P. Carlson, Joseph P. Schneider, James Fontaine, Kris Johnson, Christine
Mockett, Nate Baker, Kirk Layton or Greg Inman, any one acting alone (or such
other individuals as the president or chief financial officer of Borrower shall
designate from time to time by written notice to Bank), who are authorized to
request advances and direct the disposition of any advances until written notice
of the revocation of such authority is received by the holder at the office
designated above, or (ii) any person, with respect to advances deposited to the
credit of any deposit account of Borrower that is maintained with Bank, which
advances, when so deposited, shall be conclusively presumed to have been made to
or for the benefit of each Borrower regardless of the fact that persons other
than those authorized to request advances may have authority to draw against
such account. The holder shall have no obligation to determine whether any
person requesting an advance is or has been authorized by Borrower,

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     (c) Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied in succession to the Fixed Rate Term advances
in order of their successive maturities from the payment date.
PREPAYMENT:
     (a) Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without any penalty or prepayment fee.
     (b) LIBOR. Borrower may prepay principal on any LIBOR-based advance which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of $100,000.00; provided however, that if the outstanding principal
balance of such portion of this Note is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal balance thereof. In
consideration of Bank providing this prepayment option to Borrower, or if any
such portion of this Note shall become due and payable at any time prior to the
last day of the Fixed Rate Term applicable thereto by acceleration or otherwise,
Borrower shall pay to Bank immediately upon demand a fee which is the sum of the
discounted differences for the period from the day of prepayment through the day
on which such Fixed Rate Term matures, calculated as follows for each such
month:

  (i)   Determine the amount of remaining interest which would have accrued on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.     (ii)   Subtract from the amount determined in (i) above the amount
of interest which would have accrued for the period on the amount prepaid for
the remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.     (iii)   If the result obtained in (ii) for any month is
greater than zero, discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum 2.000% above the Prime Rate in
effect from time to time (computed on the basis of a 360-day year, actual days
elapsed). Each change in the rate of interest on any such past due prepayment
fee shall become effective on the date each Prime Rate change is announced
within Bank.

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EVENTS OF DEFAULT:
     This Note is made pursuant to and is subject to the terms and conditions of
that certain Amended and Restated Credit Agreement between Borrower and Bank
dated as of September 1, 2006, as amended from time to time (the “Credit
Agreement”). Any default in the payment or performance of any obligation under
this Note, or any defined event of default under the Credit Agreement, shall
constitute an “Event of Default” under this Note.
MISCELLANEOUS:
     (a) Remedies. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder’s option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. The non-prevailing party shall pay to the
prevailing party immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of in-house counsel),
expended or incurred by the non-prevailing party in connection with (a) the
enforcement of Bank’s rights and/or the collection of any amounts which become
due to Bank under this Note, and (b) the prosecution or defense of any action in
any way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or Subsidiary (as the term is defined in the
Credit Agreement).
     (b) Obligations Joint and Several. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
     (c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Oregon.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3,1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
This Note amends, replaces and supersedes the promissory note in the principal
amount of $30,000,000.00 dated as of October 1, 2005 executed by Borrower
pursuant to the Credit Agreement.

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     IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.

            LACROSSE FOOTWEAR, INC.
      By:   For Exhibit Purposes Only       Joseph P. Schneider       
President/Chief Executive Officer              By:   For Exhibit Purposes Only  
    David P. Carlson        Executive Vice President/Chief Financial Officer   

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EXHIBIT B
SECURITY AGREEMENT
     1. GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned
LACROSSE FOOTWEAR, INC., or any of them (“Debtor”), hereby grants and transfers
to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) a security interest in all of
the property of Debtor described as follows (collectively, the “Collateral”):
     (a) all accounts, deposit accounts, contract rights, chattel paper (whether
electronic or tangible), instruments, promissory notes, documents, general
intangibles, payment intangibles, software, letter of credit rights, health-care
insurance receivables and other rights to payment of every kind now existing or
at any time hereafter arising;
     (b) all inventory, goods held for sale or lease or to be furnished under
contracts for service, or goods so leased or furnished, raw materials, component
parts, work in process and other materials used or consumed in Debtor’s
business, now or at any time hereafter owned or acquired by Debtor, wherever
located, and all products thereof, whether in the possession of Debtor, any
warehousemen, any bailee or any other person, or in process of delivery, and
whether located at Debtor’s places of business or elsewhere;
     (c) all warehouse receipts, bills of sale, bills of lading and other
documents of every kind (whether or not negotiable) in which Debtor now has or
at any time hereafter acquires any interest, and all additions and accessions
thereto, whether in the possession or custody of Debtor, any bailee or any other
person for any purpose;
     (d) all money and property heretofore, now or hereafter delivered to or
deposited with Bank or otherwise coming into the possession, custody or control
of Bank (or any agent or bailee of Bank) In any manner or for any purpose
whatsoever during the existence of this Agreement and whether held in a general
or special account or deposit for safekeeping or otherwise;
     (e) all right, title and interest of Debtor under licenses, guaranties,
warranties, management agreements, marketing or sales agreements, escrow
contracts, indemnity agreements, insurance policies, service or maintenance
agreements, supporting obligations and other similar contracts of every kind in
which Debtor now has or at any time hereafter shall have an interest;
     (f) all goods, tools, machinery, furnishings, furniture and other equipment
of every kind now existing or hereafter acquired, and improvements,
replacements, accessions and additions thereto and embedded software included
therein, whether located on any property owned or leased by Debtor or elsewhere,
including without limitation, any of the foregoing now or at any time hereafter
located at or installed on the land or in the improvements at any of the real
property owned or leased by Debtor, and all such goods after they have been
severed and removed from any of said real property; and
     (g) all motor vehicles, trailers, mobile homes, manufactured homes, boats,
other rolling stock and related equipment of every kind now existing or
hereafter acquired and all additions and accessories thereto, whether located on
any property owned or leased by Debtor or elsewhere;

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(excluding from the foregoing all Excluded Collateral), together with whatever
is receivable or received when any of the foregoing or the proceeds thereof are
sold, leased, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including without limitation, all
rights to payment, including returned premiums, with respect to any insurance
relating to any of the foregoing, and all rights to payment with respect to any
claim or cause of action affecting or relating to any of the foregoing
(collectively, “Proceeds”). As used herein “Excluded Collateral” means (i) all
“Intent to Use” applications for trademark or service mark registrations filed
pursuant to Section 1(b) of the Lanham Act, and all goodwill associated
therewith and all other assets, rights and interests that uniquely reflect or
embody such goodwill (each, a “Lanham Act Application”), unless and until an
Amendment to Allege Use or a Statement of Use under Section 1(c) and 1(d) of
said Act has been filed with respect to this Agreement; and (ii) contracts with
the United States Government or any political subdivision thereof for which any
necessary consent for the security interest granted hereunder has not been
obtained from the United States Government or such subdivision under 31 U.S.C.
§3727 and 41 U.S.C. §15, and the regulations in effect thereunder, and accounts
generated under such contracts.
     2. OBLIGATIONS SECURED. The obligations secured hereby are the payment and
performance of: (a) all present and future Indebtedness of Debtor to Bank;
(b) all obligations of Debtor and rights of Bank under this Agreement; and
(c) all present and future obligations of Debtor to Bank of other kinds. The
word “Indebtedness” is used herein in its most comprehensive sense and includes
any and all advances, debts, obligations and liabilities of Debtor, or any of
them, heretofore, now or hereafter made, incurred or created, whether voluntary
or involuntary and however arising, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Debtor may be liable individually or jointly with others, or whether recovery
upon such Indebtedness may be or hereafter becomes unenforceable.
     3. TERMINATION. This Agreement will terminate upon the performance of all
obligations of Debtor to Bank under the Loan Documents, including without
limitation, the payment of all Indebtedness of Debtor to Bank, and the
termination or expiration of all commitments of Bank to extend credit to Debtor.
     4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans hereunder
that are independent of the Bank’s commitments under the Loan Agreement. Any
money received by Bank in respect of the Collateral may be deposited, at Bank’s
option, into a non-interest bearing account over which Debtor shall have no
control, and the same shall, for all purposes, be deemed Collateral hereunder,
subject, however, to the terms of the Credit Agreement regarding the use of
insurance proceeds, and the right of Debtor to retain and use proceeds of the
sale of inventory in the ordinary course of business when an Event of Default
does not exist.
     5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank
that: (a) Debtor’s legal name is exactly as set forth on the first page of this
Agreement, and all of Debtor’s organizational documents or agreements delivered
to Bank are complete and accurate in every respect; (b) Debtor is the owner and
has possession or control of the Collateral and Proceeds, except security
deposits (and interest thereon), goods in transit or that are temporarily in the
possession of repairmen or goods in storage in the ordinary course of business;
(c) Debtor has the exclusive right to grant a security interest in the
Collateral and Proceeds; (d) all Collateral and Proceeds are genuine, free from
liens, adverse claims, setoffs, default, prepayment, defenses and conditions
precedent of any kind or character, except the

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lien created hereby, or Permitted Encumbrances, as defined in the Credit
Agreement of even date herewith between Debtor and Bank, as amended, renewed or
restated from time to time (the “Credit Agreement”), as otherwise agreed to by
Bank, or as heretofore disclosed by Debtor to Bank, in writing; (e) all
statements contained herein and, where applicable, in the Collateral are true
and complete in all material respects; (f) no financing statement covering any
of the Collateral or Proceeds, and naming any secured party other than Bank, is
on file in any public office; and (g) to the extent that Collateral included in
the Borrowing Base consists of particular rights to payment in excess of
$100,000.00, all persons appearing to be obligated on these particular items of
Collateral and Proceeds have authority and capacity to contract and are bound as
they appear to be, all property subject to chattel paper has been properly
registered and filed in compliance with law and to perfect the interest of
Debtor in such property, and all such Collateral and Proceeds comply with all
applicable laws concerning form, content and manner of preparation and
execution, including where applicable Federal Reserve Regulation Z and any State
consumer credit laws. A breach of the representation made in clause (g) above
shall be deemed not to constitute an Event of Default if Borrower notifies Bank
in writing after first becoming aware of any such breach and the applicable
right to payment is thereafter not included In the Borrowing Base.
     6. COVENANTS OF DEBTOR.
     (a) Debtor agrees in general: (i) to pay Indebtedness secured hereby when
due; (ii) to indemnify Bank against all losses, claims, demands, liabilities and
expenses of every kind caused by property subject hereto, except to the extent
caused by Bank after taking possession or control thereof; (iii) to pay all
reasonable costs and expenses, including reasonable attorneys’ fees, incurred by
Bank in the perfection and preservation of the Collateral or Bank’s interest
therein and/or the realization, enforcement and exercise of Bank’s rights,
powers and remedies hereunder; (iv) to permit Bank to exercise its powers;
(v) to execute and deliver such documents as Bank deems necessary to create,
perfect and continue the security interests contemplated hereby; (vi) not to
change its name, and as applicable, its chief executive office, Its principal
residence or the jurisdiction in which it is organized and/or registered without
giving Bank prior written notice thereof; (vii) not to change the places where
Debtor keeps any Collateral (except security deposits (and interest thereon),
goods in transit, goods that are temporarily in the possession of repairmen or
goods in storage in the ordinary course of business) or Debtor’s records
concerning the Collateral and Proceeds without giving Bank prior written notice
of the address to which Debtor is moving same; and (viii) to cooperate with Bank
in perfecting all security interests granted herein as required in the Credit
Agreement and in obtaining such agreements from third parties as Bank deems
necessary, proper or convenient in connection with the preservation, perfection
or enforcement of any of its rights hereunder. Upon the occurrence and during
the continuance of an Event of Default, Debtor shall immediately execute, obtain
from third parties, deliver, file and record such documentation as Bank
reasonably requires in order to perfect the Bank’s security interest in all
Collateral.
     (b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank
agrees otherwise in writing: (i) that Bank is authorized to file financing
statements in the name of Debtor to perfect Bank’s security interest in
Collateral and Proceeds; (ii) where applicable, to Insure the tangible
Collateral with Bank named as a loss payee as its interest may appear, in form,
substance and amounts, under agreements, against risks and liabilities, and with
insurance companies satisfactory to Bank; (iii) where applicable, to operate the
Collateral in accordance with all applicable statutes, rules and regulations
relating to the use and control thereof, and not to use any Collateral for any
unlawful purpose or in any way that would void any insurance required to be
carried in connection therewith; (iv) not to remove the Collateral

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(other than goods in transit, goods that are temporarily in the possession of
repairmen or goods in storage in the ordinary course of business) from Debtor’s
premises, except (A) for deliveries to buyers in the ordinary course of Debtor’s
business, and deliveries of damaged, obsolete, surplus or worn-out property, and
(B) Collateral which consists of mobile goods as defined in the Oregon Uniform
Commercial Code, in which case Debtor agrees not to remove or permit the removal
of such Collateral from its state of domicile for a period in excess of thirty
(30) calendar days; (v) to pay when due all license fees, registration fees and
other charges in connection with any Collateral; (vi) not to permit any lien on
the Collateral or Proceeds, including without limitation, liens arising from
repairs to or storage of the Collateral, except in favor of Bank or as set forth
in the Credit Agreement, or Permitted Encumbrances; (vii) not to sell,
hypothecate or dispose of, nor permit the transfer by operation of law of, any
of the Collateral or Proceeds or any interest therein, except sales of inventory
to buyers in the ordinary course of Debtor’s business, sales of damaged,
obsolete, surplus, or worn-out property, or as otherwise permitted herein or in
the Credit Agreement; (viii) to permit Bank to inspect the Collateral at any
reasonable time; (ix) to keep, in accordance with generally accepted accounting
principles, complete and accurate records regarding all Collateral and Proceeds,
and to permit Bank to Inspect the same and make copies thereof at any reasonable
time; (x) if requested by Bank during the continuance of an Event of Default, to
receive and use reasonable diligence to collect Collateral consisting of
accounts and other rights to payment and Proceeds, in trust and as the property
of Bank, and to immediately endorse as appropriate and deliver such Collateral
and Proceeds to Bank daily in the exact form in which they are received together
with a collection report in form satisfactory to Bank; (xi) intentionally
deleted; (xii) to give only normal allowances and credits and to advise Bank
thereof Immediately in writing if they affect any rights to payment or Proceeds
in any material respect; (xiii) from time to time, when requested by Bank, to
prepare and deliver a schedule of all Collateral and Proceeds subject to this
Agreement and during the continuance of an Event of Default to assign in writing
and deliver to Bank all accounts, contracts, leases and other chattel paper,
instruments, documents and other evidences thereof; (xiv) in the event Bank
elects to receive payments of rights to payment or Proceeds hereunder during the
continuance of an Event of Default, to pay all expenses incurred by Bank in
connection therewith, including expenses of accounting, correspondence,
collection efforts, reporting to account or contract debtors, filing, recording,
record keeping and expenses incidental thereto; and (xv) to provide any service
and do any other acts which may be necessary to maintain, preserve and protect
all Collateral and, as appropriate and applicable, to keep all Collateral in
good and saleable condition, to deal with the Collateral in accordance with the
standards and practices adhered to generally by users and manufacturers of like
property, and to keep all Collateral and Proceeds free and clear of all
defenses, rights of offset and counterclaims, subject to offsets in the ordinary
course of business for defective inventory.
     (c) Except as specifically set forth in writing by Bank and the effect of
leases and applicable law that convey fixtures or improvements to landlords,
Debtor shall not sell or transfer equipment, provided, however, that Debtor may
sell or transfer damaged, obsolete, worn-out, and surplus equipment Collateral
with an aggregate book value not to exceed $500,000.00 in each of Debtor’s
fiscal years.
     7. POWERS OF BANK. Debtor appoints Bank its true attorney in fact to
perform any of the following powers, which are coupled with an interest, are
irrevocable until termination of this Agreement and may be exercised from time
to time by Bank’s officers and employees, or any of them, if Debtor is in
default (unless otherwise set forth herein): (a) to perform any obligation of
Debtor hereunder in Debtor’s name or otherwise; (b) to give notice to account
debtors or others of Bank’s rights in the Collateral and Proceeds, to enforce or
forebear from enforcing the same and make extension and modification agreements
with respect thereto;

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(c) to release persons liable on Collateral or Proceeds and to give receipts and
acquittances and compromise disputes in connection therewith; (d) to release or
substitute security; (e) to resort to security in any order, (f) to prepare,
execute, file, record or deliver notes, assignments, schedules, designation
statements, financing statements, continuation statements, termination
statements, statements of assignment, applications for registration or like
papers to perfect, preserve or release Bank’s interest in the Collateral and
Proceeds; (g) to receive, open and read mail addressed to Debtor, and promptly
deliver the originals thereof (or, if the mail consists of Collateral or
Proceeds, copies) to Debtor; (h) to take cash, instruments for the payment of
money and other property to which Bank is entitled; (i) at any time whether or
not a default exists, to verify facts concerning the Collateral and Proceeds by
inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;
(j) to endorse, collect, deliver and receive payment under instruments for the
payment of money constituting or relating to Proceeds; (k) to prepare, adjust,
execute, deliver and receive payment under insurance claims, and to collect and
receive payment of and endorse any instrument in payment of loss or returned
premiums or any other insurance refund or return, and to apply such amounts
received by Bank, at Bank’s sole option, toward repayment of the indebtedness
or, where appropriate, replacement of the Collateral; (l) to exercise all
rights, powers and remedies which Debtor would have, but for this Agreement,
with respect to all Collateral and Proceeds subject hereto; (m) at any
reasonable time whether or not a default exists, to enter onto Debtor’s premises
in inspecting the Collateral; (n) to make withdrawals from and to close deposit
accounts or other accounts with any financial institution, wherever located,
into which Proceeds may have been deposited, and to apply funds so withdrawn to
payment of the Indebtedness; (o) to preserve or release the interest evidenced
by chattel paper to which Bank is entitled hereunder and to endorse and deliver
any evidence of title incidental thereto; and (p) to do all acts and things and
execute all documents in the name of Debtor or otherwise, deemed by Bank as
necessary, proper and convenient in connection with, at any time whether or not
a default exists, the preservation or perfection (as required in the Credit
Agreement), or, after default, the enforcement of its rights hereunder.
     8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay or secure by bond (or contest in good faith, provided adequate
reserves are made therefor and no enforcement proceedings against any Collateral
has been instituted that are not stayed or dismissed within sixty days
thereafter), prior to delinquency, all insurance premiums, taxes, charges, liens
and assessments against the Collateral and Proceeds, and upon the failure of
Debtor to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Debtor to Bank,
due and payable immediately upon demand, together with interest at a rate equal
to Prime Rate, which rate shall vary as the Prime Rate changes, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
     9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an “Event of Default” under this Agreement: (a) any defined Event of
Default, under the Credit Agreement; (b) any material impairment of the rights
of Bank in any Collateral or Proceeds; and (e) Bank, in good faith, believes
that $500,000.00 or more of the Collateral and/or Proceeds to be in danger of
misuse, dissipation, commingling, loss, theft, damage or destruction, or
otherwise in jeopardy or unsatisfactory in character or value. As used in this
Section 9, “material impairment” means having an adverse effect of at least
$500,000.00.
     10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have
the right to declare immediately due and payable all or any Indebtedness secured
hereby and to terminate any commitments to make loans or otherwise extend credit
to Debtor. Bank shall

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have all other rights, powers, privileges and remedies granted to a secured
party upon default under the Oregon Uniform Commercial Code or otherwise
provided by law, including without limitation, the right (a) to contact all
persons obligated to Debtor on any Collateral or Proceeds and to instruct such
persons to deliver all Collateral and/or Proceeds directly to Bank, and (b) to
sell, lease, license or otherwise dispose of any or all Collateral. All rights,
powers, privileges and remedies of Bank shall be cumulative. No delay, failure
or discontinuance of Bank in exercising any right, power, privilege or remedy
hereunder shall affect or operate as a waiver of such right, power, privilege or
remedy; nor shall any single or partial exercise of any such right, power,
privilege or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power, privilege or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any default
hereunder, or any such waiver of any provisions or conditions hereof, must be in
writing and shall be effective only to the extent set forth in writing. It is
agreed that public or private sales or other dispositions, for cash or on
credit, to a wholesaler or retailer or investor, or user of property of the
types subject to this Agreement, or public auctions, are all commercially
reasonable since differences in the prices generally realized in the different
kinds of dispositions are ordinarily offset by the differences in the costs and
credit risks of such dispositions. While an Event of Default exists: (a) Debtor
will deliver to Bank from time to time, as requested by Bank, current lists of
all Collateral and Proceeds; (b) Debtor will not dispose of any Collateral or
Proceeds except on terms approved by Bank; (c) at Bank’s request, Debtor will
assemble and deliver all Collateral and Proceeds, and books and records
pertaining thereto, to Bank at a reasonably convenient place designated by Bank;
and (d) Bank may, without notice to Debtor, enter onto Debtor’s premises and
take possession of the Collateral. With respect to any sale or other disposition
by Bank of any Collateral subject to this Agreement, Debtor hereby expressly
grants to Bank the right to sell such Collateral using any or all of Debtor’s
trademarks, trade names, trade name rights and/or proprietary labels or marks.
Debtor further agrees that Bank shall have no obligation to process or prepare
any Collateral for sale or other disposition.
     11. DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In
disposing of Collateral hereunder, Bank may disclaim all warranties of title,
possession, quiet enjoyment and the like. Any proceeds of any disposition of any
Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing, including
reasonable attorneys’ fees, and the balance of such proceeds may be applied by
Bank toward the payment of the Indebtedness in such order of application as Bank
may from time to time elect. Upon the transfer of the Indebtedness (which shall
be subject to the terms of the Credit Agreement), Bank shall transfer its
interest in the Collateral and Proceeds and shall be fully discharged thereafter
from all liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred.
     12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in
full and all commitments by Bank to extend credit to Debtor have been terminated
or expired, the power of sale or other disposition and all other rights, powers,
privileges and remedies granted to Bank hereunder shall continue to exist and
may be exercised by Bank at any time and from time to time irrespective of the
fact that the Indebtedness or any part thereof may have become barred by any
statute of limitations, or that the personal liability of Debtor may have
ceased, unless such liability shall have ceased due to the payment in full of
all Indebtedness secured hereunder.

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     13. MISCELLANEOUS. Debtor hereby waives any right to require Bank to
(i) proceed against Debtor or any other person, (ii) proceed against or exhaust
any security from Debtor or any other person, (iii) perform any obligation of
Debtor with respect to any Collateral or Proceeds, and (d) make any presentment
or demand, or give any notice of nonpayment or nonperformance, protest, notice
of protest or notice of dishonor hereunder or in connection with any Collateral
or Proceeds. Debtor further waives any right to direct the application of
payments or security for any Indebtedness of Debtor or indebtedness of customers
of Debtor.
     14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Bank at the address specified in any
other loan documents entered into between Debtor and Bank and to Debtor at the
address of its chief executive office (or principal residence, if applicable)
specified below or to such other address as any party may designate by written
notice to each other party, and shall be deemed to have been given or made as
follows: (a) if personally delivered, upon delivery; (b) if sent by mall, upon
the earlier of the date of receipt or three (3) days after deposit in the U.S.
mail, first class and postage prepaid; and (c) if sent by telecopy, upon
receipt.
     15. COSTS, EXPENSES AND ATTORNEYS’ FEES. The non-prevailing party shall pay
to the prevailing party immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of in-house counsel),
expended or incurred by the non-prevailing party in connection with (a) the
enforcement of Bank’s rights and/or the collection of any amounts which become
due to Bank under this Agreement, and (b) the prosecution or defense of any
action in any way related to this Agreement, including without limitation, any
action for declaratory relief, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by Bank
or any other person) relating to Debtor or Subsidiary. All of the foregoing
shall be paid by Debtor with interest from the date of demand until paid in full
at a rate per annum equal to two percent (2.00%) above the Bank’s Prime Rate in
effect from time to time.
     16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties, and may be amended or
modified only in writing signed by Bank and Debtor.
     17. DEFINED TERMS. Terms used in this Agreement which are defined in the
Credit Agreement or the Line of Credit Note shall have the same meaning herein
that they are given therein.
     18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
     19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
     Debtor warrants that Debtor is an organization registered under the laws of
the State of Wisconsin.

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     Debtor warrants that its chief executive office (or principal residence, if
applicable) is located at the following address: 18550 NE Riverside Parkway,
Portland, OR 97230.
     Debtor warrants that the tangible Collateral (except goods in transit or in
possession of repairmen) is located or domiciled at the following additional
addresses: 12722 NE Airport Way, Portland, OR 97230; 18550 NE Riverside Parkway,
Portland, OR 97230; 1629 Caledonia Street, LaCrosse, WI 54603; 1325 St. Andrew
St., LaCrosse, WI 54603; 1320 St. Andrew St, LaCrosse, WI 54603; 401 Washington
St., Claremont, NH 03743.
     IN WITNESS WHEREOF, this Agreement has been duly executed as of April 15,
2004.

            LACROSSE FOOTWEAR, INC.
        By:   For Exhibit Purposes Only       Joseph P. Schneider
President/Chief Executive Officer              By:   For Exhibit Purposes Only  
    David P. Carlson        Executive Vice President/Chief Financial Officer   
 

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EXHIBIT C
THIRD PARTY SECURITY AGREEMENT
     1. GRANT OF SECURITY INTEREST. In consideration of any credit or other
financial accommodation heretofore, now or hereafter extended or made to
LACROSSE FOOTWEAR, INC. (“Borrower”) by WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Bank”), and for other valuable consideration, as security for the payment of
all Indebtedness of Borrower to Bank, the undersigned DANNER, INC. (“Owner”)
hereby grants and transfers to Bank a security interest in all of the property
of Owner described as follows (collectively, the “Collateral”):
     (a) all accounts, deposit accounts, contract rights, chattel paper (whether
electronic or tangible), instruments, promissory notes, documents, general
intangibles, payment intangibles, software, letter of credit rights, health-care
insurance receivables and other rights to payment of every kind now existing or
at any time hereafter arising;
     (b) all inventory, goods held for sale or lease or to be furnished under
contracts for service, or goods so leased or furnished, raw materials, component
parts, work in process and other materials used or consumed in Owner’s business,
now or at any time hereafter owned or acquired by Owner, wherever located, and
all products thereof, whether in the possession of Owner, any warehousemen, any
bailee or any other person, or in process of delivery, and whether located at
Owner’s places of business or elsewhere;
     (c) all warehouse receipts, bills of sale, bills of lading and other
documents of every kind (whether or not negotiable) in which Owner now has or at
any time hereafter acquires any interest, and all additions and accessions
thereto, whether in the possession or custody of Owner, any bailee or any other
person for any purpose;
     (d) all money and property heretofore, now or hereafter delivered to or
deposited with Bank or otherwise coming into the possession, custody or control
of Bank (or any agent or bailee of Bank) in any manner or for any purpose
whatsoever during the existence of this Agreement and whether held in a general
or special account or deposit for safekeeping or otherwise;
     (e) all right, title and interest of Owner under licenses, guaranties,
warranties, management agreements, marketing or sales agreements, escrow
contracts, indemnity agreements, insurance policies, service or maintenance
agreements, supporting obligations and other similar contracts of every kind in
which Owner now has or at any time hereafter shall have an interest;
     (f) all goods, tools, machinery, furnishings, furniture and other equipment
of every kind now existing or hereafter acquired, and improvements,
replacements, accessions and additions thereto and embedded software included
therein, whether located on any property owned or leased by Owner or elsewhere,
including without limitation, any of the foregoing now or at any time hereafter
located at or installed on the land or in the improvements at any of the real
property owned or leased by Owner, and all such goods after they have been
severed and removed from any of said real property; and
     (g) all motor vehicles, trailers, mobile homes, manufactured homes, boats,
other rolling stock and related equipment of every kind now existing or
hereafter acquired and all

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additions and accessories thereto, whether located on any property owned or
leased by Owner or elsewhere;
(excluding from the foregoing all Excluded Collateral), together with whatever
is receivable or received when any of the foregoing or the proceeds thereof are
sold, leased, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including without limitation, all
rights to payment, including returned premiums, with respect to any insurance
relating to any of the foregoing, and all rights to payment with respect to any
claim or cause of action affecting or relating to any of the foregoing
(collectively, “Proceeds”). As used herein “Excluded Collateral” means (i) all
“Intent to Use” applications for trademark or service mark registrations filed
pursuant to Section 1(b) of the Lanham Act, and all goodwill associated
therewith and all other assets, rights and interests that uniquely reflect or
embody such goodwill (each, a “Lanham Act Application”), unless and until an
Amendment to Allege Use or a Statement of Use under Section 1(c) and 1(d) of
said Act has been filed with respect to this Agreement; and (ii) contracts with
the United States Government or any political subdivision thereof for which any
necessary consent for the security interest granted hereunder has not been
obtained from the United States Government or such subdivision under 31 U.S.C.
§3727 and 41 U.S.C. §15, and the regulations in effect thereunder, and accounts
generated under such contracts.
     2. CONTINUING AGREEMENT; REVOCATION; OBLIGATION UNDER OTHER AGREEMENTS.
This is a continuing agreement and all rights, powers and remedies hereunder
shall apply to all past, present and future Indebtedness of Borrower to Bank,
including that arising under successive transactions which shall either continue
the Indebtedness, increase or decrease it, or from time to time create new
Indebtedness after all or any prior Indebtedness has been satisfied, and
notwithstanding the death, Incapacity, dissolution, liquidation or bankruptcy of
Borrower or Owner or any other event or proceeding affecting Borrower or Owner.
This Agreement shall not apply to any new Indebtedness created after actual
receipt by Bank of written notice of its revocation as to such new Indebtedness;
provided however, that loans or advances made by Bank to Borrower after
revocation under commitments existing prior to receipt by Bank of such
revocation, and extensions, renewals or modifications, of any kind, of
Indebtedness incurred by Borrower or committed by Bank prior to receipt by Bank
of such revocation, shall not be considered new Indebtedness. Any such notice
must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its
office at Portland Regional Commercial Banking Office, 1300 S.W. Fifth Avenue,
MAC P6101-133, Portland OR, 97208, or at such other address as Bank shall from
time to time designate. The obligations of Owner hereunder shall be in addition
to any obligations of Owner under any other grants or pledges of security for
any liabilities or obligations of Borrower or any other person heretofore or
hereafter given to Bank unless said other grants or pledges of security are
expressly modified or revoked in writing; and this Agreement shall not, unless
expressly herein provided, affect or invalidate any such other grants or pledges
of security.
     3. SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF
LIABILITY. A separate action or actions may be brought and prosecuted against
Owner whether action is brought against Borrower or any other person, or whether
Borrower or any other person is joined in any such action or actions. Owner
acknowledges that this Agreement is absolute and unconditional, there are no
conditions precedent to the effectiveness of this Agreement, and this Agreement
is in full force and effect and is binding on Owner as of the date written
below, regardless of whether Bank obtains collateral or any guaranties from
others or takes any other action contemplated by Owner. Owner waives the benefit
of any statute of limitations affecting Owner’s liability hereunder or the

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enforcement thereof, and Owner agrees that any payment of any Indebtedness or
other act which shall toll any statute of limitations applicable thereto shall
similarly operate to toll such statute of limitations applicable to Owner’s
liability hereunder. The liability of Owner hereunder shall be reinstated and
revived and the rights of Bank shall continue if and to the extent that for any
reason any amount at any time paid on account of any Indebtedness secured hereby
is rescinded or must be otherwise restored by Bank, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, all as though such
amount had not been paid. The determination as to whether any amount so paid
must be rescinded or restored shall be made by Bank in its sole discretion;
provided however, that if Bank chooses to contest any such matter at the request
of Owner, Owner agrees to indemnify and hold Bank harmless from and against all
costs and expenses, including reasonable attorneys’ fees, expended or incurred
by Bank in connection therewith, including without limitation, in any litigation
with respect thereto.
     4. OBLIGATIONS OF BANK. Any money received by Bank in respect of the
Collateral may be deposited, at Bank’s option, into a non-interest bearing
account over which Owner shall have no control, and the same shall, for all
purposes, be deemed Collateral hereunder, subject, however, to the terms of the
Credit Agreement regarding the use of insurance proceeds, and the right of Owner
to retain and use proceeds of the sale of inventory in the ordinary course of
business when an Event of Default does not exist.
     5. REPRESENTATIONS AND WARRANTIES.
     (a) Owner represents and warrants to Bank that: (i) Owner’s legal name is
exactly as set forth on the first page of this Agreement, and all of Owner’s
organizational documents or agreements delivered to Bank are complete and
accurate in every respect; (ii) Owner is the owner and has possession or control
of the Collateral and Proceeds, except security deposits (including interest
thereon), goods in transit or that are temporarily in the possession of
repairmen or goods in storage in the ordinary course of business; (iii) Owner
has the exclusive right to grant a security interest in the Collateral and
Proceeds; (iv) all Collateral and Proceeds are genuine, free from liens, adverse
claims, setoffs, default, prepayment, defenses and conditions precedent of any
kind or character, except the lien created hereby, or Permitted Encumbrances, as
defined in the Credit Agreement of even date herewith between Borrower and Bank,
as amended, renewed or restated from time to time (the “Credit Agreement”), as
otherwise agreed to by Bank, or as heretofore disclosed by Owner to Bank, in
writing; (e) all statements contained herein and, where applicable, in the
Collateral are true and complete in all material respects; (f) no financing
statement covering any of the Collateral or Proceeds, and naming any secured
party other than Bank, is on file in any public office; and (g) to the extent
that Collateral included in the Borrowing Base consists of particular rights to
payment in excess of $100,000.00, all persons appearing to be obligated on these
particular items of Collateral and Proceeds have authority and capacity to
contract and are bound as they appear to be, all property subject to chattel
paper has been properly registered and filed in compliance with law and to
perfect the interest of Owner in such property, and all such Collateral and
Proceeds comply with all applicable laws concerning form, content and manner of
preparation and execution, including where applicable Federal Reserve
Regulation Z and any State consumer credit laws. A breach of the representation
made in clause (g) above shall be deemed not to constitute an Event of Default
if Borrower notifies Bank in writing after first becoming aware of any such
breach and the applicable right to payment is thereafter not included in the
Borrowing Base.
     (b) Owner further represents and warrants to Bank that: (i) the Collateral
pledged hereunder is so pledged at Borrower’s request; (ii) Bank has made no
representation to Owner

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as to the creditworthiness of Borrower; and (iii) Owner has established adequate
means of obtaining from Borrower on a continuing basis financial and other
information pertaining to Borrower’s financial condition. Owner agrees to keep
adequately informed from such means of any facts, events or circumstances which
might in any way affect Owner’s risks hereunder, and Owner further agrees that
Bank shall have no obligation to disclose to Owner any information or material
about Borrower which is acquired by Bank in any manner.
     6. COVENANTS OF OWNER.
     (a) Owner agrees in general; (i) to indemnify Bank against all losses,
claims, demands, liabilities and expenses of every kind caused by property
subject hereto, except to the extent caused by Bank after taking possession or
control thereof; (ii) to pay all reasonable costs and expenses, including
reasonable attorneys’ fees, incurred by Bank in the perfection and preservation
of the Collateral or Bank’s interest therein and/or the realization, enforcement
and exercise of Bank’s rights, powers and remedies hereunder; (iii) to permit
Bank to exercise its powers; (iv) to execute and deliver such documents as Bank
deems necessary to create, perfect and continue the security interests
contemplated hereby; (v) not to change Owner’s name, and as applicable, its
chief executive office, its principal residence or the jurisdiction in which it
is organized and/or registered without giving Bank prior written notice thereof;
(vi) not to change the places where Owner keeps any Collateral (except security
deposits (including interest thereon), goods in transit, goods that are
temporarily in the possession of repairmen or goods in storage in the ordinary
course of business) or Owner’s records concerning the Collateral and Proceeds
without giving Bank prior written notice of the address to which Owner is moving
same; and (vii)to cooperate with Bank in perfecting all security interests
granted herein as required in the Credit Agreement and in obtaining such
agreements from third parties as Bank deems necessary, proper or convenient in
connection with the preservation, perfection or enforcement of any of its rights
hereunder. Upon the occurrence and during the continuance of an Event of
Default, Owner shall immediately execute, obtain from third parties, deliver,
file and record such documentation as Bank reasonably requires in order to
perfect the Bank’s security interest in all Collateral.
     (b) Owner agrees with regard to the Collateral and Proceeds, unless Bank
agrees otherwise in writing: (i) that Bank is authorized to file financing
statements in the name of Owner to perfect Bank’s security interest in
Collateral and Proceeds; (ii) where applicable, to insure the tangible
Collateral with Bank named as a loss payee as its interest may appear, in form,
substance and amounts, under agreements, against risks and liabilities, and with
insurance companies satisfactory to Bank; (iii) where applicable, to operate the
Collateral in accordance with all applicable statutes, rules and regulations
relating to the use and control thereof, and not to use any Collateral for any
unlawful purpose or in any way that would void any insurance required to be
carried in connection therewith; (iv) not to remove the Collateral (other than
goods in transit, goods that are temporarily in the possession of repairmen or
goods in storage in the ordinary course of business) from Owner’s premises,
except (A) for deliveries to buyers in the ordinary course of Owner’s business,
and deliveries of damaged, obsolete, surplus or worn-out property, and
(B) Collateral which consists of mobile goods as defined in the Oregon Uniform
Commercial Code, in which case Owner agrees not to remove or permit the removal
of such Collateral from its state of domicile for a period in excess of thirty
(30) calendar days; (v) to pay when due all license fees, registration fees and
other charges in connection with any Collateral; (vi) not to permit any lien on
the Collateral or Proceeds, including without limitation, liens arising from
repairs to or storage of the Collateral, except in favor of Bank or as set forth
in the Credit Agreement, or Permitted Encumbrances; (vii) not to sell,
hypothecate or dispose of, nor permit the transfer by operation of law of, any
of the Collateral or Proceeds or

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any interest therein, except sales of inventory to buyers in the ordinary course
of Owner’s business, sales of damaged, obsolete, surplus, or worn-out property,
or as otherwise permitted herein or in the Credit Agreement; (viii) to permit
Bank to inspect the Collateral at any reasonable time; (ix) to keep, in
accordance with generally accepted accounting principles, complete and accurate
records regarding all Collateral and Proceeds, and to permit Bank to inspect the
same and make copies thereof at any reasonable time; (x) if requested by Bank
during the continuance of an Event of Default, to receive and use reasonable
diligence to collect Collateral consisting of accounts and other rights to
payment and Proceeds, in trust and as the property of Bank, and to immediately
endorse as appropriate and deliver such Collateral and Proceeds to Bank daily in
the exact form in which they are received together with a collection report in
form satisfactory to Bank; (xi) intentionally deleted; (xii) to give only normal
allowances and credits and to advise Bank thereof immediately in writing if they
affect any rights to payment or Proceeds in any material respect; (xiii) from
time to time, when requested by Bank, to prepare and deliver a schedule of all
Collateral and Proceeds subject to this Agreement and during the continuance of
an Event of Default to assign in writing and deliver to Bank all accounts,
contracts, leases and other chattel paper, instruments, documents and other
evidences thereof; (xiv) in the event Bank elects to receive payments of rights
to payment or Proceeds hereunder during the continuance of an Event of Default,
to pay all expenses incurred by Bank in connection therewith, including expenses
of accounting, correspondence, collection efforts, reporting to account or
contract Owners, filing, recording, record keeping and expenses incidental
thereto; and (xv) to provide any service and do any other acts which may be
necessary to maintain, preserve and protect all Collateral and, as appropriate
and applicable, to keep all Collateral in good and saleable condition, to deal
with the Collateral in accordance with the standards and practices adhered to
generally by users and manufacturers of like property, and to keep all
Collateral and Proceeds free and clear of all defenses, rights of offset and
counterclaims, subject to offsets in the ordinary course of business for
defective inventory.
     (c) Except as specifically set forth in writing by Bank and the effect of
leases and applicable law that convey fixtures or improvements to landlords,
Owner shall not sell or transfer equipment, provided, however, that Debtor may
sell or transfer damaged, obsolete, worn-out, and surplus equipment Collateral
with an aggregate book value not to exceed $500,000.00 in each of Debtor’s
fiscal years.
     7. POWERS OF BANK. Owner appoints Bank its true attorney in fact to perform
any of the following powers, which are coupled with an interest, are irrevocable
until termination of this Agreement and may be exercised from time to time by
Bank’s officers and employees, or any of them, if Owner is in default (unless
otherwise set forth herein): (a) to perform any obligation of Owner hereunder in
Owner’s name or otherwise; (b) to give notice to account Owners or others of
Bank’s rights in the Collateral and Proceeds, to enforce or forebear from
enforcing the same and make extension and modification agreements with respect
thereto; (c) to release persons liable on Collateral or Proceeds and to give
receipts and acquittances and compromise disputes in connection therewith;
(d) to release or substitute security; (e) to resort to security in any order;
(f) to prepare, execute, file, record or deliver notes, assignments, schedules,
designation statements, financing statements, continuation statements,
termination statements, statements of assignment, applications for registration
or like papers to perfect, preserve or release Bank’s interest in the Collateral
and Proceeds; (g) to receive, open and read mail addressed to Owner, and
promptly deliver the originals thereof (or, if the mail consists of Collateral
or Proceeds, copies) to Owner; (h) to take cash, instruments for the payment of
money and other property to which Bank is entitled; (i) at any time whether or
not a default exists, to verify facts concerning the Collateral and Proceeds by
inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;
(j) to endorse, collect deliver and receive

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payment under instruments for the payment of money constituting or relating to
Proceeds; (k) to prepare, adjust, execute, deliver and receive payment under
insurance claims, and to collect and receive payment of and endorse any
instrument in payment of loss or returned premiums or any other insurance refund
or return, and to apply such amounts received by Bank, at Bank’s sole option,
toward repayment of the Indebtedness or, where appropriate, replacement of the
Collateral; (l) to exercise all rights, powers and remedies which Owner would
have, but for this Agreement, with respect to all Collateral and Proceeds
subject hereto; (m) at any reasonable time whether or not a default exists, to
enter onto Owner’s premises in inspecting the Collateral; (n) to make
withdrawals from and to close deposit accounts or other accounts with any
financial institution, wherever located, into which Proceeds may have been
deposited, and to apply funds so withdrawn to payment of the Indebtedness;
(o) to preserve or release the interest evidenced by chattel paper to which Bank
is entitled hereunder and to endorse and deliver any evidence of title
incidental thereto; and (p) to do all acts and things and execute all documents
in the name of Owner or otherwise, deemed by Bank as necessary, proper and
convenient in connection with, at any time whether or not a default exists, the
preservation or perfection (as required in the Credit Agreement), or, after
default, the enforcement of its rights hereunder.
     8. OWNER’S WAIVERS.
     (a) Owner waives any right to require Bank to: (i) proceed against Borrower
or any other person; (ii) marshall assets or proceed against or exhaust any
security held from Borrower or any other person; (iii) give notice of the terms,
time and place of any public or private sale or other disposition of personal
property security held from Borrower or any other person; (iv) take any action
or pursue any other remedy in Bank’s power; or (v) make any presentment or
demand for performance, or give any notice of nonperformance, protest, notice of
protest or notice of dishonor hereunder or in connection with any obligations or
evidences of Indebtedness held by Bank as security for or which constitute in
whole or in part the Indebtedness secured hereunder, or in connection with the
creation of new or additional Indebtedness.
     (b) Owner waives any defense to its obligations hereunder based upon or
arising by reason of: (i) any disability or other defense of Borrower or any
other person; (ii) the cessation or limitation from any cause whatsoever, other
than payment in full, of the Indebtedness of Borrower or any other person;
(iii) any lack of authority of any officer, director, partner, agent or any
other person acting or purporting to act on behalf of Borrower which is a
corporation, partnership or other type of entity, or any defect in the formation
of Borrower; (iv) the application by Borrower of the proceeds of any
Indebtedness for purposes other than the purposes represented by Borrower to, or
intended or understood by, Bank or Owner; (v) any act or omission by Bank which
directly or indirectly results in or aids the discharge of Borrower or any
portion of the Indebtedness by operation of law or otherwise, or which in any
way impairs or suspends any rights or remedies of Bank against Borrower in the
absence of Bank’s gross negligence, willful misconduct or bad faith; (vi) any
impairment of the value of any interest in security for the Indebtedness or any
portion thereof, including without limitation, the failure to obtain or maintain
perfection or recordation of any interest in any such security, the release of
any such security without substitution, and/or the failure to preserve the value
of, or to comply with applicable law in disposing of, any such security;
(vii) any modification of the Indebtedness, in any form whatsoever, including
any modification made after revocation hereof to any Indebtedness incurred prior
to such revocation, and including without limitation the renewal, extension,
acceleration or other change in time for payment of, or other change in the
terms of, the Indebtedness or any portion thereof, including increase or
decrease of the rate of interest thereon; or (viii) any requirement that Bank
give any notice of acceptance of this Agreement. Until all Indebtedness shall
have been paid in full, Owner shall have no right of subrogation, and

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Owner waives any right to enforce any remedy which Bank now has or may hereafter
have against Borrower or any other person and waives any benefit of, or any
right to participate in, any security now or hereafter held by Bank. Owner
further waives all rights and defenses Owner may have arising out of (A) any
election of remedies by Bank, even though that election of remedies, such as a
non-judicial foreclosure with respect to any security for any portion of the
Indebtedness, destroys Owner’s rights of subrogation or Owner’s rights to
proceed against Borrower for reimbursement, or (B) any loss of rights Owner may
suffer by reason of any rights, powers or remedies of Borrower in connection
with any anti-deficiency laws or any other laws limiting, qualifying or
discharging Borrower’s Indebtedness, whether by operation of law or otherwise,
including any rights Owner may have to a fair market value hearing to determine
the size of a deficiency following any foreclosure sale or other disposition of
any real property security for any portion of the Indebtedness.
     9. AUTHORIZATIONS TO BANK. Owner authorizes Bank either before or after
revocation hereof, without notice to or demand on Owner, and without affecting
Owner’s liability hereunder, from time to time to: (a) alter, compromise, renew,
extend, accelerate or otherwise change the time for payment of, or otherwise
change the terms of, the Indebtedness or any portion thereof, including increase
or decrease of the rate of interest thereon; (b) take and hold security, other
than the Collateral and Proceeds, for the payment of the Indebtedness or any
portion thereof, and exchange, enforce, waive, subordinate or release the
Collateral and Proceeds, or any part thereof, or any such other security;
(c) apply the Collateral and Proceeds or such other security and direct the
order or manner of sale thereof, including without limitation, a non-judicial
sale permitted by the terms of the controlling security agreement, mortgage or
deed of trust as Bank in its discretion may determine; (d) release or substitute
any one or more of the endorsers or guarantors of the Indebtedness, or any
portion thereof, or any other party thereto; and (e) apply payments received by
Bank from Borrower to any Indebtedness of Borrower to Bank, in such order as
Bank shall determine in its sole discretion, whether or not such Indebtedness is
covered by this Agreement, and Owner hereby waives any provision of law
regarding application of payments which specifies otherwise. Bank may without
notice assign this Agreement in whole or in part.
     10. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Owner
agrees to pay or secure by bond (or contest in good faith, provided adequate
reserves are made therefor and no enforcement proceedings against any Collateral
has been instituted that are not stayed or dismissed within sixty days
thereafter), prior to delinquency, all insurance premiums, taxes, charges, liens
and assessments against the Collateral and Proceeds, and upon the failure of
Owner to do so, Bank at its option may pay any of them and shall be the sole
judge of the legality or validity thereof and the amount necessary to discharge
the same. Any such payments made by Bank shall be obligations of Owner to Bank,
due and payable immediately upon demand, together with interest at a rate equal
to Prime Rate, which rate shall vary as the Prime Rate changes, and shall be
secured by the Collateral and Proceeds, subject to all terms and conditions of
this Agreement.
     11. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an “Event of Default” under this Agreement: (a) any defined Event of
Default, under the Credit Agreement; (b) any material impairment of the rights
of Bank in any Collateral or Proceeds; and (e) Bank, in good faith, believes
that $500,000.00 or more of the Collateral and/or Proceeds to be in danger of
misuse, dissipation, commingling, toss, theft, damage or destruction, or
otherwise in jeopardy or unsatisfactory in character or value. As used in this
Section l, “material impairment” means having an adverse effect of at least
$500,000.00.

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     12. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have
and may exercise without demand any and all rights, powers, privileges and
remedies granted to a secured party upon default under the Oregon Uniform
Commercial Code or otherwise provided by law, including without limitation, the
right (a) to contact all persons obligated to Owner on any Collateral or
Proceeds and to instruct such persons to deliver all Collateral and/or Proceeds
directly to Bank, and (b) to sell, lease, license or otherwise dispose of any or
all Collateral. All rights, powers, privileges and remedies of Bank shall be
cumulative. No delay, failure or discontinuance of Bank in exercising any right,
power, privilege or remedy hereunder shall affect or operate as a waiver of such
right, power, privilege or remedy; nor shall any single or partial exercise of
any such right, power, privilege or remedy preclude, waive or otherwise affect
any other or further exercise thereof or the exercise of any other right, power,
privilege or remedy. Any waiver, permit, consent or approval of any kind by Bank
of any default hereunder, or any such waiver of any provisions or conditions
hereof, must be in writing and shall be effective only to the extent set forth
in writing. It is agreed that public or private sales or other dispositions, for
cash or on credit, to a wholesaler or retailer or investor, or user of property
of the types subject to this Agreement, or public auctions, are all commercially
reasonable since differences in the prices generally realized in the different
kinds of dispositions are ordinarily offset by the differences in the costs and
credit risks of such dispositions. While an Event of Default exists: (a) Owner
will deliver to Bank from time to time, as requested by Bank, current lists of
all Collateral and Proceeds; (b) Owner will not dispose of any of the Collateral
or Proceeds except on terms approved by Bank; (c) at Bank’s request, Owner will
assemble and deliver all Collateral and Proceeds, and books and records
pertaining thereto, to Bank at a reasonably convenient place designated by Bank;
and (d) Bank may, without notice to Owner, enter onto Owner’s premises and take
possession of the Collateral. With respect to any sale or other disposition by
Bank of any Collateral subject to this Agreement, Owner hereby expressly grants
to Bank the right to sell such Collateral using any or all of Owner’s
trademarks, trade names, trade name rights and/or proprietary labels or marks.
Owner further agrees that Bank shall have no obligation to process or prepare
any Collateral for sale or other disposition.
     13. DISPOSITION OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS. In
disposing of Collateral hereunder, Bank may disclaim all warranties of title,
possession, quiet enjoyment and the like. Any proceeds of any disposition of any
Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing, including
reasonable attorneys’ fees, and the balance of such proceeds may be applied by
Bank toward the payment of the Indebtedness in such order of application as Bank
may from time to time elect. Upon the transfer of the Indebtedness (which shall
be subject to the terms of the Credit Agreement), Bank shall transfer its
interest in the Collateral and Proceeds and shall be fully discharged thereafter
from all liability and responsibility with respect to any of the foregoing so
transferred, and the transferee shall be vested with all rights and powers of
Bank hereunder with respect to any of the foregoing so transferred.
     14. NOTICES. All notices, requests and demands required under this
Agreement must be in writing, addressed to Bank at the address specified in
Section 2 hereof and to Owner at the address of its chief executive office (or
principal residence, if applicable) specified below or to such other address as
any party may designate by written notice to each other party, and shall be
deemed to have been given or made as follows: (a) if personally delivered, upon
delivery; (b) if sent by mail, upon the earlier of the date of receipt or three
(3) days after deposit in the U.S. mail, first class and postage prepaid; and
(c) if sent by telecopy, upon receipt.

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     15. COSTS, EXPENSES AND ATTORNEYS’ FEES. The non-prevailing party shall pay
to the prevailing party immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of in-house counsel),
expended or incurred by the non-prevailing party in connection with (a) the
enforcement of Bank’s rights and/or the collection of any amounts which become
due to Bank under this Agreement, and (b) the prosecution or defense of any
action in any way related to this Agreement, including without limitation, any
action for declaratory relief, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by Bank
or any other person) relating to Owner or Borrower. All of the foregoing shall
be paid by Owner with interest from the date of demand until paid in full at a
rate per annum equal to two percent (2.00%) above the Bank’s Prime Rate in
effect from time to time.
     16. SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Owner may not
assign or transfer any of its interests or rights hereunder without Bank’s prior
written consent. Owner acknowledges that Bank has the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, any Indebtedness of Borrower to Bank and any obligations with
respect thereto, including this Agreement. In connection therewith, Bank may
disclose all documents and information which Bank now has or hereafter acquires
relating to Owner and/or this Agreement, whether furnished by Borrower, Owner or
otherwise, subject to a confidentiality agreement reasonably acceptable to Bank
and Owner. Owner further agrees that Bank may disclose such documents and
information to Borrower.
     17. AMENDMENT. This Agreement may be amended or modified only in writing
signed by Bank and Owner,
     18. DEFINED TERMS. Terms used in this Agreement which are defined in the
Credit Agreement or the Line of Credit Note shall have the same meaning herein
that they are given therein.
     19. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
     20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon.
     21. ARBITRATION.
     (a) Arbitration. The parties hereto agree, upon demand by any party, to
submit to binding arbitration all claims, disputes and controversies between or
among them, whether in tort, contract or otherwise arising out of or relating to
in any way (i) the loan and related loan and security documents which are the
subject of this Agreement and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests by Borrower
for additional credit.

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     (b) Governing Rules. Any arbitration proceeding will (i) proceed in a
location in Oregon selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the “Rules”). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.
     (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.
     (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in
which the amount in controversy is $5,000,000.00 or less will be decided by a
single arbitrator selected according to the Rules, and who shall not render an
award of greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of Oregon or a neutral retired judge of the state
or federal judiciary of Oregon, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of Oregon and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the Oregon Rules of Civil Procedure or other applicable law.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not constitute a
waiver of the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such action for
judicial relief.

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     (e) Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
dispute with the AAA. All requests for an extension of the discovery periods, or
any discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is
available.
     (f) Class Proceedings and Consolidations. The resolution of any dispute
arising pursuant to the terms of this Agreement shall be determined by a
separate arbitration proceeding and such dispute shall not be consolidated with
other disputes or included in any class proceeding, except for consolidations
with other disputes between the parties hereto arising out of or relating to
this Agreement, the other Loan Documents or the matters described in Section
21(a)(i) or (ii)
     (g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all
costs and expenses of the arbitration proceeding.
     (h) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the documents between the parties or the subject matter of the
dispute shall control. This arbitration provision shall survive termination,
amendment or expiration of any of the documents or any relationship between the
parties.
     Owner warrants that Owner is an organization registered under the laws of
the State of Wisconsin.
     Owner warrants that its chief executive office (or principal residence, if
applicable) is located at the following address: 18550 NE Riverside Parkway,
Portland, OR 97230.
     Owner warrants that the Collateral (except goods in transit) is located or
domiciled at the following additional addresses: 12722 NE Airport Way, Portland,
OR 97230.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3,1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.

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     IN WITNESS WHEREOF, this Agreement has been duly executed as of
April 15,2004.
DANNER, INC.

         
By:
  For Exhibit Purposes Only    
 
 
 
   
Title:
       
 
 
 
   
 
       
By:
  For Exhibit Purposes Only    
 
 
 
   
Title:
       
 
 
 
   

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