Document:

exv10w7

Exhibit 10.7

AMERIGROUP CORPORATION

AMENDED AND RESTATED CHANGE IN CONTROL BENEFIT POLICY

     Section 1. Purpose of Policy.

          The name of this policy is the AMERIGROUP Corporation Amended and Restated Change in Control
Benefit Policy (the “Policy”). The purposes of the Policy are as follows: (1) to reinforce and
encourage the continued attention and dedication of members of the Company’s management to their
assigned duties without the distraction arising from the possibility of a change in control of the
Company; (2) to enable and encourage the Company’s management to focus their attention on obtaining
the best possible transaction for the Company’s stockholders and to make an independent evaluation
of all possible transactions, without being diverted by their personal concerns regarding the
possible impact of various transactions on the security of their jobs and benefits; and (3) to
provide severance benefits to certain Participants (as defined below) who incur a termination of
employment under the circumstances described herein within a certain period following a Change in
Control (as defined below).

     Section 2. Definitions.

          For purposes of the Policy, the following terms shall be defined as set forth below:

          (a) “Affiliate” means any corporation or other entity 50% or more of the voting
power of the outstanding voting securities of which is owned by the Company or its Subsidiaries or
by any other Affiliate.

          (b) “Award” means all payments to a Participant under the Policy, including to the
extent applicable, the payment upon a Change in Control under Section 5(a), the Severance Payment
under Section 5(b) and the Gross-Up Payment under Section 5(d).

          (c) “Board” means the Board of Directors of the Company.

          (d) “Cause” means, unless a Participant is a party to a written employment agreement
with the Company, Subsidiary or Affiliate which contains a definition of “cause,” “termination for
cause,” or any other similar term or phrase, in which case “Cause” shall have the meaning set forth
in such agreement, conduct involving one or more of the following: (i) the substantial and
continuing failure of the Participant to render services to the Company or any Subsidiary or
Affiliate in accordance with the Participant’s obligations and position with the Company,
Subsidiary or Affiliate, after 30 day’s notice from the President of the Company or any Subsidiary
or Affiliate, such notice setting forth in reasonable detail the nature of such failure, and in the
event the Participant fails to cure such breach or failure within 30 days of notice from the
Company or any Subsidiary or Affiliate, if such breach or failure is capable of cure; (ii)
dishonesty, gross negligence, breach of fiduciary duty; (iii) the commission by the Participant of
an act of fraud or embezzlement, as found by a court of competent jurisdiction; (iv) the conviction
of the Participant of a felony; or a (v) material breach of the terms of an agreement with the
Company or any Subsidiary or Affiliate, provided that the Company or any Subsidiary or Affiliate
provides the

 

 

Participant with adequate notice of such breach and the Participant fails to cure such breach,
if the breach is reasonably curable, within thirty (30) days after receipt of such notice.

          (e) “Change in Control” means (1) in the case of any Award that is subject to
Section 409A of the Code, any event that constitutes, within the meaning of Section
409A(a)(2)(A)(v) of the Code, (i) a change in the ownership of the Company, (ii) a change in the
effective control of the Company, or (iii) a change in the ownership of a substantial portion of
the Company’s assets, or (2) in the case of any other Award, the first to occur of any one of the
events set forth in the following paragraphs:

          (i) any Person is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any securities acquired directly from the
Company) representing 25% or more of the Company’s then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection with a transaction described in
clause (A) of paragraph (iii);

          (ii) the following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the Effective Date of the Policy,
constitute the Board of Directors and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors
of the Company) whose appointment or election by the Board of Directors or nomination for
election by the Company’s stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors on the
Effective Date of the Policy or whose appointment, election or nomination for election was
previously so approved or recommended;

          (iii) there is consummated a merger or consolidation of the Company with any other
corporation other than (A) a merger or consolidation which results in the directors of the
Company immediately prior to such merger or consolidation continuing to constitute at least
a majority of the board of directors of the Company, the surviving entity or any parent
thereof, or (B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the Company)
representing 25% or more of the combined voting power of the Company’s then outstanding
securities; or

          (iv) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or disposition
by the Company of all or substantially all of the Company’s assets, other than a sale or
disposition by the Company of all or substantially all of the Company’s assets to an entity
at least a majority of the board of directors of which comprises individuals who were
directors of the Company immediately prior to such sale or disposition.

          (f) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

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          (g) “Committee” means the Compensation Committee of the Board or, to the extent so
provided by the Board, any other person, committee or entity the Board may appoint to administer
the Policy.

          (h) “Company” means AMERIGROUP Corporation, a Delaware corporation, and, except in
determining under Section 2(e) hereof whether or not any Change in Control of the Company has
occurred, shall include any successor to its business and/or assets.

          (i) “Date of Termination” with respect to any purported termination of a
Participant’s employment (other than by reason of the Participant’s death or Disability), means the
date specified in the Notice of Termination (which shall be within thirty (30) days from the date
such Notice of Termination is given).

          (j) “Disability” means the condition of a Participant who is either (i) unable to
engage in any substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months; or (ii) by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under an accident and health
plan covering employees of the Company.

          (k) “Eligible Recipient” means an employee, officer or director (including a
non-employee director) of the Company or of any Subsidiary or Affiliate.

          (l) “Enhancement Amount” means an additional LTI Award amount that a Participant may
have the opportunity to earn with respect to the first calendar year of a performance cycle under
the LTI Plan.

          (m) “Equity Plan” means the AMERIGROUP Corporation 2005 Equity Incentive Plan, or
any successor stock incentive plan, as amended from time to time.

          (n) “Excise Tax” means the excise tax imposed by Section 4999 of the Code, together
with any interest or penalties imposed with respect to that tax.

          (o) “Good Reason” means, without the consent of the Participant, (i) any changes in
the duties and responsibilities of the Participant which are materially inconsistent with the
duties and responsibilities of the Participant within the Company immediately prior to the Change
in Control, (ii) any 10% or greater reduction of the Participant’s target annual compensation in
effect immediately prior to the change of control, (iii) any required relocation of the
Participant’s office beyond a 50 mile radius from the location of the Participant’s office
immediately prior to the Change in Control, or (iv) any failure by the Company to obtain the
assumption of the Policy by a successor of the Company.

          (p) “LTI Award” means a long-term incentive compensation award granted pursuant to
the LTI Plan.

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          (q) “LTI Plan” means the Company’s Long Term Incentive Program, or any successor
long-term cash incentive plan, as amended from time to time, which is a component of the Company’s
2007 Cash Incentive Plan, as amended.

          (r) “Multiple” means a number for each Participant, selected by the Committee,
ranging from one (1) to three (3). Unless otherwise specified in writing by the Committee, the
following multiples shall be used: (i) three (3) for the Chief Executive Officer; (ii) two (2) for
the President, Chief Operating Officer, Chief Financial Officer, any Executive Vice President and
any Regional Chief Executive Officer; and (iii) one (1) for the Company’s Health Plan Chief
Executive Officers (which includes the Chief Executive Officer of the Company’s Senior & Special
Services Organization) and any other Participant not specifically listed herein or assigned a
different Multiple by the Committee. In the event a Participant holds more than one officer
position listed in this definition and the Multiples differ between such officer positions, only
the higher Multiple attributable to such positions shall apply.

          (s) “Notice of Termination” means a notice which shall indicate the specific
termination provision in this Policy relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Participant’s employment under
the provision so indicated.

          (t) “Participant” means any Eligible Recipient selected by the Committee pursuant to
the Committee’s authority in Section 4(a) hereof. Notwithstanding the foregoing, for (i) Awards
payable under Sections 5(a), 5(b) and 5(d), the Participants shall include the Company’s Chief
Executive Officer, President, Chief Operating Officer, Chief Financial Officer, any Executive Vice
President, any Regional Chief Executive Officer and the Company’s Health Plan Chief Executive
Officers (which includes the Chief Executive Officer of the Company’s Senior & Special Services
Organization), and any other Participants designated by the Committee, and (ii) for Awards payable
under Sections 5(a) and 5(d), the Participants shall include those Company employees who are
eligible for an annual cash bonus and/or a long term incentive cash award, as applicable, as of the
date of a Change in Control

          (u) “Payment” means any payment or distribution in the nature of compensation
(within the meaning of Section 280G(b)(2)(A) of the Code) to or for the benefit of a Participant,
whether paid or payable pursuant to this Agreement or otherwise pursuant to any plan, agreement or
understanding between the Participant and the Company, which within the meaning of Section
280G(b)(2)(A)(i) of the Code, is contingent on a change in the ownership or effective control of
the Company, or in the ownership of a substantial portion of the assets of the Company.

          (v) “Protected Period” shall mean the period beginning on the date of a Change in
Control and ending on the date which is two (2) years after the date of such Change in Control.

          (w) “Separation from Service” means a Participant’s “separation from service” with
the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code.

          (x) “Subsidiary” means any corporation or other entity (other than the Company) in
an unbroken chain of entities beginning with the Company, if each of the entities (other than the
last entity) in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of securities in one of the other entities in the chain.

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          (y) “Target Amount” means an amount determined under the LTI Plan that might be
earned by a Participant in three annual installments during a performance cycle of the LTI Plan.

     Section 3. Effective Date.

          The effective date of the Policy shall be February 12, 2007, as amended and restated July 30,
2008 (the “Effective Date”). The Policy shall remain in effect until the earlier of (i) such time
as the Company has discharged all of its obligations hereunder, or (ii) the date of the termination
of the Policy pursuant to Section 10(e) hereof.

     Section 4. Administration.

          (a) Prior to the date of a Change in Control, the Policy shall be interpreted, administered
and operated by the Committee; on and after the date of a Change in Control, the Policy shall be
interpreted, administered and operated by a committee appointed by the Committee as such Committee
is constituted immediately prior to the Change in Control. In each case, subject to the terms of
the Policy, the Committee shall have complete authority, in its sole discretion subject to the
express provisions of the Policy, to determine who shall be a Participant, to interpret the Policy,
to prescribe, amend and rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable for the administration of the Policy. Notwithstanding the
foregoing, the Committee may delegate any of its duties hereunder to such person or persons from
time to time as it may designate.

          (b) All expenses and liabilities which members of the Committee incur in connection with the
administration of the Policy shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants, appraisers, brokers, or other persons, and the Committee, the Company and
the Company’s officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. No member of the Committee or the Board shall be personally liable
for any action, determination or interpretation made in good faith with respect to the Policy, and
all members of the Committee shall be fully protected by the Company in respect of any such action,
determination or interpretation.

     Section 5. Benefits Provided.

          (a) “Payments Upon a Change in Control” Subject to Section 5(d) hereof, the Company
shall pay to each Participant within ten (10) business days after a Change in Control, a lump sum
payment in an amount equal to the sum of (i) the Participant’s Target Amount for any LTI Award
(including any Enhancement Amount) that has been established for such Participant under the LTI
Plan, as amended, or any successor long-term incentive plan, for a performance year that has been
completed as of the date of the Change in Control and (ii) any unpaid but earned annual cash bonus
plus a pro-rated annual cash bonus for the fiscal year in which the Change in Control occurs. The
amount of any such pro-rated annual cash bonus shall be equal to the product of the Participant’s
target annual bonus for the applicable fiscal year, multiplied by a fraction, the numerator of
which is the number of months in the fiscal year completed prior to the date of the Change in
Control, and the denominator of which is twelve (12). Notwithstanding anything hereinabove to the
contrary, in the case of any Enhancement Amount for the 2006 performance year and any portion of
the Target Amount of an LTI Award that is attributable to the 2006 performance year, in no event
shall any payment be made hereunder prior to January, 2008.

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          (b) “Termination After Change in Control” Subject to Section 5(d) hereof, if a
Participant’s employment with the Company is terminated during the Protected Period (i) by the
Company other than for Cause, or by reason of the Participant’s Disability or death, or (ii) by the
Participant for Good Reason, the Company shall pay to each Participant within ten (10) business
days after the Participant’s Date of Termination a lump sum severance payment (the “Severance
Payment”) in an amount equal to the Participant’s Multiple times the sum of the Participant’s
annual base salary and the Participant’s target annual cash bonus, in each case, for the fiscal
year in which the Change in Control occurs. Notwithstanding anything hereinabove to the contrary,
in the case of any Severance Payment to be made after the Separation from Service of a Participant
that constitutes a distribution of deferred compensation to a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code, the Severance Payment shall be paid to the
Participant on the date that is six (6) months after the date of the Participant’s Separation from
Service.

          (c) “General Release” The Severance Payment shall be conditioned upon the execution
by the Participant of the Company’s standard form general release.

          (d) “Section 280G”

               (i) Notwithstanding anything in this Policy to the contrary, in the event that it shall be
determined that any Payment would constitute an “excess parachute payment” within the meaning of
Section 280G(b) of the Code, the Participant shall be paid an additional amount (a “Gross-Up
Payment”) such that the net amount retained by the Participant after deduction of any Excise Tax,
and any federal, state and local income and employment taxes and excise tax, including any interest
and penalties with respect thereto, imposed upon the Gross-Up Payment, shall be equal to the
Payment; provided, however, that if the total Payment(s) are less than or equal to 120% of the
Capped Benefit (as defined below), the Payment(s) shall be reduced by an amount necessary to
prevent any portion of the Payment(s) from being a “parachute payment” as defined in
Section 280G(b)(2) of the Code. If the Payment(s) are to be reduced pursuant to this Section, the
Company shall provide Participant with a reasonable opportunity to request which of the benefits
payable to the Participant shall be reduced. For purposes of determining the amount of the
Gross-Up Payment, the Participant shall be deemed to pay federal income tax and employment taxes at
the highest marginal rate of federal income and employment taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Participant’s residence on the date the Payment is made,
net of the reduction in federal income taxes that the Participant may obtain from the deduction of
such state and local income taxes. The “Capped Benefit” shall equal the total Payment(s), reduced
by the amount necessary to prevent any portion of the Payment(s) from being a “parachute payment”
as defined in Section 280G(b)(2) of the Code.

               (ii) All determinations to be made under this Section 5(d) shall be made by the Company’s
independent public accountant immediately prior to the Change in Control (the “Accounting Firm”);
provided, that if the Accounting Firm is serving as accountant or auditor to the individual, entity
or group effecting the Change of Control, the Committee shall appoint another independent
accounting firm to make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). The Accounting Firm shall provide its
determinations and any supporting calculations and work papers both to the Company and the
Participant within fifteen (15) business days after receipt of written notification from the Company

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or the Participant that there has been a Payment or by such earlier time as
is requested by the Company. Any such determination by the Accounting Firm shall include
explanations of whether and when a Gross-Up Payment is required, the amount of any such Gross-Up
Payment and the assumptions utilized in arriving at the determination. The Accounting Firm’s
determination shall be binding upon the Company and the Participant. Within five (5) days after
receipt of the Accounting Firm’s determination, the Company shall pay to the Participant any
Gross-Up Payment determined by the Accounting Firm.

               (iii) In the event that upon any audit by the Internal Revenue Service, or by a state or
local taxing authority, of a Payment or Gross-Up Payment, a change is finally determined to be
required in the amount of taxes paid by the Participant, appropriate adjustments shall be made
under this Section 5(d) in the manner determined by the Accounting Firm, such that the net amount
which is payable to the Participant after taking into account the provisions of Section 4999 of the
Code and any interest and penalties shall reflect the intent of the parties as expressed in
paragraph (A) of this Section 5(d). The Participant shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than
ten (10) business days after the Participant is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which such claim is requested to be paid.
The Participant shall not pay such claim prior to the expiration of the 30-day period following the
date on which the Participant gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the Company notifies the
Participant in writing prior to the expiration of such period that it desires to contest such
claim, the Participant shall: (A) give the Company any information reasonably requested by the
Company relating to such claim; (B) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney reasonably selected by the
Company; (C) cooperate with the Company in good faith in order effectively to contest such claim;
and (D) permit the Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall indemnify and hold the
Participant harmless, on an after-tax basis, for any excise tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section 5(d), the Company
shall control all proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may contest the claim in any permissible manner, and
the Participant agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company
shall determine. The Company’s control of the contest shall be limited to issues the resolution of
which could result in a Gross-Up Payment’s being payable hereunder, and the Participant shall be
entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

               (iv) All of the fees and expenses of the Accounting Firm in performing the determinations
referred to in paragraphs (ii) and (iii) of this Section 5(d) shall be borne solely by the Company.

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          (e) Other Existing Arrangements This Policy will be subordinated to any written
severance benefit arrangement, change of control severance agreement or employment agreement that
provides for severance benefits in existence between the Participant and the Company,
notwithstanding the terms of any such arrangement or agreement, and any benefits under any such
arrangement or agreement will be paid prior to any payments under this Policy, which shall be
delayed for payment until all benefits under any such arrangement or agreement have been determined
and paid, and payments under this Policy will be reduced by any amounts paid under any such
arrangement or agreement.

     Section 6. Termination Procedures.

          Any purported termination of a Participant’s employment following a Change in Control (other
than by reason of death) shall be communicated by written Notice of Termination from one party to
the other party in accordance with Section 9 hereof.

     Section 7. No Mitigation.

          The Company agrees that, in order for a Participant to be eligible to receive the Severance
Payment and other benefits described herein, the Participant is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the Participant by the Company
pursuant to Section 5 hereof. Further, the amount of any payment or benefit provided for in this
Policy hereof shall not be reduced by any compensation or income earned by the Participant as the
result of employment by another employer or self-employment, by retirement benefits, by offset
against any amount claimed to be owed by the Participant to the Company, or otherwise.

     Section 8. Successors.

          (a) The Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business and/or assets of
the Company to expressly assume this Policy and all obligations of the Company hereunder in the
same manner and to the same extent that the Company would be so obligated if no such succession had
taken place.

          (b) This Policy shall inure to the benefit of and shall be binding upon the Company, its
successors and assigns, but without the prior written consent of the Participants this Policy may
not be assigned other than in connection with the merger or sale of substantially all of the
business and/or assets of the Company or similar transaction in which the successor or assignee
assumes (whether by operation of law or express assumption) all obligations of the Company
hereunder.

          (c) This Policy shall inure to the benefit of and be enforceable by the Participant’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees, legatees or other beneficiaries. If a Participant shall die while any amount would still
be payable to such Participant hereunder (other than amounts which, by their terms, terminate upon
the death of the Participant) if such Participant had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this Policy to the
executors, personal representatives or administrators of such Participant’s estate.

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     Section 9. Notices.

          For the purpose of this Policy, notices and all other communications provided for in the
Policy shall be in writing and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid, addressed, if to a
Participant, to the address on file with the Company and, if to the Company, to the address set
forth below, or to such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective only upon actual
receipt:

          To the Company:

AMERIGROUP Company

4425 Company Lane

Virginia Beach, VA 23462

Attention: Executive Vice President, Associate Services

     Section 10. Miscellaneous

          (a) No waiver by the Company or any Participant, as the case may be, at any time of any breach
by the other party of, or of any lack of compliance with, any condition or provision of this Policy
to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. All other plans, policies and
arrangements of the Company in which the Participant participates during the term of this Policy
shall be interpreted so as to avoid the duplication of benefits paid hereunder. It is expressly
acknowledged that the terms of this policy shall not affect the terms of any equity incentive
agreement between the Company and the Participant.

          (b) Employment with any present or future Affiliate or Subsidiary shall be considered
employment with the Company for all purposes of this Policy.

          (c) Nothing contained in this Policy or any documents relating to the Policy shall (i) confer
upon any Participant any right to continue in the employ of the Company or a subsidiary, (ii)
constitute any contract or agreement of employment, or (iii) interfere in any way with the right of
the Company to terminate the Participant’s employment at any time, with or without Cause.

          (d) A Participant shall be entitled to the benefits of any indemnity applicable to the
Participant that is provided by the Company’s articles of incorporation, bylaws or otherwise
immediately prior to a Change in Control, and any subsequent changes to the articles of
incorporation, bylaws or otherwise reducing the indemnity granted to the Company’s officers and
employees shall not affect the rights granted hereunder.

          (e) Prior to a Change in Control, the Committee shall have the right to amend or terminate the
Policy and to add or remove Participants from time to time, in its sole and absolute discretion.
From and after (i) the occurrence of a Change in Control; (ii) the public announcement of a
proposal for a transaction that, if consummated, would constitute a Change in Control; or (iii)

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the Board’s learning of a specific proposal containing the essential terms of a transaction
that, if consummated, would constitute a Change in Control, the Committee shall not have the right
to terminate the Policy or amend it any manner which adversely affects the rights of any
Participant unless the Company has obtained the prior written consent of each affected Participant.
Notwithstanding the preceding sentence, however, in the case of a proposal under clause (ii) or
clause (iii) immediately above, if the proposal is finally withdrawn or terminated, the Policy may
be terminated or amended after the withdrawal or termination. Notwithstanding the foregoing, the
Policy shall automatically terminate on the date following the termination of the Protected Period,
provided that all obligations accrued by Participants prior to such termination of the Policy must
be satisfied in full in accordance with the terms hereof.

          (f) Except as otherwise provided herein or by law, no right or interest of any Participant
under the Policy shall be assignable or transferable, in whole or in part, either directly or by
operation of law or otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be
effective; and no right or interest of any Participant under the Policy shall be liable for, or
subject to, any obligation or liability of such Participant.

          (g) All amounts payable hereunder shall be subject to applicable federal, state and local tax
withholding.

          (h) This Policy shall be construed, interpreted and the rights of the parties determined in
accordance with the laws of the Commonwealth of Virginia (without regard to the conflicts of laws
principles thereof), to the extent not preempted by federal law, which shall otherwise control.

          (i) The invalidity or unenforceability of any provision of this Policy shall not affect the
validity or enforceability of any other provision of this Policy, which shall remain in full force
and effect. If this Policy shall for any reason be or become unenforceable by either party, this
Policy shall thereupon terminate and become unenforceable by the other party.

          (j) This Policy shall have no effect on any equity incentive award granted by the Company to a
Participant under the Equity Incentive Plan or any other equity incentive program or arrangement.
The terms of the equity incentive award shall govern those awards with respect to a change of
control.

          (k) If a Participant commences a legal action to enforce any of the obligations of the Company
under this Policy and it is ultimately determined that the Participant is entitled to any payments
or benefits under this Policy, the Company shall pay the Participant the amount necessary to
reimburse the Participant in full for all reasonable expenses (including reasonable attorneys’ fees
and legal expenses) incurred by the Participant with respect to such action. The Company shall pay
to a Participant interest on any unpaid portion of the Participant’s Award that is not paid when
due, calculated at the prime rate of the Company’s primary lending institution as in effect from
time to time from the date that payment should have been made under this Policy, until the Award is
fully paid.

10exv10w1

	 	 	 	 	 

Exhibit 10.1

October 3, 2008

Mr. James R. Bednark

Vice President

Wells Fargo Bank, National Association

Portland Regional Commercial Banking Office

1300 S.W. Fifth Avenue

MAC P6101-133

Portland, Oregon 97208

			
	     Re:	 	Amended and Restated Credit Agreement between LaCrosse Footwear, Inc.
(“LaCrosse Footwear”) and Wells Fargo Bank, National Association (“Bank”) dated as of
September 6, 2006, as amended (“Credit Agreement”).

Dear Jim:

     Thank you for your cooperation with our developments in Denmark. This letter confirms our
understanding on that and other matters and serves to amend the Credit Agreement and certain other
Loan Documents as follows:

     Denmark Subsidiary

     LaCrosse Footwear has formed a subsidiary corporation, LaCrosse Europe, Inc., an Oregon
corporation (“LaCrosse Europe”) and has made an equity contribution of DKK 125,000 thereto, and
LaCrosse Europe has formed a subsidiary corporation, LaCrosse Europe ApS, a Denmark private limited
company (“LaCrosse Denmark”) and has made an equity contribution of DKK 125,000 thereto. Sections
5.5 and 5.7 of the Credit Agreement are hereby deemed amended to permit the formation of LaCrosse
Europe and LaCrosse Denmark and the above-described equity contributions made in connection
therewith.

     LaCrosse Footwear has entered into a long term revolving loan agreement with LaCrosse Denmark
for the extension of credit to LaCrosse Denmark in the maximum principal amount outstanding at any
time of U.S.$5,000,000, under which loan advances will accrue interest at the floating rate per
annum equal to the Official Discount Rate of the Danish National Bank from time to time, plus four
percent, and which shall be repaid, with interest, not later than July 31, 2013. LaCrosse Footwear
also has an informal agreement/arrangement with LaCrosse Denmark for short term extensions of
credit to LaCrosse Denmark (to support sales of product from LaCrosse Footwear to LaCrosse Denmark)
in the maximum principal amount outstanding at any time of U.S.$2,000,000 (average balance will
approximate $600,000 from February through July, and will build to a peak season maximum in October
of $2,000,000) under which each loan advance shall be repaid on demand, or, if no demand is made,
within ninety days after the loan advance is made, which shall not accrue interest. LaCrosse
Footwear will extend credit to LaCrosse Denmark from time to time under the foregoing agreements.
Section 5.7 of the Credit Agreement is hereby deemed amended to permit the entering into and
extensions of credit by LaCrosse Footwear pursuant to both such agreements up to the respective
maximum amounts set forth above.

     LaCrosse Denmark acquired certain assets including: inventory, business system, and customer
list from Attemosegaard Administration ApS (“Distributor”) in consideration for a payment of
DKK14,881,184 (the “Acquisition Price”). In connection with the transaction, LaCrosse Footwear has
contributed to LaCrosse Europe an account receivable payable by Distributor in the amount of
DKK2,438,825 (the “Account Receivable”), and LaCrosse Europe has contributed the Account Receivable
to LaCrosse Denmark in the form of an equity contribution. The Acquisition Price was paid for by
means of cancellation by LaCrosse Denmark of the Account Receivable, and by means of an advance
under the long term revolving line of credit extended to it by LaCrosse Footwear. Sections 5.5 and
5.7of the Credit Agreement is hereby deemed amended to permit the contributions of the Account
Receivable as set forth herein.

     LaCrosse Footwear and the Bank are agreed that LaCrosse Europe and LaCrosse Denmark are not
“Subsidiaries” as that term is defined in the Credit Agreement. LaCrosse Europe shall not be
deemed to be a Subsidiary until it represents five percent or more of the consolidated assets or
consolidated revenues of LaCrosse Footwear, and at such time as it becomes a Subsidiary, it shall
grant a security interest as contemplated in the Credit Agreement, provided, however, that it shall
not be required to grant a security interest in, or pledge or assign more than sixty-five percent
of its interest in,

 

 

LaCrosse Denmark. LaCrosse Denmark shall not be deemed to be a Subsidiary until it represents five
percent or more of the consolidated assets or consolidated revenues of LaCrosse Footwear, and shall
not be required to guaranty or grant security for any of the obligations of LaCrosse Footwear under
the Loan Documents.

     LaCrosse International, Inc.

     Our wholly-owned subsidiary LaCrosse International, Inc. an Oregon corporation (“LaCrosse
International”) renders quality control and sourcing services to LaCrosse Footwear in China.
LaCrosse Footwear advances funds to LaCrosse International, which accrue interest at the rate of
8.5 percent, to enable it to pay its expenses. LaCrosse International charges LaCrosse Footwear
for the services it provides, at a rate of costs plus a 5 percent profit. On an annual basis, the
charges and the advances and interest are credited against each other. The sum of the equity
investment of LaCrosse Footwear in LaCrosse International and the net obligations owed to LaCrosse
Footwear from LaCrosse International have not exceeded $1,000,000, however, the net obligations may
increase to as much as $1,250,000 by the end of 2008. Sections 5.5 and 5.7 of the Credit Agreement
are hereby deemed amended to permit the investment and obligations described hereinabove, subject
to the condition that the sum of the equity investment of LaCrosse Footwear in LaCrosse
International and the net obligations owed to LaCrosse Footwear from LaCrosse International shall
not exceed $1,250,000.

     Indiana Distribution Facility

     LaCrosse Footwear intends to consolidate some warehouse and distribution operations (located
currently in La Crosse, Wisconsin) at a new facility to be built at Whitestown, Indiana and leased
to LaCrosse Footwear (“Distribution Center”). The Distribution Center is to be a building located
on approximately 27.2 acres of land. A draft project site plan and premises site plan are attached
to this letter as Exhibits A-1 and A-2. The address of the Distribution Center has recently been
assigned. Further, the address of the chief executive office of LaCrosse Footwear is as stated in
the current form of the Credit Agreement. Accordingly, we are agreed that the last two paragraphs
of the Security Agreement granted by LaCrosse Footwear to the Bank dated as of April 15, 2004 (as
amended from time to time the “Security Agreement”) are amended and restated in their entirety as
follows:

Debtor warrants that the address of its chief executive office is 17634 NE Airport Way,
Portland OR 97230, or such other address of which the Debtor notifies the Bank from time to
time.

Debtor warrants that the tangible Collateral (except goods in transit or in possession of
repairmen) is located or domiciled at the above or at any of 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, or
the Debtor’s distribution center at Whitestown, IN, 5352 Performance Way, Whitestown, IN
46075, and such other addresses of which the Debtor notifies the Bank from time to time.

     Likewise, LaCrosse Footwear’s subsidiary Danner, Inc., a Wisconsin corporation, has changed
the address of its chief executive office and an address at which it stores inventory and property.
Accordingly, we are agreed that the last two paragraphs of the Security Agreement it signed in
favor of the Bank dated as of April 15, 2004 are amended and restated in their entirety as follows:

Debtor warrants that the address of its chief executive office is 17634 NE Airport Way,
Portland OR 97230, or such other address of which the Debtor notifies the Bank from time to
time.

Debtor warrants that the tangible Collateral (except goods in transit or in possession of
repairmen) is located or domiciled at the above or at the following additional address:
12722 NE Airport Way, Portland, OR 97230, and such other addresses of which the Debtor
notifies the Bank from time to time.

     The purpose of this letter is to confirm that the Bank and LaCrosse Footwear accept and
approve the foregoing. Except as amended pursuant to the terms of the letter, all terms and
conditions of the Loan Documents remain in full force and effect, without waiver or modification.
To the extent that any of the foregoing situations, facts or activities may have required a waiver
or consent from Wells Fargo heretofore under the Loan Documents (prior to the effectiveness of the
amendments set forth herein), or constitute or constituted defaults thereunder, Wells Fargo hereby
grants such waivers and consents and waives any and all such defaults.

 

 

     Unless otherwise provided herein, all terms defined in the Credit Agreement shall have the
same meaning when used in this Amendment. The parties acknowledge and agree that as used herein
and in the Credit Agreement and the other Loan Documents, the term “Loan Documents” means the
Credit Agreement, all other agreements evidencing and securing the loan evidenced by the Credit
Agreement, and all related agreements, as amended, assigned, assumed, restated, renewed, or
otherwise modified from time to time, including, without limitation, this letter.

     LaCrosse Footwear hereby renews its representations and warranties contained in the Credit
Agreement and Security Agreement and reaffirms all covenants set forth therein. LaCrosse Footwear
further certifies that, except to the extent any exist and are waived herein, as of the date of
this letter 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 any such Event of Default. LaCrosse
Footwear acknowledges that:

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.

     We ask that you sign a copy of this letter where indicated below to confirm our agreement as
set forth above and that you return to us an original signature or a copy thereof. If you have any
questions concerning this letter, please do not hesitate to contact the undersigned.

Very Truly Yours

LaCrosse Footwear, Inc.

/s/ David Carlson

David Carlson

Executive Vice President/

Chief Financial Officer

Accepted and agreed to

the 3 day of October, 2008

WELLS FARGO BANK, NATIONAL

ASSOCIATION

	 	 	 	 	 
	 	 	 
	 	By:  	                  /s/ James R. Bednark
 	 
	 	 	     James R. Bednark 	 
	 	 	     Vice President

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