10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2009

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 000-23800

LaCrosse Footwear, Inc.

(Exact name of Registrant as specified in its charter)

Wisconsin	39-1446816
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

17634 NE Airport Way
Portland, Oregon 97230

(Address, zip code of principal executive offices)

(503) 262-0110

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value, outstanding as of April 22, 2009: 6,296,331 shares

LACROSSE FOOTWEAR, INC.

Form 10-Q Index

			Page
PART I.	Financial Information
	Item 1.	Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets March 28, 2009 (Unaudited) and March 29, 2008 (Unaudited) and December 31, 2008		3
		Condensed Consolidated Statements of Operations (Unaudited) for the quarters ended March 28, 2009 and March 29, 2008		4
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the quarters ended March 28, 2009 and March 29, 2008		5
		Notes to Interim Unaudited Condensed Consolidated Financial Statements		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		16
	Item 4.	Controls and Procedures		16
PART II.	Other Information
	Item 1.	Legal Proceedings		17
	Item 1A.	Risk Factors		17
	Item 6	Exhibits		19
Signatures				20
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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PART I — FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements

LACROSSE FOOTWEAR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 28,			December 31,			March 29,
(in thousands, except share and per share data)	2009			2008			2008
	(unaudited)						(unaudited)
Assets:
Current Assets:
Cash and cash equivalents	$	12,059		$	13,683		$	10,253
Trade and other accounts receivable, net		18,190			22,449			19,307
Inventories (Note 2)		28,023			28,618			26,053
Prepaid expenses		1,169			1,402			1,111
Deferred tax assets		1,466			1,364			1,394
Total current assets		60,907			67,516			58,118
Property and equipment, net		7,585			6,137			4,648
Goodwill		10,753			10,753			10,753
Other assets		310			159			443
Total assets	$	79,555		$	84,565		$	73,962
Liabilities and Shareholders’ Equity:
Current Liabilities:
Accounts payable	$	8,646		$	10,478		$	5,478
Accrued compensation		1,588			3,151			1,147
Other accruals (Note 3)		1,689			2,528			2,026
Total current liabilities		11,923			16,157			8,651
Long-term debt		—			—			366
Deferred revenue		338			375			122
Compensation and benefits (Note 7)		5,634			5,844			1,855
Deferred tax liabilities		1,273			777			2,327
Total liabilities		19,168			23,153			13,321
Shareholders’ Equity:
Common stock, par value $.01 per share; authorized 50,000,000 shares; issued 6,717,627 shares		67			67			67
Additional paid-in capital		28,549			28,247			27,675
Accumulated other comprehensive loss (Note 10)		(4,060	)		(4,029	)		(1,011	)
Retained earnings (Notes 8 and 12)		37,694			39,173			36,123
Less cost of 421,296, 464,496 and 503,512 shares of treasury stock, respectively		(1,863	)		(2,046	)		(2,213	)
Total shareholders’ equity		60,387			61,412			60,641
Total liabilities and shareholders’ equity	$	79,555		$	84,565		$	73,962

See notes to interim unaudited condensed consolidated financial statements.

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LACROSSE FOOTWEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Quarter Ended
	March 28,			March 29,
(in thousands, except per share data)	2009			2008
Net sales	$	25,910		$	24,732
Cost of goods sold		16,079			14,671
Gross profit		9,831			10,061
Selling and administrative expenses		10,869			8,968
Operating income (loss)		(1,038	)		1,093
Non-operating income (expense)		(52	)		159
Income (loss) before income taxes		(1,090	)		1,252
Income tax provision (benefit) (Note 4)		(398	)		473
Net income (loss)	$	(692	)	$	779
Net income (loss) per common share (Note 1):
Basic	$	(0.11	)	$	0.13
Diluted	$	(0.11	)	$	0.12
Weighted average number of common shares outstanding:
Basic		6,274			6,165
Diluted		6,274			6,408

See notes to interim unaudited condensed consolidated financial statements.

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LACROSSE FOOTWEAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Quarter Ended
	March 28,			March 29,
(in thousands)	2009			2008
Cash flows from operating activities:
Net income (loss)	$	(692	)	$	779
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		662			441
Stock-based compensation expense (Note 6)		227			210
Deferred income taxes		338			(148	)
Other		37			2
Changes in operating assets and liabilities:
Trade and other accounts receivable		4,259			3,286
Inventories		595			1,078
Accounts payable		(1,832	)		(1,978	)
Accrued expenses and other		(2,398	)		(2,314	)
Net cash provided by operating activities		1,196			1,356
Cash flows from investing activities:
Purchases of property and equipment		(2,173	)		(156	)
Cash flows from financing activities:
Cash dividends paid (Note 8)		(787	)		(6,984	)
Purchase of treasury stock		—			(95	)
Proceeds from exercise of stock options		258			747
Net cash used in financing activities		(529	)		(6,332	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(118	)		—
Net decrease in cash and cash equivalents		(1,624	)		(5,132	)
Cash and cash equivalents:
Beginning of period		13,683			15,385
End of period	$	12,059		$	10,253
Supplemental information:
Cash payments for income taxes	$	62		$	279

See notes to interim unaudited condensed consolidated financial statements.

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LACROSSE FOOTWEAR, INC.

Notes to Interim Unaudited Condensed Consolidated Financial Statements

NOTE 1. INTERIM FINANCIAL REPORTING

Basis of Presentation — LaCrosse Footwear, Inc. (NASDAQ: BOOT) is referred to as “we”, “us”, or “our” in this report. The accompanying condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, we have condensed or omitted certain information and footnote disclosures that are included in our annual financial statements. These condensed unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2008. These condensed consolidated financial statements reflect, in the opinion of management, all adjustments (which consist of normal, recurring adjustments) necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented.

These condensed consolidated financial statements include the accounts of LaCrosse Footwear, Inc., and our wholly owned subsidiaries, Danner, Inc., LaCrosse International, Inc. and LaCrosse Europe, Inc. LaCrosse Europe, Inc. and its wholly-owned subsidiary, LaCrosse Europe ApS, were formed during the third quarter of 2008 to expand our direct sales and marketing support to our European customers. The results of operations since the date of acquisition have been included in the consolidated financial statements. All material inter-company accounts and transactions have been eliminated in consolidation.

We report our quarterly interim financial information based on 13-week periods. The nature of the 13-week calendar requires that all periods end on a Saturday, and that the year end on December 31. As a result, every first quarter and every fourth quarter have a unique number of days. The results of the interim periods are not necessarily indicative of the results for the full year. Historically, our net sales and operating income have been more heavily weighted to the second half of the year.

Use of Estimates — We are required to make certain estimates and assumptions which affect the amounts of assets, liabilities, revenues and expenses we have reported, and our disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ materially from these estimates and assumptions.

Net Income (Loss) per Common Share — We present our net income (loss) on a per share basis for both basic and diluted common shares. Basic net income (loss) per common share excludes all dilutive stock options and is computed using the weighted average number of common shares outstanding during the period. The diluted net income (loss) per common share calculation assumes that all stock options were exercised or converted into common stock at the beginning of the period, unless their effect would be anti-dilutive. A reconciliation of the shares used in the basic and diluted net income (loss) per common share is as follows:

	Quarter Ended
	March 28,		March 29,
(in thousands)	2009		2008
Basic weighted average shares outstanding		6,274		6,165
Dilutive stock options		—		243
Diluted weighted average shares outstanding		6,274		6,408

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NOTE 2. INVENTORIES

A summary of inventories is presented below:

	March 28,			December 31,			March 29,
(in thousands)	2009			2008			2008
Raw materials	$	3,417		$	3,590		$	1,859
Work in process		329			316			265
Finished goods		24,765			25,161			24,804
Subtotal		28,511			29,067			26,928
Less: provision for slow-moving inventory		(488	)		(449	)		(875	)
Total	$	28,023		$	28,618		$	26,053

NOTE 3. PRODUCT WARRANTY

We provide a limited warranty for the replacement of defective products. Our limited warranty requires us to repair or replace defective products at no cost to the consumer within a specified time period after sale. We estimate the costs that may be incurred under our limited warranty and record a liability in the amount of such costs at the time product revenue is recognized. Factors that affect our estimate of warranty liability include sales volume, and historical and anticipated future rates of warranty claims. Changes in the accrued product warranty costs during the quarters ended March 28, 2009 and March 29, 2008, which are included in other accruals on our condensed consolidated balance sheets, are summarized as follows:

	Quarter Ended
	March 28,			March 29,
(in thousands)	2009			2008
Balance, beginning of period	$	1,266		$	941
Accruals for products sold		773			817
Warranty claims		(773	)		(738	)
Balance, end of period	$	1,266		$	1,020

NOTE 4. INCOME TAXES

On a quarterly basis, we estimate what our effective tax rate will be for the full fiscal year and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances by each tax jurisdiction. The effective tax rates for the quarters ended March 28, 2009 and March 29, 2008 were 36.5% and 37.8%, respectively. The decrease in the tax rate from 2008 is primarily due to the timing of realization of federal research and experimentation credits. The law allowing such credits for 2008 and 2009 was enacted on October 2, 2008, and the impact of the 2008 credits was recognized in the fourth quarter of 2008.

At March 28, 2009, we had $0.3 million of net uncertain tax benefit positions that would reduce our effective income tax rate if recognized. Upon expiration of the statute of limitations or the conclusion of examinations, an adjustment could occur with respect to our FIN 48 reserve in the next twelve months.

Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of March 28, 2009, December 31, 2008, and March 29, 2008 was $0.05 million, $0.05 million and $0.03 million, respectively. Interest is computed on the difference between our uncertain tax benefit positions under FIN 48 and the amount deducted or expected to be deducted in our tax returns.

We file a consolidated U.S. federal income tax return as well as state tax returns on a consolidated, combined, or stand-alone basis (depending upon the jurisdiction). We are no longer subject to U.S. federal income tax examinations by tax authorities for years prior to the tax year ended December 2004. Depending on the jurisdiction, we are no longer subject to state examinations by tax authorities for years prior to the December 2003 and 2004 tax years. We are not subject to foreign tax examinations prior to the December 2008 tax year.

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NOTE 5. FINANCING ARRANGEMENTS

On March 9, 2009, we entered into a new line of credit agreement with Wells Fargo Bank, N.A., which expires June 30, 2012. This line of credit agreement represents a 3-year extension of our previous line of credit agreement with Wells Fargo Bank, N.A. Amounts borrowed under the agreement are secured by substantially all of our assets. The maximum aggregate principal amount of borrowings allowed from January 1 to May 31 is $17.5 million and from June 1 to December 31, the total available is $30 million. There are no borrowing base limitations under the credit agreement. The credit agreement provides for an interest rate of LIBOR plus 1.75% and an annual commitment fee of 0.15% on the unused balance. At March 28, 2009, December 31, 2008, and March 29, 2008, we had no outstanding balances under our financing agreements.

NOTE 6. STOCK-BASED COMPENSATION

We recognized $0.2 million of stock-based compensation expense for the quarters ended March 28, 2009 and March 29, 2008. To calculate the stock-based compensation expense under SFAS 123R, we use the Black-Scholes option-pricing model. Our determination of fair value of option-based awards on the date of grant using the Black-Scholes model is affected by various assumptions regarding certain subjective variables. These variables include, but are not limited to, our expected dividend yield, our expected stock price volatility over the expected term of the awards, the risk-free interest rates, the estimated forfeiture rates, and the expected life of the options. The risk-free interest rate assumption is based on treasury instruments whose terms are consistent with the expected life of the stock options granted. The expected dividend yield, volatility, life of options, and forfeiture of options assumptions are based on historical experience.

The following table lists the assumptions we used in determining the fair value of stock options and the resulting weighted average fair value of options granted:

	Quarters Ended
	March 28, 2009			March 29, 2008
Expected dividend yield		3.7	%		2.9	%
Expected stock price volatility		46	%		31	%
Risk-free interest rate		1.4	%		3.2	%
Expected life of options	4.6 years			4.5 years
Estimated forfeiture rate		16	%		16	%
Weighted average fair value of options granted	$	3.41		$	3.97

The following table represents stock option activity for the quarter ended March 28, 2009:

				Weighted		Weighted
				Average		Average
	Number of			Exercise		Remaining
	Shares			Price		Contract Life
Outstanding options at beginning of period		796,839		$	11.12
Granted		141,850			11.94
Exercised		(43,200	)		3.71
Canceled		(13,988	)		13.67
Outstanding options at end of period		881,501			11.57	5.4 years
Outstanding exercisable at end of period		455,144			9.76	4.8 years

At March 28, 2009, the aggregate intrinsic value of options outstanding was $0.4 million, and the aggregate intrinsic value of exercisable options was $0.4 million. The intrinsic value of options exercised during the quarter ended March 28, 2009 was $0.3 million.

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NOTE 7. COMPENSATION AND BENEFIT PLANS

We have a defined benefit pension plan covering eligible past employees and approximately 7% of current employees. We also sponsor an unfunded defined benefit postretirement death benefit plan that covers eligible past employees. Information relative to these two plans is presented below.

	Pension Plan						Other Plan
	Quarter Ended						Quarter Ended
	March 28,			March 29,			March 28,		March 29,
(in thousands)	2009			2008			2009		2008
Cost (income) recognized during the quarter:
Interest cost	$	236		$	238		$	4	$	4
Expected return on plan assets		(199	)		(274	)		—		—
Amortization of prior loss		48			—			—		—
Amortization of prior service cost		—			4			—		—
Net period cost (income)	$	85		$	(32	)	$	4	$	4

The following is reconciliation to the compensation and benefits financial statement line item on the accompanying condensed consolidated balance sheets:

	March 28,		December 31,		March 29,
(in thousands)	2009		2008		2008
Pension Plan	$	5,351	$	5,565	$	1,570
Other Plan		283		279		285
Total compensation and benefits	$	5,634	$	5,844	$	1,855

We contributed $0.3 million to our defined benefit pension plan during the first quarter of 2009 and anticipate contributing an additional $0.9 million during the remainder of 2009.

NOTE 8. CASH DIVIDENDS

On February 2, 2009, we announced a first quarter cash dividend of twelve and one-half cents ($0.125) per share of our common stock. This dividend of $0.8 million was paid on March 18, 2009 to shareholders of record as of the close of business on February 22, 2009.

The Board of Directors, while not declaring future dividends to be paid, established a quarterly dividend policy reflecting its intent to declare and pay a quarterly dividend of $0.125 per share of common stock (approximately $0.8 million per quarter) for the balance of 2009.

NOTE 9. EXIT COSTS FOR DISTRIBUTION CENTERS

On June 19, 2008, we announced the relocation of our two distribution centers in La Crosse, Wisconsin to a new distribution center in Indianapolis, Indiana. We will operate our two Wisconsin distribution centers through April 30, 2009. We will incur exit costs related to compensation incentives and other costs of approximately $0.4 million through the exit time. In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”), these exit costs are being expensed ratably through April 2009. Through March 28, 2009, we have expensed $0.3 million.

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NOTE 10. COMPREHENSIVE INCOME OR LOSS

Comprehensive Income (Loss):

Comprehensive income (loss) represents net earnings (loss) and any revenue, expenses, gains and losses that are excluded from net earnings and recognized directly as a component of shareholders’ equity.

     The reconciliation from net income (loss) to comprehensive income (loss) is as follows:

	Quarter Ended
	March 28,			March 29,
(in thousands)	2009			2008
Net income (loss)	$	(692	)	$	779
Other comprehensive income (loss):
Minimum pension liability, net of tax		87			—
Foreign currency translation adjustment		(118	)		—
Comprehensive income (loss)	$	(723	)	$	779

     Accumulated Other Comprehensive Loss:

Accumulated other comprehensive loss reported on our condensed consolidated balance sheets consists of adjustments related to foreign currency translation and pension benefits. The components of accumulated other comprehensive loss are as follows:

	March 28,			December 31,			March 29,
(in thousands)	2009			2008			2008
Pension liability, net of tax	$	(3,633	)	$	(3,720	)	$	(1,011	)
Foreign currency translation adjustment		(427	)		(309	)		—
Accumulated other comprehensive loss	$	(4,060	)	$	(4,029	)	$	(1,011	)

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NOTE 11. RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which replaces SFAS No. 141 and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R and SFAS 160 are effective for us in 2009, but have no impact on the financial statements presented herein.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 was effective for financial instruments for 2008 but had no impact on the financial statements presented herein. For nonfinancial instruments, it is effective for us in 2009, but also has no impact on the financial statements presented herein.

In April 2009, the FASB issued FSP SFAS 157-4, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed which further clarifies the principles established by SFAS No. 157. The guidance is effective for the periods ending after June 15, 2009 with early adoption permitted for the periods ending after March 15, 2009. We are assessing the impact, if any, and will not elect to early adopt FSP SFAS 157-4.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option For Financial Assets and Financial Liabilities. SFAS 159 was effective for us in 2008 but we did not elect to apply its fair value reporting in any of our financial statement accounts.

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. FSP FAS 132(R)-1 requires more detailed disclosures about employers’ plan assets in a defined benefit pension or other postretirement plan, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and inputs and valuation techniques used to measure the fair value of plan assets. FSP FAS 132(R)-1 also requires, for fair value measurements using significant unobservable inputs (Level 3), disclosure of the effect of the measurements on changes in plan assets for the period. The disclosures about plan assets required by FSP FAS 132(R)-1 must be provided for fiscal years ending after December 15, 2009. As this pronouncement is only disclosure-related, it will not have an impact on the financial position and results of operations but will affect the disclosures within our financial statements. There will be no impact to the quarterly financial statements for 2009.

NOTE 12. SUBSEQUENT EVENT

On April 23, 2009, we announced a second quarter cash dividend of twelve and one-half cents ($0.125) per share of our common stock. This dividend will be paid on June 18, 2009 to shareholders of record as of the close of business on May 22, 2009. The total cash payment for this dividend will be approximately $0.8 million.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the following “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements relate to future events and typically address the Company’s expected future business and financial performance. Words such as “plan,” “expect,” “aim,” “believe,” “project,” “target,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other terms of similar meaning, typically identify such forward-looking statements. The Company assumes no obligation to update or revise any forward-looking statements to reflect the occurrence or non-occurrence of future events or circumstances.

The forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding future shipments of previously announced orders to the U.S. Army, anticipated capital expenditures for the balance of 2009, planned contributions to our defined benefit pension plan, future cash dividend policies and the adequacy of our existing resources and anticipated cash flows from operations to satisfy our future working capital needs. Forward-looking statements are based on certain assumptions and expectations of future events and trends that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those reflected in any such forward-looking statements depending on a variety of factors, including without limitation, economic, competitive and governmental factors outside of our control. For more information concerning these factors and other risks and uncertainties that could materially affect our results of operations, please refer to Part I, Item 1A—Risk Factors, of our 2008 Annual Report on Form 10-K, as may be supplemented or amended in our 2009 quarterly reports on Form 10-Q, which information is incorporated herein by reference.

Overview

Our mission is to maximize the work and outdoor experience for our consumers. To achieve this, we design, develop, manufacture and market premium-quality, high-performance footwear and apparel, supported by compelling marketing and superior customer service. Our trusted Danner® and LaCrosse® brands are sold to a network of specialty retailers and distributors in the United States, Canada, Europe and Asia. Additionally, we operate four websites for use by our consumers and retailers, and we operate a retail outlet store at our manufacturing facility in Portland, Oregon.

We focus on two types of consumers for our footwear and apparel lines: work and outdoor. Work consumers include people in law enforcement, transportation, firefighting, construction, military services and other occupations that require high-performance and protective footwear as a critical tool for the job. Outdoor consumers include people active in hunting, outdoor cross-training, hiking and other outdoor recreational activities.

Weather, especially in the fall and winter, has been, and will likely continue to be, a significant contributing factor impacting our financial performance. Sales are typically higher in the second half of the year due to stronger demand for our cold and wet weather outdoor product offerings. We augment these offerings by infusing innovative technology into all product categories with the intent to create additional demand in all four quarters of the year.

We have achieved consistent growth in our core business in recent years, driven by our consumers’ demand for our innovative footwear and apparel products. Our sales growth continues to be driven by the success of our new product lines, our ability to meet at-once demand, and our ability to diversify and strengthen our portfolio of sales channels.

In the first quarter of 2009, we realized our first quarterly operating loss since the second quarter of 2004. Our sales have historically been higher in the second half of the year due primarily to greater consumer demand for our outdoor product offerings during the fall and winter months. The amount of fixed operating expenses represents a larger percentage of net sales in the first two quarters of each year, resulting in lower operating profit margins during those quarters than our operating margins on an annual basis. Accordingly, any significant investments or nonrecurring costs incurred during those periods increases the likelihood of the Company reporting a quarterly operating loss.

As more fully described under “Results of Operations”, there were three significant areas of such costs in the first quarter of 2009: (i) expenses related to establishment and operation of our new Indianapolis distribution center ($0.5 million) (these establishment costs are not expected to continue beyond the second quarter of 2009); (ii) bad debt expense related primarily to the

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bankruptcy of two significant retail customers ($0.3 million); and, (iii) expenses related to establishment and operation of our European subsidiary ($1.0 million). We established our European subsidiary in July, 2008 with the intent to build out a long term distribution channel for Europe. During the start-up phase of this business, the impact of seasonality is magnified due to the higher initial establishment costs. However, we expect to reduce costs related to this subsidiary through the remainder of 2009.

Results of Operations

The following table sets forth selected financial information derived from our interim unaudited condensed consolidated financial statements. The discussion that follows the table should be read in conjunction with the interim unaudited condensed consolidated financial statements. In addition, please see Management’s Discussion and Analysis of Financial Condition and Results of Operations, our consolidated annual financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2008.

	Quarter Ended
	March 28,			March 29,
($ in thousands)	2009			2008			% Change
Net Sales	$	25,910		$	24,732			5	%
Gross Profit		9,831			10,061			(2	%)
Gross Profit %		37.9	%		40.7	%	(280 bps)
Selling and Administrative Expenses		10,869			8,968			21	%
% of Net Sales		41.9	%		36.3	%	560 bps
Non-Operating Income (Expense)		(52	)		159			(133	%)
Income (Loss) Before Income Taxes		(1,090	)		1,252			(187	%)
Income Tax Provision (Benefit)		(398	)		473			(184	%)
Net Income (Loss)		(692	)		779			(189	%)
Trade and other accounts receivable, net		18,190			19,307			(6	%)
Inventories		28,023			26,053			8	%

Quarter Ended March 28, 2009 Compared to Quarter Ended March 29, 2008:

Net Sales: Net sales for the first quarter of 2009 increased 5%, to $25.9 million, from $24.7 million in the same period of 2008. Sales to the work market were $19.0 million for the first quarter of 2009, up 6% from $17.9 million for the same period of 2008. The growth in work market sales reflects continued penetration into various avenues within the U.S. Government market, including growing demand from aftermarket military suppliers, partially offset by the bankruptcies of two major retailers and widespread softness in the retail channel. While the loss of these two retailers negatively impacted our quarterly revenue growth by $1.8 million, our strength in our portfolio of sales channels enabled our consolidated growth in net sales of 5% in the first quarter of 2009. We expect to ship $6.7 million of previously announced orders to the U.S. Army during the balance of 2009.

Sales to the outdoor market were $6.9 million for the first quarter of 2009, up slightly from $6.8 million for the same period of 2008. Despite continued softness in the overall retail environment, our first quarterly increase in outdoor sales since the third quarter of 2007 was primarily due to strength in our cold weather product offerings, offset by the continued sluggish retail environment.

In addition, the first quarter of 2009 had 61 business days, representing a 3% decrease compared to 63 business days during the first quarter of 2008.

Gross Profit: Gross profit for the first quarter of 2009 was 37.9% of net sales, compared to 40.7% in the same period of 2008. The decline in gross profit of 280 basis points (“bps”) was due to the impact of investments in our Portland factory (80 bps), increased costs as a result of re-sourcing key rubber styles due to the closure of one of our third party manufacturing facilities in 2008 (40 bps), an increase in markdown sales (30 bps), and product cost and product mix changes and other items (130 bps).

Selling and Administrative Expenses: Selling and administrative expenses in the first quarter of 2009 increased $1.9 million, or 21%, to $10.9 million from $9.0 million in the same period of 2008, driven by expenses related to establishment and operation of our European subsidiary which was established in the third quarter of 2008 ($1.0 million), expenses

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related to establishment and operation of our new Indianapolis distribution center ($0.5 million), bad debt expense related primarily to the bankruptcy of two significant retail customers ($0.3 million) and other expenses ($0. 1 million).

Non-Operating Income (Expense): Non-operating income (expense) in the first quarter of 2009 changed from income of approximately $0.16 million to an expense of $0.05 million compared with the same period of 2008, primarily as a result of a decrease in interest income due to lower rates in 2009 and the recovery of certain foreign taxes on royalty income in 2008.

Income Tax Provision (Benefit): We recognized an income tax benefit at an effective rate of 36.5% for the first quarter of 2009 compared to income tax expense at an effective tax rate of 37.8% in the same period of 2008. The change in the effective tax rate from 2008 is primarily due to the timing of realization of federal research and experimentation credits. The law allowing such credits for 2008 and 2009 was enacted on October 2, 2008, and the impact of the 2008 credits was recognized in the fourth quarter of 2008.

Net Income (Loss): Net loss for the first quarter of 2009 was $0.7 million, or $0.11 diluted loss per common share, compared to net income of $0.8 million, or $0.12 diluted earnings per common share in the same period of 2008. The net income decline of $1.5 million is attributable to the net sales, gross profit and expense changes as discussed above.

Trade and Other Accounts Receivable, Net: Trade and other accounts receivable decreased $1.1 million, or 6%, as compared to the first quarter of 2008. This decrease is primarily attributable to increased sales to the government channel which pays more timely than other channels, an increase in our allowance for doubtful accounts of $0.3 million, and the collection of receivables from certain of our third party manufacturers for replacement of defective products we purchased from them.

Inventories: Inventories increased $2.0 million, or 8%, from the first quarter of 2008. The increase in inventories was due to an increase in raw materials inventory to support domestic production related to government sales, an increase in European inventories which were acquired in the third quarter of 2008, and the overall increase in sales for the quarter, partially offset by less carryover of outdoor products from a year ago, and improved sales of markdown items.

LIQUIDITY AND CAPITAL RESOURCES

In recent years, we have funded working capital requirements and capital expenditures principally with cash generated from operations. We require working capital to support fluctuating accounts receivable and inventory levels caused by our seasonal business cycle. Working capital requirements are generally the lowest in the first quarter and the highest during the third quarter. We did not borrow against our credit line during the first quarters of 2009 or 2008.

Net cash provided by operating activities was $1.2 million and $1.4 million in the first quarters of 2009 and 2008, respectively. Operating cash flows in the first quarter of 2009 included a net loss of $0.7 million, adjustments for non-cash items including depreciation and amortization totaling $0.7 million and $0.2 million of stock-based compensation expense, and changes in working capital components, primarily consisting of a decrease in accounts receivable of $4.3 million, and a decrease in inventory of $0.6 million, a decrease in accounts payable and accrued expenses of $4.2 million. With the seasonality of our business, a decrease in accounts receivable and inventory is normal for the first quarter of the year. The decrease in accounts payable is primarily related to the timing of payments related to inventory. The decrease from year-end in accrued expenses and other primarily relates to the payment of $1.9 million of incentive compensation, which was accrued at year-end.

Operating cash flows in the first quarter of 2008 included net income of $0.8 million, adjustments for non-cash items including depreciation and amortization totaling $0.4 million and $0.2 million of stock-based compensation expense, and changes in working capital components, primarily consisting of a decrease in accounts receivable of $3.3 million, a decrease in inventory of $1.1 million, a decrease in accrued expenses and other of $2.3 million and a decrease in accounts payable of $2.0 million.

Net cash used in investing activities was $2.2 million and $0.2 million in the first quarters of 2009 and 2008, respectively, representing purchases of property and equipment. We anticipate spending $2.8 million on capital expenditures during the balance of 2009.

Net cash used in financing activities in the first quarters of 2009 and 2008, was $0.5 million and $6.3 million, respectively. Cash dividends paid were $0.8 million in the first quarter of 2009, compared to $7.0 million in the first quarter of 2008. Proceeds from the exercise of stock options were $0.3 million in the first quarter of 2008, compared to $0.7 million in the same period of 2008.

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A summary of our contractual cash obligations at March 28, 2009 is as follows:

(in thousands)	Payments due by year:
			Remaining in
Contractual Obligations	Total		2009		2010		2011		2012		2013		Thereafter
Operating leases (1)	$	19,673	$	1,676	$	2,305	$	2,106	$	2,129	$	2,151	$	9,306

(1) See Part I, Item 2 — Properties in our Annual Report on Form 10-K for the year ended December 31, 2008 for a description of our leased facilities.

At March 28, 2009 and March 29, 2008, our pension plan had accumulated benefit obligations in excess of the respective plan assets and accrued pension liabilities. These obligations in excess of plan assets and accrued pension liabilities have resulted in the inclusion of accumulated other comprehensive loss in shareholders’ equity net of tax of $3.6 million and $1.0 million as of March 28, 2009 and March 29, 2008, respectively. We contributed $0.3 million to our defined benefit pension plan during the first quarter of 2009 and anticipate contributing an additional $0.9 million during the remainder of 2009.

In June 2006, we received a grant of $0.2 million and a non-interest bearing loan of $0.6 million from the Portland Development Commission, which were used to finance certain leasehold improvements at our Portland distribution facility. The grant is recorded as deferred revenue and is being amortized as a reduction of operating expenses on a straight-line basis over five years, which is the estimated useful life of the associated leasehold improvements. In the third quarter of 2008, the loan was forgiven by the Portland Development Commission as we met certain facility usage requirements and employment criteria, including maintaining a minimum number of employees in the city of Portland, Oregon and paying those employees a competitive specified wage and benefits package. Given the forgiveness of this loan, we have reclassified the remaining unamortized long-term debt to deferred revenue and will continue to amortize the balance until 2011.

The Board of Directors, while not declaring future dividends to be paid, established a quarterly dividend policy reflecting its intent to declare and pay a quarterly dividend of $0.125 per share of common stock (approximately $0.8 million per quarter) for the balance of 2009. Accordingly, a quarterly dividend of $0.8 million was paid on March 18, 2009 to shareholders of record as of the close of business on February 22, 2009.

On April 23, 2009, we announced a second quarter cash dividend of twelve and one-half cents ($0.125) per share of our common stock. This dividend will be paid on June 18, 2009 to shareholders of record as of the close of business on May 22, 2009. The total cash payment for this dividend will be approximately $0.8 million.

In the second quarter of 2009, we will have consolidated our two La Crosse, Wisconsin distribution facilities to one location in Indianapolis, Indiana for increased capacity and operating efficiencies. We spent $1.4 million in the first quarter of 2009 and anticipate spending approximately $1.2 million in the second quarter of 2009 for capital assets related to building out this new Midwest consolidated distribution facility including racking, computer systems and other build-out costs. We have evaluated the capital assets in our two distribution centers in La Crosse and have determined that no impairment exists as of March 28, 2009.

From time to time we enter into purchase commitments with our suppliers under customary purchase order terms. Any significant losses implicit in these contracts would be recognized in accordance with generally accepted accounting principles. At March 28, 2009, no such losses existed.

On March 9, 2009, we entered into a new line of credit agreement with Wells Fargo Bank, N.A., which expires June 30, 2012. This line of credit agreement represents a 3-year extension of our previous line of credit agreement with Wells Fargo Bank, N.A. (See Note 5 in our Notes to Unaudited Condensed Consolidated Financial Statements in this Form 10-Q). No amounts were outstanding under this line at March 28, 2009 or at March 29, 2008 under the former credit agreement with Wells Fargo Bank, N.A. We believe that our existing resources and anticipated cash flows from operations will be sufficient to satisfy our working capital needs for the foreseeable future.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies and estimates are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2008. There have been no significant changes in these critical accounting policies since December 31, 2008. Some of our accounting policies require us to exercise significant judgment in selecting the appropriate assumptions for calculating financial estimates. Such judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, known trends in our industry, terms of existing contracts and other information from outside sources, as appropriate. Actual results could differ from these estimates.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our disclosures regarding market risk since December 31, 2008. See also Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2008 for further sensitivity analysis regarding our market risk related to interest rates, pension liability and foreign currencies.

ITEM 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated, with the participation of our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of the date of such evaluation in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to management, including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

From time to time, we become involved in ordinary or routine legal and regulatory proceedings incidental to our business. When a loss is deemed probable, a reasonable estimate is recorded in our financial statements.

ITEM 1A. Risk Factors

Other than the modification to the risk factors set forth below, there has not been a material change to the risk factors as set forth in our Annual Report on Form 10-K for the year ended December 31, 2008.

The current slow-down of consumer spending is negatively impacting our domestic retailers, which impacts their financial operations and their access to capital to fund growth, which increases and concentrates our credit risk and which puts our retail sales channel volumes at risk.

Certain of our domestic and international retailers have announced significantly lower growth expectations, and in some cases are reducing the number of stores in operation. The contraction in consumer spending and the tightening of the credit markets has created an unfavorable business environment for our retailers, especially the retailers who use debt to finance their inventory purchases and other operating capital. During the first quarter of 2009, two of our significant retailers filed for Chapter 11 bankruptcy proceedings which have put our outstanding accounts receivable balances and our 2009 sales plans with these customers at risk. While we have provided appropriate allowances for these outstanding balances as of March 28, 2009, the risk that the current environment could result in similar outcomes for other of our domestic and foreign retailers is high and such outcomes would have a material adverse impact on our future results of operations.

For all of our distribution channels, including domestic retailers, the current decline in consumer spending due to unfavorable economic and consumer credit conditions has created an environment of increasing price discounts which will likely continue to negatively impact our future product revenues, gross margins and earnings.

Our success in generating sales of our products to consumers depends upon a number of factors, including economic factors impacting disposable consumer income. These factors include economic conditions and factors such as employment levels, general business conditions, consumer confidence, prevailing interest rates and changes in tax laws. Under such conditions we may need to offer our domestic retailers and, in turn, consumers, increasing product discounts in order to generate sales of our products. If we are forced to offer increasing discounts on our products, our margins and our results of operations will be negatively impacted.

Sales to the U.S. Government, which are becoming an increasingly significant portion of our net sales, may not continue at current levels, or we may not be able to fill these orders due to constraint in our production capacity.

Our ability to continue to generate sales growth in our government channel is partially dependent upon the current U.S. presidential administration’s policies regarding troop deployments in various global regions requiring our specialized footwear. Additionally, given that a substantial portion of our military sales must be produced by our domestic manufacturing facility, we may be unable to fill orders which we receive on a timely basis due to constraints in the capacity of that facility. Being unable to fill orders on a timely basis could cause us to lose future orders from these sources. Also, given that such orders can be sporadic, we may incur fixed costs associated with this operation even if the orders do not support such levels of fixed costs. If government orders do not continue at current levels, or if we are unable to fill orders on a timely basis, our earnings growth and results of operations would be negatively impacted. In addition, we sell our products through the Army & Air Force Exchange Service (“AAFES”). If our products do not continue to meet specifications or other requirements such as domestic content, then those sales volumes may be negatively impacted.

Our newly established European subsidiary, LaCrosse Europe ApS, increases our exposure to risks associated with foreign operations and the transition of customers to our new subsidiary may not be successful.

Foreign operations through our European subsidiary increases our exposure to various risks associated with foreign currency transactions and compliance with foreign laws. Additionally, if we fail to successfully transition our European customer base from our former European distributor to our newly established subsidiary, we could lose existing customers or be required to grant additional customer incentives which are less favorable than the incentives we provided to our prior distribution partner. Also, our distribution center for Europe is owned and managed by an independent third party, which increases our risks associated with inventory management and timely and accurate customer shipments. Any negative outcome related to these risks would harm our results of operations.

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The recent market price of our common stock creates a market value of the Company which is below the net book value of the Company. Such market valuation could have a future material adverse impact on our recorded asset value of goodwill.

During the first quarter of 2009, our common stock market price ranged from a high of $12.20 per common share to a low of $7.05 and closed at $8.10 per common share as of March 28, 2009. Based on the closing share price as of the end of the first quarter of 2009, our market value was $51.0 million and our net book value was $60.4 million as of that date. While management currently does not believe that its recorded goodwill of $10.8 million is impaired, we will continue to monitor market conditions which may change our conclusions in the future.

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ITEM 6. Exhibits

The following exhibits are filed herewith and this list is intended to constitute the exhibit index:

(10.1)	Second Amended and Restated Credit Agreement, dated March 9, 2009, by and between LaCrosse Footwear, Inc. as borrower, and Wells Fargo Bank, National Association, as lender.
(10.2)	Revolving Line of Credit Note, dated as of March 9, 2009, issued by LaCrosse Footwear, Inc. in favor of Wells Fargo Bank, National Association.
(31.1)	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
(31.2)	Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934.
(32.1)	Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
(32.2)	Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LACROSSE FOOTWEAR, INC. (Registrant)
Date: April 24, 2009	By:	/s/ Joseph P. Schneider
		Joseph P. Schneider
		President and Chief Executive Officer (Principal Executive Officer)
Date: April 24, 2009	By:	/s/ David P. Carlson
		David P. Carlson
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

     THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of March 1, 2009, 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, 2012, 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 (“Danner”) including transactions that are authorized herein. Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of March 1, 2009 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 or the promissory note dated as of $30,000,000.00 dated as of September 8, 2006 (collectively, the “Prior Notes”) and agrees that it shall not hereafter endorse, assign, endorse or transfer the either of the Prior Notes.

     (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 (“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 Daily One Month LIBOR-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 Daily One Month LIBOR-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.

     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 Daily One Month LIBOR-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 through and including June 1, 2011 unless before that date the Bank has no further commitments to make Line of Credit advances under the Loan Documents.

     (e) 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.

     (f) 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.

     (g) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to fifteen hundredths of one percent (0.15%) per annum (computed on the basis of a 360-day year, actual days elapsed) on the average daily unused amount of the Line of Credit (with outstanding advances, Letters of Credit and Usance Drafts, without duplication, deemed to constitute utilization of the Line of Credit), which fee shall be calculated on a monthly basis by Bank and shall be due and payable by Borrower in arrears within fifteen days after the Bank submits an invoice therefor to Borrower. The foregoing fee shall be calculated based on a Line of Credit of $17,500,000.00 during the Reduction Periods.

     SECTION 1.3. DEBIT.

     Borrower authorizes Bank to collect all interest and fees due under the Line of Credit by charging Borrower’s deposit account number 4100055821 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.

     SECTION 1.4. COLLATERAL.

     As security for all indebtedness of Borrower to Bank subject hereto, Borrower shall grant, and shall cause Danner 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.

     Unless an Event of Default exists, none of Borrower or any Material Subsidiaries shall be obligated to perfect the Bank’s security interest under a 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 a Material Subsidiary thereunder exceeds $100,000.00, Borrower or the Material 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 the Material 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 the Material 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 the Material 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 the relevant Material 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 1.5. TERMS

References in this Agreement to fiscal quarters and fiscal years are to Borrower’s fiscal quarters and fiscal years.

As used herein;

“AAA” has the meaning given to it in Section 7.11(b).

“Bankruptcy Code” has the meaning given to it in Section 6.1(f).

“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.

“Current Ratio” has the meaning given to it in Section 4.9(d).

“Daily One Month LIBOR” has the meaning given to it in the Line of Credit Note”

“Danner” has the meaning given to it in Section 1.1(a).

“Event of Default” has the meaning given to it in Section 6.1.

“ERISA” has the meaning given to it in Section 2.9.

“GAAP” means generally accepted accounting principles in effect in the United States (or with respect to a foreign Subsidiary, in the country of its formation or operations), consistently applied.

“LaCrosse Denmark” has the meaning given to it in Section 2.12.

“LaCrosse Europe” has the meaning given to it in Section 2.12.

“LaCrosse International” has the meaning given to it in Section 2.12.

“Letter of Credit” has the meaning given to it in Section 1.1(b).

“Line of Credit Note” has the meaning given to it in Section 1.1(a).

“Loan Document” has the meaning given to it in Section 2.2.

“material” and “material adverse effect” have the meanings given to them in Section 2.11.

“Material Subsidiary” means Danner and any Subsidiary of Borrower that (including, without duplication, the assets and revenues of its own Subsidiaries) represents five percent or more of the consolidated assets or consolidated revenues of Borrower.

“Permitted Encumbrance” has the meaning given to it in Section 5.8.

“Permitted Transaction” has the meaning given to it in Section 5.5.

“Plan” has the meaning given to it in Section 2.9.

“Prior Note” has the meaning given to it in Section 1.1(a).

“Reduction Period” has the meaning given to it in Section 1.1(a).

“Rules” has the meaning given to it in Section 7.11(b).

“Security Agreement” has the meaning given to it in Section 1.3

“Subordinated Debt” has the meaning given to it in Section 4.9(a).

“Subsidiary” of a person or entity means a corporation, partnership, joint venture, limited liability company or other business entity of which more than 50% of the stock or other equity interests having ordinary voting power for the election of directors, managing general partners or other governing body (other than stock or other equity interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such person or entity.

“Tangible Net Worth” has the meaning given to it in Section 4.9(a).

“Third Party Obligor” has the meaning given to it in Section 6.1(d).

“Total Liabilities” has the meaning given to it in Section 4.9(b).

“Usance Draft” has the meaning given to it in Section 1.1(b)

In this Agreement words denoting the singular shall include the plural, and vice versa, and words denoting any gender shall include all genders.

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

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 September 27, 2008, 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. Except as set forth in Schedule 2.6, Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year. Routine tax examinations with respect to which no underreporting or misreporting of material information by Borrower is asserted by the relevant taxing authority or is known to Borrower’s officers do not constitute breaches of this representation and warranty.

     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.

     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. Danner, Lacrosse International, Inc., an Oregon corporation (“LaCrosse International”), and LaCrosse Europe, Inc., an Oregon corporation (“LaCrosse Europe”), 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, and LaCrosse Europe ApS, a Danish company (“LaCrosse Denmark”) is the only entity in existence as of the date hereof in which Borrower indirectly owns all or a majority or a controlling share of the equity interests.

ARTICLE III
CONDITIONS

     SECTION 3.1. CONDITIONS OF 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)	Revolving Line of Credit Note.
(ii)	Corporate Resolution: Borrowing.
(iii)	Resolution from Danner.
(iv)	Certificates of Incumbency.
(v)	Security Agreement.
(vi)	Third Party Security Agreement.
(vii)	Agreement and Acknowledgment of Security Interest (5).
(viii)	UCC-1 Financing Statement.
(ix)	First Amendment to Security Agreement
(x)	First Amendment to Third Party Security Agreement
(xi)	Officers Certificate — Borrower
(xii)	Officers Certificate — Danner

     (c) Financial Condition. There shall have been no material adverse change, as determined by Bank in the exercise of its reasonable discretion, in the financial condition or business of Borrower, nor any material decline, as determined by Bank in the exercise of its reasonable discretion, 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 Danner’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 Danner’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 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 all Material Subsidiaries 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 the Material Subsidiaries.

     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) (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, and (c) discloses the names of all Subsidiaries that in the preceding fiscal quarter have become Material Subsidiaries;

     (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 the Material Subsidiaries’ businesses; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s and the Material Subsidiaries’ continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower, the Material Subsidiaries 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 Danner, 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 the Material Subsidiaries 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 the Material Subsidiaries 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 the Material Subsidiaries’ businesses 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 any Material Subsidiary may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower or such Material Subsidiary has made provision, in accordance with GAAP, for eventual payment thereof in the event Borrower is obligated to make such payment.

     SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower or Danner 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, determined as of the end of each fiscal quarter, not less than $40,000,000.00, increasing (on a permanent and cumulative basis) as of the end of each fiscal quarter (commencing March 31, 2009), by an amount equal to 25% of Borrower’s net income after taxes in the fiscal quarter then most recently ended (with no deduction for losses), 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 1.50 to 1.0 determined as of the end of each fiscal quarter, 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 after an officer of Borrower becomes aware of (but in no event more than five (5) days after an officer of Borrower becomes aware of 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 (without prior or concurrent renewal or replacement) 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 MATERIAL SUBSIDIARY. In the event that, at any time, non-Material Subsidiaries of Borrower (including, without duplication, such Subsidiaries’ Subsidiaries) represent, in the aggregate, more than 80% of the consolidated assets or consolidated revenues of Borrower, Borrower shall, in writing to Bank, given concurrently with the reports given to Bank pursuant to section 4.3(c), designate sufficient non-Material Subsidiaries to be (and which shall be) deemed for all purposes Material Subsidiaries such that the remaining non-Material Subsidiaries (including, without duplication, such Subsidiaries’ Subsidiaries) no longer represent more than 80% of the consolidated assets or consolidated revenues of Borrower. New Material Subsidiaries shall be deemed as such for purposes of the relevant representations, warranties, affirmative and negative covenants and Events of Default at the beginning of the Borrower’s fiscal quarter that immediately follows the fiscal quarter in which the new Material Subsidiary became a Material Subsidiary.

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 the Material Subsidiaries 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. 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 any fiscal year excess of an aggregate of $5,000,000.00 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, however, in fiscal year ending 2009, such amount may be increased by up to an additional $2,500,000.00 in connection with a new factory for Danner. Any amount of the allowed $7,500,000.00 in 2009 may be expended in connection with the new factory for Danner.

     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 the Material Subsidiaries 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 a Material 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 the Material Subsidiaries. “Permitted Transactions” means (i) mergers with other entities whose businesses are substantially similar to that of Borrower’s or Danner’s so long as Borrower or a Material Subsidiary is the surviving entity, (ii) the acquisition by Borrower or a Material Subsidiary of all or substantially all of the assets of other entities or divisions thereof, (iii) the acquisition by Borrower or a Material Subsidiary of not less than 50.1% of the outstanding ownership interests in other entities; and, with respect to each of the foregoing, and (iv) prior to entering into a definitive agreement, (aa) Borrower demonstrates to Bank’s satisfaction, on a pro forma basis, that Borrower will remain in compliance with all of the financial covenants set forth in Section 4.9, and (bb) no breach of this Agreement or any other Loan Document would exist following such transaction.

     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 any Material 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:

     (a) any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof;

     (b) loans or advances to employees or officers of Borrower or its Subsidiaries;

     (c) loans or advances to LaCrosse Denmark not exceeding the sum of DKK 20,000,000.00 in principal at any one time, and extensions of trade credit to LaCrosse Denmark not exceeding USD 2,000,000.00 at any one time;

     (d) loans advances to, or investments in LaCrosse International not exceeding $1,500,000.00 in any fiscal year;

     (e) loans or advances to, or investments in or to any Subsidiary that has not executed a Security Agreement in favor of the Bank in substantially the form of the Danner Security Agreement, 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; and

     (f) loans or advances to, or investments in any amount in or to any Material Subsidiary that has executed a Security Agreement in favor of the Bank in substantially the form of the Danner Security Agreement.

In the event that as a result of a Permitted Transaction Borrower or a Material Subsidiary acquires or forms a new subsidiary that satisfies the definition of Material Subsidiary, Borrower acknowledges that it shall be deemed to be a Material Subsidiary hereunder and shall promptly execute a Security Agreement in substantially the form of the Danner Security 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. Neither LaCrosse Denmark nor any Material Subsidiary that is not incorporated or formed in the United States of America shall be required to guaranty or grant security for any of the obligations of Borrower under the Loan Documents.

     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 a Subsidiary (or a freight forwarder, agent or contractor therefor) 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 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.

     SECTION 5.9. LETTER AGREEMENT. For the avoidance of doubt the transactions and matters that are the subject of the letter agreement dated October 3, 2008 between Borrower and Bank were and remain approved, any provisions of this Agreement (or its predecessors to the contrary notwithstanding).

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, a Material 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 (other than to Borrower or a Subsidiary thereof), 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 or an affiliate thereof, or Borrower or a Subsidiary thereof, the amount thereof exceeds $2,000,000.00, 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, a Material Subsidiary or any Third Party Obligor; or the recording of any abstract of judgment against Borrower, a Material Subsidiary or any Third Party Obligor in any county in which Borrower, a Material 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, a Material Subsidiary or any Third Party Obligor; or the entry of a judgment against Borrower, a Material Subsidiary or any Third Party Obligor; and with respect to each of the foregoing, the uninsured amount in dispute exceeds $2,000,000.00 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, a Material Subsidiary or any Third Party Obligor (and the same is not dismissed within 60 days after its commencement, or Borrower, a Material 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, a Material Subsidiary or any Third Party Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower, a Material 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 30 days after written notice from Bank to Borrower.

     (h) The dissolution or liquidation of any of Borrower, a Material 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, Material 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) at the Bank’s sole option, 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 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 Senior 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

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 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 Material 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, as amended and restated. 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.

     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. §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.

     (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 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.

		WELLS FARGO BANK,
LACROSSE FOOTWEAR, INC.		NATIONAL ASSOCIATION
By:	/s/ Joseph P. Schneider	By:	/s/ James R. Bednark
	Joseph P. Schneider President/Chief Executive Officer Executed March 9, 2009		James R. Bednark Senior Vice President Executed March 9, 2009
By:	/s/ David P. Carlson
	David P. Carlson Executive Vice President/Chief Financial Officer Executed March 9, 2009

EX-10.2

EXHIBIT 10.2

REVOLVING LINE OF CREDIT NOTE

$30,000,000.00 Portland, Oregon
March 1, 2009

     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 the 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) “Daily One Month LIBOR” means for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.

     (c) “Fixed Rate Term” means a period commencing on a Business Day and continuing for 1 month or 3 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.

     (d) “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 (A) for the purpose of calculating effective rates of interest for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with the understanding that such rate shall be one 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, or (B) for the purpose of calculating effective rates of interest for loans making reference to the

Daily One Month LIBOR, as the Inter-Bank Market Offered Rate in effect from time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of such loans. 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. If on any date of determination a LIBOR rate cannot be established under this Note, the rate publicly announced at that time as the Bank’s Prime Rate shall be substituted for the relevant period of time, and the LIBOR rate shall be determined again on the next interest rate determination date.

     (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.

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) as selected pursuant to paragraph (b) below, either (i) at a fluctuating rate per annum equal to 1.75% above the Daily One Month LIBOR in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be 1.75% above LIBOR in effect on the first day of the applicable Fixed Rate Term. When interest is determined in relation to the Daily One Month LIBOR, each change in the rate of interest hereunder shall become effective each Business Day that the Bank determines that the Daily One Month LIBOR has changed. 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 (if any) 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 such time as Borrower requests an advance hereunder, 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 (other than a selection of Daily One Month LIBOR), the length of the applicable Fixed Rate Term; provided, when a Fixed Rate Term expires while an Event of Default has occurred and is continuing, then, at the sole option of the Bank the LIBOR interest rate basis for the relevant loan advances shall be the Daily One Month LIBOR Rate in effect from time to time. 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. Principal evidenced by this Note 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 Daily One Month LIBOR 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 Daily One Month LIBOR, Borrower may convert

$250,000.00 or more thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower. 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 Daily One Month LIBOR interest selection for such advance or the principal amount to which such Fixed Rate Term applied.

     (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 March 31, 2009.

     (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 rate of interest from time to time applicable to this Note.

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, (i) Fixed Rate Term borrowings shall be in an amount of not less than $250,000.00, and (ii) Daily One Month LIBOR borrowings may be in any amount; and provided further, however, that 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, 2012.

     (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 or Kirk Layton, 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.

     (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 Daily One Month LIBOR, if any, and second, to the remaining 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) Daily One Month LIBOR. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Daily One Month LIBOR 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 Daily One Month LIBOR in effect from time to time (computed on the basis of a 360-day year, actual days elapsed).

EVENTS OF DEFAULT:

     This Note is made pursuant to and is subject to the terms and conditions of that certain Second Amended and Restated Credit Agreement between Borrower and Bank dated as of March 1, 2009, 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.

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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 Revolving Line of Credit Note in the principal amount of $30,000,000.00 dated as of September 1, 2006 executed by Borrower pursuant to the Credit Agreement.

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

LACROSSE FOOTWEAR, INC.
By:	/s/ Joseph P. Schneider
	Joseph P. Schneider
	President/Chief Executive Officer Executed March 9, 2009
By:	/s/ David P. Carlson
	David P. Carlson
	Executive Vice President/Chief Financial Officer Executed March 9, 2009

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

I, Joseph P. Schneider, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of LaCrosse Footwear, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 24, 2009

/s/ Joseph P. Schneider  

Joseph P. Schneider 

President and Chief Executive Officer 

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

I, David P. Carlson, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of LaCrosse Footwear, Inc.;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 24, 2009

/s/ David P Carlson  

David P. Carlson 

Executive Vice President and Chief Financial Officer 

EX-32.1

Exhibit 32.1

Written Statement of the President and Chief Executive Officer
Pursuant to 18 U.S.C. §1350

     Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned President and Chief Executive Officer of LaCrosse Footwear Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 28, 2009 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 24, 2009

/s/ Joseph P. Schneider  

Joseph P. Schneider 

EX-32.2

Exhibit 32.2

Written Statement of the Executive Vice President and Chief Financial Officer
Pursuant to 18 U.S.C. §1350

     Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Executive Vice President and Chief Financial Officer of LaCrosse Footwear Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 28, 2009 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: April 24, 2009

/s/ David P Carlson  

David P. Carlson