EXHIBIT 10.3

FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

THIS FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (the “Amendment”), dated
November 5, 2009, is entered into by and among PHOENIX FOOTWEAR GROUP, INC., a
Delaware corporation (“Phoenix Footwear”), PENOBSCOT SHOE COMPANY, a Maine
corporation (“Penobscot”), H.S. TRASK & CO., a Montana corporation (“Trask”),
CHAMBERS BELT COMPANY, a Delaware corporation (“Chambers”), and PHOENIX DELAWARE
ACQUISITION, INC., a Delaware corporation (“Phoenix Acquisition”, and together
with Phoenix Footwear, Penobscot, Trask and Chambers, each individually, a
“Company,” and collectively, the “Companies”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Wells Fargo”), acting through its Wells Fargo Business Credit
operating division.

RECITALS

A. Companies and Wells Fargo are parties to a Credit and Security Agreement
dated as of June 10, 2008 (as amended by that certain Forbearance Agreement and
First Amendment to Credit and Security Agreement, dated as of July 7, 2009 (the
“First Amendment”), that certain First Amendment to Forbearance Agreement and
Second Amendment to Credit and Security Agreement, dated as of July 24, 2009
(the “Second Amendment”), that certain Second Amendment to Forbearance Agreement
and Third Amendment to Credit and Security Agreement, dated as of September 29,
2009 (the “Third Amendment”), and that certain Third Amendment to Forbearance
Agreement and Fourth Amendment to Credit and Security Agreement, dated
October 16, 2009 (the “Fourth Amendment”; and together with the First Amendment,
the Second Amendment, and the Third Amendment, collectively, the “Forbearance
Agreement”), and as further amended from time to time, the “Credit Agreement”).
Capitalized terms used in these recitals have the meanings given to them in the
Credit Agreement unless otherwise specified.

B. Companies and Wells Fargo desire to amend the Credit Agreement as set forth
in this Amendment.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

1. Amendments to Credit Agreement.

1.1 Section 1.2(a)(ii) of the Credit Agreement. Section 1.2(a)(ii) of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:

“(ii) the least of (x) 85% or such lesser percentage (as Wells Fargo in its sole
discretion may deem appropriate) of the Net Orderly Liquidation Value of
Eligible Inventory, (y) 41% or such lesser percentage (as Wells Fargo in its
sole discretion may

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deem appropriate) of Eligible Inventory valued at the lower of cost or fair
market value in accordance with GAAP; or (z) the Inventory Sublimit; provided
that (A) Advances and/or Letters of Credit supported by Wrangler branded
inventory shall not exceed $2,500,000, provided that Advances and/or Letters of
Credit supported by Wrangler branded inventory shall be automatically reduced to
$-0- upon the initial receipt of funds by Chambers in respect of the Chambers
Sale, and (B) (1) prior to the Chambers Closing Date, the maximum amount of
Eligible In-Transit Inventory that may be included as Eligible Inventory for
purposes of this paragraph (ii) shall not exceed $475,000 (based on the lower of
cost or fair market value), and (2) from and after the Chambers Closing Date
Eligible In-Transit Inventory shall be excluded from Eligible Inventory; less”

1.2 Exhibit A to the Credit Agreement. The following definition that appears in
Exhibit A to the Credit Agreement is hereby amended to read in its entirety as
follows:

““Inventory Sublimit” shall mean $2,100,000.

2. No Other Changes. Except as explicitly amended or waived by this Amendment,
all of the terms and conditions of the Credit Agreement and the Forbearance
Agreement shall remain in full force and effect and shall apply to any advance
or letter of credit thereunder.

3. Accommodation Fee. [Intentionally Omitted].

4. Conditions Precedent. This Amendment shall be effective when Wells Fargo
shall have received and accepted an executed original of this Amendment,
together with each of the following, each in substance and form acceptable to
Wells Fargo in its sole discretion:

4.1 A Certificate of the Secretary of each Company certifying as to (i) the
resolutions of the board of directors of such Company approving the execution
and delivery of this Amendment, (ii) the fact that the articles of incorporation
and bylaws of such Company, which were certified and delivered to Wells Fargo
pursuant to the Certificate of Authority of such Company’s secretary or
assistant secretary dated June 10, 2008, continue in full force and effect and
have not been amended or otherwise modified except as set forth in the
Certificate to be delivered, and (iii) except as noted on each such Certificate,
certifying that the officers and agents of such Company who have been certified
to Wells Fargo, pursuant to the Certificate of Authority of such Company’s
secretary or assistant secretary dated June 10, 2008, as being authorized to
sign and to act on behalf of such Company continue to be so authorized or
setting forth the sample signatures of each of the officers and agents of such
Company authorized to execute and deliver this Amendment and all other
documents, agreements and certificates on behalf of such Company; and

4.2 Such other matters as Wells Fargo may require.

 

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5. Representations and Warranties. Each Company hereby represents and warrants
to Wells Fargo as follows:

5.1 Such Company has all requisite power and authority to execute this Amendment
and any other agreements or instruments required hereunder and to perform all of
its obligations hereunder, and this Amendment and all such other agreements and
instruments has been duly executed and delivered by such Company and constitute
the legal, valid and binding obligation of such Company, enforceable in
accordance with its terms.

5.2 The execution, delivery and performance by such Company of this Amendment
and any other agreements or instruments required hereunder have been duly
authorized by all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to such Company, or the
articles of incorporation or by-laws of such Company, or (iii) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such Company is a
party or by which it or its properties may be bound or affected.

5.3 All of the representations and warranties contained in Article IV of the
Credit Agreement are correct on and as of the date hereof as though made on and
as of such date, except (i) to the extent that such representations and
warranties relate solely to an earlier date, (ii) that the Event of Default has
occurred; and (iii) to the extent otherwise disclosed to Wells Fargo in writing
and consented to or waived by Wells Fargo.

6. References. All references in the Credit Agreement to “this Agreement” shall
be deemed to refer to the Credit Agreement as amended hereby; and any and all
references in the Loan Documents to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby.

7. No Waiver. The execution of this Amendment and the acceptance of all other
agreements and instruments related hereto shall not be deemed to be a waiver of
any Default or Event of Default under the Forbearance Agreement or a waiver of
any breach, default or event of default under any Loan Document or other
document held by Wells Fargo, whether or not known to Wells Fargo and whether or
not existing on the date of this Amendment.

8. Release. Each Company hereby absolutely and unconditionally releases and
forever discharges Wells Fargo, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents, attorneys, and employees of any of the
foregoing, from any and all claims, demands or causes of action of any kind,
nature or description, whether arising in law or equity or upon contract or tort
or under any state or federal law or otherwise, which such Company has had, now
has or has made claim to have against any such person for or by reason of any
act, omission, matter, cause or thing whatsoever arising from the beginning of
time to and including the date of this Amendment, whether such claims, demands
and causes of action are matured or unmatured or known or unknown. It is the
intention of each Company in executing this release that the same shall be
effective as a bar to each and every claim, demand and cause of action specified
and in furtherance of this intention each Company waives and relinquishes all
rights and benefits under Section 1542 of the Civil Code of the State of
California, which provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MIGHT HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

 

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The parties acknowledge that each may hereafter discover facts different from or
in addition to those now known or believed to be true with respect to such
claims, demands, or causes of action and agree that this instrument shall be and
remain effective in all respects notwithstanding any such differences or
additional facts.

9. Costs and Expenses. Companies hereby reaffirm their agreement under the
Credit Agreement to pay or reimburse Wells Fargo on demand for all costs and
expenses incurred by Wells Fargo in connection with the Loan Documents,
including without limitation all reasonable fees and disbursements of legal
counsel. Without limiting the generality of the foregoing, Companies
specifically agree to pay all fees and disbursements of counsel to Wells Fargo
for the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. Companies
hereby agree that Wells Fargo may, at any time or from time to time in its sole
discretion and without further authorization by Companies, make a loan to
Companies under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses and the
Accommodation Fee or the Deferred Accommodation Fee required under Section 3 of
this Amendment.

10. Miscellaneous. This Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which counterparts, taken together, shall constitute one and the same
instrument. Signed counterparts delivered by facsimile or electronic mail
transmission shall also be binding of the parties, regardless of whether a
signed original is also delivered.

[Signatures on the next page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.

 

PHOENIX FOOTWEAR GROUP, INC. By:     Print Name:   James R. Riedman Title:  
Chairman PENOBSCOT SHOE COMPANY By:     Print Name:   James R. Riedman Title:  
Chairman H.S. TRASK & CO. By:     Print Name:   James R. Riedman Title:  
Chairman CHAMBERS BELT COMPANY By:     Print Name:   James R. Riedman Title:  
Chairman PHOENIX DELAWARE ACQUISITION, INC. By:     Print Name:   James R.
Riedman Title:   Chairman WELLS FARGO BANK, NATIONAL ASSOCIATION By:    
Print Name:   Harry L. Joe Title:   Vice President

 

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