EXHIBIT 10.7

AMENDED AND RESTATED CREDIT FACILITY AGREEMENT

AMENDMENT NUMBER 2

This AMENDED AND RESTATED CREDIT FACILITY AGREEMENT AMENDMENT NUMBER 2
(“Amendment”) is made as of the 31st day of October, 2007, by and among PHOENIX
FOOTWEAR GROUP, INC., a corporation formed under the laws of the State of
Delaware (“Borrower”) and MANUFACTURERS AND TRADERS TRUST COMPANY (“Agent”), a
New York banking corporation, with offices at 255 East Avenue, Rochester, New
York 14604 as administrative agent for the Lenders, and each of the LENDERS
(defined in the Agreement described below).

This Amendment amends the Amended and Restated Credit Facility Agreement
(“Credit Agreement”) dated as of November 13, 2006 made between Borrower, the
Agent, and the Lenders described therein, as previously amended by Amendment
Number 1 dated September 12, 2007.

1. Section 2.2 of the Credit Agreement is hereby amended to read in its entirety
as follows:

2.2 Borrowing Base. Notwithstanding the provisions of Section 2.1, the aggregate
principal amount of all outstanding Revolving Credit Loans, Swing Line Loans,
and all Letter of Credit Obligations shall not exceed the lesser of the
Borrowing Base and the Revolving Credit Commitment, plus for the period through
and including November 30, 2007 only, (i) an amount equal to 40% of inventory
that would otherwise be Eligible Inventory but for the fact that such inventory
consists of goods-in-transit and (ii) $1,000,000. At any time that the aggregate
principal amount of all outstanding Revolving Credit Loans, Swing Line Loans,
and all Letter of Credit Obligations exceeds the lesser of the Borrowing Base
and the Revolving Credit Commitment, the Borrower shall immediate prepay the
Revolving Credit Loans and/or Swing Line Loans pursuant to Section 2.7 hereof.

2. The Borrower agrees to pay the Agent’s legal fees in connection with this
Amendment.

3. All other terms of the Credit Agreement as amended shall remain in full force
and effect.

4. Borrower acknowledges that, by entering into this Amendment for the benefit
of Borrower, neither the Agent nor the Lenders are waiving existing Defaults or
Event of Defaults, or any right or remedy they may have, under the Credit
Agreement. The Bank reserves, among others, the right in its sole discretion at
any time not to make further advances under the Credit Agreement due to the
existing Events of Default under the Credit Agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.

 

MANUFACTURERS AND TRADERS TRUST COMPANY,

as Administrative Agent and on behalf of the Lenders

By:  

/s/ Timothy G. Denniston

  Timothy G. Denniston   Vice President

 

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PHOENIX FOOTWEAR GROUP, INC. By:  

/s/ James R. Riedman

  James R. Riedman   Chairman

 

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The undersigned Guarantors (defined in the Credit Agreement referenced in the
foregoing Amendment Number 2) hereby consent to the Amendment and acknowledge
and agree that the Guaranties (defined in such Credit Agreement) remain in full
force and effect and that the obligations of Guarantors thereunder are unchanged
by such Amendment.

 

ALTAMA DELTA CORPORATION By:  

/s/ James R. Riedman

  James R. Riedman   Chairman ALTAMA DELTA (PUERTO RICO) CORPORATION By:  

/s/ James R. Riedman

  James R. Riedman   Chairman CHAMBERS BELT COMPANY By:  

/s/ James R. Riedman

  James R. Riedman   Chairman PENOBSCOT SHOE COMPANY By:  

/s/ James R. Riedman

  James R. Riedman   Chairman PXG CANADA INC. By:  

/s/ James R. Riedman

  James R. Riedman   Chairman PHOENIX DELAWARE ACQUISITION, INC. By:  

/s/ James R. Riedman

  James R. Riedman   Chairman

 

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H.S. TRASK & CO. By:  

/s/ James R. Riedman

  James R. Riedman   Chairman

 

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