Exhibit 10.1

Confidential treatment has been requested for portions of this Exhibit. The copy
filed herewith omits the information subject to the confidential treatment
request submitted to the Securities and Exchange Commission. Omissions are
designated as (*****). A complete version of this Exhibit has been filed
separately with the Securities and Exchange Commission.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is effective as of the 23rd day of
April 2007, between Phoenix Footwear Group, Inc. (the “Company”), and Cathy
Taylor (the “Executive”).

In consideration of the promises and covenants set forth below, the parties
hereto agree as follows:

 

  1. Employment.

The Company hereby agrees to employ Executive, and Executive hereby agrees to
accept such employment with the Company, on the terms and conditions set forth
herein.

 

  2. Term.

The employment of Executive by the Company as provided in this Agreement will
commence on April 23, 2007, and shall end on April 22, 2012 (‘Expiration Date”),
unless sooner terminated as provided in Section 6. If not so terminated, then on
April 23, 2012, and on April 23 of each year thereafter (each an “Expiration
Date”), the term of Executive’s employment hereunder shall automatically be
extended for one additional year. Executive’s current consulting agreement ends
effective April 22, 2007.

 

  3. Position and Duties.

(a) Executive shall serve as Chief Executive Officer of the Company or such
other position or positions as may be agreed upon by Executive and the Company’s
Board of Directors. Executive shall at all times perform her duties and
obligations faithfully and diligently and shall devote all her business time,
attention and efforts exclusively to the business of the Company and its related
entities. Executive shall industriously perform her duties under the supervision
of and report to the Board of Directors of the Company and shall accept and
comply with all directions from and all policies established from time to time
by the Board of Directors of the Company. Executive’s primary duties shall
include, without limitation, responsibility for the management, oversight and
strategic direction of the Company’s brands, assets and employees and such other
duties as may from time to time be prescribed by the Board of Directors of the
Company. Executive shall promote the trade and business of the Company and its
related entities to the best of her ability and shall adhere to the Company’s
policies and procedures applicable to the Company’s employees generally.

(b) Executive shall not directly or indirectly render any services of a
business, commercial or professional nature to any other person, entity or
organization, whether for

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compensation or otherwise, that would interfere with or impair her timely and
proper performance of her duties and responsibilities hereunder. The foregoing
shall not preclude Executive from (i) serving on boards of trade associations
and/or charitable organizations, including Boston Elderhostel and Women’s
Voices, and possibly others with the prior written consent of the Board or
(ii) engaging in charitable activities and community affairs, with the prior
consent of the Board and provided that such activities and directorships do not
interfere with or impair her timely and proper performance of Executive’s duties
and responsibilities hereunder.

(c) Executive will also be appointed as a member of the Board of Directors at a
telephonic Board meeting to be scheduled within fifteen (15) days of the
commencement of this agreement and nominated for election to the Board at each
annual meeting.

 

  4. Place of Performance.

In connection with Executive’s employment by the Company and except for required
travel on Company business, Executive shall be based at the executive offices of
the Company, currently located in Carlsbad, California.

 

  5. Compensation and Related Matters.

(a) Salary. During the term of Executive’s employment hereunder, the Company
shall pay to Executive a salary of $550,000 per annum, subject to increase (but
not decrease) in the sole discretion of Board of Directors based on performance
and salary reviews of Executive in accordance with Company policy. Such salary
shall be paid in equal monthly installments (or such shorter intervals as the
Company may elect). Executive’s salary shall be subject to annual review by the
Company’s Board of Directors or its Compensation Committee.

(b) Bonus. During the term of Executive’s employment hereunder, Executive shall
be eligible for an annual bonus up to 120% of Executive’s base salary as set
forth in Section 5(a), in accordance with the terms of Exhibit A attached
hereto. Executive’s annual bonus shall be payable within ninety (90) days after
the end of each Company fiscal year. Should Executive’s employment terminate for
any reason prior to the end of the eighth month of the Company’s then-current
fiscal year, no bonus would be earned or payable for that year. Should
Executive’s employment terminate for any reason during the last four months of
the Company’s then-current fiscal year, any annual bonus earned under the terms
of Exhibit A for that year would be prorated for the months of active service
during that fiscal year prior to such termination.

(c) Vacations. During the term of Executive’s employment hereunder, Executive
shall be entitled to four weeks (20 days) of vacation each year, earned at the
rate of 1.66 vacation days for each month of active service. The maximum amount
of vacation that can be earned is 25 days, at which point no additional vacation
is earned until the earned amount is below such maximum amount. Company
acknowledges that Executive has already scheduled vacations between the dates of
June 8 - June 15, 2007 and September 21 - September 30, 2007, and shall be
permitted to attend these vacation weeks.

(d) Medical Insurance and Other Benefits. During the term of Executive’s
employment hereunder, Executive will be entitled to participate in any medical,
dental and disability insurance plans, life insurance plans, retirement plans
and other employee welfare and benefit plans or programs on the same terms as
the Company’s other senior-level executives, as such plans and programs may be
in effect from time to time.

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(e) Expenses. During the term of Executive’s employment hereunder, Executive
shall be entitled to receive reimbursement for all reasonable out-of-pocket
travel and other expenses (excluding ordinary commuting expenses) incurred by
Executive in performing Executive’s services hereunder, with the exception of
hotel expenses in New York City, provided that:

(i) Each such expenditure is of a nature qualifying it as a proper business
expenditure of the Company and is approved by the Company; and

(ii) Executive furnishes to the Company adequate documentary evidence for the
substantiation of such expenditures and Executive otherwise complies with
Company policies with respect to expense reimbursement.

In addition, Company shall pay Executive a monthly housing stipend of $3300 per
month toward her cost of maintaining an apartment in New York City, which
payment shall be in lieu of any hotel-related expenses she would otherwise incur
on visits to the New York City area.

(f) Stock. The Company will provide Executive as additional compensation for
Executive’s employment hereunder shares of common stock pursuant to the terms of
Exhibit B attached hereto.

(g) Moving and Temporary Living Expenses. The Company will pay to Executive an
advance of $20,000, for personal expenditures in connection with Executive’s
relocation to California on or about June 18, 2007, and up to an additional
$20,000, all of which will be supported by expense verifications by Executive.
In addition, Company shall use its best efforts to assist in securing for
Executive a favorable loan for a period of ten (10) years.

 

  6. Termination.

(a) Agreement Terminable at Will. Notwithstanding anything herein to the
contrary, this Agreement and Executive’s employment with the Company are
terminable at will by the Company for any reason, with or without prior notice
or cause, provided, however, that Executive’s entitlement to payments and
benefits following such termination will depend on the type of termination and
shall be governed by the following provisions of this Section 6. Upon
termination for any reason, Executive hereby agrees that her membership on the
Board also ends and will sign any document requested by Company to implement
such ending.

(b) Termination for Cause.

(i) The Company may terminate this Agreement and Executive’s employment
hereunder for “Cause” pursuant to the provisions of this Section 6(b). Executive
shall be given notice by the Board of Directors of the grounds for its intention
to terminate Executive for Cause, and the Board shall give Executive an
opportunity to address with the Board, the grounds on which the proposed
termination for Cause is based. If Cause is cured to the Board’s satisfaction
within twenty (20) days of such notice, a termination for Cause will not be
implemented.

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For purposes of this Agreement, the Company shall have “Cause” to terminate
Executive’s employment hereunder upon:

(A) Executive’s refusal to comply with lawful written instructions of the Board
regarding specific actions Executive must do or not do;

(B) Executive’s engagement in an act of dishonesty or falsification or any
transaction involving a material conflict of interest which was not disclosed to
and approved by the Company’s Board of Directors; or

(C) Executive’s use of illegal narcotics; or

(D) Executive’s engagement in theft, embezzlement, fraud, misappropriation of
funds, or other act involving moral turpitude; or

(E) Executive’s engagement in any violation of law relating to Executive’s
employment by the Company.

(ii) If this Agreement is terminated by the Company for Cause pursuant to this
Section 6(b), the Company shall have no further obligation or liability to
Executive, except that Executive shall be entitled to receive only (i) the
portion of Executive’s salary as set forth in Section 5(a) which has been earned
up to the Date of Termination, (ii) compensation for any accrued and unused
vacation up to the Date of Termination, and (iii) reimbursement, pursuant to
Section 5(d) for business expenses incurred up to the Date of Termination
(collectively, the “Minimum Payments”).

(c) Death.

(i) This Agreement and Executive’s employment hereunder shall terminate
automatically upon Executive’s death.

(ii) If this Agreement is terminated because of Executive’s death pursuant to
this Section 6(c), the Company shall have no further obligation or liability to
Executive, except that Executive shall be entitled to receive only (i) the
Minimum Payments, and (ii) any life insurance proceeds Executive is otherwise
entitled to under any applicable life insurance in effect on the Date of
Termination.

(d) Disability.

(i) If Executive becomes disabled during Executive’s employment hereunder, this
Agreement and Executive’s employment hereunder shall terminate. As used herein,
“disability” shall mean any condition that qualifies as a disability under the
Company’s long-term disability plan as in effect on the date of determination
and which renders Executive incapable of performing her responsibilities
hereunder for one hundred twenty (120) days or more in the aggregate during any
12-month period, and which at any time after such ninety (90) days the Company’s
Board of Directors shall determine continues to render Executive incapable of
performing such responsibilities.

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(ii) If this Agreement is terminated because of Executive’s disability pursuant
to this Section 6(d), the Company shall have no further obligation or liability
to Executive, except that Executive shall be entitled to receive only (i) the
Minimum Payments, and (ii) any benefits to which Executive is entitled under the
Company’s long-term disability plan as in effect on the Date of Termination.

(e) Termination Other Than for Cause, Death or Disability.

(i) The Company shall, for any reason, be entitled to terminate this Agreement
and Executive’s employment hereunder at any time without Cause and other than on
account of Executive’s death or disability.

(ii) If this Agreement is terminated by the Company pursuant to this
Section 6(e) or by Executive pursuant to Section 6(f) below, the Company shall
have no further obligation or liability to Executive, except that Executive
shall be entitled to receive only (i) the Minimum Payments, and (ii) a severance
payment as follows:

Salary: Eighteen (18) months salary continuation if terminated without Cause
prior to April 15, 2008, and twelve (12) months salary continuation if
terminated without Cause thereafter.

Bonus: Payable in accordance with the terms of Section 5(b).

However, Executive shall not be entitled to any severance payment from the
Company unless and until a general release is signed by the Executive in a form
acceptable the Company.

(f) Resignation for Good Reason.

(i) Executive shall be entitled to terminate this Agreement and Executive’s
employment hereunder at any time for Good Reason pursuant to the provisions of
this Section 6(f).

For purposes of this Agreement, Executive shall have “Good Reason” to terminate
Executive’s employment hereunder if:

(A) The Company relocates its principal executive offices outside of San Diego
County, California, and Executive gives the Company written notice of her
objection to such relocation within five (5) days of being informed of such
contemplated relocation; or

(B) Without Executive’s express consent, the Company reduces Executive’s duties
and responsibilities such that it results in a material adverse reduction in
Executive’s position, authority or responsibilities, and the Company fails to
cure such reduction in duties and responsibilities within twenty (20) days after
its receipt of written notice from Executive specifying the particular acts
objected to and the specific cure requested by Executive.

(ii) If this Agreement is terminated by Executive for Good Reason pursuant to
this Section 6(f), the Company shall have no further obligation or liability to
Executive,

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except that Executive shall be entitled to receive the same Minimum Payment and
severance payment set forth in Section 6(e)(ii) for a termination without Cause
in exchange for the general release referred to therein.

(g) Resignation without Good Reason.

(i) Executive shall be entitled to terminate this Agreement and Executive’s
employment hereunder without Good Reason at any time on thirty (30) days prior
written notice delivered by Executive to the Company.

(ii) If this Agreement is terminated by Executive pursuant to this Section 6(g),
the Company shall have no further obligation or liability to Executive, except
that Executive shall be entitled to receive only the Minimum Payments.

(h) Termination of Employment Following a Change of Control.

(i) If a “Change of Control of the Company” occurs and either (i) Executive
terminates her employment for Good Reason or (ii) the Company or purchaser
terminates Executive’s employment other than for Cause, death or disability,
then the Company shall be obligated to pay to Executive the payments and
benefits provided in Subsection 6(e)(ii) above, and Executive’s vesting, if any,
in the performance-based stock awards granted under the Company’s 2001 Long Term
Incentive Plan shall be controlled exclusively by the terms and conditions of
the Agreement attached hereto as Exhibit B.

(ii) For purposes of this Agreement, a “Change of Control of the Company” shall
be deemed to have occurred if:

(A) the shareholders of the Company approve a definitive agreement to sell,
transfer, or otherwise dispose of all or substantially all of the Company’s
assets and properties; or

(B) any “person” (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company’s then outstanding securities;
provided, however, that the following shall not constitute a “Change in Control”
of the Company:

(1) any acquisition directly from the Company (excluding any acquisition
resulting from the exercise of a conversion or exchange privilege in respect of
outstanding convertible or exchangeable securities); or

(2) any acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; or

(C) the shareholders of the Company approve the dissolution or liquidation of
the Company; or

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(D) the shareholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another entity or entities, the result of
which merger or consolidation is that less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are to be, owned by
holders of the Company’s common stock immediately prior to the merger.

(i) Notice of Termination. Any termination of Executive’s employment by the
Company or by Executive (other than termination pursuant to Section 6(c) above)
shall be communicated by a written Notice of Termination to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” means a notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth the circumstances which provide a basis for termination of
Executive’s employment under the provisions so indicated, and (iii) if the
termination date is other than the date of receipt of such notice, specifies the
termination date of this Agreement in accordance with the terms of this
Agreement.

(j) Notice Not to Extend. A written notice by either party given to the other at
least 30 days prior to any Expiration Date not to extend this Agreement
effectuates termination on the next Expiration Date. In the event of such
termination, Executive shall be entitled to receive a severance payment of six
(6) months salary in exchange for the general release referred to in
Section 6(e)(ii).

 

  7. Proprietary Information.

(a) Definition. Executive hereby acknowledges that Executive will learn and may
make use of, acquire, create, develop or add to certain confidential and/or
proprietary information regarding the Company and its business (whether in
existence prior to, as of or after the date hereof, collectively, “Proprietary
Information”), which Proprietary Information shall include, without limitation,
all of the following materials and information (whether or not reduced to
writing and whether or not patentable or protected by copyright): trade secrets,
ideas or designs for product styles or concepts for footwear, apparel or
accessories, inventions, processes, formulae, programs, technical data,
“know-how,” procedures, manuals, confidential reports and communications,
marketing methods, product sales or cost information, new product ideas or
improvements, new packaging ideas or improvements, research and development
programs, identities or lists of suppliers, vendors or customers, financial
information and financial projections of the Company, or any other confidential
or proprietary information relating to the Company and/or its business. The term
“Proprietary Information” does not include any information that (i) at the time
of disclosure is generally available to and known by the Executive and/or public
(other than as a result of its disclosure by Executive), (ii) was available to
Executive prior to disclosure by the Company, provided that the person who was
the source of such information was not known by Executive to be subject to an
obligation of confidentiality to the Company, or (iii) becomes available to
Executive on a non-confidential basis from a person other than the Company or
its representatives, provided that the source of such information was not known
by Executive to be subject to an obligation of confidentiality to the Company.

(b) Nondisclosure and No Misappropriation. During the term of this Agreement and
thereafter, Executive will not, without the prior express written consent of the
Board of Directors, disclose or make any use of any Proprietary Information
except for the benefit of the Company and as may be required in the course of
the performance of Executive’s services under this Agreement.

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(c) Agreement Not to Solicit Employees and Customers. To protect the Proprietary
Information and trade secrets of the Company, Executive agrees, during the term
of this Agreement and for a period of one (1) year after termination of this
Agreement, not to, directly or indirectly, either on Executive’s own behalf or
on behalf of any other person or entity, solicit or employ any person who is an
employee of the Company or any Company subsidiary to resign and/or accept
employment elsewhere, or to use such information to attempt to persuade any
customer of the Company or any Company subsidiary to cease to do business or to
reduce the amount of business which any customer of the Company or any Company
subsidiary has customarily done or contemplates doing with the Company or the
subsidiary. Executive agrees that the covenants contained in this paragraph are
reasonable and desirable.

(d) Agreement Not To Compete. During the term of Executive’s employment by the
Company, Executive will not, directly or indirectly, whether as an officer,
director, stockholder, partner, employee, representative or otherwise, become,
or be associated in business with, any person, corporation, firm, partnership or
other entity which engages in any business or activity which is a competitor of
the Company, except that Executive may retain her 2% ownership interest in
Rocket Dog and attend Board meetings and other incidental activities related to
such ownership.

(e) Protection of Property. All records, files, manuals, documents,
specifications, lists of customers, forms, materials, supplies, computer
programs and other materials furnished to the Executive by the Company, used on
its behalf or generated or obtained during the course of the performance of the
Executive’s services hereunder, shall be the property of the Company. Upon
termination of Executive’s employment with the Company for any reason, Executive
shall immediately deliver to the Company, or its authorized representative, all
such property, including all copies, remaining in Executive’s possession or
control.

(f) Specific Performance. In the event of the breach by either party of any of
the provisions of this Agreement, the other party may apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
relief pending arbitration pursuant to Section 8 in order to enforce or prevent
further violations of the provisions hereof.

 

  8. Arbitration.

(a) The parties hereto acknowledge that it is in their best interests to
facilitate the informal resolution of any disputes arising out of this Agreement
or otherwise by mutual cooperation and without resorting to litigation. As a
result, if either party has a legally recognized claim or dispute arising
hereunder or otherwise, including but not limited to any claim for breach of any
contract or covenant (express or implied), any dispute regarding Executive’s
termination of employment from the Company, tort claims, claims for harassment
or discrimination (including, but not limited to, race, sex, religion, national
origin, age, or disability), claims for compensation or benefits (except where a
benefit plan or pension plan or insurance policy specifies a different claims
procedure) and claims for violation of public policy or, any federal, state or
other governmental law, statute, regulation or ordinance (except for claims
involving workers’ compensation benefits), and the parties are unable to reach
agreement among themselves within

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thirty (30) days, then the parties agree to submit the dispute to binding
arbitration in accordance with its then-current employment rules of Judicial
Arbitration and Mediation Services (“JAMS”) and applicable law. Such thirty
(30) day discussion period shall not prevent either party from seeking immediate
relief under Section 7(f).

(b) The parties agree that the arbitration must be initiated within the time
period of the statute of limitations applicable to the claim(s) if the claim(s)
had been filed in Court. Arbitration may be initiated by the aggrieved party by
sending written notice of an intent to arbitrate by registered certified mail to
all parties and to JAMS. The notice must contain a description of the dispute,
the amount involved and the remedies sought. All fees and expenses of the
arbitration will be borne by the Company. Each party will pay for the fees and
expenses of its own attorneys, experts, witnesses, and preparation and
presentation of proofs and post-hearing briefs, unless the party prevails on a
claim for which attorneys’ fees are recoverable by statute, in which case the
arbitrator may award attorneys’ fees and costs to the prevailing party. The
arbitration will be held in San Diego County, California.

 

  9. General Provisions.

(a) Successors. This Agreement is personal to the Executive and is not
assignable by the Executive. This Agreement shall inure to the benefit of and be
enforceable by Executive’s legal representatives. This Agreement shall inure to
the benefit of and be binding upon the Company and its successors and assigns.

(b) Notice. For purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered to the following address or mailed
by United States registered mail, return receipt requested, postage prepaid,
addressed as follows:

 

If to Executive:   Executive’s address as on file with the Company
If to Company:   Phoenix Footwear Group, Inc.   5840 El Camino Real   Suite #106
  Carlsbad, CA 92008   Attention: James Riedman

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt thereof.

(c) Entire Agreement. This Agreement, together with the documents referenced
herein, contains the entire agreement of the parties hereto with respect to the
subject matter hereof. It supersedes any and all other agreements, either oral
or in writing, between the parties hereto with respect to the employment of
Employee by the Company. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, written, oral or
otherwise, have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein, and that any agreement, statement or promise not
contained in this Agreement shall not be valid or enforceable.

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(d) Amendment; Waiver; Governing Law. No provisions of this Agreement may be
waived or modified unless such waiver or modification is agreed to in a writing
signed by Executive and by such officer of the Company as may be specifically
designated by the Company’s Board of Directors. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.

(e) Validity. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

(f) Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one and the same instrument.

(g) Withholding of Taxes; Tax Reporting. The Company may withhold from any
amounts payable under this Agreement all such Federal, state, city and other
taxes, and may file with appropriate governmental authorities all such
information, returns or other reports with respect to the tax consequences of
any amounts payable under this Agreement, as may, in its reasonable judgment, be
required by law.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

PHOENIX FOOTWEAR GROUP, INC.       EXECUTIVE

By:

 

/s/ James Riedman

   

/s/ Cathy Taylor

Name:

  James Riedman     Cathy Taylor

Title:

  President    

April 23, 2007

    April 23, 2007

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EXHIBIT A TO TAYLOR EMPLOYMENT AGREEMENT

Executive will be eligible to earn a cash bonus for the fiscal year ending
December 31, 2007 in accordance with the following provisions:

1. The maximum amount of bonus that the Executive is eligible to earn for 2007
is 120% of the total base salary paid to Executive during 2007. The opportunity
to earn such bonus is based on four components which have weighted values as
follows:

 

  •  

Tommy Bahama — 32.5%

 

  •  

Trotter/Soft Walk/Chambers — 25%

 

  •  

Trask — 27.5%

 

  •  

American Red Cross — 15%

Each component is separate from the other three, so that Executive can earn all
or part of the bonus in each component even if no bonus is earned in one or more
of the other components.

2. Cash Bonus Based on Sales to Tommy Bahama. 32.5% of the potential cash bonus
award will be earned if the Company reaches the following benchmarks as a result
of sales to Tommy Bahama:

 

  (a) 20% Award Level: $***** in net sales to Tommy Bahama and gross margin at
or above 40%, or gross profit at or above $*****.

 

  (b) 60% Award Level: $***** in net sales to Tommy Bahama and gross margin at
or above 43%, or gross profit at or above $*****.

 

 

(c)

100% Award Level: $***** in net sales to Tommy Bahama and gross margin at or
above 44%, or gross profit at or above $*****.

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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  (d) 120% Award Level: $***** in net sales to Tommy Bahama and gross margin at
or above 44.5%, or gross profit at or above $*****.

For example, if Executive satisfied the 60% award level for this component and
had a base salary paid in 2007 of $400,000, the earned cash bonus attributable
to this component would be 60% times 32.5% times $400,000 or $78,000.

3. Trotter/Soft Walk/Chambers. 25% of the potential cash bonus award will be
earned if Company reaches the following benchmarks as a result of sales for the
Trotter/Soft Walk/Chambers business units:

 

  (a) 20% Award Level: $***** in net contribution for these three business
units.

 

  (b) 60% Award Level: $***** in net contribution for these three business
units.

 

  (c) 100% Award Level: $***** million in net contribution for these three
business units.

 

  (d) 120% Award Level: $***** in net contribution for these three business
units.

For example, if Executive satisfied the 120% award level for this component and
had a base salary paid in 2007 of $400,000, the earned cash bonus attributable
to this component would be 120% times 25% times $400,000 or $120,000.

4. Trask. 27.5% of the potential cash bonus award will be earned if the Company
is satisfied that the Company reaches the following benchmarks by December 31,
2007:

 

  (a) 20% Award Level: Build Trask organization to support re-launch.

of 2007.

 

  (b) 100% Award Level: Satisfy (a) and (b) and develop product offering for
Spring 2008 re-launch.

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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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  (c) 120% Award Level: Satisfy (a), (b), and (c) and obtain more than $***** of
future orders for new Trask product by December 31, 2007.

For example, if Executive satisfied the 20% award level for this component and
had a base salary paid in 2007 of $400,000, the earned cash bonus attributable
to this component would be 20% times 27.5% times $400,000 or $22,000.

5. American Red Cross. 15% of the potential cash bonus award will be earned if
the Company is satisfied that the Company reaches the following benchmarks:

 

  (a) 20% Award Level: Develop and implement a marketing plan for American Red
Cross within budgetary constraints.

 

  (b) 60% Award Level: Accomplish (a) and generate total net sales to American
Red Cross of at least $*****.

 

  (c) 100% Award Level: Satisfy (a) and (b) and generate $***** in direct net
sales from at least 10 high profile institutions.

 

  (d) 120% Award Level: Satisfy (a) and (c) and generate total net sales to
American Red Cross of at least $*****.

For example, if Executive satisfied the 100% award level for this component and
had a base salary paid in 2007 of $400,000, the earned cash bonus attributable
to this component would be 100% times 15% times $400,000 or $60,000.

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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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6. Resolution of differences. Whether the objective financial benchmarks
specified above have been satisfied will be based on the Company’s unaudited
financial records after fiscal year-end close. Any differences between the
parties regarding whether any bonus thresholds were fulfilled will be discussed
in good faith in an effort to resolve, but if no resolution is reached, be
subject to arbitration under the terms of the employment agreement.

 

 

  

 

James Riedman, for Phoenix Footwear   

Cathy Taylor

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EXHIBIT B

FORM OF

PHOENIX FOOTWEAR GROUP, INC.

PERFORMANCE-BASED DEFERRED STOCK AWARD AGREEMENT

UNDER THE AMENDED AND RESTATED

2001 LONG-TERM INCENTIVE PLAN

This AWARD AGREEMENT (the “Award Agreement”) is made effective as of April 23,
2007 between Phoenix Footwear Group, Inc., a Delaware corporation (the
“Company”), and Cathy Taylor (the “Participant”). Capitalized terms not
otherwise defined herein shall have the same meanings as in the Amended and
Restated 2001 Long-Term Incentive Plan (the “Plan”).

WHEREAS, the Company desires to grant an award (the “Award”) of
performance—based deferred stock pursuant to the Plan and the terms and
conditions set forth herein;

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties agree as follows:

1. GRANT OF AWARD. If the Company’s Compensation Committee (hereinafter
“Committee”) determines that participant has satisfied the criteria set forth in
Appendix A hereto for the award of common stock in the Company, such stock shall
be issued to Participant. The Award granted under this Award Agreement is
intended to qualify under Sections 7(c) and (g) of the Plan. The grant of this
Award is subject to the Participant’s execution and return of this Award
Agreement to the Company.

2. NATURE OF AWARD. The Company agrees to issue the number of shares of Stock
provided in Appendix A to Participant upon achievement of the conditions
specified in Section 4 and Appendix A, subject to the terms and conditions of
the Plan and this Award Agreement. The Award is unfunded and unsecured, and
Participant’s rights to any Stock hereunder shall be no greater than those of an
unsecured general creditor of the Company. The Award may not be assigned,
transferred, pledged, hypothecated or otherwise disposed of. The Award does not
entitle Participant to any rights as a shareholder with respect to any shares of
Stock subject to the Award, unless and until such shares of Stock have been
issued to Participant. The Award is intended to constitute an arrangement that
qualifies as a “short term deferral” exempt from the requirements of
Section 409A of the Code, and shall be construed accordingly. The Award is
intended to constitute “qualified performance-based compensation” within the
meaning of Section 162(m) of the Code and regulations thereunder.

3. INCORPORATION OF PLAN. The Award is subject to the terms and conditions of
the Plan, as from time to time amended, the provisions of which are incorporated
by reference in this Award Agreement. The Participant hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all the terms and
provisions thereof.

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In the event of a conflict between any term or provision contained herein and a
term or provision of the Plan, the applicable terms or provisions of the Plan
shall govern and prevail.

 

  4. PERFORMANCE VESTING CRITERIA.

(a) Participant shall be entitled to have issued to Participant the number of
shares of Stock upon the satisfaction of the performance condition(s) set forth
in Appendix A or in connection with a Change in Control as provided in
Section 5. None of the foregoing performance conditions shall be deemed to have
been satisfied unless the Committee shall have so certified in accordance with
Section 162(m) of the Code.

(b) If a performance condition required for the vesting of any portion of the
Award is not satisfied by the end of the period specified in Appendix A for
achieving such performance condition(s), such portion of the Award shall
thereupon be immediately forfeited.

(c) At the end of each fiscal year, or at such earlier time selected by the
Committee, the Committee shall determine whether the performance condition(s)
have been met. Such results shall be certified in writing by the Committee prior
to any Stock being issued hereunder. Except as provided in Section 5, in no
event shall the Participant be deemed to be vested in any Award prior to the
achievement of the performance conditions and certification of the Committee as
provided above.

5. CHANGE IN CONTROL. Upon the occurrence of (a) a Change in Control as defined
in participant’s April 2007 Employment Agreement and (b) either of the
conditions in section 6(h)(i) of such Agreement, Participant shall immediately
and automatically be entitled to have issued to Participant any shares of Stock
to which Participant has not yet become entitled pursuant to Section 4 and which
prior to the Change in Control had not been forfeited (whether or not the
performance condition(s) specified under Section 4 above has/have been
satisfied).

6. ISSUANCE OF STOCK. As soon as practicable after Participant’s right to have
issued to Participant any share of Stock subject to the Award has vested under
Section 4 or Section 5 above, but in no event later than the 15th day of the 3rd
month following the close of the calendar year in which such vesting occurs or,
if later, the close of the fiscal year of the Company in which such vesting
occurs, the Company shall issue to Participant such shares of Stock evidenced
either by a stock certificate or by such other evidence of record ownership as
the Company deems appropriate. Notwithstanding the foregoing, if Participant’s
right to any shares of Stock subject to the Award vests in connection with a
Change in Control, or has previously vested but such shares of Stock has not yet
been issued prior to the Change in Control, the Company in its discretion, to
the extent consistent with Section 409A of the Code and subject to such
conditions as the Company may prescribe (including, where vesting has not yet
occurred, a condition that the Stock be relinquished if the Change in Control
does not occur), may issue such shares of Stock to Participant sufficiently in
advance of the Change in Control to permit Participant to participate in the
Change in Control as a shareholder with respect to such shares of Stock.

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7. TERMINATION OF EMPLOYMENT. In the event of a termination of Participant’s
employment, Participant’s rights to any stock are subject to the provisions of
the Employment Agreement between Company and Participant dated April 23, 2007.

8. NO RIGHTS OF A STOCKHOLDER OR TO CONTINUED EMPLOYMENT. The Participant shall
have no rights as a stockholder of the Company with respect to the Stock
underlying an Award unless and until certificates evidencing such Stock shall
have been issued by the Company to the Participant. Until such time, the
Participant shall not be entitled to dividends or distributions in respect of
any shares of Stock subject to an Award or to vote such Stock on any matter
submitted to the shareholders of the Company. This Agreement shall not confer
upon the Participant any right to continued employment by the Company.

9. ADJUSTMENTS. The Award and the shares of Stock subject to the Award are
subject to adjustment as provided in Section 4(c) of the Plan.

10. WITHHOLDING. Participant or Beneficiary shall, no later than the date on
which any share of Stock is issued to Participant or Beneficiary and as a
condition to such transfer, pay to the Company in cash, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income. If
any taxes are required to be withheld prior to such issue of such share of Stock
(for example, upon the vesting of the right to receive such share), the Company
may require Participant or Beneficiary to pay such taxes timely in cash by
separate payment, may withhold the required taxes from other amounts payable to
Participant or Beneficiary, or may agree with Participant or Beneficiary on
other arrangements for the payment of such taxes, all as the Company determines
in its discretion.

11. SECTION 83(b) NOT APPLICABLE. Because the Award does not give to Participant
a present ownership right in any Stock, but only a conditional right to acquire
shares of Stock in the future, Participant shall not be entitled to make a
so-called “83(b) election” with respect to the shares of Stock subject to the
Award.

12. ENTIRE AGREEMENT. This Award Agreement, Appendix A attached hereto, the
Plan, and the relevant portions of Participant’s Employment Agreement constitute
the entire understanding between the Participant and the Company and its
Subsidiaries, and supersede all other agreements, whether written or oral, with
respect to the Award. The Participant agrees to accept as binding, conclusive
and final all decisions and interpretations of the Committee of the Company with
respect to any question that may arise under the Plan and this Agreement.

13. NOTICE. Unless otherwise provided herein, any notice or other communication
hereunder shall be in writing and shall be given by registered or certified
mail. Any notice given by the Company to the Participant directed to him at his
address on

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file with the Company shall be effective to bind any other person who shall
acquire rights hereunder. The Company shall be under no obligation whatsoever to
advise or notify the Participant of the existence, maturity or termination of
any rights hereunder and the Participant shall be deemed to have familiarized
himself with all matters contained herein and in the Plan which may affect any
of the Participant’s rights or privileges hereunder.

14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.

 

PHOENIX FOOTWEAR GROUP, INC.

By:

 

 

PARTICIPANT:

 

 

 

SIGNATURE

 

STREET ADDRESS

 

CITY, STATE, ZIP CODE

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APPENDIX A

Executive will earn shares of common stock in the Company, under this Award,
upon achieving either individual goals outlined in Section A, or by the
Company’s stock value reaching levels specified in Section B. In no instance
shall this grant of Performance—Based Deferred Stock result in more than 420,000
shares being earned.

 

A. Individual Performance Criteria

1. Growth. Executive will earn 126,000 shares of stock if for any trailing 12
month period during the term of this Agreement, Operating Income equals or
exceeds $*****, and during the same 12 month period:

 

  (a) Consolidated Company net sales equal or exceed $*****, and

 

  (b) Tommy Bahama’s net sales equal or exceed $*****.

2. Margins. Executive will earn 168,000 shares of stock if for any trailing 12
month period during the term of this Agreement,

 

  (a) Company Operating Income equals or exceeds $*****, and

 

  (b) Tommy Bahama’s net contribution margin equals or exceeds 18%.

3. Trask Brand Building. Executive will earn 63,000 shares of stock if for any
trailing 12 month period during the term of this Agreement, Operating Income
equal or exceeds $*****, and during the same 12 month period:

 

  (a) Net sales of Trask equal or exceed $*****, and

 

  (b) Trask’s Net contribution margin equals or exceeds 17%.

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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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4. Organization Development. Executive will earn 63,000 shares of stock if for
any trailing 12 month period during the term of this Agreement, Operating Income
equals or exceeds $*****, and during the same 12 month period:

(a) Executive has put into place a senior management team which, based upon the
determination of the Compensation Committee of the Board of Directors, has the
needed industry expertise and experience to further grow the business, and

(b) Executive has put into place or has accomplished a succession plan for new
leadership of the Chambers business unit.

 

B. Stock Value Criteria

As an alternative to the individual performance criteria described above,
Executive will earn up to 420,000 shares of stock if for 60 consecutive trading
days, the Company’s stock price on the AMEX closes above $23 per share. If such
event occurs, then the 420,000 shares earned under this alternative method will
be reduced by any shares previously earned, so that in no event will Executive
have earned more than 420,000 shares under this Performance — Based Stock Grant.

 

C. Other Provisions

1. The stock awards referred to above will not be earned or issued unless the
criteria above are satisfied during the term of Participant’s employment under
her April 23, 2007 Employment Agreement. However, if Participant is terminated
without Cause under section 6(e) of the April 23, 2007 Employment Agreement,
Participant’s “trailing twelve month period” for purposes of measuring whether
the criteria above is met will be extended for an additional 6 months after the
date of such termination without Cause.

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***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

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2. For purposes of this Appendix A, “Operating Income” is Net Income before
interest and taxes, excluding any gain or loss on the sale of assets. “Net
contribution margin” is the margin generated by each business unit as detailed
in the Company’s monthly “Report Card” Income Statement as presently prepared or
any successor report that is reasonably consistent with the methodology used to
prepare such Report.

 

D. Resolution of Differences

Whether the criteria specified above have been satisfied will be determined by
the Company’s Compensation Committee based on the Company’s unaudited financial
records. Any differences between the parties regarding whether such criteria
were fulfilled will be discussed in good faith in an effort to resolve, but if
no resolution is reached, be subject to arbitration under the terms of the
Employment Agreement.