EXHIBIT 10.8

DEPOSIT ACCOUNT CONTROL AGREEMENT

This DEPOSIT ACCOUNT CONTROL AGREEMENT (this “Agreement”) is made as of
November 1, 2010, by PACIFIC WESTERN BANK, a California state-chartered bank,
whose address is 21600 Oxnard Street, Suite 100, Woodland Hills, CA 91367,
Attn: SHARON SKIBISKI, (the “Bank”), PHOENIX FOOTWEAR GROUP, INC., a Delaware
Corporation, whose address is 5840 El Camino Real, Suite 106, Carlsbad, CA 92008
(with respect to its respective Blocked Deposit Account(s) (“Borrower”) and,
GIBRALTAR BUSINESS CAPITAL, LLC, a Delaware Limited Liability Company, whose
address is 60 Revere Drive Northbrook, IL 60062 Attn: Darren Latimer (“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower has requested and Lender is providing the Borrower with
certain revolving loans and a term loan up to the maximum the aggregate stated
amount of $5,750,000 (the “Loan”) which Loan is being secured by, among other
collateral, certain [real property and certain personal property] related
thereto (collectively, the “Property”); and

WHEREAS, pursuant to that certain LOAN AND SECURITY AGREEMENT, dated as of
November 2, 2010 between the Borrower and Lender (the “Security Agreement”),
funds are to be delivered by Borrower to Lender to be held and applied as
additional collateral and as reserves for [taxes, replacement reserves, lease
rollover, and any other reserves] provided for in the Loan Agreement, and Lender
directs Borrower and Borrower agrees, to deliver such payments to Bank for
deposit into the following account at the Bank, and any further accounts which
may be added to this Agreement by amendment (as such accounts may be renumbered
or retitled, the “Blocked Deposit Accounts”):

 

Account Name

   Account #(s)      Tax Id #  

Phoenix Footwear Lockbox

        15-0327010   

[which funds, if held for more than one purpose, Borrower agrees may be
commingled in the Blocked Deposit Accounts; and]

WHEREAS, pursuant to the Security Agreement and/or the other documents
evidencing, securing, or otherwise relating to the Loan (the Security Agreement
and said other documents, collectively, the “Loan Documents”), Lender requires
the execution and delivery of this Agreement as a control agreement (a “Control
Agreement”) of the type described in Section 9-104(a)(2) of the Uniform
Commercial Code as enacted in the state which is the Bank’s jurisdiction as
hereinbelow provided (the “UCC”) to perfect Lender’s security interests in the
Blocked Deposit Accounts;

NOW, THEREFORE, in consideration of the mutual promises herein contained and
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Bank, Borrower, and Lender agree as follows:

1. Security Interest. Borrower acknowledges to all, and warrants and represents
to the Bank, that, pursuant to the Security Agreement, Lender has, with respect
to the Loan, a first priority security interest in the Blocked Deposit Accounts,
in all funds now or hereafter held therein (including, without limitation, all
federal wire transfers of funds and all cash, checks, drafts, and other
instruments now or hereafter deposited in the Blocked Deposit Accounts), in all
proceeds thereof, and in all rights related thereto (all such security being
referred to herein as the “Deposit Account Security”). Borrower hereby further
pledges, assigns and grants to Lender pursuant to this Agreement a first
priority lien and security interest as security for the Loan in the Deposit
Account Security, which

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lien and security interest are granted in accordance with the terms and
conditions of the security interests granted pursuant to the Security Agreement.
The Bank acknowledges the aforesaid security interests in the Blocked Deposit
Accounts; provided, however, the Bank does not warrant the existence, priority
or perfection of such security interests. The Bank, however, shall not be bound
in any way by the terms or provisions of any loan document or other agreements
between Borrower and Lender, regardless of whether the Bank has knowledge
thereof.

2. Control.

(a) Borrower hereby authorizes and directs the Bank to comply with all
instructions of Lender pertaining to the Blocked Deposit Accounts, including,
without limitation, instructions originated by Lender relating to the operation
of, deposit of funds to, payment of items from, withdrawal of funds from,
disposition of funds on deposit in or other transactions and matters related to
or associated with, the Blocked Deposit Accounts, without further consent by
Borrower and notwithstanding any conflicting instructions, demands or claims by
Borrower. Neither Borrower nor any officer, director, partner, manager, agent,
or other representative of Borrower, has or shall have, during the term hereof,
signature authority with respect to the Blocked Deposit Accounts or any right to
direct any disposition of funds from the Blocked Deposit Accounts or to give any
instructions of any kind to the Bank with respect to the Blocked Deposit
Accounts. The Bank will not comply with any instructions of the Borrower related
to the Blocked Deposit Accounts, unless confirmed in writing by Lender.
Accordingly, Borrower, Lender and the Bank hereby agree that Lender has and
shall have control of the Blocked Deposit Accounts and that the Bank will comply
with instructions originated by Lender with respect to the Blocked Deposit
Accounts, including the disposition of the funds therein, without further
consent by Borrower.

(b) All notifications and instructions to the Bank shall be reasonable and shall
be reasonably acceptable to the Bank, and the Bank shall have a reasonable time
to comply with such instructions which shall be not less than two (2) business
days exclusive of the day that actual notice is received by the Bank in the
manner specified herein. The Bank may rely upon any instructions from any person
that the Bank reasonably believes to be an authorized representative of Lender,
or Borrower, as the case may be; provided, however, the Bank shall not be
obligated to comply with any instructions received from an “Assignee” (as
defined in Section 4 below) unless and until the Bank shall have received
written notice from Lender of such assignment, such notice to be pursuant to and
in accordance with Section 4 below. All payments or transfers of funds from the
Blocked Deposit Accounts shall be subject to the Bank’s availability schedule of
funds (i.e., the schedule maintained by the Bank concerning the typical timing
of collection by the Bank of funds deposited by check drawn on the clearing
banks listed therein).

(c) Borrower hereby authorizes and directs the Bank to provide to Lender, on
request by Lender from time to time, copies of all agreements, balances, written
notices, and other account information related to the Blocked Deposit Accounts;
provided, however, that the Bank shall have no liability for its failure or
delay in providing any such agreements, balances, written notices, and account
information other than as may arise under the “Standard Account Agreements” (as
defined in Section 6 hereinbelow) or unless such failure is the result of the
intentional misconduct or gross negligence of the Bank. The Bank shall have no
responsibility to provide Borrower or Lender any internal communications
(whether written, oral, or computer generated) by, between, or among the Bank’s
employees and agents related to the Blocked Deposit Accounts, and such internal
communications shall not be considered account information or notice regarding
the Blocked Deposit Accounts.

(d) The Bank represents that it is not now a party to any Control Agreement
(other than this Agreement) related to the Blocked Deposit Accounts, and agrees
that it will not enter into any other Control Agreement with respect to the
Blocked Deposit Accounts while this Agreement remains in effect, without the
written consent of Lender.

(e) In the event of any conflict between the instructions from Lender and
instructions from Borrower, the instructions of Lender shall control in their
entirety without any reference to the instructions of Borrower (for purposes of
clarity, the foregoing is intended to permit the Bank to rely on one set of
instructions without having to rely on portions of several sets of
instructions). Upon receipt by the Bank of any notice from Lender revoking such
authority of Borrower, Borrower shall have no further signature authority or
right to direct dispositions or give instructions with respect to the Blocked
Deposit Accounts, unless and until Bank receives subsequent written instructions
from Lender directing otherwise.

 

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3. Lockbox Procedures

(a) Bank shall establish a unique U.S. Postal Service address (“Lockbox”) to be
used for remittances which are to be deposited into a Blocked Deposit Account
pursuant to this Agreement (as designated by Lender or Borrower, as the case may
be) and shall promptly notify Borrower and Lender in writing of such address.
Bank shall have exclusive and unrestricted access to, and use of, the Lockbox
for the purpose of handling such remittances in accordance with this Agreement.
Bank will collect, open and process for deposit all mail received in the Lockbox
in accordance with the procedures set forth on Exhibit A attached hereto.
Borrower shall be responsible for all fees associated with the Lockbox and
Deposit Account, as may be charged by the Bank pursuant to the Lockbox terms and
conditions and its schedule of fees and charges, applicable to customers
generally, as may be amended from time to time.

(b) The parties agree that items deposited in the Deposit Account shall be
deemed to bear the valid and legally binding endorsement of the payee and to
comply with all of Bank’s requirements for the supplying of missing
endorsements, now or hereafter in effect. As between Borrower and Lender, any
deposit made by or on behalf of Borrower into a Blocked Deposit Account shall be
deemed deposited into such account when the funds in respect of such deposit
shall become collected funds.

(c) Bank shall redeposit without advice any item returned for any reason. If any
item is returned a second time, Bank will charge the amount of such item and its
current standard charge for returned items against the Blocked Deposit Accounts
if any such account contains sufficient funds to pay the amount of the returned
item and the returned item charges. If the balance in the Blocked Deposit
Accounts is not sufficient to pay the amount of the returned item and the
returned item charges, Bank shall notify Lender and Borrower. Within five
(5) business days of such notification, Borrower agrees to reimburse Bank for
same. In the event Borrower does not reimburse Bank, the Bank may charge the
amount of such items and charges to any Blocked Deposit Account, provided
however, that Lender shall be liable to Bank only for amounts actually paid to
Lender which are not recovered by Bank in accordance with the preceding
sentence. Bank shall return the item along with the debit advice to Borrower.

(d) Bank is granted the further right to debit from the Blocked Deposit Account
any amounts deposited therein in error or as necessary to correct processing
errors.

4. Reporting of Interest Income. Interest income on funds in the Blocked Deposit
Accounts should be reported by the Bank for federal and, if applicable, state
income tax purposes as income of, and taxable to, the respective Borrower, the
federal taxpayer identification numbers for which are set forth above in the
Recitals hereto.

5. Transfer of Blocked Deposit Accounts. Lender may assign its rights under this
Agreement to a financial institution or to a trust (in either case, an
“Assignee”) in connection with an assignment of the Loan Documents and/or the
issuance of mortgage pass-through certificates or other securities evidencing a
beneficial interest in a rated or unrated public offering or private placement
related to the Loan. Lender will notify the Bank in writing of such assignment
(an “Assignment Notice”) within ten (10) business days of such assignment, which
notice shall at a minimum notify the Bank of the existence and effective date of
such assignment and the identity of the Assignee, and shall give instructions to
the Bank regarding any necessary changes to the deposit account titles. Lender
acknowledges and agrees that neither such assignment nor the receipt by the Bank
of such written notice of such assignment shall in any manner modify or abrogate
the termination rights of the Bank set forth in Section 9 below, which rights
shall remain in full force and effect following such assignment. Upon any such
assignment this Agreement shall continue in full force and effect as a control
agreement for the benefit of such Assignee, as the successor secured party with
respect to the Blocked Deposit Accounts, to permit such Assignee to hold a
continuously perfected security interest in the Blocked Deposit Accounts. The
acceptance by an Assignee of any such assignment by Lender of the Loan and
Lender’s interest hereunder with respect thereto shall be deemed to, and shall,
constitute an assumption by such Assignee of the rights and obligations of
Lender hereunder, effective as of the time of acceptance of such assignment by
such Assignee. By acceptance of assignment hereof, any such Assignee hereby
agrees to such assumption. Upon such assignment and assumption becoming
effective, but not prior thereto, Lender shall be deemed to be, and shall be,
released from any obligations or liability thereafter arising under this
Agreement. Without implying any limitation of the foregoing, if requested by
Lender, the parties hereto will execute an agreement with such Assignee
confirming the foregoing. Prior to the receipt by the Bank of an

 

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Assignment Notice, and except in connection with the exercise by the Bank of any
right expressly reserved in this Agreement, the Bank shall act with respect to
the Blocked Deposit Accounts only at, and in compliance with, the instructions
of Lender. After receipt by the Bank of an Assignment Notice, and except in
connection with the exercise by the Bank of any right expressly reserved in this
Agreement, the Bank shall act with respect to the Blocked Deposit Accounts only
at, and in compliance with, the instructions of Assignee. It is acknowledged
that there may be further assignments of the Loan Documents and the rights of
Lender (whether original Lender or an assignee) under this Agreement, including,
without limitation, possible reassignment to the original Lender or to a prior
assignee, and each assignor and assignee shall have the benefits afforded the
original Lender and Assignee under this Section 5 upon compliance with all
requirements of this Section 5, all in accordance with the foregoing provisions
of this Section 5.

6. Waiver and Retention of Rights. The Bank hereby waives and relinquishes all
security interests, banker’s liens, and rights of set-off, chargeback, deduction
and recoupment which the Bank may now or hereafter have with respect to the
Blocked Deposit Accounts; provided, however, that nothing herein constitutes a
waiver or relinquishment of, and the Bank expressly reserves all of, its present
and future rights (whether described as security interests, banker’s liens,
rights of set-off, chargeback, deduction or recoupment or otherwise) with
respect to: (a) items (electronic, paper or other) deposited in or credited to
the Blocked Deposit Accounts which are returned unpaid, whether for insufficient
funds, erroneous crediting of funds or for any other reason, whether deposited
or credited before or after the date of this Agreement; (b) the Bank’s usual and
customary charges for services rendered, including basic periodic deposit
account fees, in connection with the Blocked Deposit Accounts and (c) any
security interest to which the Bank is entitled pursuant to Section 4-210 of the
UCC as in effect in the State of California. Except where inconsistent with the
provisions of this Agreement, the deposit agreement(s) governing the Blocked
Deposit Accounts and the Bank’s Terms and Conditions applicable to the Blocked
Deposit Accounts, copies of which have been provided to Borrower and Lender
(collectively, the “Standard Account Agreements”), as such Standard Account
Agreements may be modified from time to time in accordance with their terms,
shall continue in full force and effect.

7. Third Party Rights. If a bankruptcy or insolvency proceeding shall be
instituted by or against Borrower, or if any third party should assert an
adverse claim against the Blocked Deposit Accounts or any sums on deposit
therein, whether such a claim arises by tax lien, execution, attachment,
garnishment, levy, the claim of a trustee in bankruptcy or debtor-in-possession,
or a competing lien creditor or otherwise, then the Bank shall be entitled to
refuse to permit any deposits, withdrawals and/or transfers from the Blocked
Deposit Accounts without any liability until reasonably satisfactory
documentation is provided to the Bank that continued deposits, withdrawals,
and/or transfers from the Blocked Deposit Accounts are authorized and do not
violate any laws, regulations, or orders of any court.

8. Endorsements/Returned Items. Borrower hereby grants the Bank for the term of
this Agreement an irrevocable power of attorney, coupled with an interest, to
endorse all checks, drafts, remittances and receipts of every kind and nature
(collectively “Items”) deposited in the Blocked Deposit Accounts. The Bank may
supply whatever endorsement it may deem necessary for such Items, provided such
remittances are payable to Borrower in its name or a trade name of Borrower or
any reasonable variation thereof, in order to deposit such Items to the Blocked
Deposit Accounts. Borrower agrees that such endorsement shall constitute the
proper endorsement of Borrower. The Bank does not warrant any endorsements.
Items under $1,000.00 deposited with the Clearing Bank which are returned for
insufficient or uncollected funds will be re-deposited the first time. Items
over $1,000.00 returned or unpaid the second time for whatever reason shall be
debited to the Property Account under advice and returned to Borrower. Items
returned unpaid the second time for whatever reason shall be debited to the
Property Account under advice and returned to Borrower.

9. Hold Harmless.

(a) Borrower shall pay all fees, charges, costs, and expenses, including,
without limitation, reasonable attorneys’ fees and expenses of every kind
(collectively, “Charges”), which the Bank may charge, suffer or incur in
connection with this Agreement or the Blocked Deposit Accounts. Borrower further
covenants and agrees that it shall indemnify, defend, and hold harmless the Bank
and its successors, assigns, officers, directors, and agents, from any and all
liabilities, obligations, losses, damages, claims, actions, suits, costs, or
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) of every kind (collectively, “Losses”) suffered or

 

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incurred by the Bank in connection with the Bank’s acceptance of the Blocked
Deposit Accounts and the duties provided for under this Agreement, provided,
however, that Borrower shall have no obligation to so indemnify, defend, and
hold the Bank harmless for any Charges or Losses suffered by the Bank as a
result of its intentional misconduct or gross negligence.

(b) Borrower shall reimburse the Bank for all Charges and Losses of the types
described in subsections (a) and (b) of Section 6 above, when there are
insufficient funds in the Blocked Deposit Account from which the Bank can recoup
such Charges or Losses. If Borrower fails to reimburse the Bank for any Charges
or Losses suffered or incurred by the Bank which are (i) of the types described
in subsections (a) and (b) of Section 6 above, and the Bank has complied with
instructions of Lender with respect to the disbursement of funds from the
Blocked Deposit Account which left the Blocked Deposit Account with insufficient
funds for the Bank to recoup such Charges and Losses or (ii) of the type
described in such subsections (a) and (b) of Section 6 above, then Lender shall
reimburse the Bank for such Charges and Losses.

(c) In performing its functions and duties under this Agreement, the Bank shall
not be deemed to have assumed any fiduciary obligation towards or relationship
of trust with or for any other party hereto. The Bank’s duties shall continue to
be that of a debtor/creditor as in any other depository account, and the duties
specified hereunder shall be deemed to be ministerial and administrative in
nature. The Bank shall have no duty to monitor the Items deposited into the
Blocked Deposit Accounts, except as may be set forth in the Standard Account
Agreements.

(d) The Bank will use due care in performing its duties and responsibilities and
shall only be responsible for any loss which any other party hereto sustains to
the extent that such loss is proximately caused by the Bank’s intentional
misconduct or gross negligence; however, in such case such liability will extend
only to direct loss resulting therefrom, as opposed to any consequential or
special loss or damages. The Bank shall not be responsible for liability, loss,
or damage resulting from any delay in the performance of or failure to perform
its responsibilities hereunder which is caused by any force majeure, including,
without limitation, fire, other natural catastrophe or act of God, electrical or
computer failure, or act, failure to act, delay or fraud by any third party, or
any other cause beyond the Bank’s control.

(e) Borrower shall reimburse and indemnify, defend and hold harmless Lender in
full upon demand by Lender with respect to any and all payments by, or liability
or claim of liability on the part of, Lender to Bank hereunder or under the
Standard Account Agreements by way of indemnity, reimbursement or otherwise.

10. Termination. This Agreement will terminate on the first to occur of
(a) Lender’s delivery to the Bank of Lender’s notice of termination hereof,
(b) thirty (30) days after the Bank’s delivery to Lender of the Bank’s notice of
termination hereof, or (c) the filing of an interpleader by the Bank pursuant to
the following sentence; provided, however, that no such termination will affect
the duties or responsibilities of any party hereto arising out of transactions
occurring prior to such termination or the obligations of Borrower or Lender
under Section 9 above arising out of or related to transactions or activity
occurring prior to such termination. In connection with any such termination by
the Bank pursuant to clause 10(b) hereinabove, the Bank shall reasonably
cooperate with Lender in connection with the closing of the Blocked Deposit
Accounts and the transfer of funds to another depository institution identified
by Lender at such time. If a bankruptcy or insolvency proceeding shall be
instituted by or against Borrower, or if any third party should assert an
adverse claim against the Blocked Deposit Accounts or any sums on deposit
therein, whether such a claim arises by tax lien, execution, attachment,
garnishment, levy, the claim of a trustee in bankruptcy or debtor-in-possession,
or a competing lien creditor or otherwise, and the Bank determines that its
interests may be prejudiced or harmed in any respect even if it takes the
actions contemplated by Section 7 hereinabove with respect to the Blocked
Deposit Accounts, then the Bank, in addition to any other remedies it may
possess under this Agreement or at law or in equity, may (and if the Bank has
taken or intends to take any such actions pursuant to Section 7 hereinabove and
Lender has requested the Bank to terminate this Agreement, then the Bank shall)
immediately terminate all obligations of the Bank under this Agreement by
interpleading all funds then held in the Blocked Deposit Accounts into the
registry of the appropriate court for the state which is the Bank’s jurisdiction
as hereinbelow provided, and Borrower (or, if such interpleader shall be brought
at Lender’s request, Lender, with reimbursement from Borrower) shall pay the
reasonable costs, expenses and attorney’s fees actually incurred by the Bank
related to such interpleader. In the event of a termination of all obligations
of the Bank under this Agreement in connection with an interpleader in
accordance with the foregoing

 

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sentence, this Agreement shall be deemed to continue to constitute a Control
Agreement for purposes of perfecting Lender’s security interest in such funds.
Upon such interpleader, the Bank shall be fully acquitted and discharged from
all liability hereunder to Lender and Borrower for any obligation performable by
the Bank for the first time after the filing of such interpleader.

11. Bankruptcy Notice/Effect of Filing. If Bank at any time receives notice of
the commencement of a bankruptcy case or other insolvency or liquidation
proceeding by or against Borrower (a “Bankruptcy Notice”), Bank shall continue
to comply with its obligations under this Agreement, except to the extent that
any action required of Bank under this Agreement is prohibited under applicable
bankruptcy laws or regulations or is stayed pursuant to the automatic stay
imposed under the United States Bankruptcy Code or by order of any court or
agency. With respect to any obligations of Bank hereunder or under the terms and
conditions governing the Blocked Accounts which requires prior demand upon
Borrower by Bank, the commencement of a bankruptcy case or other insolvency or
liquidation proceeding by or against Borrower shall automatically eliminate the
necessity of such demand upon Borrower and shall immediately entitle Bank to
make demand on Lender with the same effect as if demand had been made upon
Borrower and the time for Borrower’s performance had expired.

12. Bank’s Jurisdiction/Governing Law. Notwithstanding any provision to the
contrary in any other agreement by or among any of the parties hereto related to
the Blocked Deposit Accounts, the “bank’s jurisdiction”, as said term is used in
Section 9-304 of the UCC, is and shall be the State of California. This
Agreement shall be interpreted, construed, and enforced according to the
substantive laws of such jurisdiction without giving effect to its principles of
choice of law or conflicts of law.

13. Borrower Liability. The liability of Borrower hereunder is not, and shall
not hereafter be, subject to any limitation of liability provisions contained in
any of the Loan Documents.

14. Notices. All notices, demands, elections, requests, consents, approvals,
waivers, or other communications (collectively, “Notices”) required or permitted
to be sent by one party to another hereunder or required by law shall be in
writing (including telex, facsimile transmission or similar writing), and given
by delivery of such Notice in person to the intended addressee, or by depositing
the same with Federal Express or another reputable national private courier
service for next business day delivery, or by depositing the same in the United
States mail, postage prepaid, registered or certified mail, return receipt
requested, in any event addressed to the intended addressee at its address set
forth in the preamble on the first page of this Agreement, to the facsimile
number specified below opposite its signature, or at such other address or telex
or facsimile number as may be designated by such party as herein provided. All
Notices shall become effective upon such personal delivery, or on date of
delivery if sent by private courier service or by United States mail, or, if
given by telex or facsimile transmission, when such telex or facsimile is
transmitted to the telex or facsimile number specified herein and the sender
receives from his transmitting device a written confirmation of transmittal.
Rejection or other refusal to accept delivery or the inability to deliver
because of changed address or telex or facsimile number of which no notice was
received by the sender in accordance with this provision prior to the sending of
the Notice given hereunder shall be deemed to be receipt of the Notice sent. Any
party may change its address or telex or facsimile number for Notices by Notice
to each other party hereunder, provided, however, that no notice of change of
address or telex or facsimile number shall be effective with respect to Notices
sent prior to the time of receipt thereof.

15. Miscellaneous. The parties hereto agree to the content of the recitals on
the first page of this Agreement, which recitals are incorporated herein as a
part of this Agreement. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns,
except that Borrower may not assign any of its rights or obligations hereunder
without the prior written consent of Lender which may be granted or withheld by
Lender in its sole and absolute discretion, and the Bank may assign its rights
and duties hereunder only to a successor bank. This Agreement may not be
modified, waived, discharged, or terminated orally or by any act or failure to
act on the part of party hereto, but only by an agreement in writing signed by
the party against whom enforcement of any modification, waiver, discharge, or
termination is sought. Each of the Blocked Deposit Accounts is a “deposit
account” within the meaning of Article 9 of the UCC. This Agreement is an
“authenticated record” (as said terms are defined in Section 9-102 of the UCC).
This Agreement may be executed in several counterparts, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. The exchange by facsimile of executed copies of this
Agreement shall be legally sufficient to constitute the legal execution and
delivery by the parties of this Agreement.

 

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IN WITNESS WHEREOF, the Bank, Borrower and Lender have executed this Agreement,
under seal, as of the day and year first above written. Facsimile signatures
shall be effective as though original signatures have been provided.

 

Bank’s Telephone No.: (818) 610-2772     BANK: Bank’s Facsimile No.: (818)
703-8457         PACIFIC WESTERN BANK,     a California state-chartered bank    
  By:   /s/ Susan Thomas       Name:     Susan Thomas       Title:       Vice
President Borrower’ Telephone No.: (760) 579-5020     BORROWER: Borrower’s
Facsimile No.: (760) 804-9042         PHOENIX FOOTWEAR GROUP, INC.,     a
Delaware Corporation       By:   /s/ Dennis Nelson       Name:     Dennis Nelson
      Title:       Chief Financial Officer Lender’s Telephone No.:
(847) 272-9618     LENDER: Lender’s Facsimile No.: (847) 272-9765        
Gibraltar Business Capital, LLC     a Delaware Limited Liability Company      
By:    /s/ Darren M. Latimer       Name: Darren M. Latimer, CEO       Its:
Authorized Signatory

 

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DEPOSIT ACCOUNT CONTROL AGREEMENT

SCHEDULE A – DESCRIPTION OF LOCKBOX SERVICES

Description of Services. The following Services shall be provided by Bank.

 

1. Collect mail from the post office on behalf of Customer daily. To be
processed the following day.

 

2. Open Customer’s mail and extract all contents.

 

3. Inspect all payments received for acceptability based on Customer’s
specifications.

 

4. Prepare all acceptable checks and their associated paperwork for further
processing.

 

5. Encode the face of each check with the appropriate dollar amount.

 

6. Endorse each check for deposit.

 

7. Capture an electronic image of each check before it is deposited.

 

8. Prepare a deposit for Customer and post it each processing day.

 

9. Prepare a package of information for Customer containing any unacceptable
items, batch total reports and any other information Customer has requested and
Bank has agreed to provide.

 

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