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                                                                    EXHIBIT 10.3

                                ESCROW AGREEMENT

         This ESCROW AGREEMENT (this "AGREEMENT") is made and entered into as of
August 6, 2003 by and among PHOENIX FOOTWEAR GROUP, INC., a Delaware corporation
("PHOENIX FOOTWEAR") and Nancy Delekta (the "STOCKHOLDER REPRESENTATIVE") for
and on behalf of the former holders of outstanding H.S. Trask Common Shares (the
"FORMER H.S. TRASK STOCKHOLDERS") under that certain Agreement and Plan of
Merger dated as of June 16, 2003 (the "MERGER AGREEMENT") by and among Phoenix
Footwear, PFG Acquisition Inc., a Montana corporation and a wholly-owned
subsidiary of Phoenix Footwear ("PURCHASER"), and H.S. Trask & Co., a Montana
corporation ("H.S. TRASK").

                              W I T N E S S E T H:

         WHEREAS, pursuant to the Merger Agreement, Phoenix Footwear will issue
the Merger Consideration to the Former H.S. Trask Stockholders pursuant to the
merger (the "MERGER") of H.S. Trask with and into Purchaser; and

         WHEREAS, pursuant to Article VIII of the Merger Agreement, the Former
H.S. Trask Stockholders have agreed to make available to Phoenix Footwear and
certain other Indemnitees an escrow fund to compensate such parties for certain
Losses incurred as permitted therein;

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual obligations herein, the parties agree as follows:

         1.       DEFINITIONS. All capitalized terms used herein without
definitions shall have the meanings specified in the Merger Agreement.

         2.       ESCROW ARRANGEMENTS. Except as otherwise expressly set forth
herein, all matters pertaining to the Escrow Fund shall be governed by the
provisions of Article VIII of the Merger Agreement; provided, however, that if
any express provision of this Agreement conflicts with the provisions of Article
VIII of the Merger Agreement, the provisions of Article VIII of the Merger
Agreement shall control.

         3.       ESTABLISHMENT OF ESCROW. Within five (5) business days of the
Effective Time, Phoenix Footwear shall cause its transfer agent to deliver to
the Escrow Agent for deposit into escrow (the "ESCROW FUND") a certificate
representing 50,000 shares of Phoenix Footwear common stock (the "ESCROW
SHARES") as required by Section 2.6(b) of the Merger Agreement. The Escrow Agent
agrees to establish the Escrow Fund in the manner set forth in Section 2.6(b)
and Article VIII of the Merger Agreement.

         4.       MAINTENANCE OF THE ESCROW.

                  (a)      The Escrow Agent shall establish a separate account
("SUBACCOUNTS") for each Former H.S. Trask Stockholder for the number of Escrow
Shares set opposite such Former H.S. Trask Stockholder ANNEX A (the "FORMER H.S.
TRASK STOCKHOLDER LIST"), which has been

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determined on the basis of the provisions of the Merger Agreement. All dividends
and distributions in respect of the Escrow Shares, whether in cash, additional
shares of Phoenix Footwear common stock or other property received by the Escrow
Agent shall be distributed currently to the Former H.S. Trask Stockholders and
shall be retained by the Escrow Agent as part of the Escrow Fund and credited
proportionately to the Subaccounts to which the Escrow Shares are credited. In
the event the Escrow Shares are reclassified or otherwise changed into or
exchanged for other securities, property or cash pursuant to any merger,
consolidation, sale of assets and liquidation or other transaction, the
securities, cash or other property received by the Escrow Agent in respect of
the Escrow Shares shall be retained by it as part of the Escrow Fund, credited
proportionately to the Subaccounts to which the Escrow Shares are credited and,
in the case of securities, registered in the name of the Escrow Agent or its
nominee. All cash, property, Phoenix Footwear common stock and other securities
received and retained by the Escrow Agent as described in this Section 4 are
referred to herein as "DISTRIBUTIONS." The provisions of this Section 4 shall
apply to successive Distributions.

                  (b)      The Escrow Agent shall maintain records showing each
Stockholder's Pro-Rata Share of the Escrow Fund and shall adjust each Former
H.S. Trask Stockholder's account to reflect distributions from, and additions or
substitutions to, the property held for the account of such Former H.S. Trask
Stockholder in the Escrow Fund. The Escrow Agent is hereby granted the power to
effect any transfer of Escrow Shares required by this Agreement. Phoenix
Footwear shall cooperate with the Escrow Agent in promptly issuing, or causing
its transfer agent to promptly issue, such stock certificates as shall be
required to effect such transfers. All Escrow Shares held in the Escrow Fund
shall be registered in the name of the Escrow Agent or its nominee on behalf of
the Former H.S. Trask Stockholders in the respective amounts set forth on the
Former H.S. Trask Stockholder List. Notwithstanding the above, upon the
determination by Phoenix Footwear that a Stockholder has perfected its
dissenter's right of appraisal under applicable Montana law, Phoenix Footwear
shall deliver to the Escrow Agent a revised Former H.S. Trask Stockholder List
that takes into account such determination in calculating the Pro-Rata Share of
all other Former H.S. Trask Stockholders, which revised Former H.S. Trask
Stockholder List shall be satisfactory in form and substance to the Stockholders
Representative and which shall replace, in its entirety, the ANNEX A attached
hereto.

                  (c)      All dividends, distributions, interest and gains
earned or realized on the Escrow Fund ("EARNINGS") and credited to a Subaccount
shall be accounted for by the Escrow Agent separately from the Escrow Fund and,
notwithstanding any provisions of this Agreement, shall be treated as having
been received by the Former H.S. Trask Stockholders to whose Subaccount the
Earnings are credited for tax purposes. The Former H.S. Trask Stockholder List
sets forth each Former H.S. Trask Stockholder's address and Taxpayer
Identification Number. The Escrow Agent shall file information returns with the
United States Internal Revenue Service and payee statements with the Former H.S.
Trask Stockholders, documenting such Earnings. H.S. Trask Stockholders shall
provide to the Escrow Agent all forms and information necessary to complete such
information returns and payee statements. In the event the Escrow Agent becomes
liable for the payment of taxes, including withholding taxes, relating to
Earnings or any payment made hereunder, the Escrow Agent may deduct such taxes
from the Escrow Fund.

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                  (d)      The Stockholder Representative shall have the right
to vote all Escrow Shares.

         5.       ADMINISTRATION OF ESCROW FUND. The Escrow Agent shall
administer the Escrow Fund as set forth in Article VIII of the Merger Agreement.

         6.       TERM OF ESCROW AGREEMENT. This Agreement shall terminate upon
the complete distribution in accordance with Article VIII of the Merger
Agreement of all property held in the Escrow Fund. Phoenix Footwear and the
Stockholder Representative shall provide the Escrow Agent with notice of the
Release Date.

         7.       FEES OF THE ESCROW AGENT. The fees of the Escrow Agent,
including (i) the normal costs of administering the Escrow Fund as set forth on
the Fee Schedule attached hereto as ANNEX B and (ii) all fees and costs
associated with the Escrow Agent's administration of Claims, shall be paid
one-half by Phoenix Footwear and one-half out of the Escrow Fund on behalf of
the Former H.S. Trask Stockholders. Payment out of the Escrow Fund shall be made
by sale back to Phoenix Footwear of Escrow Shares for the amount required to be
paid to the Escrow Agent based on the Parent Stock Price for the five trading
days preceding the Effective Time. Such amount shall be treated as though a Pro
Rata Share thereof has been paid by each Former H.S. Trask Stockholder and such
Pro Rata Share shall be credited against the amount otherwise distributable to
the Former H.S. Trask Stockholders hereunder. In the event that the Escrow Agent
renders any service hereunder not provided for herein or there is any assignment
of any interest in the subject matter of the Escrow Fund or modification hereof,
the Escrow Agent shall be reasonably compensated for such extraordinary services
by the party that is responsible for or requests such services and if made by
the Stockholder Representative, payment shall be made out of the Escrow Fund in
the same manner as provided above.

         8.       LIABILITY OF THE ESCROW AGENT. In performing any of its duties
under this Agreement, the Escrow Agent shall not be liable to any party for
damages, losses or expenses, except in the event of gross negligence or willful
misconduct on the part of the Escrow Agent. The Escrow Agent shall not incur any
such liability for (a) any act or failure to act made or omitted in good faith
or (b) any action taken or omitted in reliance upon any instrument, including
any written statement or affidavit provided for in this Agreement that the
Escrow Agent shall in good faith believe to be genuine; nor will the Escrow
Agent be liable or responsible for forgeries, fraud or determining the scope of
any agent's authority. In addition, the Escrow Agent, at the expense of Phoenix
Footwear and the Former H.S. Trask Stockholders, to the extent of the amount
that may be paid out of the Escrow Fund, may consult with legal counsel in
connection with its duties under this Agreement and shall be fully protected in
any act taken, suffered or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent shall not be responsible for mistakes with
respect to determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement to the extent the
Escrow Agent is not grossly negligent.

         9.       CONTROVERSIES. If any controversy arises between the parties
to this Agreement, or with any other party, concerning the subject matter of the
Escrow Fund, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action

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regarding it. The Escrow Agent may hold all documents and funds and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, it may require, despite what
may be set forth elsewhere in this Agreement. In such event, the Escrow Agent
will not be liable for interest or damage. Furthermore, the Escrow Agent may at
its option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is authorized
to deposit with the clerk of the court all documents and funds held in the
escrow, except all costs, expenses, charges and reasonable attorneys' fees
incurred by it due to the interpleader action and which the parties jointly and
severally agree to pay. Upon initiating such action, the Escrow Agent shall be
fully released and discharged of and from all obligations and liability imposed
by the terms of the escrow, and the action will be deemed to be solely a dispute
between the parties subject to Article VIII of the Merger Agreement.

         10.      INDEMNIFICATION OF ESCROW AGENT. Phoenix Footwear and the
Stockholder Representative, on behalf of the Former H.S. Trask Stockholders, and
in the case of the Stockholder Representative, to the extent of the amount
available from the Escrow Fund agree to jointly and severally indemnify and hold
the Escrow Agent harmless against any and all losses, claims, damages,
liabilities and expenses, including reasonable costs of investigation, outside
counsel fees, and disbursements that may be imposed on the Escrow Agent, or
incurred by it in connection with the performance of its duties under this
Agreement, including but not limited to any arbitration or litigation arising
from this Agreement or involving its subject matter, unless such loss, claim,
damage, liability or expense shall be caused by the negligence or willful
misconduct on the part of the Escrow Agent. Nothing contained in this Section 10
shall impair the rights of the Former H.S. Trask Stockholders and Phoenix
Footwear, as between themselves.

         11.      RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign at
any time upon giving at least 30 days written notice to the other parties;
provided, however, that no such resignation shall become effective until the
appointment of a successor Escrow Agent which shall be accomplished as follows:
Phoenix Footwear and the Stockholders Representative shall use their best
efforts to agree on a successor Escrow Agent within 30 days after receiving such
notice. If the parties fail to agree on a successor Escrow Agent within such
time, then the Escrow Agent shall have the right to appoint a successor Escrow
Agent, provided that the successor so chosen shall have capital, surplus and
undivided profits of at least $200,000,000. The successor Escrow Agent shall
execute and deliver to the Escrow Agent an instrument accepting such
appointment, and the successor Escrow Agent shall, without further acts, be
vested with all the estates, property rights, powers and duties of the
predecessor Escrow Agent as if originally named as Escrow Agent herein. The
predecessor Escrow Agent then shall be discharged from any further duties and
liability under this Agreement.

         12.      MISCELLANEOUS.

                  (a)      Assignment; Binding Upon Successors and Assigns. None
of the parties hereto may assign any of its rights or obligations hereunder
without the prior written consent of the other parties. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.

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                  (b)      Severability. If any provision of this Agreement, or
the application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further agree
to replace such invalid or unenforceable provision of this Agreement with a
valid and enforceable provision which will achieve, to the extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.

                  (c)      Entire Agreement. This Agreement, the Merger
Agreement, the Annexes hereto, the documents referenced herein, and the exhibits
thereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and thereof and supersede all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto and
thereto. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.

                  (d)      Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly delivered if delivered
personally (upon receipt), or three business days after being mailed by
registered or certified mail, postage prepaid (return receipt requested), or one
business day after it is sent by reputable nationwide overnight courier service,
or upon transmission, if sent via facsimile (with confirmation of receipt) to
the parties at the following address (or at such other address for a party as
shall be specified by like notice):

                  (i)      If to Stockholder Representative:

                                               Nancy Delekta
                                               2975 Hwy #287 North
                                               Cameron, Montana  59720

                  Copy to:                     Preston Gates & Ellis LLP
                                               925 Fourth Avenue
                                               Suite 2900
                                               Seattle, Washington 98104-1158
                                               Attention: Gary J. Kocher, Esq.

                  (ii) If to Phoenix Footwear: Phoenix Footwear Group, Inc.
                                               5759 Fleet Street, Suite 220
                                               Carlsbad, California  92008
                                               Attention: James Riedman,
                                               Chairman and CEO

                  Copy to:                     Woods Oviatt Gilman LLP
                                               700 Crossroads Building
                                               Rochester, New York  14614
                                               Attention:  Gordon E. Forth, Esq.

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                  (e)      Other Remedies. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.

                  (f)      Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.

                  (g)      Further Assurances. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.

                  (h)      Absence of Third Party Beneficiary Rights. No
provisions of this Agreement are intended, nor shall be interpreted, to provide
or create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, partner of any party hereto or any
other person or entity unless specifically provided otherwise herein and except
for the Former H.S. Trask Stockholders, and, except as so provided, all
provisions hereof shall be solely between the parties to this Agreement.

                  (i)      Governing Law. It is the intention of the parties
hereto that the internal laws of the State of Delaware (irrespective of its
choice of law principles) shall govern the validity of this agreement, the
construction of its terms, and the interpretation and enforcement of the rights
and duties of the parties hereto.

                  (j)      Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original and all of
which together shall constitute one and the same instrument.

                          SIGNATURES ON FOLLOWING PAGE

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         IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as
of the date first set forth above.

                           AMERICAN STOCK TRANSFER & TRUST COMPANY

                           /s/ Herbert J. Lemmer
                           ---------------------------------------------------
                           By: Herbert J. Lemmer
                           Its: Vice President

                           PHOENIX FOOTWEAR GROUP, INC.

                           By: /s/ James R. Riedman
                               -----------------------------------------------
                           Name: James R. Riedman
                           Title: Chief Executive Officer and President

                           /s/Nancy A. Delekta
                           ---------------------------------------------------
                           Nancy Delekta, as Stockholder Representative

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