Document:

EXHIBIT 4.6

                             ALLAIRE COMMUNITY BANK

                                      2001

                           DIRECTOR STOCK OPTION PLAN

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                             ALLAIRE COMMUNITY BANK
                         2001 Director Stock Option Plan
                                Table of Contents

                                                                            Page
                                                                            ----

SECTION 1. Definitions .....................................................   1

SECTION 2. Purpose of Plan .................................................   3

SECTION 3. Administration ..................................................   3

SECTION 4. Shares Subject to the Plan ......................................   4

SECTION 5. Stock Option Agreements and Exercise Thereof ....................   4

SECTION 6. Stock Option Price ..............................................   5

SECTION 7. Grants ..........................................................   5

SECTION 8. Vesting of Stock Options ........................................   5

SECTION 9. Duration and Time For Exercise of Stock Options .................   5

SECTION 10. Effects of Death, Disability and Termination of Employment .....   6

SECTION 11. Termination for Misconduct .....................................   6

SECTION 12. Stock Option Adjustments .......................................   6

SECTION 13. Amendment to the Plan ..........................................   6

SECTION 14. General Provisions .............................................   6

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                             ALLAIRE COMMUNITY BANK

                         2001 DIRECTOR STOCK OPTION PLAN

SECTION 1. Definitions

      Wherever used in this Plan, the following capitalized terms shall have the
meaning set forth below:

      (a)   "Board" shall mean the Company's Board of Directors.

      (b)   "Chairman" shall mean the Chairman of the Company's Banks Board of
            Directors.

      (c)   "Vice Chairman" shall mean the Vice Chairman of the Company's Board
            of Directors.

      (d)   "Change of Control" shall mean any of the following:

            (i)   The acquisition of the beneficial ownership of at least 25% of
                  the Stock or all or substantially all of the assets of the
                  Bank by a single person or entity or a group of persons or
                  entities acting in concert;

            (ii)  The merger, consolidation or combination of the Company with
                  an unaffiliated corporation in which the Directors immediately
                  prior to such transaction constitute less than a majority of
                  the board of directors of the surviving new or combined entity
                  in such transaction;

            (iii) The transfer of all or substantially all of the Company's
                  assets to an unaffiliated corporation;

            (iv)  The election to the Board during any consecutive three-year
                  period of a group of individuals constituting a majority of
                  the Board who were not serving as directors of either of such
                  boards immediately prior to such consecutive three-year
                  period.

      (e)   "Code" shall mean the Internal Revenue Code of 1986, as amended.

      (f)   "Committee" shall mean a committee of two or more members of the
            Board, to which the Board has delegated the authority to administer
            the Plan under Section 3.

      (g)   "Company" shall mean Allaire Community Bank, a banking corporation
            chartered under the laws of the State of New Jersey.

      (h)   "Director" shall mean an individual duly elected to serve as a
            member of the Board or the board of directors of a Subsidiary.

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      (i)   "Disability" shall mean the permanent disability of a Participant or
            the failure of a Participant to perform substantially all of the
            services to the Company or a Subsidiary performed by the Participant
            prior to such failure for a period of six months commencing with the
            first date of such failure for reasons other than Voluntary or
            Involuntary Termination, Termination for Misconduct, death or
            approved retirement.

      (j)   "Effective Date" shall mean April 25, 2001.

      (k)   "Employee" shall mean a person in the employ, under common law, of
            the Company or any of its Subsidiaries.

      (l)   "Grant" shall mean the award of a Stock Option to a Participant.

      (m)   "Grant Date" shall mean the date on which the Committee acts to
            award the Stock Option in question in the case of a Grant to an
            Employee and the date on which an option is awarded to an Outside
            Director under the Plan (notwithstanding any initial 6-month
            prohibition against exercise).

      (n)   "Incentive Stock Option" shall mean a Stock Option which qualifies
            under section 422A of the Code.

      (o)   "Involuntary Termination" shall mean separation from services as an
            Employee or Director at the request or demand of the Company or the
            Subsidiary to whom such services were rendered for any reason other
            than Misconduct, Voluntary Termination, death, Retirement or
            Disability.

      (p)   "Misconduct" shall mean willful and continued failure by the
            Participant to perform the Participants duties for the Company or a
            Subsidiary after a warning in writing from the Committee
            specifically identifying any such failure; the willful engaging by
            the Participant in an act which causes material injury to the
            Company or a Subsidiary as specified in a written notice from the
            Committee; conviction of a crime (other than a traffic violation);
            habitual drunkenness, drug abuse or excessive absenteeism (other
            than for illness), after a warning in writing from the Committee. No
            act or failure to act on the part of a Participant shall be
            considered willful unless done, or omitted to be done, not in good
            faith and without reasonable belief that the action or omission was
            in the best interest or the Company.

      (q)   "Non-qualified Stock Option" shall mean a Stock Option which is not
            an Incentive Stock Option.

      (r)   "Outside Director" shall mean a Director who is not also an Employee
            but who is a member of the board of directors of the Bank.

      (s)   "Inside Director" shall mean a Director who is also an employee and
            is also a member of the board of directors of the Bank.

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      (t)   "Participant" shall mean an Employee or Director who has received a
            Grant.

      (u)   "Plan" shall mean this Allaire Community Bank 1999 Employee Stock
            Option Plan.

      (v)   "Retirement" shall mean separation from services as an Employee or
            Director by reason of ceasing to perform any services to the Bank as
            an Employee or Director which shall be approved by the Company.

      (w)   "Stated Expiration Date" shall mean the date set forth in a Stock
            Option agreement on which the related Stock Option expires absent
            the Participants termination of service to the Company or a
            Subsidiary.

      (x)   "Stock" shall mean the Common Stock of the Company par value $5.00.

      (y)   "Stock Option" shall mean a right to purchase Stock.

      (z)   "Stock Option Price" shall mean the purchase price for a share of
            Stock subject to a Stock Option.

      (aa)  "Subsidiary" shall mean a subsidiary corporation of the Company, as
            defined in Sections 424 (f) and 424 (g) of the Code.

      (bb)  "Qualified Person" means a Participant's legal guardian or legal
            representative or a deceased Participant's heir or legatee who has a
            legal right to or in respect of an Incentive of that Participant.

      (cc)  "Voluntary Termination" shall mean a termination of service as an
            Employee or Director which is not an Involuntary Termination, a
            Termination for Misconduct, a Termination by reason of death, a
            Termination by reason of Retirement or a termination by reason of
            Disability.

SECTION 2. Purpose of Plan

      The purpose of the Plan is to make a provision for the Grant of Stock
Options to acquire up to 60,000 shares of Stock to Outside Directors and Inside
Directors and as a means of compensating them for service provided to the
Company and its Subsidiaries in addition to any other compensation provided to
them. Of the number of Stock Options available for Grant, 60,000 may be granted
to Outside Directors and Inside Directors, the Chairman of the Board and the
Vice Chairman as Non-Qualified Stock Options from time to time by the Committee.

SECTION 3. Administration

      3.01. The Committee. The Plan shall be administered by the Committee
consisting of not less than two persons appointed by the Board from among its
members. Committee members shall serve at the pleasure of the Board.

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      3.02. Committee Authority. Except as otherwise provided in the Plan, the
Committee shall have full and final authority in its sole discretion to grant to
eligible Participants pursuant to the terms of the Plan, Stock Options. The
Committee shall also have the authority, which shall be not limited to:

            (i)   interpret provisions of the Plan and decide all questions of
                  fact arising in its application; and

            (ii)  make all other determinations necessary or advisable for the
                  administration of the Plan; and

            (iii) authorize any of its members to execute and deliver documents
                  on behalf of the Committee.

            (iv)  have discretion to determine the Outside Directors and Inside
                  Directors who shall receive Grants, the times at which Grants
                  shall be made, the number of shares of

      Stock to make available to each Outside Director or Inside Director in the
form of a Grant, whether Grants to Inside Directors shall be Incentive Stock
Options or Non-Qualified Stock Options and the terms of Grants to such Inside
Directors.

      However, the Committee shall not have authority to take action
inconsistent with other provisions of the Plan.

      No member of the Committee shall be liable for any action or determination
made in good faith.

SECTION 4. Shares Subject to the Plan

      4.01. Number of Shares. The aggregate number of Shares which may be issued
under the Plan shall not exceed 60,000 Shares.

      4.02. Expiration and Cancellation. If a Stock Option granted under the
Plan expires, is terminated or is otherwise canceled before exercise, the
related shares of Common Stock shall not apply toward the limits provided in
Section 4.01. If the Shares issued or granted under this Plan are forfeited,
canceled, terminated or reacquired by the Company, those forfeited, canceled,
terminated or reacquired Shares shall not apply toward the limits provided in
Section 4.01 and shall be available again for grants hereunder.

SECTION 5. Stock Option Agreements and Exercise Thereof

      5.01. Agreement. Each Grant shall be evidenced by a written Stock Option
Agreement, an example of the same is attached hereto as Exhibit "A", which shall
specify the number of shares of Stock available for purchase, the Stock Option
Price pertaining to such Grant, the date of expiration of the Stock Option, that
the Stock Option is not transferable except pursuant to the laws of decent and
distribution on the death of the Participant, that during the Participant's

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lifetime the Stock Option is exercisable only by the Participant or, in the
event of the Participant's disability by the Participant's attorney in fact.

      5.02. Exercise. A Stock Option may be exercised, in whole or in part, by
giving written notice to the Company (Attention: Chief Financial Officer) at its
principal office or to such transfer agent as the Company may designate. The
notice shall identify the number of Stock Options being exercised and shall
contain such other information and terms as the Committee may require. The
notice shall be accompanied by full payment of the purchase price for the Shares
(a) in United States dollars in cash or by check, (b) at the discretion of the
Committee, by delivery of previously acquired Shares having a Fair Market Value
equal on the date of exercise to the cash exercise price of the Stock Option, or
(c)at the discretion of the Committee, by a combination of (a) and (b) above. As
soon as practicable after receipt of the written notice, the Company shall
deliver to the person exercising the Stock Option one or more certificates for
the Shares.

SECTION 6. Stock Option Price

      The Stock Option Price shall be equal to the Fair Market Value of a share
of Stock on the Grant Date. The Fair Market Value of a share of Stock on the
Grant Date (or any other date on which such Fair Market Value is relevant) shall
be determined by the Committee which may use the bid price last quoted by a
reputable brokerage firm on such Grant Date or if no such reputable broker has
any bid prices available then the Fair Market Value is to be determined in good
faith from time to time by the Committee. In no event shall any option be
granted for less than par value of the Bank's Stock.

SECTION 7. Grants

      7.01. General. Grants may be made from time to time by the Committee to
Inside Directors and Outside Directors. All stock options granted hereunder are
subject to shareholder approval.

SECTION 8. Vesting of Stock Options

      The vesting schedule, of Stock Options shall be determined by the
Committee and shall be a date specified by the Committee, provided that such
date is not before the date on which the Stock Option is granted. No vesting
schedule has been established and any future vesting of Stock Options shall be
determined in the sole discretion of the Committee.

SECTION 9. Duration and Time For Exercise of Stock Options

      The Grant Date of a Stock Option shall be the date specified by the
Committee, provided that such date shall not be before the date on which the
Stock Option is actually granted. The terms of each Stock Option shall be
determined by the Committee but shall not exceed ten (10) years from the date of
grant. Each Stock Option shall become exercisable at such time or times in such
amount or amounts during its term as shall be determined by the Committee at the
time of grant. The Committee may accelerate the exercisability of any Stock
Option. Unless

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otherwise specified by the Committee, once a Stock Option becomes exercisable,
whether in full or in part, it shall remain so exercisable until its expiration,
forfeiture, termination or cancellation.

SECTION 10. Effects of Death, Disability and Termination of Employment

      Notwithstanding the Stated Expiration Date of a Stock Option set forth in
a Stock Option Agreement, the related Stock Option shall expire as follows in
the event the Participant terminates service as an Inside or Outside Director.
If the Participants service is terminated pursuant to an Voluntary/Involuntary
Termination, the Stock Option shall expire no later than ninety (90) days after
the effective date of the act of such Voluntary/ Involuntary Termination. If the
Participants service is terminated pursuant to a death, the Stock Option shall
expire no later than the earlier of the expiration date of such stock options or
date which is eighteen (18) months after such death whichever is earlier. If the
Participants service is terminated pursuant to a Disability or Retirement, the
Stock Option shall expire no later than the remaining term of the option after
the effective date of the act of such Disability or Retirement. No stock option
in the Plan provides for the payment of cash to any Director upon cancellation
of any option granted hereunder.

SECTION 11. Termination for Misconduct

      If the Participants service is terminated by the Company or Subsidiary for
Misconduct, the Stock Option shall expire immediately effective with the act of
termination.

SECTION 12. Stock Option Adjustments

      The aggregate number of shares of Stock with respect to which Stock
Options may be granted, the aggregate number of shares of Stock subject to each
outstanding Stock Option, and the Stock Option Price of each outstanding Stock
Option shall be appropriately adjusted for any increase or decrease in the
number of shares of issued Stock resulting from a division or consolidation of
shares, whether through a reorganization, recapitalization, stock split, stock
distribution or combination of shares outstanding effected without receipt of
consideration by the Company to the extent practical.

SECTION 13. Amendment to the Plan

      The Board may amend the Plan from time to time (including amendment to
terminate the Plan) at is discretion. However, no amendment shall adversely
affect any outstanding Stock Option without the consent of the Participant.

SECTION 14. General Provisions

      14.01. Effective Date. This Plan shall be effective as of the date of its
approval by the shareholders of the Company. If shareholder approval is not
obtained within one year following the date the Plan is adopted by the Board,
the plan and any Incentives awarded thereunder shall be void ab initio.

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      14.02. Duration. Unless the Plain is terminated earlier, the Plan shall
terminate ten (10) years from the date on which the Plan is approved by
shareholders of the Company. No Stock Option rights under the Plan shall be
granted thereafter. The Board, without further approval of the Company's
stockholders, may at any time before that date terminate the Plan. After
termination of the Plan, no further Stock Options may be granted under the Plan.
Stock Options granted before any such termination shall continue to be
exercisable in accordance with the terms of the Option.

      14.03. Non-transferability of Incentives; Exercise by Participant. No
Incentive may be sold, pledged, assigned, encumbered, disposed of or otherwise
transferred other than by will or the laws of descent and distribution. The
Company shall not be required to recognize any attempted disposition by any
Participant. During a Participant's lifetime, such Participant's Stock Options
are only exercisable by such Participant.

      14.04. Compliance with Law. The Company may determine, in its sole
discretion, that it is necessary or desirable to list, register or qualify (or
to update any listing, registration or qualification of) any the Shares issuable
or issued under any Stock Option or this Plan on any securities exchange or
under any federal or state securities law, or to obtain consent or approval of
any governmental body as a condition of, or in connection with, the award of any
incentive, the issuance of Shares under this Plan, or the removal of any
restrictions imposed on such Shares. If the Company makes such a determination,
the Stock Option shall not be awarded and the Shares shall not be issued or the
restrictions shall not be removed, as applicable, in whole or in part, unless
and until the listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company. The Company's obligation to sell or issue Shares under this Plan is
subject to the compliance with all applicable laws and regulations. The
Committee, in its sole discretion, shall determine whether the sale and issue of
Shares is in compliance with all applicable laws and regulations.

      14.05. Withholding. The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition to any award, payment
or issuance of Shares under the Plan any taxes required to be withheld by
Federal, state or local law.

      14.06. No Right to Continued Directorship. No Participant under the Plan
shall have any right to continue as a Director of the Company for any period of
time because of his or her participation in the Plan.

      14.07. No Right as Stockholder. No participant or Qualified Person shall
have the rights of a stockholder with respect to the Shares covered by a Stock
Option unless a stock certificate is issued to that person for the Shares. No
adjustment shall be made for cash dividends or similar rights for which the
record date is before the date on which such stock certificate is issued.

      14.08. Acceleration; Exercise. Notwithstanding anything to the contrary
set forth in the Plan, in the event that (i) the Company should adopt a plan of
reorganization pursuant to which (A) it shall merge into, consolidate with or
sell substantially all of its assets to, any other corporation or entity or (B)
any other corporation or entity shall merge into the Company in a transaction in
which the Company shall become a wholly-owned subsidiary of another entity, or

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(ii) the Company should adopt a plan of complete liquidation, then (A) all Stock
Options granted hereunder shall be fully exercisable upon consummation of such
event and (B) the Company may give a Participant written notice thereof
requiring such Participant either (1) to exercise his or her Stock Options
within thirty days after receipt of such notice, including all installments
whether or not they would otherwise be exercisable at that date, (2) in the
event of a merger or consolidation in which shareholders of the Company will
receive shares of another corporation, to agree to convert his or her Stock
Options into comparable options to acquire such shares, (3) in the event of a
merger or consolidation in which shareholders of the Company will receive cash
or other property (other than capital stock), to agree to convert his or her
Stock Options into such consideration (in an amount representing the
appreciation over the exercise price of such Stock Options) or (4) to surrender
such Stock Options or any unexercised portion thereof.

      14.09. Fractional and Minimum Shares. In no event shall a fraction of a
Share be purchased or issued under the Plan without Board approval. The
Committee may specify a minimum number of Shares for which each Stock Option
must be exercised.

      14.10. Application of Funds. The proceeds received by the Company from the
sale of Shares under the Plan shall be used for general corporate purposes.

      14.11. Other Incentives and Plans. Nothing in this Plan shall prohibit any
member of the Board from establishing other Employee incentives and plans.

      14.12. Governing Law. The validity and construction of the Plan and of
each agreement evidencing Incentives shall be governed by the laws of the State
of New Jersey, excluding the conflict-of-laws principles thereof.

      Adopted as of February 28, 2001
      by the Board of Directors of
      Allaire Community Bank

      /s/ George S. Callas
      --------------------
      George S. Callas
      Chairman of the Board

      Approved and ratified by the shareholders at the Allaire Community Bank
      2001 Annual Meeting of the Shareholders by majority vote of all of the
      outstanding shares.

      /s/ Robert S. Vuono
      -------------------
      Robert S. Vuono
      Secretary of the 2001 Shareholders Meeting

                                       8<PAGE>
                                                                    Exhibit 10.1

                           THIRD AMENDED AND RESTATED
                    REVOLVING CREDIT AND TERM LOAN AGREEMENT
                               AMENDMENT NUMBER 1

      This THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
AMENDMENT NUMBER 1 ("Amendment") is made as of the ___ day of February, 2005, by
and among PHOENIX FOOTWEAR GROUP, INC., a corporation formed under the laws of
the State of Delaware ("Borrower") and MANUFACTURERS AND TRADERS TRUST COMPANY,
a bank formed under the laws of the State of New York ("Bank").

      This Amendment amends the Third Amended and Restated Revolving Credit and
Term Loan Agreement (the "Credit Agreement") dated as of July 19, 2004 made
between the Borrower and the Bank. All references in all notes, agreements, and
other documents to the Credit Agreement shall be deemed to be references to the
Credit Agreement as amended hereby, and all guarantees and collateral for the
Obligations shall continue to be guarantees and collateral for the Obligations
as amended hereby.

      This Amendment evidences terms and conditions related to an Overline of
Credit Facility available between the date hereof and May 30, 2005. This
Amendment will remain in effect through and including May 30, 2005, but
thereafter will be of no further force and effect and at such time the Credit
Agreement shall revert to its original terms.

      1.    The following definitions are hereby added to Section 1.1 of the
Credit Agreement to read in their entirety:

                  "Overline Credit Facility" means the overline credit facility
      established pursuant to Section 2.1 of this Agreement.

                  "Overline Credit Loan" means a loan made by the Bank to
      Borrower under the Overline Credit Facility.

                  "Overline Credit Note" means the $4,000,000 Overline Credit
      Note, as such note may be amended, modified or restated from time to time.

      2.    Subsection (b) of the definition of "Borrowing Base" in Section 1.1
of the Credit Agreement is hereby amended to read in its entirety as follows:

            (b)   plus 50% of the Eligible Inventories of Borrower and its
      Subsidiaries that are used in their business, with a $3,500,000 inventory
      cap for Borrower, $2,000,000 inventory cap for the Trask Business,
      $2,000,000 inventory cap for the Royal Business, and $3,000,000 inventory
      cap for the Altama Business, provided, however, that such inventory caps
      for Borrower, the Trask Business, the Royal Business, and the Altama
      Business shall not apply during the period commencing January 1, 2005 and
      ending May 30, 2005,

      3.    The definition of "Commitment" in Section 1.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:

<PAGE>

                  "Commitment" means the obligation of the Bank to make
      Revolving Credit Loans to the Borrower, to make Overline Credit Loans to
      the Borrower during the period described in Section 2.1, and to issue
      Letters of Credit for the account of the Borrower pursuant to the
      provisions of Section 2.1 and 4.1, respectively.

      4.    Subsection (b) of the definition of "Interest Period" in Section 1.1
of the Credit Agreement is hereby amended to read in its entirety as follows:

            (b)   No Interest Period may extend beyond the Termination Date, or
      in the case of Overline Credit Loans, beyond May 30, 2005; and

      5.    The definition of "Loans" in Section 1.1 of the Credit Agreement is
hereby amended to read in its entirety as follows:

                  "Loan(s)" means, collectively, the Revolving Credit Loans, the
      Overline Credit Loans, and the Term Loans, or the Revolving Credit Loans,
      the Overline Credit Loans, or the Term Loans, as the context requires.

      6.    The definition of "Notes" in Section 1.1 of the Credit Agreement is
hereby amended to read in its entirety as follows:

                  "Notes" means, collectively, the Revolving Credit Note, the
      Overline Credit Note, and the Term Notes, and "Note" means any of the
      Notes.

      7.    The definition of "Obligations" in Section 1.1 of the Credit
Agreement is hereby amended to read in its entirety as follows:

                  "Obligations" shall include all of the Borrower's obligations
      related to the Agreement of any kind or nature, arising now or in the
      future, including, without limitation, obligations under the Revolving
      Credit Note, the Overline Credit Note, the Term Notes, and the
      Reimbursement Agreements.

      8.    Sections 2.1 through and including 2.4 of the Credit Agreement are
hereby amended to read in their entirety as follows:

            2.1   Commitment. The Bank agrees, subject to Section 2.2 and the
      other terms and conditions hereinafter set forth, to make Revolving Credit
      Loans to the Borrower from time to time during the period from the date of
      this Agreement up to but not including the Termination Date in an
      aggregate principal amount not to exceed at any time outstanding the
      amount of $18,000,000, as such amount may be reduced pursuant to Section
      2.3.

            Subject to Section 2.2 and the other terms and conditions
      hereinafter set forth, the Bank agrees to make Overline Credit Loans to
      the Borrower from time to time during the period from January 1, 2005 up
      to but not including May 30, 2005 in an aggregate principal amount not to
      exceed at any time outstanding the amount of $4,000,000, as such amount
      may be reduced pursuant to Section 2.3.

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<PAGE>

            Each Revolving Credit Loan and Overline Credit Loan which shall not
      utilize the Commitment in full shall be in an amount not less than Fifty
      Thousand Dollars ($50,000), provided that each LIBOR Loan shall be in an
      amount not less than Five Hundred Thousand Dollars ($500,000). During the
      period from the Closing Date to the Termination Date and within the limits
      of the Commitment and subject to Section 2.2, the Borrower may borrow,
      prepay pursuant to Section 2.8, and reborrow under the Revolving Credit
      Facility under this Section 2.1. During the period commencing January 1,
      2005 and ending May 30, 2005 and within the limits of the Commitment and
      subject to Section 2.2, the Borrower may borrow, prepay pursuant to
      Section 2.8, and reborrow under the Overline Credit Facility under this
      Section 2.1. On such terms and conditions, the Revolving Credit Loans may
      be outstanding as Prime Loans or LIBOR Loans, and Overline Credit Loans
      may be outstanding only as Prime Loans. Each type of Revolving Credit Loan
      and Overline Credit Loan shall be made and maintained at the Bank's
      Principal Office.

            2.2   Borrowing Base. Notwithstanding the provisions of Section 2.1,
      the aggregate principal amount of all outstanding Revolving Credit Loans,
      Overline Credit Loans, and all Letter of Credit Obligations shall not
      exceed the lesser of the Borrowing Base and the Commitment. At any time
      that the aggregate principal amount of all outstanding Revolving Credit
      Loans, Overline Credit Loans, and all Letter of Credit Obligations exceeds
      the lesser of the Borrowing Base and the Commitment, the Borrower shall
      immediate prepay first the Overline Credit Loans and then the Revolving
      Credit Loans pursuant to Section 2.8 hereof.

            2.3   Reduction of Commitment. The Borrower shall have the right,
      upon at least three (3) Business Days' notice to the Bank, to terminate in
      whole or reduce in part the unused portion of the Commitment on the
      following terms and conditions;

                  (a)   each partial reduction in the Commitment shall be in the
      amount of at least One Million Dollars ($1,000,000);

                  (b)   unless financed from a Non-Premium Event, a reduction in
      the Commitment requires concurrent payment to Bank of a Reduction Fee.

                  (c)   no reduction in the Commitment shall be permitted if,
      after giving effect thereto, and to any prepayment made therewith, the
      outstanding and unpaid principal amount of the Revolving Credit Loans, the
      Overline Credit Loans, and the Letter of Credit Obligations shall exceed
      the lesser of Commitment or the Borrowing Base; and

                  (d)   the Commitment, once reduced or terminated, may not be
      reinstated.

            2.4   Notice and Manner of Borrowing. Borrower agrees to give the
      Bank notice of any Revolving Credit Loan under this Agreement, at least
      one (1) Business Day before each Prime Loan, and at least three (3)
      Business Days before each LIBOR Loan, specifying: (a) the date of such
      Loan; (b) the amount of such Loan; (c) the type of Loan;

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<PAGE>

      and (d) in the case of a LIBOR Loan, the duration of the Interest Period
      applicable thereto. Not later than 3:00 P.M. (eastern standard time) on
      the date of such Revolving Credit Loan and upon fulfillment of the
      applicable conditions set forth in Article VII, the Bank will make such
      Revolving Credit Loan available to the Borrower in immediately available
      funds by crediting the amount thereof to the Borrower's account with the
      Bank.

            Borrower agrees to give the Bank notice of any Overline Credit Loan
      under this Agreement, at least one (1) Business Day before each Prime
      Loan. Not later than 3:00 P.M. (eastern standard time) on the date of such
      Overline Credit Loan and upon fulfillment of the applicable conditions set
      forth in Article VII, the Bank will make such Overline Credit Loan
      available to the Borrower in immediately available funds by crediting the
      amount thereof to the Borrower's account with the Bank.

            All notice given under this Section 2.4 shall be irrevocable and
      shall be given not later than 11:00 A.M. (eastern standard time) on the
      day which is not less than the number of Business Days specified above for
      such notice.

      9.    Sections 2.6 through and including 2.10 of the Credit Agreement are
hereby amended to read in their entirety as follows:

            2.6   Interest. Borrower shall pay interest to the Bank on the
      outstanding and unpaid principal amount of the Revolving Credit Loans made
      under this Agreement at a rate per annum of LIBOR plus 250 basis points or
      Prime plus .25% through December 31, 2004, and thereafter, at a rate per
      annum selected by Borrower, at the appropriate level, from the two
      Revolver columns of the pricing grid attached as Exhibit B to this
      Agreement. Borrower shall pay interest to the Bank on the outstanding and
      unpaid principal amount of the Overline Credit Loans made under this
      Agreement at a rate per annum of Prime plus .50%. Any change in the
      interest rate resulting from a change in the Prime Rate shall be effective
      as of the opening of business on the day on which such change in the Prime
      Rate becomes effective. Interest on each Loan shall be calculated on the
      basis of a year of 360 days for the actual number of days elapsed.
      Interest on the Loans shall be paid in immediately available funds to the
      Bank at its Principal Office, in the case of Prime Loans on the first day
      of each month and in the case of LIBOR Loans, on the last day of the
      Interest Period with respect thereto. All accrued and unpaid interest
      shall be due and payable on the Termination Date, or in the case of
      Overline Credit Loans, on May 30, 2005.

            2.7   Notes. Borrower's obligation to repay the Revolving Credit
      Loan shall be evidenced by the Revolving Credit Note in substantially the
      form of Exhibit D to this Agreement, with blanks appropriately completed.
      All Revolving Credit Loans shall be repaid on the Termination Date.

            Borrower's obligation to repay the Overline Credit Loan shall be
      evidenced by the Overline Credit Note in substantially the form of Exhibit
      D-2 to this Agreement, with blanks appropriately completed. All Overline
      Credit Loans shall be repaid on May 30, 2005.

                                        4

<PAGE>

            2.8   Prepayments. Borrower may prepay the Revolving Credit Note and
      the Overline Credit Note in whole or in part with accrued interest to the
      date of such prepayment on the amount prepaid, but without premium or
      penalty, provided that (a) each partial payment shall be in a principal
      amount of not less then Fifty Thousand Dollars ($50,000); and (b) LIBOR
      Loans may be prepaid only on the last day of the Interest Period for such
      Loans. In addition, at any time that the Borrower becomes aware or receive
      notice (oral or written) that the aggregate outstanding principal amount
      of all Revolving Credit Loans and Overline Credit Loans exceeds the
      Borrowing Base, Borrower shall immediately prepay first the Overline
      Credit Loans and then the Revolving Credit Loans by the amount necessary
      to comply with the provisions of Section 2.2.

            2.9   Method of Payment. Borrower shall make each payment under this
      Agreement and under the Notes not later than 12:00 P.M. (eastern standard
      time) on the date when due in lawful money of the United States to the
      Bank at its Principal Office in immediately available funds. Borrower
      hereby authorizes the Bank, if and to the extent payment is not made when
      due under this Agreement or under the Notes, to change from time to time
      against any account of Borrower with the Bank any amount as due. Whenever
      any payment to be made under this Agreement or under the Notes shall be
      stated to be due on a day other than a Business Day, such payments shall
      be made on the next succeeding Business Day, and such extension of time
      shall be included in the computation of the payment of interest and the
      commitment fee, as the case may be, except, in the case of a LIBOR Loan,
      if the result of such extension would be to extend such payment into
      another calendar month, such payment shall be made on the immediately
      preceding Business Day.

            2.10  Use of Proceeds. The proceeds of the Revolving Credit Loans
      and the Overline Credit Loans hereunder shall be used to finance the
      working capital requirements of the Borrower. Borrower will not, directly
      or indirectly, use any part of such proceeds for the purpose of purchasing
      or carrying any margin stock within the meaning of Regulation U of the
      Board of Governors of the Federal Reserve System or to extend credit to
      any person for the purpose of purchasing or carrying any such margin
      stock, or for any purpose which violates, or is inconsistent with,
      Regulation X of such Board of Governors.

      10.   Section 4.1 of the Credit Agreement is hereby amended to read in its
entirety as follows:

            4.1   Letter of Credit Subfacility. Subject to the terms and
      conditions of this Agreement and provided the Borrower complies with all
      application requirements of the Bank for issuing letters of credit, prior
      to the Termination Date, the Bank agrees to issue and extend standby and
      commercial letters of credit (individually, a "Letter of Credit") for the
      account of Borrower: provided, however, that (a) no Letter of Credit
      (other than the Earn-Out Letter of Credit) shall have an expiration date
      that is later than the earlier of one year after the date of issuance
      thereof or the Termination Date (provided that a Letter of Credit may
      provide that it is extendable for consecutive one year periods if such
      period does not end after the Termination Date); (b) Borrower shall not
      request that the Bank

                                        5

<PAGE>

      issue any Letter of Credit, if, after giving effect to such issuance, the
      sum of the aggregate Letter of Credit Obligations plus the aggregate
      outstanding principal amount of all outstanding Revolving Credit Loans and
      Overline Credit Loans would exceed the Commitment; and (c) Borrower shall
      not request that the Bank issue any Letter of Credit if after giving
      effect to such issuance, the aggregate Letter of Credit Obligations would
      exceed $6,000,000.

      11.   The introductory paragraph of Section 7.2 is hereby amended to read
in its entirety as follows:

            7.2   Subsequent Loans and Letters of Credit. The obligation of the
      Bank to make any Revolving Credit Loan or issue any Letters of Credit, and
      the making of any Overline Credit Loan, shall at all times be subject to
      the following continuing conditions:

      12.   Section 10.1 is amended to read in its entirety as follows:

            10.1  Average Borrowed Funds to EBITDA. Maintain an Average Borrowed
      Funds to EBITDA Ratio, on a consolidated basis, measured at the end of
      each Fiscal Quarter, as follows:

                  (a)   On March 31, 2005: no greater than 3.8 to 1.0;

                  (b)   On June 30, 2005: no greater than 3.8 to 1.0;

                  (c)   On September 30, 2005: no greater than 3.5 to 1.0; and

                  (i)   From and after October 1, 2005: no greater than 3.0 to
                        1.0.

      13.   Section 10.3 is amended to read in its entirety as follows:

            10.3  Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage Ratio,
      on a consolidated basis, equal to or greater than (i) .6 to 1.0 on March
      31, 2005 (ii) 1.2 to 1 .0 from April 1, 2005 until the Termination Date,
      and (ii) thereafter, a ratio set by the Bank by giving ninety (90) days
      prior written notice thereof to Borrower, each measured at the end of each
      Fiscal Quarter.

      14.   Exhibit A to the Credit Agreement is amended to read in its entirety
 in the Form Attached hereto as Exhibit A.

      15.   A new Exhibit D-2 is hereby added to the Credit Agreement to read in
 its entirety in the form attached hereto as Exhibit D-2.

      16.   As a condition of this Amendment becoming effective, the Borrower
 shall pay to the Bank a fee of $20,000.

      17.   The terms and conditions of the Credit Agreement except as amended
 hereby shall remain in full force and effect.

                                        6

<PAGE>

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

MANUFACTURERS AND TRADERS TRUST COMPANY

By:    /s/ Kevin Wilmot
       __________________________________
Name:  Kevin Wilmot
Title: Assistant Vice President

PHOENIX FOOTWEAR GROUP, INC.

By:    /s/ James R. Riedman
       __________________________
Name:  James R. Riedman
Title: Chairman

                                        7

<PAGE>

                                    Exhibit A

                   Form of Quarterly Covenant Compliance Sheet

                             PHOENIX FOOTWEAR GROUP
                         FINANCIAL COVENANT CALCULATION

                              As of ______________:

<TABLE>
<CAPTION>
Credit Agreement                                              Calculation as of  Compliance
     Section                Covenant                              Above Date      (Yes/No)                 Requirement
---------------- --------------------------------             -----------------  ---------- ----------------------------------------
<S>              <C>                                          <C>                <C>        <C>
Section 10.1     Average Borrowed Funds to EBITDA             ____ to 1.0                   On March 31, 2005 and June 30, 2005, no
                                                                                            greater than 3.8 to 1.0

                                                                                            On September 30, 2005, no greater than
                                                                                            3.5 to 1.0

                                                                                            From and after October 1, 2005, no
                                                                                            greater than 3.00:1.00

Section 10.2     Minimum Current Ratio                        ____ to 1.0                   On March 31, 2005, at least .6 to 1.0

                                                                                            From April 1, 2005 to the Termination
                                                                                            Date, at least 1.35:1.00

                                                                                            After the Termination Date, as set by
                                                                                            the Bank

Section 10.3     Cash Flow Coverage Ratio                     ___ to 1.0                    At least 1.20:1.00

Section 10.4     Net Income                                   Last 2 Quarters:              No negative income for two consecutive
                                                              $____________                 quarters
                                                              and
                                                              $____________
</TABLE>

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