EMPLOYMENT AGREEMENT

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is effective as of the 6th day of August, 2008, between Phoenix Footwear Group, Inc. (the “Company”), and James R. Riedman (the “Executive”).

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

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

2. Term. The employment of Executive by the Company as provided in this Agreement commenced on the date hereof, and shall end on August 6, 2010 (“Expiration Date”), unless sooner terminated as provided in Section 5. If not so terminated, then on August 6, 2010, and on the 6th day of August of each year thereafter (each also an “Expiration Date”), the term of Executive’s employment hereunder shall automatically be extended for one additional year.

3. Position and Duties.

(a) Chairman of the Board. Executive shall serve as Chairman of the Board of the Company or such other position or positions as may be agreed upon by Executive and the Company’s Board of Directors.

(b) Duties. Executive shall at all times perform his duties and obligations faithfully and diligently and shall devote all of his business time, attention and efforts exclusively to the business of the Company and its related entities. Executive shall industriously perform his duties under the supervision of and report to the Board of Directors of the Company and shall accept and comply with all directions from and all policies established from time to time by the Board of Directors of the Company. Executive’s areas of emphasis, working closing with the CEO, shall include, without limitation, responsibility for the Company’s: strategic planning, investor relations, banking and financing related relationships, acquisitions and divestures and acting as liaison between the Company’s management and the Board of Directors and such other duties as may from time to time be prescribed by the Board of Directors of the Company. Executive shall promote the trade and business of the Company and its related entities to the best of his ability and shall adhere to the Company’s policies and procedures applicable to the Company’s employees generally.

(c) Other Activities. Executive shall not directly or indirectly render any services of a business, commercial or professional nature to any other person, entity or organization, whether for compensation or otherwise, that would interfere with or impair his timely and proper performance of his duties and responsibilities hereunder. The foregoing shall not preclude Executive from (i) serving on boards of trade associations and/or charitable organizations or (ii) engaging in charitable activities and community affairs, with the prior consent of the Board and provided that such activities and directorships do not interfere with or impair his timely and proper performance of Executive’s duties and responsibilities hereunder.

4. Compensation and Related Matters.

(a) Salary. During the term of Executive’s employment hereunder, the Company shall pay to Executive a salary of $335,000 per annum, subject to increase (but not decrease) in the sole discretion of Board of Directors based on performance and salary reviews of Executive in accordance with Company policy. Such salary shall be paid in equal monthly installments (or such shorter intervals as the Company may elect). Executive’s salary shall be subject to annual review by the Company’s Board of Directors or its Compensation Committee.

(b) Bonus. During the term of Executive’s employment hereunder, Executive shall be eligible for such bonuses as may be determined and approved by the Board of Directors or its Compensation Committee from time to time.

(c) Vacations. During the term of Executive’s employment hereunder, Executive shall be entitled to four weeks (20 days) of vacation each year, earned at the rate of 1.66 vacation days for each month of active service. The maximum amount of vacation that can be earned is 25 days, at which point no additional vacation is earned until the earned amount is below such maximum amount.

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

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

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

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

5. Termination.

(a) Agreement Terminable at Will. Notwithstanding anything herein to the contrary, this Agreement and Executive’s employment with the Company are terminable at will by the Company for any reason, with or without prior notice or cause, provided, however, that Executive’s entitlement to payments and benefits following such termination will depend on the type of termination and shall be governed by the following provisions of this Section 5. Upon termination for any reason, Executive hereby agrees that his membership on the Board also ends and will sign any document requested by Company to implement such ending.

-2-

(b) Termination for Cause.

(i) The Company may terminate this Agreement and Executive’s employment hereunder for “Cause” pursuant to the provisions of this Section 5(b). Executive shall be given notice by the Board of Directors of the grounds for its intention to terminate Executive for Cause, and the Board shall give Executive an opportunity to address with the Board, the grounds on which the proposed termination for Cause is based. If Cause is cured to the Board’s satisfaction within twenty (20) days of such notice, a termination for Cause will not be implemented. For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment hereunder upon:

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

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

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

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

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

(ii) If this Agreement is terminated by the Company for Cause pursuant to this Section 5(b), the Company shall have no further obligation or liability to Executive, except that Executive shall be entitled to receive only (A) the portion of Executive’s salary then in effect which has been earned up to the Date of Termination, (B) compensation for any accrued and unused vacation up to the Date of Termination, and (C) reimbursement, pursuant to Section 4(d) for business expenses incurred up to the Date of Termination (collectively, the “Minimum Payments”).

(c) Death.

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

(ii) If this Agreement is terminated because of Executive’s death pursuant to this Section 5(c), the Company shall have no further obligation or liability to Executive, except that Executive shall be entitled to receive only (i) the Minimum Payments, and (ii) any life insurance proceeds Executive is otherwise entitled to under any applicable life insurance in effect on the Date of Termination.

(d) Disability.

(i) If Executive becomes disabled during Executive’s employment hereunder, this Agreement and Executive’s employment hereunder shall terminate. As used herein,

-3-

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

(ii) If this Agreement is terminated because of Executive’s disability pursuant to this Section 5(d), the Company shall have no further obligation or liability to Executive, except that Executive shall be entitled to receive only (i) the Minimum Payments, and (ii) any benefits to which Executive is entitled under the Company’s long-term disability plan as in effect on the Date of Termination.

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

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

(ii) If this Agreement is terminated by the Company pursuant to this Section 5(e) or by Executive pursuant to Section 5(f) below, the Company shall have no further obligation or liability to Executive, except that Executive shall be entitled to receive only (i) the Minimum Payments, and (ii) the Non-Compete Payments (as defined in Section 7(d) below). Executive shall only be entitled to receive such payments from the Company upon execution and delivery to Company of a general release in a form acceptable the Company.

(f) Resignation for Good Reason.

(i) Executive shall be entitled to terminate this Agreement and Executive’s employment hereunder at any time for Good Reason pursuant to the provisions of this Section 5(f). For purposes of this Agreement, Executive shall have “Good Reason” to terminate Executive’s employment hereunder if without Executive’s express consent, the Company reduces Executive’s duties and responsibilities such that it results in a material adverse reduction in Executive’s position, authority or responsibilities, and the Company fails to cure such reduction in duties and responsibilities within twenty (20) days after its receipt of written notice from Executive specifying the particular acts objected to and the specific cure requested by Executive.

(ii) If this Agreement is terminated by Executive for Good Reason pursuant to this Section 5(f), the Company shall have no further obligation or liability to Executive, except that Executive shall be entitled to receive the same payments set forth in Section 5(e)(ii) above for a termination without Cause. Executive shall only be entitled to receive such payments from the Company upon execution and delivery to Company of a general release in a form acceptable the Company.