MAXWELL SHOE CO INC, S-2, 1998-03-18

MAXWELL SHOE CO INC
S-2, 1998-03-18
FOOTWEAR, (NO RUBBER)

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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MAXWELL SHOE COMPANY INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<TABLE>
<S> <C>
DELAWARE 04-2599205
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

101 SPRAGUE STREET
P.O. BOX 37
READVILLE (BOSTON), MA 02137
(617) 364-5090
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------
MR. MARK J. COCOZZA
PRESIDENT
MAXWELL SHOE COMPANY INC.
101 SPRAGUE STREET
P.O. BOX 37
READVILLE (BOSTON), MA 02137
(617) 364-5090
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)

COPIES TO:
<TABLE>
<S> <C>
JONATHAN K. LAYNE ARNOLD B. PEINADO, III
GIBSON, DUNN & CRUTCHER LLP MILBANK, TWEED, HADLEY & MCCLOY
333 SOUTH GRAND AVENUE 1 CHASE MANHATTAN PLAZA
LOS ANGELES, CA 90071 NEW YORK, NY 10005
(213) 229-7000 (212) 530-5000
</TABLE>

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Class A Common Stock...................... 6,145,792 $17.625 $108,319,584 $31,954.28
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 801,625 shares of Class A Common Stock to cover shares issuable
upon exercise of an overallotment option granted by the Company to the
Underwriters.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to Completion, dated March 18, 1998
PROSPECTUS

5,344,167 SHARES
[LOGO OF MAXWELL SHOE COMPANY INC.]
MAXWELL SHOE COMPANY INC.
CLASS A COMMON STOCK

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The shares of Class A Common Stock offered hereby (the "Offering") are being
sold by the Selling Stockholders. See "Principal and Selling Stockholders."
Maxwell Shoe Company Inc. (the "Company") will not receive any proceeds from
the sale of shares by the Selling Stockholders. The Class A Common Stock is
traded on the NASDAQ National Market System under the symbol "MAXS." On March
17, 1998, the last sale price of the Class A Common Stock, as reported by
NASDAQ, was $17.625 per share. See "Price Range of Class A Common Stock."

The Company has two classes of authorized Common Stock, Class A Common Stock,
which is offered hereby, and Class B Common Stock. Holders of Class A Common
Stock are entitled to one vote per share and holders of Class B Common Stock
are entitled to ten votes per share. Class A Common Stock is not convertible
but is freely transferable, while Class B Common Stock is transferable only to
certain transferees and is freely convertible into Class A Common Stock. After
the Offering, there will be no outstanding shares of Class B Common Stock, and
the Company intends to seek stockholder approval to amend its Certificate of
Incorporation to eliminate the authorization for the issuance of Class B Common
Stock as soon as practicable after the consummation of the Offering.

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PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE 7 IN CONNECTION WITH THE PURCHASE OF THE CLASS A
COMMON STOCK OFFERED HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting Discounts Selling
Public and Commissions(1) Stockholders(2)
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<S> <C> <C> <C>
Per Share............................ $ $ $
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Total(3)............................. $ $ $
</TABLE>

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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
801,625 additional shares of Class A Common Stock, on the same terms and
conditions as set forth above, to cover over-allotments, if any. If such
option is exercised in full, the total Price to Public will be $ ,
the total Underwriting Discounts and Commissions will be $ , and
the total proceeds to the Company will be $ . The Selling Stockholders
will not receive any of the proceeds from the sale of shares by the
Company. See "Underwriting."

------------

The shares of Class A Common Stock offered by this Prospectus are offered by
the Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the certificates representing Class A Common Stock will be made at the offices
of Lehman Brothers Inc., 3 World Financial Center, New York, NY 10285, on or
about , 1998.

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LEHMAN BROTHERS

BEAR, STEARNS & CO. INC.

BT ALEX. BROWN

TUCKER ANTHONY
INCORPORATED

, 1998
<PAGE>

[Copy of current Mootsies Tootsies ad.]

Mootsies Tootsies(R), Mootsies Kids(R), Sam & Libby(R) and Just Libby(R) are
registered trademarks of Maxwell Shoe Company Inc. or its subsidiaries in the
United States. Jones New York(R) and Jones New York Sport(R) are registered
trademarks of Jones Investment Co., Inc. in the United States. J.G. Hook(R) and
Hook Sport(R) are registered trademarks of J.G. Hook, Inc. in the United
States.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR, AND PURCHASE SHARES OF THE CLASS A COMMON STOCK IN THE OPEN
MARKET. IN ADDITION, THE UNDERWRITERS AND SELLING GROUP MEMBERS MAY ENGAGE IN
PASSIVE MARKET MAKING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A COMMON
STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE
"UNDERWRITING."
<PAGE>

[Pictures of Sam & Libby products and Sam & Libby retail stores.]
<PAGE>

[Pictures of Jones New York footwear and Jones New York retail stores.]
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the historical and pro forma financial statements of the
Company, including the notes thereto, appearing elsewhere in this Prospectus.
Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the overallotment option granted to the Underwriters and all
references herein to "Maxwell Shoe Company" or the "Company" mean Maxwell Shoe
Company Inc., a Delaware corporation, and its predecessors and its consolidated
subsidiaries, unless the context otherwise requires. References herein to
"Common Stock" mean the Company's Class A Common Stock and its Class B Common
Stock, collectively. The Company's fiscal year ends on October 31; all
references herein to a fiscal year mean the twelve month period ended on the
October 31 of the particular year.

THE COMPANY

The Company designs, develops and markets casual and dress footwear for women
and children under multiple brand names, each of which is targeted to a
distinct segment of the footwear market. The Company offers casual and dress
footwear for women in the moderately priced market segment under the Mootsies
Tootsies brand name, in the upper moderately priced market segment under the
Sam & Libby brand name and in the better market segment under the Jones New
York and Jones New York Sport brand names. The Company also sells moderately
priced and upper moderately priced children's footwear under both the Mootsies
Tootsies and Sam & Libby brand names. Furthermore, the Company designs and
develops private label footwear for selected retailers under the retailers' own
brand names. The Company has licensed the J.G. Hook tradename to source and
develop private label products for retailers who require brand identification.
In addition, the Company sells footwear closeouts which it has purchased at
discounts from other manufacturers.

Since 1987, when the Company first focused on its branded footwear strategy,
the Company has increased net sales every year and consistently maintained
profitability. In fiscal 1997, the Company's net sales and net income increased
28.7% and 52.5%, respectively, as compared to fiscal 1996. In the first quarter
of fiscal year 1998, the Company's net sales and net income increased 26.3% and
34.2%, respectively, as compared to the same period in fiscal 1997. The
Company's financial success has been largely a result of its ability to design,
develop and market footwear with contemporary styles at affordable prices.
Retail prices for the Company's footwear generally range from $20 to $90.
Substantially all of the Company's products are manufactured overseas by
independent factories selected by the Company and its overseas agents. The
Company sells its footwear primarily to department stores and specialty stores
in the United States as well as through national catalog retailers and cable
television consumer shopping channels.

The Company's strategy is to leverage its existing competitive strengths,
including but not limited to its strong manufacturing relationships and focused
brand management and to increase profitably its share of the women's and
children's footwear markets by further strengthening its existing footwear
brands and its private label business and expanding its brand portfolio through
a combination of acquisition, licensing and development of additional brands in
the future.

3
<PAGE>

1996. The Company is in the process of re-positioning the Sam & Libby brand
from its prior focus on the junior women's market segment to the late 20's,
career-oriented women market segment, and management believes that sales under
the Sam & Libby lines should increase significantly in the future upon
completion of this brand re-positioning and the introduction of additional
products under such brand name. The Company believes that there is a growing
demand among retailers for footwear to market under their own brand names, and
the Company licensed the J.G. Hook name in 1997 to sell as a first cost product
for retailers who require brand identification.

The Company competes primarily in the women's casual and dress footwear
market, which emphasizes contemporary fashion, quality and value. The Company
believes that there has been a shift in the "moderate" segment of the women's
casual and dress footwear market toward value priced footwear. The Company has
positioned its Mootsies Tootsies line to take advantage of this shift by
offering value priced footwear which reflects current fashion trends. The Sam &
Libby brand is aimed at the fashion-conscious customers in the upper moderate
price range which has been less affected by this shift. The Company believes
that the better segment of this market has also not been as affected by this
shift due to a continuing interest in higher quality and brand name products,
such as the Company's Jones New York and Jones New York Sport brands.

In April 1997, the Company entered into an agreement to operate approximately
130 retail Sam & Libby and Jones New York women's footwear stores through a
joint venture, SLJ Retail LLC ("SLJ Retail"). The Company and the Butler Group
Inc., a wholly owned subsidiary of General Electric Capital Corporation
("Butler"), own 49% and 51% of SLJ Retail, respectively. The Company views SLJ
Retail as a significant opportunity to increase awareness of its brands,
achieve greater purchasing leverage with manufacturers and potentially
recognize a portion of any future profits of the joint venture. A subsidiary of
the Company is the manager of SLJ Retail. Under current generally accepted
accounting principles, the Company is required to account for its interest in
SLJ Retail under the equity method of accounting for so long as the Company
owns less than 50% of the voting equity of SLJ Retail. Under the equity method
of accounting, the Company is required to record its proportionate share of SLJ
Retail's net income or loss; provided, however, net losses of SLJ Retail
recorded by the Company are limited to the Company's investment in and advances
to SLJ Retail. Since the Company made a nominal investment in SLJ Retail,
operating losses of SLJ Retail are not recorded by the Company. The Company
holds an option through February 1, 2000 to purchase additional equity in SLJ
Retail to increase its equity ownership to 55%, subject to achieving certain
operating income levels. In the event the Company exercises such option, it
could be required to consolidate SLJ Retail's and its financial statements.
However, the Company does not intend to exercise such option until SLJ Retail
achieves profitability, if ever.

The Company, originally a closeout footwear business, was founded by Mr.
Maxwell V. Blum in 1949 and was incorporated as Maxwell Shoe Co., Inc. in
Massachusetts in 1976. During the late 1980s, the Company shifted its focus to
designing, developing and marketing full lines of branded women's footwear. In
order to implement this new strategy, the Company hired experienced senior
management to strengthen its organizational infrastructure, developed cost-
efficient product sourcing, implemented an advertising program and improved
internal systems. In March 1994, Maxwell Shoe Co., Inc. became a Delaware
incorporated company.

Mr. Blum, the Chairman of the Board and Chief Executive Officer of the
Company, Mr. Blum's daughters, Ms. Betty Ann Blum and Ms. Marjorie Blum, both
of whom are currently officers and directors of the Company, and a trust for
the benefit of Mr. Blum's wife intend to convert or exercise into shares of
Class A Common Stock all of their shares of Class B Common Stock and Class A
options of the Company and sell all such shares in the Offering. See "Principal
and Selling Stockholders." In addition, upon consummation of the Offering, it
is expected that Mr. Blum will resign as Chairman of the Board and Chief
Executive Officer (but remain as a member of the Board of Directors and a
consultant), Ms. Betty Ann Blum and Ms. Marjorie Blum will resign as executive
officers and directors of the Company (but each will remain as an employee of
the

4
<PAGE>

Company through a transition period), and Mr. Mark Cocozza will become Chairman
of the Board and Chief Executive Officer in addition to his existing
responsibilities as President and Chief Operating Officer of the Company. See
"Management--Management Changes Upon Consummation of the Offering."

The Company's principal executive offices are located at 101 Sprague Street,
P.O. Box 37, Readville (Boston), Massachusetts 02137, and its telephone number
is (617) 364-5090.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Selling Stock-
holders..................................... 5,344,167 shares of Class A Common Stock
Common Stock to be Outstanding after the Of-
fering...................................... 7,979,937 shares of Class A Common
Stock(1)(2); no shares of Class B Common
Stock
Use of Proceeds.............................. The Company will not receive any proceeds
from the sale of shares by Mr. Blum, Ms.
Betty Ann Blum, Ms. Marjorie Blum, a trust
for the benefit of Mr. Blum's wife, and Mr.
Cocozza (collectively, the "Selling
Stockholders"). Any proceeds to the Company
from any exercise of the Underwriters'
overallotment option will be used to fund
increased capital expenditures and
advertising, as well as for working capital
and general corporate purposes.
NASDAQ Symbol................................ MAXS
</TABLE>

- --------
(1) Excludes (i) 588,412 shares of Class A Common Stock issuable upon exercise
of an option that had been granted to Mr. Mark Cocozza, the President of
the Company, which option had been granted in exchange for the termination
of a pre-existing deferred compensation arrangement, (ii) 725,080 shares of
Class A Common Stock issuable upon exercise of options to purchase shares
that have been granted prior to the Offering to employees and non-employee
directors of the Company, (iii) 14,150 shares of Class A Common Stock
reserved for issuance upon exercise of options that have been granted under
the Company's 1994 Stock Incentive Plan and (iv) 100,000 shares of Class A
Common Stock issuable upon exercise of 75,000 and 25,000 options to be
granted to Mr. Cocozza and Mr. James J. Tinagero, respectively, upon
consummation of the Offering. In December 1997, the Board of Directors
amended the Company's 1994 Stock Incentive Plan to increase by 300,000 the
authorized number of shares of Class A Common Stock issuable under such
plan, subject to approval of the stockholders at the Company's April 1998
annual meeting. See Note 7 of "Notes to Consolidated Financial Statements."

(2) Does not give effect to the sale of 801,625 shares of Class A Common Stock
upon any exercise of the Underwriters' overallotment option.

5
<PAGE>

SUMMARY FINANCIAL INFORMATION

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED JANUARY
YEAR ENDED OCTOBER 31, 31,
--------------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $79,049 $100,931 $101,870 $104,337 $134,211 $28,764 $36,328
Cost of sales.......... 56,297 72,117 77,912 79,915 98,230 21,503 26,491
------- -------- -------- -------- -------- ------- -------
Gross profit........... 22,752 28,814 23,958 24,422 35,981 7,261 9,837
Selling, general and
administrative ex-
penses(1)(2) ......... 17,690 23,695 13,581 15,413 20,982 4,563 6,180
------- -------- -------- -------- -------- ------- -------
Operating income....... 5,062 5,119 10,377 9,009 14,999 2,698 3,657
Interest expense....... 609 662 255 38 110 7 11
Other expenses (in-
come), net............ 62 (101) 399 (579) 325 11 49
------- -------- -------- -------- -------- ------- -------
Income before income
taxes................. 4,391 4,558 9,723 9,550 14,564 2,680 3,597
Income taxes........... 400 1,709 3,889 3,629 5,534 1,018 1,367
------- -------- -------- -------- -------- ------- -------
Net income............. $ 3,991 $ 2,849 $ 5,834 $ 5,921 $ 9,030 $ 1,662 $ 2,230
======= ======== ======== ======== ======== ======= =======
Earnings per share(3)
Basic ................ $ 0.77 $ 0.78 $ 1.19 $ .22 $ .29
======== ======== ======== ======= =======
Diluted............... $ 0.70 $ 0.72 $ 1.06 $ .20 $ .26
======== ======== ======== ======= =======
Shares used to compute
earnings per share(3)
Basic................. 7,588 7,588 7,588 7,588 7,588
======== ======== ======== ======= =======
Diluted............... 8,311 8,261 8,537 8,358 8,702
======== ======== ======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
OCTOBER 31, 1997 JANUARY 31, 1998
---------------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $44,441 $44,915
Total assets......................................................... 60,179 66,835
Total debt (including current maturities)............................ 469 438
Total stockholders' equity........................................... $50,635 $52,864
</TABLE>
- -------
(1) Operating results for fiscal 1993 and 1994 were significantly affected by
officers' compensation expense, which totaled $8,370 and $12,381,
respectively. Operating income before officers' compensation for fiscal
1993 and 1994 was $13,432 and $17,500, respectively.

(2) Includes a $7,000 one-time compensation expense incurred in the first
quarter of fiscal 1994 in connection with the grant of an option to the
Company's President to purchase 888,412 shares of Class A Common Stock,
which option was granted in exchange for the termination of a pre-existing
deferred compensation arrangement. The shares offered hereby include
300,000 shares of Class A Common Stock to be sold by the Company's
President issuable pursuant to a partial exercise of such option. See
"Certain Transactions."

(3) Earnings per share have not been presented for fiscal years 1993 and 1994
since such amounts are not deemed meaningful due to the significant changes
in the Company's income tax status and compensation arrangements subsequent
to the initial public offering in fiscal 1994. Prior to the initial public
offering, as a Subchapter S corporation the Company was not required to
provide for federal income taxes and incurred significantly greater
officers' compensation expense. In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings Per Share" ("FAS 128"),
which has been adopted beginning with the Company's first fiscal quarter of
1998. With respect to such adoption, the Company has changed the method
used to compute the former primary and fully diluted earnings per share to
basic and diluted earnings per share and restated all prior periods.

6
<PAGE>

RISK FACTORS

This Prospectus includes or incorporates by reference forward looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that involve risks and uncertainties. These statements appear in a number of
places in this Prospectus, and include statements regarding the intent, belief
or current expectations of the Company, its directors or its officers with
respect to, among other things: (i) the financial prospects of the Company;
(ii) trends affecting the Company's financial condition or results of
operations; (iii) the Company's growth strategy and operating strategy; (iv)
trends in the retail footwear industry; and (v) the declaration and payment of
dividends. Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those in the
forward looking statements as a result of various factors including, but not
limited to, changing consumer preference, competition from other footwear
manufacturers, loss of key employees, general economic conditions and adverse
factors impacting the retail footwear industry and the inability by the Company
to source its products due to political or economic factors or the imposition
of trade or duty restrictions. The accompanying information contained in this
Prospectus including without limitation the information set forth under the
headings "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," identifies other important
factors that could cause such differences.

An investment in the securities offered hereby involves a high degree of
risk. In analyzing an investment in the securities offered hereby, prospective
investors should carefully consider, along with the other matters referred to
herein, the following risk factors:

CHANGING FASHION TRENDS

The Company believes that its success depends largely on its ability to
identify and interpret fashion trends as well as on its ability to anticipate
and react to changing consumer tastes and preferences in a timely manner. There
is no assurance that the Company will continue to be successful in these
regards. In the past three fiscal years, the Company has not had a single style
of footwear that has represented more than 4% of the Company's annual net
sales. There can be no assurance that the Company will be able to continue to
develop successful styles in the future or that a chosen style will result in
sales of the Company's footwear since the Company normally chooses styles for
its footwear up to 12 months in advance of the arrival of such footwear in
retail stores. The Company attempts to reduce the risks of changing fashion
trends and product acceptance through market research and development and
testing of a broad range of styles. The Company places orders for footwear with
its manufacturers prior to the time the Company has received customers' orders
for such footwear. See "--Risk of Obsolete Inventory." If the Company misjudges
the market for its product lines, the Company could experience poor orders from
its customers, resulting in excess inventories, or its customers could
experience poor sell-through of the Company's products at the retail level,
resulting in customer requests for allowances from the Company. Disposal of
unsold inventories at unfavorable prices or excessive allowances could have a
material adverse effect on the Company's financial condition or results of
operations.

POSSIBLE TERMINATION OF AND RESTRICTIONS UNDER THE JONES NEW YORK LICENSE
AGREEMENT

In fiscal 1996 and fiscal 1997, Jones New York and Jones New York Sport
footwear sales accounted for 23% and 24%, respectively, of the Company's total
net sales. In the first quarter of fiscal 1998 and fiscal 1997, Jones New York
and Jones New York Sport footwear sales accounted for 25.9% and 27.4%,
respectively, of the Company's total net sales. The license agreement under
which the Company has the right to manufacture and market its Jones New York
and Jones New York Sport footwear (the "Jones License Agreement") expires in
December 2002, unless the Company exercises one of its three five-year options
to renew through December 2017. There is no assurance that the Jones License
Agreement would not be terminated prior to its expiration date or that the
Company would meet the necessary pre-conditions contained in such agreement in
order to exercise its option to renew such agreement. A breach by the

7
<PAGE>

Company of its obligations under the Jones License Agreement would permit the
licensor to terminate such agreement. The Jones License Agreement could also be
terminated by the licensor for certain other reasons, including any termination
(including pursuant to resignation) of Mr. Cocozza's employment as Chief
Executive Officer of the Company or the beneficial ownership of any one
stockholder or affiliated group of beneficial stockholders of 15% or more of
the Company's voting stock. Termination of the Jones License Agreement would
require the Company to discontinue its Jones New York and Jones New York Sport
footwear lines, which would have a material adverse effect on the Company's
financial condition or results of operations. The Jones License Agreement
prohibits the Company from manufacturing, selling, distributing or promoting
merchandise that would compete as to style, price or quality with the Jones New
York and Jones New York Sport footwear lines. Hence, the Company is restricted
from expanding its brand portfolio and acquiring new product lines in the Jones
New York and Jones New York Sport women's footwear market segments while this
license is in effect. Because of the 15% beneficial ownership restriction under
the Jones License Agreement, the Company may also be limited in its ability to
use its Common Stock to finance any acquisition of brands in the future. In
addition, use of any materials, designs, styles, packaging or advertising by
the Company in connection with Jones New York and Jones New York Sport footwear
lines is subject to approval by the licensor in its sole discretion based
solely on its subjective standards. There is no assurance that such approval
can be obtained in each instance or, if obtained, maintained for the duration
of the term of the agreement. See "Business--License Agreements--Jones New
York."

COMPETITION

The women's and kids' fashion footwear markets are highly competitive. The
Company's products compete with other branded footwear as well as with private
label footwear sold by many large retailers, including some of the Company's
customers. Many of the Company's competitors have substantially greater
financial, distribution and marketing resources, as well as greater consumer
brand awareness than the Company. In addition, the general availability of
contract manufacturing capacity allows easy access by new market entrants. See
"Business--Competition."

IMPACT OF FOREIGN OPERATIONS; CHINA MANUFACTURING

The Company does not own or operate any manufacturing facilities.
Substantially all of the Company's products are currently manufactured by
independent contractors located in the People's Republic of China ("China"),
Brazil, Italy, and Spain. As a result, the Company's import operations are
subject to compliance with all relevant laws and regulations enforced by the
United States Customs Service, as well as customary risks of doing business
abroad, including fluctuations in the value of currencies, increases in customs
duties and related fees resulting from position changes by the United States
Customs Service, import controls and trade barriers (including the unilateral
imposition of import quotas), restrictions on the transfer of funds, work
stoppages and, in certain parts of the world, political instability causing
disruption of trade from the countries in which the Company's suppliers are
located.

In addition, the Company's ability to cost-effectively produce or obtain
products from manufacturers in China, which currently manufactures
approximately 83% of the Company's products, is subject to retention by China
of its "most favored nation" ("MFN") tariff status and its compliance with
certain other requirements. Pursuant to MFN status, products imported by the
Company from China currently receive the lower tariff rates made available to
most of the United States' major trading partners. In the case of China,
however, this MFN treatment is made possible under the Trade Act of 1974 by
virtue of certain Presidential findings that waive restrictions that would
otherwise render China ineligible for MFN treatment. China's MFN status is
reviewed annually. Although the President has waived these restrictions each
year since 1979, there can be no assurance that China will continue to enjoy
MFN status in the future. If goods manufactured in China enter the United
States without the benefit of MFN treatment, such goods will be subject to
significantly higher duty rates, ranging between 20% and 66% of customs value.
Any such increased duties or tariffs could significantly increase the cost or
reduce the supply of goods from China. In addition, the United States Trade
Representative is monitoring China due to concerns regarding the protection of
intellectual property rights and market barriers to United States exports to
and investments in China. China's

8
<PAGE>

failure to comply with the terms of agreements entered into with the United
States regarding these matters could result in sanctions against China, and the
imposition of new duties on certain imports from China potentially including
shoes made for the Company. Any significant increase in duties or tariffs on
the Company's products could have a material adverse effect on the Company's
financial condition or results of operations. See "Business--Restrictions on
Imports."

Historically, instability in the political and economic environments of the
countries in which the Company obtains its products has not had a material
adverse effect on the Company's operations. The Company cannot predict,
however, the effect that future changes in economic or political conditions in
such countries could have on its relationships with its manufacturers. Although
the Company believes that it could find alternative manufacturing sources,
establishment of new manufacturing relationships would involve various
uncertainties and the loss of a substantial portion of its manufacturing
capacity could have a material adverse effect on the Company's financial
condition or results of operations. The Company continually explores the
availability and feasibility of alternative locations around the world to
manufacture its products.

Although the majority of the goods sold by the Company are not currently
subject to quotas, countries in which the Company's products are manufactured
may, from time to time, impose new or adjust prevailing quotas or other
restrictions on exported products and the United States may impose new duties,
tariffs and other restrictions on imported products, any of which could
adversely affect the Company's operations and its ability to import its
products at the Company's current or increased quantity levels. In accordance
with the Harmonized Tariff Schedule, a fixed duty structure in effect for the
United States, the Company pays import duties on its products ranging from
approximately 10% to 37.5%, depending on the principal component of the
product. Other restrictions on the importation of footwear and the Company's
other products are periodically considered by the United States Congress and no
assurances can be given that tariffs or duties on the Company's goods may not
be raised, resulting in higher costs to the Company, or that import quotas with
respect to such goods may not be imposed or made more restrictive.

RISK OF DEPENDENCE ON BUYING AGENTS AND MANUFACTURERS

While the Company believes it has established strong working relationships
with its buying agents and foreign manufacturers, the Company has not entered
into contracts with any of them. Since the Company relies on its buying agents
for sourcing the manufacturing of most of the products it sells, the loss of
any of its agents, one or more of whom in any fiscal year may coordinate the
manufacturing of a substantial portion of the Company's products, could impair
the Company's ability to obtain quality products, which would have a material
adverse effect on the Company's financial condition and results of operations.
In addition, loss of one or more of its manufacturers could cause the Company
to experience a temporary increase in costs, decline in product quality,
shortage of products or delays in deliveries of its products, any of which
could have an adverse effect on the Company's financial condition or results of
operations. For the fiscal year ended October 31, 1997 and the quarter ended
January 31, 1998, Universal Max Trading, a company based in Taiwan and the
Company's principal buying agent in China, was responsible for approximately
55% and 48%, respectively, of the Company's footwear products. The loss of
Universal Max Trading could have a material adverse effect on the Company and
its business. Although the Company's ability to obtain products has not been
materially affected by competition with other footwear companies for production
facilities and the Company's manufacturers currently are able to meet the
Company's production requirements, no assurance can be given that the Company
will continue to be able to obtain sufficient product quantities in the future.
See "Business--Manufacturing."

RISK OF OBSOLETE INVENTORY

In order to minimize purchasing costs, the Company places approximately a
third of its footwear orders with its manufacturers well in advance of
receiving customers' orders. In addition, an order may be canceled by the
customer up until the time the customer accepts delivery of the merchandise.
Therefore, the Company

9
<PAGE>

has no assurance that it will be able to sell footwear ordered from its
manufacturers or its inventory on hand. As of January 31, 1998, the Company had
$30.0 million of open purchase orders at first cost with its manufacturers and
$25.7 million of inventory at landed cost.

DEPENDENCE ON GENERAL ECONOMIC CONDITIONS AND SLUGGISH RETAIL ENVIRONMENT

The Company's operating results during any given period depend significantly
on the ability and willingness of consumers to spend money on footwear, which
may be adversely affected by downward trends in the economy or the occurrence
of events that adversely affect the economy in general. Although the Company
has not experienced a recent slowdown in retail sell-through of its products,
such a slowdown could occur in the future, and if it were to occur, could have
a material adverse effect on the Company's financial position or results of
operations.

The Company, like many of its competitors, primarily sells to major
retailers, some of whom have experienced financial difficulties, including
bankruptcy. Although to date the financial difficulties of these retailers have
not had a material adverse effect on the Company, the Company cannot predict
what effect the future financial condition of such retailers will have on the
business of the Company. No assurance can be given that the Company's bad debt
expense will not be material in the future.

NO ASSURANCE OF CONTINUED RATE OF GROWTH

The Company has enjoyed rapid growth over the last year. However, the Company
remains vulnerable to a variety of business risks generally associated with
rapidly growing companies as well as risks related to the broadening of product
offerings and marketing of new brands. Therefore, the Company's past growth
cannot be assumed to be indicative of its future operating results. In
addition, failure to upgrade operating and control systems or unexpected
difficulties encountered during expansion could adversely affect the Company's
financial position or results of operations.

As part of its growth strategy, the Company seeks to acquire or license
additional brands in the future. There can be no assurance that the Company
will be able to identify such brands or successfully negotiate or finance the
acquisition or licensing of such brands. Specifically, the Company may be
limited in its ability to use its Common Stock to finance any acquisition of
brands because of the 15% beneficial ownership limitation under the Jones
License Agreement. See "--Possible Termination of and Restrictions Under the
Jones New York License Agreement." In addition, even if the Company can
successfully acquire or license additional brands, there is no assurance that
the Company will be able to generate any revenues or profits from such
acquisition or license. See "Business--Business Strategy."

RELIANCE ON KEY CUSTOMERS

The Company's largest customer, The TJX Companies, Inc. ("TJX"), the
successor entity from the combination of Marshall's and T.J. Maxx, accounted
for 22%, 19%, 30% and 19% of the Company's net sales in fiscal 1996, fiscal
1997, the first quarter of fiscal 1997 and the first quarter of fiscal 1998,
respectively, including revenues from closeouts. The Company's top three
customers accounted for 35%, 32%, 43% and 36% of net sales for fiscal 1996,
fiscal 1997, the first quarter of fiscal 1997 and the first quarter of fiscal
1998, respectively. While the Company seeks to build long-term customer
relationships, revenues from any particular customer can fluctuate from period
to period due to such customer's purchasing patterns. In addition, the Company
believes that although purchasing decisions have generally been made
independently by each department store customer, there is a trend among
department store customers toward more centralized purchasing decisions. The
retail industry has also periodically experienced consolidation, and any future
consolidation may result in loss of customers of the Company and lower profit
margins on the Company's footwear. In the future, the Company's wholesale
customers may consolidate, undergo restructurings or reorganizations, or
realign their affiliations, any of which could decrease the number of stores
that carry the Company's products or increase the ownership concentration
within the retail industry. Any termination or significant disruption of the
Company's relationships with one or more of the Company's major customers could
have a material adverse effect on the Company's financial condition or results
of operations. See Note 1 of "Notes to Consolidated Financial Statements."

10
<PAGE>

DEPENDENCE ON KEY PERSONNEL

The future success of the Company is largely dependent on the talent and
efforts of certain members of the Company's senior management team, including
Mr. Mark Cocozza, 49, President and Chief Operating Officer and prospective
Chairman of the Board and Chief Executive Officer, Mr. James Tinagero, 45,
Executive Vice President, Mr. Richard Bakos, 50, Chief Financial Officer, Mr.
Bradley Finn, 44, Division Executive for Mootsies Tootsies brands, Mr. Richard
Brandt, 36, Division Executive for Jones New York brands and Mr. Stephen Souza,
33, Division Executive for the Sam & Libby brands. The loss of the services of
any of these people could have a material adverse effect on the Company's
financial condition or results of operations. The Jones License Agreement may
be terminated by the licensor if Mr. Cocozza is not the Chief Executive Officer
of the Company at any time after the consummation of the Offering. Any
termination of the Jones License Agreement would have a material adverse effect
on the Company's financial condition and results of operations. See "--Possible
Termination of and Restrictions Under the Jones New York License Agreement."
The Company does not have employment contracts with any of its personnel other
than with Mr. Cocozza and Mr. Tinagero, and none of the Company's personnel
except Mr. Cocozza and Mr. Tinagero, are subject to noncompetition agreements.
Despite such employment agreements with Messrs. Cocozza and Tinagero, there is
no assurance that the Company will be able to retain their services. See
"Management--Employment Agreements." The Company has a $3 million key-man life
insurance policy covering Mr. Cocozza but otherwise does not maintain key-man
life insurance on the lives of any of its personnel.

RISK OF SLJ RETAIL

Any failure by the Company to successfully operate the SLJ Retail women's
footwear stores may result in substantial net losses for SLJ Retail in the
future, although the Company's financial loss is limited to its initial nominal
investment of $4,325 if the Company continues to own less than 50% of the
voting equity of SLJ Retail. Under current generally accepted accounting
principles, the Company is required to account for its interest in SLJ Retail
under the equity method of accounting for so long as the Company owns less than
50% of the voting equity of SLJ Retail. Under the equity method of accounting,
the Company is required to record its proportionate share of SLJ Retail's net
income or loss; provided, however, net losses of SLJ Retail recorded by the
Company are limited to the Company's investment in and advances to SLJ Retail.
Any failure of SLJ Retail to execute its retail strategy may adversely affect
consumer perception of the Company's Sam & Libby brand and the Jones New York
and Jones New York Sport brands and adversely impact the Company's sales of
footwear under these brand names. The Company's ability to successfully operate
the SLJ Retail women's footwear stores in the future will depend on various
factors, including general economic and business conditions affecting consumer
spending, the performance of SLJ Retail's operations, the acceptance by
consumers of SLJ Retail's concepts and the ability of the Company to manage
such operations and hire and train personnel. Although certain members of the
Company's management team have had significant retail experience prior to
joining the Company, the Company itself has no prior experience managing or
operating a national chain of retail women's footwear stores. There is no
assurance that the Company will be able to successfully operate SLJ Retail.

Under the Services Agreement with SLJ Retail, Mr. Cocozza and Mr. Tinagero
are each required to devote 25% of their time to SLJ Retail's business. There
is no assurance that such devotion of Messrs. Cocozza's and Tinagero's time to
SLJ Retail will not adversely affect the Company's financial condition and
results of operations. Under the Option Agreement among the Company, SLJ Retail
and Butler, Butler has certain rights, expiring on the fifth anniversary of the
date of the Option Agreement, to require the Company to purchase all or a
portion of its interest in SLJ Retail for cash or Common Stock of the Company
at a price to be computed using a pre-determined multiple of SLJ Retail's cash
flow. There is no assurance that any exercise by Butler of its rights under
such Option Agreement would not have a material adverse effect on the Company's
financial condition and results of operations.

11
<PAGE>

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company's quarterly operating results have fluctuated in the past and may
fluctuate in the future as a result of a variety of factors, including timing
of orders, sensitivity to general economic conditions, the health of the retail
industry, the relative mix of different products with differing margins,
clients' order patterns, changes in the pricing strategies of the Company,
foreign currency fluctuations and other costs relating to the expansion of
brands. Many of these factors are outside of the Company's control. The Company
may not be able to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall, which could have a material adverse effect on the
Company's financial condition or results of operations. For the foregoing
reasons, the Company believes that period-to-period comparisons of its
financial results should not be relied upon as an indication of future
performance. In addition, the results of any quarterly period are not
indicative of results to be expected for a full fiscal year. It is possible
that, in certain future quarters, the Company's operating results may be below
the expectations of public market analysts and investors. In such an event, the
price of the Class A Common Stock would likely be materially adversely
affected.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon completion of this Offering, the Company will have outstanding 7,979,937
shares of Class A Common Stock, all of which will be freely tradable. In
addition, 588,412 shares of Class A Common Stock will be issuable upon exercise
of an option granted to the Company's President, Mr. Mark Cocozza, all of which
shares will be restricted stock for purposes of the Securities Act. The
President's option is currently exercisable until January 6, 2010, and the
Company has agreed to separately register under the Securities Act on Form S-8
(if available) the 588,412 shares of Class A Common Stock issuable upon
exercise of Mr. Cocozza's option. Such shares will thereafter be eligible for
resale. Furthermore, 200,000 shares of Class A Common Stock will be issuable
upon exercise of an option granted to Mr. James Tinagero, the Company's
Executive Vice President, all of which shares have been registered under the
Securities Act. Such option will become exercisable upon a change of control of
the Company, and hence, such option will become exercisable upon the
consummation of this Offering. Upon consummation of the Offering, the Company
will grant to Messrs. Cocozza and Tinagero 75,000 and 25,000 additional stock
options, respectively, subject to certain time and other vesting provisions.
The Company will register under the Securities Act on Form S-8 such 100,000
shares issuable upon exercise of these additional 100,000 options. See
"Description of Capital Stock--Registration Rights;" "Shares Eligible for
Future Sale" and "Underwriting."

No prediction can be made as to the effect that future sales of Class A
Common Stock, or the availability of shares of Class A Common Stock for future
sales, will have on the market prices for the Class A Common Stock prevailing
from time to time. Sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Class A Common Stock, or the perception that such sales
could occur could impair the Company's ability to raise capital through the
future sale of its equity securities.

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Certificate of Incorporation and by-laws,
as well as provisions of the Delaware General Corporation Law, may have the
effect of delaying, deterring or preventing transactions involving a change of
control of the Company, including transactions in which stockholders might
otherwise receive a substantial premium for their shares over then current
market prices, and may limit the ability of stockholders to approve
transactions that they may deem to be in their best interests. For example,
under the Certificate of Incorporation, the Board of Directors is authorized to
issue 1,000,000 shares of one or more classes of Preferred Stock having such
designations, rights and preferences as may be determined by the Board of
Directors and which could adversely affect the voting power or other rights of
the holders of Class A Common Stock. Further, certain provisions of Delaware
law may also discourage third party attempts to acquire control of the Company.
See "Description of Capital Stock."

12
<PAGE>

FOREIGN CURRENCY FLUCTUATIONS; FORWARD EXCHANGE CONTRACTS

The Company generally purchases its products in U.S. dollars. However, the
Company sources a significant amount of its products overseas and, as a result,
the cost of these products may be affected by changes in the value of the
relevant currencies. The Company, from time to time, hedges certain exposures
to changes in foreign currency exchange rates arising in the ordinary course of
business. There can be no assurance that foreign currency fluctuations will not
have a material adverse effect on the Company's financial condition or results
of operations. The Company has entered into forward exchange contracts in
anticipation of future purchases of inventory denominated in foreign currency,
principally the Spanish peseta. Maximum risk of loss on these contracts is the
amount of the difference between the spot rate at the date of contract delivery
and the contracted rate. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

ABSENCE OF DIVIDENDS

The Company anticipates that all of its earnings in the foreseeable future
will be retained to finance the continued growth and development of its
business and has no current intention to pay cash dividends on its Common Stock
in the foreseeable future. See "Dividend Policy."

13
<PAGE>

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders, other than approximately $1,100,000 which the Company
will receive as a result of option exercises prior to the consummation of the
Offering.

If the Underwriters' overallotment option is exercised, the proceeds to the
Company from the sale of 801,625 shares of Class A Common Stock in connection
therewith are estimated to be approximately $14,100,000 (based on the closing
price of the Company's Class A Common Stock on March 17, 1998) excluding
estimated underwriting discounts and commissions and estimated expenses of this
Offering. Based upon the Company's estimates of its cash flow and cash usage
prior to the completion of this Offering, the Company estimates that, of the
net proceeds, the Company will use (i) approximately $4.0 million to fund
capital expenditures, (ii) $1.0 million to fund increased advertising costs and
(iii) the remainder for working capital and general corporate purposes. Pending
such uses, the Company will invest any Offering proceeds in short-term,
interest-bearing securities.

PRICE RANGE OF CLASS A COMMON STOCK

The Class A Common Stock is traded on the NASDAQ National Market System under
the symbol MAXS. The following table sets forth for the periods indicated the
range of high and low sale prices of the Class A Common Stock as reported by
NASDAQ:

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal 1996
First quarter............................................ 7 4 3/4
Second quarter........................................... 6 4 1/2
Third quarter............................................ 7 3/8 5
Fourth quarter........................................... 6 3/4 6 1/8
Fiscal 1997
First quarter............................................ 8 3/8 6 1/2
Second quarter........................................... 8 3/4 7 1/8
Third quarter............................................ 13 7 1/2
Fourth quarter........................................... 15 10 3/4
Fiscal 1998
First quarter ........................................... 16 3/4 10 1/2
Second quarter (through March 17, 1998).................. 18 3/4 13 7/8
</TABLE>

On March 17, 1998, the last sale price of the Class A Common Stock, as
reported by NASDAQ was $17.625 per share. There is currently no established
public trading market for the Company's Class B Common Stock and it is
contemplated that there will be no stockholders of record or otherwise of the
Class B Common Stock after the consummation of the Offering. As of March 17,
1998, there were approximately 1,400 holders of the Class A Common Stock,
including the beneficial owners of shares held in nominee accounts.

DIVIDEND POLICY

The Company has not paid cash dividends on the Common Stock to date since the
payment of certain distributions to the Selling Stockholders in connection with
the termination of the S corporation status of the Company prior to the
consummation of the Company's initial public offering. In addition, because the
Company currently intends to retain any earnings for development of its
business, the Company does not intend to pay cash dividends on its Common Stock
in the foreseeable future. Any determination to pay cash dividends on the
Common Stock in the future will be at the sole discretion of the Company's
Board of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, the general financial condition of the
Company and general business conditions.

14
<PAGE>

CAPITALIZATION

The following table sets forth the (i) actual short-term indebtedness and
capitalization of the Company at January 31, 1998, and (ii) the short-term
indebtedness and capitalization of the Company as of January 31, 1998 as
adjusted to reflect the conversion of all Class B Common Stock to Class A
Common Stock upon the consummation of the Offering and the exercise of options
to purchase 380,850 shares of Class A Common Stock. This table should be read
in conjunction with the financial statements and notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Short-term debt, including current maturities.............. $ 125 $ 125
======= =======
Long-term debt, excluding current maturities............... $ 313 $ 313
Stockholders' equity:
Preferred stock, par value $.01 per share, 1,000,000
shares authorized; none outstanding...................... -- --
Class A Common Stock, par value $.01 per share, 20,000,000
shares authorized; 2,525,000 outstanding (7,969,167 as
adjusted) (1)............................................ 25 80
Class B Common Stock, par value $.01 per share, 10,000,000
shares authorized; 5,063,317 outstanding (none as
adjusted)(2)............................................. 51 --
Additional paid-in capital................................ 27,312 28,406
Retained earnings......................................... 25,476 25,476
------- -------
Total stockholders' equity ............................ 52,864 53,962
------- -------
Total capitalization................................. $53,177 $54,275
======= =======
</TABLE>
- --------
(1) Excludes (i) 588,412 shares of Class A Common Stock issuable upon exercise
of an option that has been granted to Mr. Mark Cocozza, the President of
the Company, which option had been granted in exchange for the termination
of a pre-existing deferred compensation arrangement, (ii) 725,080 shares of
Class A Common Stock issuable upon exercise of options to purchase shares
that have been granted prior to the Offering to employees and non-employee
directors of the Company, (iii) 14,150 shares of Class A Common Stock
reserved for issuance upon exercise of options that have been granted under
the Company's 1994 Stock Incentive Plan, (iv) 801,625 shares of Class A
Common Stock issuable upon exercise of an over-allotment option granted to
the Underwriters and (v) 100,000 shares of Class A Common Stock issuable
upon exercise of 75,000 and 25,000 options to be granted to Messrs. Cocozza
and Tinagero, respectively, upon consummation of the Offering. In December
1997, the Board of Directors amended the Company's 1994 Stock Incentive
Plan to increase by 300,000 the authorized number of shares of Class A
Common Stock issuable under such plan, subject to approval of the
stockholders at the Company's April 1998 annual meeting. See Note 7 of
"Notes to Consolidated Financial Statements."
(2) As soon as practicable after the consummation of the Offering, the Company
intends to seek stockholder approval to amend its Certificate of
Incorporation to eliminate the authorization for the issuance of Class B
Common Stock. Consequently, assuming the implementation of such amendment,
the Company will have only one class of Common Stock and one class of
Preferred Stock. See "Description of Capital Stock."

15
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data of the Company with
respect to the statements of income for the years ended October 31, 1995, 1996
and 1997 and the balance sheets at October 31, 1996 and 1997 are derived from
the consolidated financial statements of the Company that have been audited by
Ernst & Young LLP, independent auditors, and are included elsewhere herein,
and are qualified by reference to such consolidated financial statements and
notes related thereto. The selected consolidated financial data of the Company
with respect to the statements of income for the years ended October 31, 1993
and 1994 and the balance sheets at October 31, 1993, 1994 and 1995 are derived
from the audited consolidated financial statements of the Company which are
not included or incorporated by reference herein. The following selected
consolidated financial data of the Company with respect to the statements of
income for the quarters ended January 31, 1997 and 1998 and the balance sheets
at January 31, 1997 and 1998 are derived from the unaudited consolidated
financial statements of the Company included elsewhere herein, which, in the
opinion of the Company's management, include all adjustments (consisting of
only normal recurring accruals) necessary for a fair presentation of the
financial position and results of operations for such periods. The following
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
--------------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Net sales............. $79,049 $100,931 $101,870 $104,337 $134,211 $28,764 $36,328
Cost of sales......... 56,297 72,117 77,912 79,915 98,230 21,503 26,491
------- -------- -------- -------- -------- ------- -------
Gross profit.......... 22,752 28,814 23,958 24,422 35,981 7,261 9,837
Selling, general and
administrative
expenses(1)(2) ...... 17,690 23,695 13,581 15,413 20,982 4,563 6,180
------- -------- -------- -------- -------- ------- -------
Operating income...... 5,062 5,119 10,377 9,009 14,999 2,698 3,657
Interest expense...... 609 662 255 38 110 7 11
Other expense
(income), net........ 62 (101) 399 (579) 325 11 49
------- -------- -------- -------- -------- ------- -------
Income before income
taxes................ 4,391 4,558 9,723 9,550 14,564 2,680 3,597
Income taxes.......... 400 1,709 3,889 3,629 5,534 1,018 1,367
------- -------- -------- -------- -------- ------- -------
Net income ........... $ 3,991 $ 2,849 $ 5,834 $ 5,921 $ 9,030 $ 1,662 $ 2,230
======= ======== ======== ======== ======== ======= =======
Earnings per share(3)
Basic................. $ 0.77 $ 0.78 $ 1.19 $ .22 $ .29
======== ======== ======== ======= =======
Diluted............... $ 0.70 $ 0.72 $ 1.06 $ .20 $ .26
======== ======== ======== ======= =======
Shares used to compute
earnings per share(3)
Basic................. 7,588 7,588 7,588 7,588 7,588
======== ======== ======== ======= =======
Diluted............... 8,311 8,261 8,537 8,358 8,702
======== ======== ======== ======= =======
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
--------------------------------------- -----------
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......... $15,967 $28,770 $35,097 $35,523 $44,441 $44,915
Total assets............. 27,926 36,621 39,979 46,920 60,179 66,835
Total debt (including
current maturities)..... 8,279 123 787 611 469 438
Total stockholders'
equity.................. $14,623 $29,850 $35,684 $41,605 $50,635 $52,864
</TABLE>
- --------
(1) Operating results for fiscal 1993 and 1994 were significantly affected by
officers' compensation expense, which totaled $8,370 and $12,381,
respectively. Operating income before officers' compensation for fiscal
1993 and 1994 was $13,432 and $17,500, respectively.

(3) Earnings per share have not been presented for fiscal years 1993 and 1994
since such amounts are not deemed meaningful due to the significant changes
in the Company's income tax status and compensation arrangements subsequent
to the initial public offering in fiscal 1994. Prior to the initial public
offering, as a Subchapter S corporation the Company was not required to
provide for federal income taxes and incurred significantly greater
officers' compensation expense. In February 1997, the Financial Accounting
Standards Board issued FAS 128, which has been adopted beginning with the
Company's first fiscal quarter of 1998. With respect to such adoption, the
Company has changed the method used to compute the former primary and fully
diluted earnings per share to basic and diluted earnings per share and
restated all prior periods.

17
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company's net sales have increased each year since 1987, and in fiscal
1997, the Company's net sales and net income increased 28.7% and 52.5%,
respectively, as compared to fiscal 1996. In the first quarter of fiscal 1998,
the Company's net sales and net income increased 26.3% and 34.2%, respectively,
as compared to the first quarter of fiscal 1997. These increases were primarily
due to significant increases in branded sales of Mootsies Tootsies, Sam &
Libby, Jones New York and Jones New York Sport footwear. Management believes
that (i) the increased consumer demand for Mootsies Tootsies, Jones New York
and Jones New York Sport footwear, (ii) the introduction of the Sam & Libby
footwear lines in 1997 and (iii) the Company's ability to design and develop
contemporary footwear to meet changing consumer demands contributed to this
positive performance.

In April 1997, the Company entered into an agreement to operate approximately
130 retail women's footwear stores through the SLJ Retail joint venture. Under
current generally accepted accounting principles, the Company is required to
account for its interest in SLJ Retail under the equity method of accounting
for so long as the Company owns less than 50% of the voting equity of SLJ
Retail. Under the equity method of accounting, the Company is required to
record its proportionate share of SLJ Retail's net income or loss; provided,
however, net losses of SLJ Retail recorded by the Company are limited to the
Company's investment in and advances to SLJ Retail. Since the Company made a
nominal investment in SLJ Retail, operating losses of SLJ Retail are not
recorded by the Company. The Company holds an option through February 1, 2000
to purchase additional equity in SLJ Retail to increase its equity ownership to
55%, subject to achieving certain operating income levels. In the event the
Company exercises such option, it could be required to consolidate SLJ Retail's
and its financial statements. However, the Company does not intend to exercise
such option until SLJ Retail achieves profitability, if ever. Under the Option
Agreement among the Company, SLJ Retail and Butler, Butler has certain rights,
expiring on the fifth anniversary of the date of the Option Agreement, to
require the Company to purchase all or a portion of its interest in SLJ Retail
for cash or Common Stock of the Company at a price to be computed using a pre-
determined multiple of SLJ Retail's cash flow. There is no assurance that any
exercise by Butler of its rights under such Option Agreement would not have a
material adverse effect on the Company's financial condition and results of
operations.

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" ("FAS 128"), which has been adopted beginning
with the Company's first fiscal quarter of 1998. With respect to such adoption,
the Company has changed the method used to compute the former primary and fully
diluted earnings per share to basic and diluted earnings per share and restated
all prior periods.

The Company's quarterly operating results have fluctuated in the past and may
fluctuate in the future as a result of a variety of factors, including timing
of orders, sensitivity to general economic conditions, the health of the retail
industry, different products with differing margins, clients' order patterns,
changes in the pricing strategies of the Company, foreign currency fluctuations
and other costs relating to the expansion of brands. Many of these factors are
outside of the Company's control, and the Company may not be able to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall,
which could have a material adverse effect on the Company's financial condition
or results of operations. For the foregoing reasons, the Company believes that
period-to-period comparisons of its financial results should not be relied upon
as an indication of future performance. In addition, the results of any
quarterly period are not indicative of results to be expected for a full fiscal
year.

18
<PAGE>

The following is a summary of unaudited quarterly results for the fiscal
years ended October 31, 1996 and October 31, 1997 and the quarter ended January
31, 1998.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------
APRIL JULY
JANUARY 31, 30, 31, OCTOBER 31,
----------- ------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fiscal 1996
Net sales........................ $23,705 $26,774 $30,222 $23,636
Gross profit..................... 5,821 5,917 7,009 5,675
Net income....................... 1,452 1,530 1,920 1,019
Net income per share
Basic.......................... $ .19 $ .20 $ .25 $ .13
======= ======= ======= =======
Diluted........................ $ .18 $ .19 $ .23 $ .12
======= ======= ======= =======
Fiscal 1997
Net sales........................ $28,764 $31,073 $36,833 $37,541
Gross profit..................... 7,261 9,161 10,173 9,386
Net income....................... 1,662 2,190 2,965 2,213
Net income per share
Basic.......................... $ .22 $ .29 $ .39 $ .29
======= ======= ======= =======
Diluted........................ $ .20 $ .26 $ .35 $ .25
======= ======= ======= =======
Fiscal 1998
Net sales........................ $36,328
Gross profit..................... 9,837
Net income....................... 2,230
Net income per share
Basic.......................... $ .29
=======
Diluted........................ $ .26
=======
</TABLE>

RESULTS OF OPERATIONS

The following table sets forth net sales by product line or category of
business:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
---------------------------------------- ------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- -----------
(IN MILLIONS--EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mootsies Tootsies....... $ 65.6 64.4% $ 60.8 58.3% $ 71.0 52.9% $15.4 53.4% $15.9 43.8%
Jones New York Footwear. 17.2 16.9 24.0 23.0 32.2 24.0 7.9 27.4 9.4 25.9
Sam & Libby............. -- -- -- -- 14.6 10.9 2.3 8.0 3.3 9.1
Private Label Footwear.. 12.9 12.7 14.5 13.9 13.6 10.1 2.6 9.0 6.7 18.5
Closeout................ 6.2 6.0 5.0 4.8 2.8 2.1 .6 2.2 1.0 2.7
------ ----- ------ ----- ------ ----- ----- ----- ----- -----
$101.9 100.0% $104.3 100.0% $134.2 100.0% $28.8 100.0% $36.3 100.0%
====== ===== ====== ===== ====== ===== ===== ===== ===== =====
</TABLE>

Three Months Ended January 31, 1998 Compared to Three Months Ended January 31,
1997

Net sales were $36.3 million for the three months ended January 31, 1998
compared to $28.8 million for the same period in the prior year, an increase of
26.3%. The net sales increase was due primarily to a $4.1 million increase in
the net sales of private label footwear and a $3.0 million increase in the net
sales of the Company's branded footwear as compared to the same period in the
prior year.

19
<PAGE>

Gross profit in the first quarter of fiscal 1998 was $9.8 million compared to
$7.3 million in the first quarter of fiscal 1998, or 27.1% of net sales as
compared to 25.2% for the same quarter in 1997. The increase in gross margins
for the first quarter of fiscal 1998 was due to improved gross margins in the
branded lines of footwear.

Selling, general and administrative expenses increased $1.6 million during
the first quarter of fiscal 1998 due to increased selling commissions and
shipping expenses related to the increased net sales volume and start up costs
of new warehouse facilities. Advertising expense increased by $0.3 million due
to increased activity and in store point of sale promotion items.

The Company has accrued an effective income tax rate of 38% for the relevant
periods in fiscal years 1998 and 1997.

At January 31, 1998 and 1997, the Company had unfilled customer orders
(backlog) of $59.4 million and $47.1 million respectively, an increase of
26.1%. The backlog at a particular time is affected by a number of factors,
including seasonality and the scheduling of manufacturing and shipment of
products. Orders generally may be canceled by customers without financial
penalty. Accordingly, a comparison of backlog from period to period is not
necessarily meaningful and may not be indicative of eventual actual shipments
to customers. The Company expects that substantially all of its backlog at
January 31, 1998 will be shipped within six months from such date.

Fiscal 1997 Compared to Fiscal 1996

Net sales were $134.2 million in fiscal 1997 compared to $104.3 million in
fiscal 1996, an increase of 28.7%. This increase was due to a 34.2% and 16.8%
rise in net sales of Jones New York and Mootsies Tootsies footwear,
respectively, over the prior year, and the additional $14.6 million in net
sales generated by the Sam & Libby division, offset by a decrease of 6.2% in
net sales generated by private label footwear.

Gross profit was $36.0 million in fiscal 1997 compared to $24.4 million in
fiscal 1996, an increase of 47.5%. Gross margins also increased in fiscal 1997
from fiscal 1996 due to improved gross margins in the branded lines of footwear
and a decrease in the proportion of net sales derived from lower margin private
label sales.

Selling, general and administrative expenses increased $5.6 million during
fiscal 1997 from fiscal 1996 due to an increase in aggregate compensation and
corresponding fringe benefits expenses resulting from the addition of new
personnel required for the launching of the Company's Sam & Libby division and
administrative charges relating to increased net sales and improved
profitability.

Other expenses were $0.3 million for fiscal 1997 compared to other income of
$0.6 million for fiscal 1996. During fiscal 1997, amortization expense relating
to the acquisition of the Sam & Libby trademark was $0.4 million and losses of
$0.1 million were realized from foreign exchange contracts, offset by $0.1
million in interest income from cash equivalents. During fiscal 1996, the
account was comprised principally of net gains from forward exchange contracts
entered into in anticipation of future purchase of inventory denominated in
foreign currencies and interest income from the investment of cash equivalents.
In fiscal 1997, other expenses included interest expense of $0.1 million
compared to $38,000 for fiscal 1996. Interest expense in fiscal 1997 was
incurred for capital leases and short term borrowings. The Company had no short
term borrowings in fiscal 1996.

Fiscal 1996 Compared to Fiscal 1995

Net sales were $104.3 million in fiscal 1996 compared to $101.9 million in
fiscal 1995, an increase of 2.4%. Net sales for the Jones New York footwear
lines of business in fiscal 1996 increased 39.5% over fiscal 1995 net sales.
Private label net sales in fiscal 1996 increased 12.4% over fiscal 1995 net
sales. These net sales

20
<PAGE>

increases were offset by a 7.3% decrease in Mootsies Tootsies net sales for
fiscal 1996 from fiscal 1995. The average selling price per pair of shoes sold
increased 2.3% in fiscal 1996 over the fiscal 1995 average selling price per
pair.

Gross profit was $24.4 million in fiscal 1996 compared to $24.0 million in
fiscal 1995, an increase of 1.7%. Gross margin was substantially unchanged from
fiscal 1996 to fiscal 1995.

Selling expenses were $5.3 million in fiscal 1996 compared to $4.8 million in
fiscal 1995. As a percentage of net sales, selling expenses increased to 5.1%
in fiscal 1996 from 4.7% in fiscal 1995 due to the expenses associated with
launching the Company's Sam & Libby brand and increased advertising expense.
General and administrative expenses were $8.0 million in fiscal 1996 compared
to $7.0 million in fiscal 1995, an increase of 14.8%. As a percentage of sales,
general and administrative expenses increased to 7.7% in fiscal 1996 from 6.8%
in fiscal 1995. The increase in expense was due to the higher salaries and
corresponding fringe benefit increases resulting from the addition of new
personnel associated with launching the Company's Sam & Libby brand and
administrative charges which are volume related.

Interest expense was less than $0.1 million in fiscal 1996 compared to $0.3
million in fiscal 1995. This decrease was due to the Company being able to rely
on cash provided by operating activities to fund its working capital
requirements throughout the year.

Other income was $0.6 for fiscal 1996 compared to other expense of $0.4 for
the same period in the prior year. In fiscal 1996, this income was comprised
principally of gains and losses from forward exchange contracts entered into in
anticipation of future purchases of inventory denominated in foreign currencies
and interest income. During fiscal 1995, expenses of approximately $0.3 million
were recognized as non-recurring costs arising from terminated discussions
relating to the possible sale of the Company.

LIQUIDITY AND CAPITAL RESOURCES

The Company has relied primarily upon internally generated cash flows from
operations, borrowings under its revolving credit facility, and borrowings from
stockholders (when the Company was privately held) to finance its operations
and expansion. Cash provided (used) by operating activities totaled
approximately $5.7 million in fiscal 1995, $9.5 million in fiscal 1996, ($6.5)
million in fiscal 1997, ($8.7) million in the first quarter of fiscal 1997 and
$0.4 million in the first quarter of fiscal 1998. At January 31, 1998, working
capital was $44.9 million as compared to $44.4 million at January 31, 1997.
Working capital may vary from time to time as a result of seasonal
requirements, the timing of early factory shipments and the Company's in-stock
position, which requires increased inventories, and the timing of accounts
receivable collections.

In fiscal 1997, cash used by operations was $6.5 million as compared to cash
provided by operations in fiscal 1996 of $9.5 million. The decrease of cash
provided was due to increases in accounts receivable and inventory balances.
This was a result of increased revenues, as well as the establishment of
inventory for the Sam & Libby division. Net cash provided by operating
activities totaled approximately $0.4 million in the three month period ended
January 31, 1998, as compared to net cash used of $8.7 million for the same
period in 1997. The decrease in cash used in operations from the prior year was
due to the absence of significant growth in accounts receivable which occurred
in 1997.

The Company currently has a $25.0 million revolving credit facility bearing
interest at a floating rate equal to Bank Boston's base rate, currently 8.5%.
The facility is renewable annually under certain conditions and is secured by
substantially all of the assets of the Company. A portion of the revolving
credit facility can be utilized to issue letters of credit to guarantee payment
of the Company's purchases of footwear manufactured overseas. Amounts available
under the revolving credit facility are based on eligible accounts receivable,
inventory and a portion of the open letters of credit. As of January 31, 1998,
there were no outstanding borrowings, $10.7 million was outstanding under
letters of credit and $14.3 million was available for future borrowings.

21
<PAGE>

Capital expenditures were $2.0 million for the three months ended January 31,
1998. The Company is in the process of installing a computerized warehouse
management system in its Brockton, Massachusetts, facility, as well as new
hardware and software for the Company's computer needs. The estimated total
cost of capital expenditures for these projects in fiscal 1998 is $6.0 million.
The Company leases substantially all of its management information systems
equipment.

The Company is dependent upon complex computer systems for certain phases of
its operations, including sales, distribution and delivery. Since many of the
Company's older computer software programs recognize only the last two digits
of the year in any date (e.g., "97" for "1997"), some software may fail to
operate properly in 1999 or 2000 if the software is not reprogrammed or
replaced (the "Year 2000 Problem"). The Company believes that many of its
customers also have Year 2000 Problems which could adversely affect the
Company. The Company intends to spend up to $3.0 million in fiscal 1998 (which
is included in the $6.0 million expenditure referred to above) to upgrade its
computer systems, which is intended to, among other things, address the Year
2000 Problem. The Company plans to fund this expenditure through proceeds, if
any, from this Offering, borrowings under its revolving credit facility or
equipment financing arrangements. It is not possible at present to quantify the
financial effect of the Year 2000 Problem if it is not resolved in a timely
manner. However, the Company presently believes that the cost of fixing the
Year 2000 Problem will not have a material effect on the Company's current
financial condition or results of operations.

The Company regularly enters into forward exchange contracts in anticipation
of future purchases of inventory denominated in foreign currency, principally
the Spanish peseta. Maximum risk of loss on these contracts is the amount of
the difference between the spot rate at the date of contract delivery and the
contracted rate.

The Company anticipates that it will be able to satisfy its cash requirements
for fiscal 1998 including its expected growth, primarily with cash flow from
operations, supplemented by borrowings under its revolving credit facility.

EFFECTS OF INFLATION

The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Company's revenues or
profitability.

22
<PAGE>

BUSINESS

GENERAL OVERVIEW

Through advertising, promotion and packaging, the Company has built consumer
and retail recognition for the Mootsies Tootsies and Mootsies Kids brand names,
and management believes that Mootsies Tootsies is currently one of the largest
selling brands in the moderately priced segment of the women's casual and dress
footwear industry. In 1994 and 1995, the Company expanded its branded product
portfolio through the introduction of the Jones New York and Jones New York
Sport footwear brands. Both product lines allow the Company to capitalize on
the strong brand name recognition and reputation for style, quality and value
enjoyed by Jones New York in the better segments of the women's apparel
industry. The Company continued its brand expansion through the acquisition of
the Sam & Libby worldwide trademarks and tradenames in 1996. The Company is in
the process of re-positioning the Sam & Libby brand from its prior focus on the
junior women's market segment to the late 20's, career-oriented women market
segment, and management believes that sales under the Sam & Libby lines should
increase significantly in the future upon completion of this brand re-
positioning and the introduction of additional products under such brand name.
The Company believes that there is a growing demand among retailers for
footwear to market under their own brand names, and the Company licensed the
J.G. Hook name in 1997 to sell as a first cost product for retailers who
require brand identification.

The Company competes primarily in the women's casual and dress footwear
market, which emphasizes contemporary fashion, quality and value. The Company
believes that there has been a shift in the "moderate" segment of the women's
casual and dress footwear market toward value priced footwear. The Company has
positioned its Mootsies Tootsies line to take advantage of this shift by
offering value priced footwear which reflects current fashion trends. The Sam &
Libby brand is directed to appeal to the fashion conscious customers in the
upper moderate price range and has been less affected by this shift. The
Company believes that the better segment of this market has also not been as
affected by this shift due to a continuing interest in higher quality and brand
name products, such as the Company's Jones New York and Jones New York Sport
brands.

23
<PAGE>

According to a footwear industry association, in 1996 sales of women's
nonathletic footwear in the United States accounted for retail sales of
approximately $10.7 billion and approximately 380 million pairs. In addition,
in 1996 retail sales of girl's nonathletic footwear in the United States
accounted for retail sales of approximately $604 million and approximately 38
million pairs. Between 1992 and 1996 the market for nonathletic women's
footwear increased by approximately 0.8% in pairs and 3.0% in sales dollars.
Despite this trend, the Company's sales have grown substantially over this
period.

In April 1997, the Company entered into an agreement to operate approximately
130 retail Sam & Libby and Jones New York women's footwear stores through SLJ
Retail. The Company and Butler own 49% and 51% of SLJ Retail, respectively. The
Company views SLJ Retail as a significant opportunity to increase awareness of
its brands, achieve greater purchasing leverage with manufacturers and
potentially recognize a portion of any future profits of the joint venture. A
subsidiary of the Company is the manager of SLJ Retail. Under current generally
accepted accounting principles, the Company is required to account for its
interest in SLJ Retail under the equity method of accounting for so long as the
Company owns less than 50% of the voting equity of SLJ Retail. Under the equity
method of accounting, the Company is required to record its proportionate share
of SLJ Retail's net income or loss; provided, however, net losses of SLJ Retail
recorded by the Company are limited to the Company's investment in and advances
to SLJ Retail. Since the Company made a nominal investment in SLJ Retail,
operating losses of SLJ Retail are not recorded by the Company. The Company
holds an option through February 1, 2000 to purchase additional equity in SLJ
Retail to increase its equity ownership to 55%, subject to achieving certain
operating income levels. In the event the Company exercises such option, it
could be required to consolidate SLJ Retail's and its financial statements.
However, the Company does not intend to exercise such option until SLJ Retail
achieves profitability, if ever.

BUSINESS STRATEGY

The Company's strategy is to leverage its existing competitive strengths to
increase profitably its share of the women's and children's footwear markets by
further developing its existing footwear brands and its private label business
and expanding its brand portfolio through a combination of acquisition,
licensing and development of additional brands in the future.

Competitive Strengths. The Company has developed certain core operating
strengths which have been significant sources of growth to date and which
management believes will help the Company achieve further growth in the future.
Such operating strengths include:

. Portfolio of Established Brands. Through advertising and promotion, the
Company has built consumer and retail recognition for its Mootsies Tootsies
and Mootsies Kids brand names and has established Mootsies Tootsies as one
of the largest selling brands in the moderately priced segment of the
women's casual and dress footwear industry. The Company continued its brand
expansion through the acquisition of the Sam & Libby worldwide trademarks
and tradenames in 1996. The Company offers its Jones New York and Jones New
York Sport footwear lines with the intention of capitalizing on the strong
brand name recognition and reputation for style, quality and value enjoyed
by Jones New York and Jones New York Sport in the better segments of the
women's apparel industry. The Company has also licensed the J.G. Hook name
to sell as a first cost product for retailers who require brand
identification. The Company continues to seek licensing or acquisition
opportunities in order to expand its current portfolio of brands.

. Strong Manufacturing Relationships. The Company believes that one of the
contributing elements of its growth has been its strong relationships with
overseas buying agents and manufacturers capable of meeting the Company's
requirements for quality and price in a timely fashion. The Company's
increased use of China-based manufacturing facilities has resulted in lower
manufacturing costs while continuing to meet the Company's high quality
standards. Universal Max Trading, the Company's principal buying agent in
China, has agreed to exclusively source and monitor product manufacturing
for the Company in China. Universal Max Trading has recently opened a
dedicated manufacturing facility in China which

24
<PAGE>

will further improve the Company's product development capabilities. The
Company continues to seek to develop other exclusive relationships with
buying agents whose access to numerous manufacturing facilities will enable
the Company to maximize its sourcing flexibility.

. Emphasis on High Volume Moderate Through Better Segments of the Footwear
Market. The Company believes that its strategy of focusing on the high
volume moderate through better segments of the women's and children's
footwear markets and of providing value-priced products reduces the risks
associated with changing fashion trends. The Company also attempts to reduce
the risks of changing fashion trends and product acceptance through market
research and development and testing of a broad range of styles prior to
placing orders with its manufacturers. The Company believes that this
approach mitigates the risks of carrying obsolete inventory and poor retail
sell-through.

. Comprehensive Customer Relationships. The Company supports its customers by
maintaining an in-stock inventory position for selected styles in order to
minimize the time necessary to fill customers' orders. In addition, the
Company provides its customers with electronic data interchange (EDI)
capability (see "--Distribution"), co-op advertising, point of sale displays
and assistance in evaluating which products are likely to appeal to their
retail customers. Management believes that it has earned a strong reputation
among customers by consistently providing quality products at attractive
prices. In return, the Company's customers provide certain information to
the Company on current retail selling trends which helps the Company
identify and interpret fashion trends.

Growth Strategy. By leveraging the above competitive strengths, the Company
has pursued and will continue to pursue growth through various initiatives,
including, but not limited to, the following:

. Growing the Company's Existing Brands. Management seeks to increase sales of
the Company's products under each of the Company's existing brands by (i)
offering a broader assortment of products and styles under such brand names,
(ii) further penetrating the Company's existing retail channels through
increased display area and additional stores, (iii) developing new retail
channel relationships appropriate to the Company's product offerings and
(iv) increasing the use of advertising to strengthen brand awareness among
retailers and consumers.

. Increasing the Company's Private Label Business. The Company entered the
private label footwear market in order to leverage its offshore
manufacturing experience and existing infrastructure by providing selected
retailers with private label products for sale under their own house brands.
This business enables the Company to sell products to new customers as well
as strengthening the Company's relationship with certain of its existing
customers. The Company believes that there is a growing demand among
retailers for footwear to market under their own brand names, and the
Company has licensed the J.G. Hook name to sell as a first cost product for
retailers who require brand identification.

. Adding Brands to the Company's Portfolio. Management believes that the
footwear industry segments in which the Company operates remain highly
fragmented, although consolidation has been accelerating recently as fewer
companies control more brands and retailers generally purchase footwear
merchandise from a reduced number of manufacturers. The Company intends to
continue capitalizing on this ongoing consolidation by expanding its
existing brand portfolio which will appeal to different market segments of
the footwear industry. Management believes that creating, acquiring or
licensing additional brands will enable the Company to increase its sales by
satisfying the needs of a broader range of customers. The Company intends to
sell these new brands through the Company's existing customers as well as
new customers which the Company seeks to develop. The acquisition and
licensing of the Sam & Libby and Jones New York brands, respectively,
represent the Company's most recent efforts to expand into new market
segments. The Company intends to continue to explore entering other market
segments through acquisition or licensing of additional brands, subject to
any constraints imposed by the Jones License Agreement. See "Risk Factors--
Possible Termination of and Restrictions Under the Jones New York License
Agreement." The Company believes that it is well positioned to continue
pursuing this strategy due to its relatively strong and unencumbered balance
sheet.

. Benefitting from Retail Joint Venture. The Company provides management
services to SLJ Retail, which plans to operate 130 stores in fiscal 1998. As
of the date hereof the number of stores that are operating

25
<PAGE>

under the Company's management has increased from 120 stores as of December
1997 to 122 stores. Management believes that the presence of SLJ Retail's
stores with the Sam & Libby or Jones New York branded concepts will broaden
acceptance of, and increase the awareness of, these Company brands among
retail consumers, and also has the potential to increase the Company's sales
to its wholesale customers. SLJ Retail also increases the Company's
purchasing leverage with its manufacturers. The Company will also continue
to pursue other available retail opportunities, including establishing
outlets, if such retail ventures present similar minimal financial risks to
the Company as in the case of the Company's investment in SLJ Retail,
subject to SLJ Retail's right of first refusal to add on any such retail
opportunity. See "Risk Factors--Risk of SLJ Retail."

PRODUCT LINES

The Company's products consist of six lines of brand name footwear as well as
private label footwear for selected retailers for sale under their own house
brands. Each of the branded product lines is targeted to appeal to a different
market segment of the footwear industry. The characteristics of the product
lines sold by the Company are summarized in the following table:

<TABLE>
<CAPTION>
GENERAL RETAIL
PRICE RANGE
---------------
INDUSTRY
STYLE SEGMENT SHOES BOOTS
-------------- --------------- ------- -------
<S> <C> <C> <C> <C>
Mootsies Tootsies............. Contemporary Moderate $25-$40 $35-$55
Mootsies Kids................. Contemporary Moderate $20-$25 $30-$40
Sam & Libby................... Updated Upper Moderate $35-$50 $45-$70
Sam & Libby Kids.............. Updated Upper Moderate $25-$45 $35-$55
Jones New York................ Contemporary Better $65-$90 --
Jones New York Sport.......... Classic Casual Better $40-$75 $60-$85
J.G. Hook Private Label....... All Budget-Moderate $12-$20 $25-$30
</TABLE>

Mootsies Tootsies

The Mootsies Tootsies brand line provides consumers with a wide selection of
footwear with contemporary styles and quality at affordable prices primarily
targeted at women ages 18 to 34. The line includes approximately 30 new styles
each spring and fall season, as well as a number of core styles that are
updated periodically based on fashion trends. The line principally consists of
casual shoes, dress shoes, boots and sandals. Styles are available in a wide
variety of colors and materials, including leather, sueded leather and fabric.
All footwear in the line is designed to have soft construction for comfort.
Mootsies Tootsies footwear accounted for a majority of the Company's total
sales during fiscal 1997.

Mootsies Kids

The Mootsies Kids brand line is targeted at girls in the misses market (ages
8 to 12) who desire contemporary footwear. The line consists of approximately
20 new styles each spring and fall that, in many cases, represent a miniature
version of the Mootsies Tootsies line. The children's line is focused on casual
shoes, party shoes, boots and sandals.

Sam & Libby

The Sam & Libby line is updated casual and dress footwear targeted at female
fashion customers, ages 21 to 35, and contains approximately 30 styles per
season, consisting of casual shoes, dress shoes, boots and sandals. The
acquisition of the Sam & Libby brand with its trademarks registered in over 20
countries allows the Company to develop and grow internationally, although the
Company's expansion to overseas markets will be a long-term effort.

26
<PAGE>

Sam & Libby Kids

The Sam & Libby Kids line is geared toward girls ages 8 to 14 and is targeted
towards the updated and more fashion-conscious girl. The line will have
approximately 20 styles each season often similar to the Sam & Libby women's
styles. The children's line is focused on dress shoes, casual shoes, casual
athletic shoes, boots and sandals.

Jones New York

The Jones New York footwear line focuses on contemporary, quality footwear
targeted at career oriented women 30 years and older. The line capitalizes on
the name recognition and reputation enjoyed by the Jones New York apparel line
produced by the Company's licensor and is designed to complement Jones New York
apparel. The Company's Jones New York footwear line consists of approximately
25 styles per season with all leather uppers and soles.

Jones New York Sport

The Jones New York Sport line appeals to the Jones New York casual sportswear
customer by providing leisure footwear to career oriented women. The line
contains approximately 20 styles per season.

J. G. Hook and Private Label Products

In response to the growing demand among retailers for footwear to market
under their own brand names, the Company designs and sources private label
women's and children's footwear for selected retailers. The Company's private
label business has minimal overhead and capital requirements primarily because
the Company utilizes its existing branded product styles (thereby incurring no
additional product development costs) and because the Company does not incur
any costs related to purchasing, importing, shipping or warehousing of
inventory, all of which costs are borne by the retailer. The Company has
licensed the J. G. Hook name to sell as a first cost product for retailers who
require brand identification.

The following table sets forth the percentage of the Company's sales
generated by each of its major product categories for the periods indicated:

<TABLE>
<CAPTION>
QUARTER
ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
--------------------------------- ------------
CATEGORY 1993 1994 1995 1996 1997 1997 1998
-------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Women's..................... 84.2% 83.8% 83.0% 85.4% 84.9% 84.3% 86.4%
Children's.................. 14.1 15.1 16.3 14.2 14.8 15.5 13.5
Other....................... 1.7 1.1 0.7 0.4 0.3 0.2 0.1
----- ----- ----- ----- ----- ----- -----
Total..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== =====
</TABLE>

CLOSEOUT BUSINESS

The Company sells certain product styles that it purchases at volume
discounts from other footwear manufacturers. These products, which are
typically either slow-moving or factory seconds, are sold to discount
retailers. At times the Company holds closeout products in inventory until the
next fashion season.

SLJ RETAIL LLC

In April 1997, the Company entered into an agreement to operate approximately
130 retail Sam & Libby and Jones New York women's footwear stores through SLJ
Retail. The Company and Butler own 49% and 51% of SLJ Retail, respectively. A
subsidiary of the Company is the manager of SLJ Retail. Under current generally
accepted accounting principles, the Company is required to account for its
interest in SLJ Retail under the equity method of accounting for so long as the
Company owns less than 50% of the voting equity

27
<PAGE>

of SLJ Retail. Under the equity method of accounting, the Company is required
to record its proportionate share of SLJ Retail's net income or loss; provided,
however, net losses of SLJ Retail recorded by the Company are limited to the
Company's investment in and advances to SLJ Retail. Since the Company made a
nominal investment in SLJ Retail, operating losses of SLJ Retail are not
recorded by the Company. The Company holds an option through February 1, 2000
to purchase additional equity in SLJ Retail to increase its equity ownership to
55%, subject to achieving certain operating income levels. In the event the
Company exercises such option it would be required to consolidate SLJ Retail's
operating results with its financial statements. However, the Company does not
intend to exercise such option until SLJ Retail achieves profitability, if
ever.

The Company's contribution to SLJ Retail was the provision of exclusive
retail license agreements with respect to the Sam & Libby and Jones New York
brand names, management services for the business of SLJ Retail and access to
the Company's manufacturing resources worldwide. SLJ Retail will purchase
footwear directly at a first cost basis from the same factories as the Company,
as well as factories which the Company does not use. The Butler Group
contributed certain assets consisting of store leases and headquarters' assets,
the purchase of a $12.5 million subordinated note and the provision of a bank
guaranty of a $16.0 million term loan all of which is secured by the assets of
SLJ Retail.

The first retail stores operated by SLJ Retail opened in July 1997. As of
March 8, 1998, 122 stores had been converted from their prior retail concepts
to either Sam & Libby or Jones New York branded concepts. As of March 8, 1998,
there were 94 Sam & Libby and 28 Jones New York footwear retail stores opened,
located primarily in the Midwest, Southeast, Texas and California.

SLJ Retail provides a showcase for the full Jones New York and Sam & Libby
product lines. The Company believes that the SLJ Retail store presence and
independent advertising campaign will increase consumer awareness of the
Company's branded footwear products. Furthermore, because SLJ Retail sources
its products through the Company's buying agents, the additional footwear
sourced by SLJ Retail has had the impact of increasing the Company's purchasing
leverage with its manufacturers. The Company believes that there are
significant financial advantages to the Company of its participation in SLJ
Retail, including modest risk of loss to the Company, an attractive transaction
cost and financing structure, a $500,000 annual management fee payable to the
Company and the potential to recognize a portion of any future profits. See
"Risk Factors--Risk of SLJ Retail."

DESIGN AND PRODUCT DEVELOPMENT

The Company seeks to identify fashion trends and to translate such trends
into contemporary footwear that appeal to its target market segments'
requirements for style, quality, fit and price. Management believes that its
philosophy of marketing contemporary styles rather than "fashion forward"
styles reduces the risks associated with changing fashion trends.

Each branded product line has its own design team, including design staff,
sales staff and a brand manager, in an effort to design footwear that appeals
to the characteristics of that line's market segment. The designers research
and confirm market trends by (i) traveling extensively to fashion markets in
the United States and Europe, (ii) attending trade shows, (iii) subscribing to
fashion and color information services and (iv) commissioning market studies.
In addition, product development efforts benefit from interaction with
retailers, who provide information on current retail selling trends, and the
Company's buying agents, who provide information on industry trends. The
designers for the Jones New York and Jones New York Sport lines also meet
regularly with the Jones New York apparel group to exchange product and fashion
concepts.

28
<PAGE>

See "--License Agreements--Jones New York." Each line initially consists of
between 100 and 200 prototypes each season from which the design team selects
the styles that it believes will satisfy the target market segment's
requirements for style, quality, fit and price. Each line is further refined
following presentations at industry shows.

MARKETING AND CUSTOMER SUPPORT

Each branded product line has its own sales organization, including a
divisional executive who oversees all aspects of selling the line and works
with a network of independent sales representatives located throughout the
United States. Certain of the independent sales representatives sell only the
Company's brands, and the rest of the independent sales representatives sell
brands that do not compete directly with the Company's brands. The Company
develops spring and fall product lines for each of its brands. Each line is
first introduced at industry trade shows prior to on-site sales visits by the
independent sales representatives and the Company's divisional head responsible
for the line. In addition, the Company maintains showrooms in New York and
Boston where buyers view products and place orders. While the Company's
products are distributed primarily in the United States, the Company also sells
to independent wholesale distributors in Canada.

In fiscal 1997, the Company sold products to approximately 1,500 accounts
with over 7,000 retail locations. The Mootsies Tootsies retailers, which market
moderately priced apparel merchandise, include department stores such as the
Mercantile Stores and Kohl's. The Sam & Libby footwear lines are distributed by
retailers focused on the upper moderate market segment, such as Rich's and
Robinson-May. The Jones New York and Jones New York Sport footwear lines are
distributed to those retailers who typically market better footwear, including
Macy's and Lord & Taylor. The Company also markets its branded products through
national catalog retailers such as Spiegel, Nordstrom and Chadwicks of Boston
and through home shopping clubs such as QVC and Home Shopping Network.

The Company believes that its reputation for quality products and
relationships with retailers will also be useful during the introduction of new
brands that it may develop or acquire to fill other niches in the women's
footwear market.

The Company supports its customers through a variety of programs, including
its in-stock inventory position for selected styles, the availability of EDI,
co-op advertising and point of sale displays. In addition, the Company assists
its customers in evaluating which products are more likely to appeal to their
retail customers. Customers may return defective products in quantities of more
than six pairs for full credit. Customer allowances are based on the Company's
ability to meet the particular customer's objectives and specifications.

ADVERTISING AND PROMOTION

The Company works closely with its retailers in promoting its brands through
its own and cooperative national consumer print advertising, in-store
merchandising, point of sale promotions, in-store events, distinctive packaging
and active solicitation of fashion editorial space. The Company anticipates
increasing its advertising and promotional expenditures during fiscal 1998
mostly in the Sam & Libby product lines in order to maximize the growth
potential of such lines. See "Use of Proceeds."

Print advertisements for Mootsies Tootsies are designed to build brand
awareness, rather than market a particular footwear product, by linking the
brand to a consumer's lifestyle. The advertisements run in fashion/lifestyle
publications like Glamour and Cosmopolitan as well as in general interest
publications like People. Utilizing the print media, the Company seeks to reach
a large percentage of its target audience, women ages 18 to 34, with a number
of advertisements each selling season. Print advertisements for Sam & Libby are
also designed to build brand awareness by creating a lifestyle viewpoint that
appeals to a modern consumer. The advertisements will appear in fashion
publications such as Vogue, Glamour and Cosmopolitan.

29
<PAGE>

In addition, SLJ Retail provides additional media focus through a direct
marketing catalog and collaborative in-store promotions. The Company's print
advertising campaign for its Jones New York and Jones New York Sport footwear
is intended to build rapid consumer awareness and acceptance of the footwear by
taking advantage of the recognition of the Jones New York apparel name. In
addition, the Company has gained additional media attention through fashion
editorial publications.

The Company also participates with its retail customers in cooperative
advertising programs intended to take the brand awareness created by the
national print advertising and channel it to local retailers where consumers
can buy the Company's brands. This includes local advertising on radio,
television, and newspaper as well as Company participation in major catalogs
for retailers such as Spiegel. The Company's co-op efforts are intended to
maximize advertising resources by having its retailers share in the cost of
promoting the Company's brands. Also the Company believes that co-op
advertising encourages the retailer to merchandise the brands properly and sell
them aggressively on the sales floor.

The Company uses point-of-sale advertising to further promote its products in
the store. Point-of-sale techniques used by the Company includes packaging,
point-of-sale displays, counter cards, banners and other visual merchandising
displays. These materials mirror the look and feel of the national print
advertising in order to reinforce brand image at the point-of-sale. Management
believes these efforts stimulate impulse sales and repeat purchases.

MANUFACTURING

Mootsies Tootsies, Mootsies Kids, Sam & Libby and Jones New York Sport
footwear are manufactured primarily in China and Brazil because of the ability
of the suppliers in these countries to manufacture quality products at
affordable prices. The Jones New York footwear brand is also manufactured in
Spain and Italy because Spanish and Italian suppliers can meet quality
requirements for this product line, and the Spanish and Italian reputation for
quality footwear is consistent with the Jones New York image.

The Company does not have contracts with any of the factories that produce
its footwear. The Company relies on its relationships with buying agents who
are responsible for securing raw materials, selecting manufacturers, monitoring
the manufacturing process, inspecting finished goods and coordinating shipments
to the Company. These agents work regularly with numerous factories with the
capacity to meet the Company's product specifications for quality, fit, volume
and price. By using buying agents rather than manufacturing products itself,
the Company is able to maximize production flexibility while avoiding
significant capital expenditures, work-in-process inventory and costs of
managing a production work force. To date, the Company has not encountered
significant delivery or quality problems. The Company works with buying agents
with access to numerous manufacturing facilities in order to maximize the
Company's sourcing flexibility. The Company believes it has built strong
relationships with its agents and manufacturing facilities over time and
through volume of business. Management believes that its buying agents do not
represent other direct competitor branded footwear lines, and Universal Max
Trading, the Company's principal buying agent in China, has agreed to act
exclusively for the Company in China. The Company pays its buying agents a
percentage of the order price of products shipped to the Company. The Company
manufactures none of its products and does not own any manufacturing facilities
or equipment. See "Risk Factors--Risk of Dependence on Buying Agents."

Prior to the start of production, the Company submits specifications for
products to the buying agent, who then provides a confirmation sample of each
style for inspection by the Company. During production, the Company makes
periodic reviews of products at the factory in addition to inspections
conducted by the buying agent. The Company also inspects products upon receipt
at its warehouse.

The Company maintains an in-stock position for selected styles of its
footwear in order to minimize purchasing costs and the time necessary to fill
customer orders. In order to maintain an in-stock position, the Company places
orders for selected footwear with its manufacturers prior to the time the
Company has

30
<PAGE>

received customers' orders for such footwear. In order to reduce the risk of
overstocking, the Company seeks to assess demand for its products by soliciting
input from its customers and monitoring retail sell-through throughout the
selling season. See "Risk Factors--Risk of Obsolete Inventory."

The Company believes that its ability to satisfy customer order demands is
enhanced by designing its products to use common elements in raw materials,
lasts and dyes. Whenever possible, the Company seeks to use factories that have
previously produced the Company's footwear because the Company believes that
this enhances continuity and quality while holding down production costs.

The Company protects itself against currency fluctuations by purchasing
products in U.S. dollars from China and Brazil. In order to denominate the
price of products from Spain in U.S. dollars, the Company buys forward exchange
contracts for Spanish pesetas in connection with the placement of orders for
products. See "Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources;" and "Risk Factors--
Foreign Currency Fluctuations; Forward Exchange Contracts."

DISTRIBUTION

Following manufacture, the Company's products are packaged in retail boxes
bearing bar codes and shipped to the Company's warehouse facilities in Boston
and Brockton, Massachusetts. When an order is received, it is filled in the
warehouse and shipped to the customer by whatever means the customer requests,
which is usually by common carrier.

The Company has an electronic data interchange system to which some of the
Company's larger customers are linked. This system allows these customers to
automatically place orders with the Company, thereby eliminating the time
involved in transmitting and inputting orders. The Company is working to add
more of its customers to the system and to expand system capability to include
direct billing, payment and shipping information.

RESTRICTIONS ON IMPORTS

The Company's operations are subject to compliance with relevant laws and
regulations enforced by the United States Customs Service and to the customary
risks of doing business abroad, including fluctuation in the value of
currencies, increases in customs duties and related fees resulting from
position changes by the United States Customs Service, import controls and
trade barriers (including the unilateral imposition of import quotas),
restrictions on the transfer of funds, work stoppages and, in certain parts of
the world, political instability causing disruption of trade. These factors
have not had a material adverse impact upon the Company's operations to date.
Imports into the United States are also affected by the cost of transportation,
the imposition of import duties and increased competition from greater
production demands abroad. The United States or the countries in which the
Company's products are manufactured may, from time to time, impose new quotas,
duties, tariffs or other restrictions, or adjust presently prevailing quotas,
duty or tariff levels, which could affect the Company's operations and its
ability to import products at current or increased levels. The Company cannot
predict the likelihood or frequency of any such events occurring.

The Company's use of common elements in raw materials, lasts and dyes give
the Company the flexibility to duplicate sourcing in various countries in order
to reduce the risk that the Company may not be able to obtain products from a
particular country.

The Company's imported products are subject to United States customs duties
and, in the ordinary course of its business, the Company may, from time to
time, be subject to claims for duties and other charges. United States customs
duties currently range from 10% to 37.5% on the principal products currently
imported by the Company. Because the Company has had no disputes with the
United States Customs Service in the past, the Company is allowed to and does
submit its footwear products to United States customs officials for pre-
classification and customs duties rates determination prior to importation of
such footwear products from abroad.

31
<PAGE>

For the fiscal year ended October 31, 1997 and the quarter ended January 31,
1998, approximately 83% and 84%, respectively, of the Company's footwear was
imported from China. After a serious dispute with the United States Trade
Representative ("USTR") over the protection of intellectual property rights in
China, including the threat by USTR to impose trade sanctions, the Chinese
government agreed to meet its enforcement obligations. That agreement is now
being monitored by USTR, and the failure of China to comply with its
obligations could result in trade sanctions in the future, including the
imposition of retaliatory tariffs that might affect the Company's imports of
footwear from China. From time to time there have been other trade disputes
with China, involving such things as market access, textile quotas, automotive
industry policies and agricultural products. These and other such matters could
also present problems in the future that might lead to trade sanctions
affecting the Company's imports of footwear.

Imports from China continue to enter the United States on a conditional most-
favored nation ("MFN") basis. Pursuant to MFN status, products imported by the
Company from China currently receive the lower tariff rates made available to
most of the United States' major trading partners. In the case of China,
however, this MFN treatment is made possible under the Trade Act of 1974 by
virtue of certain Presidential findings that waive restrictions that would
otherwise render China ineligible for MFN treatment. The President has waived
these restrictions each year since 1979. There can be no assurance that China
will continue to enjoy MFN status in the future. If goods manufactured in China
enter the United States without the benefit of MFN treatment, such goods will
be subject to significantly higher duty rates, ranging between 20% and 66% of
customs value. Any such increased duties or tariffs could significantly
increase the cost or reduce the supply of goods from China.

BACKLOG

At October 31, 1995, 1996, and 1997, the Company had unfilled customer orders
of $38.1 million, $50.0 million and $61.6 million, respectively. This is an
increase of 23.2% for fiscal year end 1997 over fiscal year end 1996. At
January 31, 1997 and 1998, the Company had unfilled customer orders of $47.1
million and $59.4 million, respectively. The backlog at a particular time is
affected by a number of factors, including seasonality and the scheduling of
manufacturing and shipment of products. Orders generally may be canceled by
customers without financial penalty. Accordingly, a comparison of backlog from
period to period is not necessarily meaningful and may not be indicative of
eventual actual shipments to customers. To date, the Company has not
experienced material returns of its products or material cancellations of
orders. The Company expects that substantially all of its backlog at January
31, 1998 will be shipped within six months from such date.

LICENSE AGREEMENTS

Jones New York

In July 1993, the Company entered into a license agreement (the "Jones
License Agreement") with Jones Investment Co., Inc. ("Jones") under which the
Company has the exclusive right to use the Jones New York and Jones New York
Sport names in connection with the development, manufacturing and marketing of
women's footwear (other than performance athletic shoes and bedroom slippers).
The Jones License Agreement covers the United States (including its
territories) and Canada and expires in December 2002. In April 1997 the Company
and Jones amended the Jones License Agreement to, among other things, (i) grant
the Company three, five-year options to extend the Jones License Agreement
through December 2017, subject to the Company meeting certain minimum net sales
amounts, (ii) extend the Jones License Agreement to cover the retail sale of
Jones New York women's footwear by SLJ, (iii) require the Company and SLJ to
pay certain royalties to Jones and (iv) permit Jones to terminate the Jones
License Agreement for SLJ Retail purposes only if the Company is no longer the
managing member of SLJ or if SLJ defaults on any of its royalty payments. The
Jones License Agreement also requires the Company to spend a specified minimum
amount each year on advertising the Jones New York and Jones New York Sport
footwear lines, which obligation may be satisfied through cooperative
advertising. The Jones License Agreement prohibits the Company from
manufacturing, selling, distributing or promoting any merchandise which would
compete as to style, price or quality with the Jones New York and Jones New
York Sport footwear lines. The Jones License

32
<PAGE>

Agreement also requires the Company to (i) employ a person to work exclusively
on a full-time basis to design and develop Jones New York and Jones New York
Sport footwear, (ii) promptly identify to Jones the names of all personnel of
the Company and any and all changes thereof (which personnel shall at all times
be acceptable to Jones) who are responsible for the design, sales,
merchandising and product development of Jones New York and Jones New York
Sport footwear ("Jones Personnel") and (iii) not change, divert or relocate any
Jones Personnel without the prior consent of Jones. A breach by the Company of
its obligations under the Jones License Agreement would permit Jones to
terminate such license agreement. The Jones License Agreement could also be
terminated by the licensor for certain other reasons, including any termination
(including pursuant to resignation) of Mr. Cocozza's employment as Chief
Executive Officer of the Company or the beneficial ownership of any one
stockholder or affiliated group of beneficial stockholders exceeding 15% or
more of the Company's voting stock.

J.G. Hook

In April 1997, the Company entered into a license agreement (the "J.G. Hook
License Agreement") with J.G. Hook, Inc. pursuant to which the Company received
the right to design, develop and market women's and children's shoes under the
J.G. Hook and Hook Sport brand names in exchange for payment of royalties based
on net sales of products marketed under such brand names. The J.G. Hook License
Agreement expires in September 1998, subject to the Company's exercise of two
one-year extension options. The J.G. Hook License Agreement is subject to early
termination for various specified reasons, including any failure by the Company
to meet its royalty obligations thereunder. The Company plans to use the J.G.
Hook label to sell footwear on a first cost basis.

SLJ Retail

In April 1997, the Company entered into a sub-license agreement (the "SLJ
Sub-License Agreement") with SLJ Retail pursuant to which the Company granted
to SLJ Retail a sub-license throughout the United States to use the Jones New
York and Jones New York Sport trademarks in connection with the manufacturing,
promotion and retail sale of women's footwear merchandise bearing such
trademarks. The initial term of the SLJ Sub-License Agreement expires in
December 2002 but is extended automatically for the same period of time as any
extension by the Company of the Jones License Agreement. The SLJ Sub-License
Agreement is subject to early termination for various reasons, including any
termination of the Jones License Agreement.

In April 1997, the Company entered into a retail license agreement (the "SLJ
Sam & Libby License Agreement") with SLJ Retail pursuant to which the Company
granted to SLJ Retail a license, throughout the United States and such other
locations outside the United States in which the Company or its affiliates may
from time to time sell Sam & Libby and Just Libby women's footwear products, to
use the Sam & Libby and Just Libby trademarks in connection with the
manufacturing, advertising, merchandising, promotion and retail sale of women's
footwear merchandise bearing such trademarks; provided however, that such
license does not extend to products to which Inter-Pacific Corporation ("IPC")
has the exclusive rights. IPC is a 40 year old California-based seller and
distributor of men's, women's and children's footwear. Under the SLJ Sam &
Libby License Agreement, SLJ Retail does not have to pay any royalty to the
Company in consideration of the license granted and the services to be
performed by the Company under such agreement. The initial term of the SLJ Sam
& Libby License Agreement expires on January 31, 2047, subject to earlier
termination upon the occurrence of certain specified events.

Inter-Pacific Corporation

In January 1997, the Company entered into a license agreement with IPC. IPC
has the exclusive rights to design, manufacture and distribute Sam & Libby
beachwear type footwear (E.V.A. sandals, jellies, aqua socks and injected
molded slides) for men, women and children for an initial period from January
1997 to May 2000. IPC may also design and manufacture women's slippers bearing
the Sam & Libby trademark. For the use of the Sam & Libby tradename, IPC will
pay the Company royalties at a rate based on sales volume, subject to payment
of minimum royalties of $495,000 over the initial term of the agreement. Upon
satisfaction of certain conditions, IPC may exercise its option to extend the
license agreement until May 2003.

33
<PAGE>

TRADEMARKS

Mootsies Tootsies and Mootsies Kids are registered trademarks of the Company
in the United States. In addition, these trademarks have been registered in
Canada, Japan and Taiwan and trademark registration applications are pending in
several other countries. The Company's United States trademark registration for
Mootsies Tootsies expires in 2000 and the registration for Mootsies Kids
expires in 2003, although both are renewable.

Jones New York and Jones New York Sport are registered trademarks of Jones in
the United States. Under the Jones License Agreement, Jones has the sole right
to defend against any infringement of these trademarks.

Sam & Libby, Just Libby, New Nineties and Jeff & Kristi are registered
trademarks of Sprague. These trademarks were acquired by the Company in August
1996 from Sam & Libby, Inc. and are registered trademarks in the United States
(see Note 1 of "Notes to Consolidated Financial Statements"). In addition, the
Sam & Libby and Just Libby trademarks are registered in over 20 countries
worldwide. Sprague's United States trademark registration of Sam & Libby
expires in 2001 and the registration of Just Libby expires in 2005, although
both are renewable.

COMPETITION

The women's and kids' fashion footwear markets are highly competitive. The
Company's products compete against other branded footwear and, in the case of
Mootsies Tootsies, against private label footwear sold by many large retailers,
including some of the Company's customers. Many of the Company's competitors
have substantially greater financial, distribution and marketing resources, as
well as greater brand awareness than the Company. In addition, the general
availability of offshore manufacturing capacity allows easy access by new
market entrants. The Company believes its ability to compete successfully is
based on its ability to design, develop and market value priced footwear that
reflects current fashion trends.

EMPLOYEES

At January 31, 1998, the Company employed 141 people, including officers,
administrative, selling and warehouse personnel. None of the Company's
employees are represented by a union. The Company considers its relationship
with its employees to be good.

FACILITIES

The Company's headquarters, which includes approximately 10,000 square feet
of office space and 130,000 square feet of warehouse space, is located in
Boston, Massachusetts, approximately 49,000 square feet of which is leased to
an unaffiliated third party. This facility is leased by the Company under a
lease that expires in 2001. The Company also leases a 64,000 square foot
warehouse located near its headquarters in Westwood, Massachusetts. This lease
expires in 1998, subject to a three-year renewal option. The Company also
leases a 215,000 square feet warehouse in Brockton, Massachusetts. This lease
expires in 2007, subject to two five-year options. The Company also holds an
option exercisable in the year 2001 to lease for six years, with two additional
five-year options, an additional 240,000 square feet of space in the same
warehouse facility. The Company also leases a 4,000 square feet showroom in New
York City under a lease that expires in 2001. The Company believes that these
facilities are adequate for its current needs and that it will be able to
obtain additional space at a reasonable cost if required in the future.

LEGAL PROCEEDINGS

The Company is, from time to time, a party to litigation that arises in the
normal course of its business operations. The Company does not believe it is
presently a party to litigation that will have a material adverse effect on its
business operations.

34
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
EXECUTIVE OFFICER OR
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------------
<S> <C> <C> <C>
Maxwell V. Blum......... 72 Chairman of the Board and 1976
Chief Executive Officer
Mark J. Cocozza......... 49 President, Chief Operating 1987
Officer and Director
James J. Tinagero....... 45 Executive Vice President 1996
Betty Ann Blum.......... 47 Executive Vice President, 1979
President of Mootsies Tootsies
and Jones New York Footwear
Divisions, and Director
Marjorie W. Blum........ 42 Vice President--Sales, 1981
Secretary and Director
Richard J. Bakos........ 50 Vice President and Chief 1993
Financial Officer
Stephen A. Fine(1)...... 49 Director 1994
Jonathan K. Layne(1).... 44 Director 1994
Malcolm L. Sherman(1)... 66 Director 1994
</TABLE>
- --------
(1) Currently a member of the Audit Committee and of the Compensation and Stock
Option Committee.

The Audit Committee recommends appointment of auditors, oversees the
accounting function of the Company and reviews and passes upon all transactions
with affiliates and other persons having a material interest in the Company.
The Compensation and Stock Option Committee determines officers' salaries and
bonuses, and administers the Company's 1994 Stock Incentive Plan.

Each director holds office until the next annual meeting of stockholders or
until his or her successor has been elected and qualified. Officers are
appointed by and serve at the discretion of the Board of Directors.

Mr. Maxwell V. Blum founded the Company's business in 1949 and has served as
the Company's Chairman of the Board and Chief Executive Officer since its
incorporation in 1976. Mr. Blum has more than forty years' experience in the
footwear industry. Mr. Blum is the father of Ms. Betty Ann Blum and
Ms. Marjorie Blum and Mr. Blum's wife is the first cousin of Mr. Malcolm L.
Sherman.

Mr. Mark J. Cocozza has served as President and Chief Operating Officer since
October 1993 and prior to that served as President of the Mootsies Tootsies
Division since joining the Company in 1987. Prior to joining the Company, Mr.
Cocozza served as President of the Sperry Top-Sider division of Stride Rite
Corporation. Mr. Cocozza has more than twenty years' experience in the footwear
industry.

Mr. James J. Tinagero joined the Company as Executive Vice President in April
1996 and has served as chairman of SLJ Retail LLC, an affiliate of the Company,
since April 1997. Mr. Tinagero has served as President and Director of
International Sales & Marketing Corporation, a New York based consulting firm
for consumer products companies, from 1993 to 1996, as Executive Vice President
of Bonaventure Textiles, U.S.A., a women's apparel company, from 1992 to 1993,
as President of Albert Nipon, a women's designer

35
<PAGE>

dress company, from 1991 to 1992, and as President of Anne Klein and Company, a
designer sportswear company, from 1987 to 1991. From 1980 to 1987, he held
various executive positions with Stride Rite Corporation.

Ms. Betty Ann Blum, the daughter of Mr. Blum, joined the Company in 1979. Ms.
Blum has served as Executive Vice President of the Company since October 1993
and prior to that served as President of the Mootsies Tootsies and Jones New
York Footwear Divisions and as President of the Company. Ms. Blum has been a
director since 1980.

Ms. Marjorie W. Blum, the daughter of Mr. Blum, joined the Company in 1981
and since then has served as Vice President--Sales, supervising national
accounts and catalog sales for the Mootsies Tootsies division. Ms. Blum has
been a director and Secretary since January 1994.

Mr. Richard J. Bakos joined the Company in 1987 as Controller and since
October 1993 has served as Vice President of Finance and Chief Financial
Officer. Before joining the Company, Mr. Bakos was Group Vice President of
Finance and Administration for the Bodwell Fashion Group of the Wingspread
Corporation. He has more than twenty years' experience in the apparel and
footwear industry.

Mr. Stephen A. Fine, who has served as a member of the Board of Directors of
the Company since May 1994, has been a Director, President and Chief Operating
Officer of The Biltrite Corporation since 1985, and from 1982 to 1985 he served
as Executive Vice-President of Biltrite. From 1970 to 1982, he held various
executive positions with American Biltrite Inc. Mr. Fine is also a Director of
K-Swiss Inc., a manufacturer of athletic footwear.

Mr. Jonathan K. Layne, who has served as a member of the Board of Directors
of the Company since May 1994, has been a partner in the law firm of Gibson,
Dunn & Crutcher LLP since 1987, where he specializes in corporate and
securities law matters. From 1979 to 1986 he was an associate of the same law
firm. Mr. Layne is also a member of the Board of Directors of Amwest Insurance
Group, Inc., an insurance holding company, The Finish Line, Inc., a retailer of
brand name athletic and leisure footwear, activewear and accessories, and K-
Swiss Inc., a manufacturer of athletic footwear.

Mr. Malcolm L. Sherman, who has served as a member of the Board of Directors
of the Company since May 1994, has served as Chairman of the Board and Chief
Executive Officer of EKCO Group Inc., a manufacturer and distributor of
household goods, since 1996 and as a member of its Board of Directors since
1994. Mr. Sherman is also a member of the Board of Directors of One Price,
Inc., a company engaged in the apparel business, since 1991. Mr. Sherman has
served as Chairman of the Board of Steth Tech Corporation, a developer of
medical devices from 1990 to 1996, as Chairman of the Board of Advisors of
Gordon Brothers, a liquidation and asset based lending firm, from 1993 to 1996,
as Chairman of the Board of K. T. Scott Ltd., a company engaged in the home
decor business, from 1990 to 1995, as President and Chief Executive Officer of
Morse Shoe, Inc., a footwear retailer, from 1992 to 1993, as a member of the
Board of Directors of United States Trust Co. from 1980 to 1993, and as a
member of the Board of Directors of Compu Chem Labs Inc., a company
specializing in drugs of abuse and environmental testing, from 1982 to 1993. In
July 1995, K. T. Scott Ltd. filed a petition for bankruptcy under Chapter 11 of
federal bankruptcy laws (which case was converted to a Chapter 7 proceeding in
November 1995). Mr. Sherman is the first cousin of Mr. Blum's wife.

KEY PERSONS

The following persons, although not executive officers of the Company, make
significant contributions to the Company:

Mr. Bradley B. Finn has served as a Divisional Executive and National Sales
Manager for the Mootsies Tootsies Division since joining the Company in 1987.
Prior to joining the Company, Mr. Finn was a Sales Executive for U.S. Shoe
Corp. and Sporto Corp.

36
<PAGE>

Mr. Richard Brandt has served as a Divisional Executive and Product Manager
for Jones New York since joining the Company in 1994. Prior to joining the
Company, Mr. Brandt served as Vice President of Kenneth Cole, New York, and as
Vice President of Jasmine Ltd. Mr. Brandt also has experience as a buyer for
May Department Stores.

Mr. Steven Sousa has served as a Divisional Executive for Sam & Libby Womens
since joining the Company in 1996. Prior to joining the Company, Mr. Sousa
served as Vice President of Kenneth Cole, New York, and in various other
management positions in his 11 years with Kenneth Cole, New York.

Mr. Jorge Domeniconi has served as a Divisional Executive for Sam & Libby
Kids since joining the Company in 1996. Prior to joining the Company, Mr.
Domeniconi served as Vice President of Stride Rite Corporation and in various
other management positions with Stride Rite Corporation.

Mr. Irwin Miller became associated with the Company in 1990 to manage the
Mootsies Kids Division. With the acquisition of the Sam & Libby trademarks and
tradenames in 1996, he is now managing the children's group. Prior to that, Mr.
Miller served as President of the Children's Division of Stride Rite
Corporation, the leading brand of children's shoes in the industry.

Ms. Marilyn M. Faison joined the Company as Product Development Manager in
1988. Prior to joining the Company, Ms. Faison worked for the Bandolino
division of U.S. Shoe Corp. and Jordache shoes in addition to managing her own
independent New York design studio.

Mr. John Kelly has served as Controller since joining the Company in November
1993. Prior to joining the Company, Mr. Kelly served as director of
merchandising for the wholesale division at Stride Rite Corporation from 1989
and prior to that was the controller of the wholesale division.

MANAGEMENT CHANGES UPON CONSUMMATION OF THE OFFERING

Upon consummation of the Offering, Mr. Cocozza will become Chairman of the
Board and Chief Executive Officer in addition to his existing responsibility as
President of the Company. Mr. Blum will resign as Chairman of the Board and
Chief Executive Officer but will remain a member of the Board of Directors of
the Company and will serve as a consultant to the Company. Ms. Betty Ann Blum
and Ms. Marjorie Blum will resign as executive officers and directors of the
Company upon consummation of the Offering but each will remain as an employee
through a transition period. The Company will seek to add two new directors to
replace Ms. Betty Ann Blum and Ms. Marjorie Blum after the consummation of the
Offering.

EMPLOYMENT AGREEMENTS

Effective upon consummation of the Offering, the Company will enter into new
employment agreements with Messrs. Cocozza and Tinagero. Mr. Cocozza's new
employment agreement will expire five years after consummation of the Offering,
subject to automatic renewal each year thereafter unless either the Company or
Mr. Cocozza gives the other party six months notice of its or his intention not
to renew the agreement. Pursuant to this agreement, Mr. Cocozza will be
compensated for the period from the completion of the Offering through the end
of fiscal 1998 at an annualized base rate of $525,000. Mr. Cocozza's bonus for
the period from the completion of the Offering through the end of fiscal 1998
will be determined pursuant to the Company's Senior Management Incentive Plan
established by the Company's Compensation and Stock Option Committee. The
employment agreement will also provide for customary perquisites and the grant
on the date of the closing of the Offering of an additional 75,000 stock
options, each with an exercise price equal to the fair market value on the date
of grant and subject to certain time and stock price performance vesting
provisions. In the event of a termination of Mr. Cocozza's employment without
Cause (as defined in the agreement) following a Change of Control (as defined
in the agreement), Mr. Cocozza will be entitled to receive a cash payment (in
addition to any salary or other amounts then due) based on a formula generally
intended to result in aggregate payments to Mr. Cocozza equal to three times
his average annual

37
<PAGE>

compensation (including bonuses and certain other taxable payments) for the
five-year period preceding the Change of Control. The payment will be reduced
by certain amounts that are taken into account in determining whether Mr.
Cocozza would be subject to the excise tax provisions of Section 4999 of the
Internal Revenue Code. Mr. Cocozza has agreed that if the employment agreement
is terminated prior to its scheduled expiration (or prior to the scheduled
expiration of the extended term of the agreement, if any), he will not compete
against the Company in the footwear industry for a period of 18 months
following the termination of the agreement, subject to certain exceptions.

Mr. Tinagero's new employment agreement expires three years after
consummation of the Offering, subject to automatic renewal each year thereafter
unless either the Company or Mr. Tinagero gives the other party six months
notice of its or his intention not to renew the agreement. Pursuant to this
agreement, Mr. Tinagero will be compensated for the period from the completion
of the Offering through the end of fiscal 1998 at an annualized base rate of
$325,000. Mr. Tinagero's bonuses for the period from the completion of the
Offering through the end of fiscal 1998 will be determined pursuant to the
Company's Senior Management Incentive Plan established by the Company's
Compensation and Stock Option Committee. The employment agreement will also
provide for customary perquisites and the grant on the date of the closing of
the Offering of an additional 25,000 stock options, each with an exercise price
equal to the fair market value on the date of grant and subject to certain time
vesting provisions. If there is a change of control of the Company and if Mr.
Tinagero is terminated in connection therewith, he will be entitled to a
severance payment equal to his total compensation for the 18-month period
immediately prior to the change of control, in addition to the other payments
that the Company is obligated to make to Mr. Tinagero in the event he is
terminated or deemed to be terminated by the Company without cause (whether or
not in connection with a change of control). Mr. Tinagero has agreed that if
the employment agreement is terminated prior to its scheduled expiration (or
prior to the scheduled expiration of the extended term of the agreement, if
any), he will not compete against the Company in the footwear industry for a
period of 12 months following the termination of the agreement, subject to
certain exceptions.

CONSULTING AGREEMENT

Effective upon consummation of the Offering, the Company will enter into a
new consulting agreement with Mr. Blum. Mr. Blum's new consulting agreement
will be on a year-to-year basis. Pursuant to this agreement, Mr. Blum will
provide the Company certain services relating to strategic planning, customer
relations and marketing issues, all as requested by the Chief Executive Officer
of the Company for up to 20 hours per month (with any additional hours to be
provided at an additional hourly fee to be agreed upon at the time such
services are requested). In consideration of Mr. Blum providing such consulting
services to the Company, the Company will provide to Mr. Blum an office, a
secretary, reimbursement for business related (including travel) expenses, an
automobile allowance and health insurance benefits available to senior
executives of the Company under the Company's health plans.

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<PAGE>

CERTAIN TRANSACTIONS

The following is a description of certain transactions in which officers and
directors of the Company and its affiliates or families had a direct or
indirect interest.

One of the Company's customers is a chain of six children's footwear stores
which had been owned or controlled by members of the family of Mr. Maxwell V.
Blum, Chairman and Chief Executive Officer of the Company. Mr. Mark J. Cocozza,
President of the Company, had owned a minority interest in three of the six
stores. Their ownership positions in these stores were sold during fiscal 1996.
Total sales (and cost of sales) to these stores in fiscal 1995, and while they
had an ownership position in 1996 were $365,000 ($229,000) and $237,000
($173,000), respectively. Terms offered to these stores were comparable to
terms offered to other customers purchasing similar amounts of comparable
products. In the past, certain of these stores have paid fees to the Company in
exchange for management and accounting services, although neither Mr. Blum nor
Mr. Cocozza was actively involved in the day-to-day business of these stores.
Such fees aggregated $25,000 and $19,000 in fiscal 1995 and fiscal 1996,
respectively.

Mr. Cocozza and the Company agreed to terminate, effective as of the
completion of the Company's May 1994 initial public offering, a Deferred
Incentive Compensation Agreement entered into in 1988 (the "Compensation
Agreement"). In exchange for his consent to terminate the Compensation
Agreement, Mr. Cocozza was granted a nontransferable option to acquire 888,412
shares of Class A Common Stock at an exercise price of $1.50 per share. The
number of shares subject to the option and the option exercise price were
determined through negotiations between Mr. Cocozza and the Company. The option
is exercisable in whole or in part from time to time during a 15-year period
beginning on January 26, 1995 (the "Exercisability Date"). If following the
Exercisability Date Mr. Cocozza ceases to be employed by the Company for any
reason, his option will cease to be exercisable upon the earlier of (i) the
stated expiration of the option and (ii) the first anniversary of the date as
of which Mr. Cocozza ceased to be employed by the Company. The shares offered
hereby include 300,000 shares of Class A Common Stock issuable pursuant to a
partial exercise of this option to be sold by Mr. Cocozza. The Company also
entered into an arrangement in fiscal 1994 with Mr. Cocozza pursuant to which
the Company, under certain circumstances, will be required to register his
shares of Class A Common Stock (including shares issuable upon the exercise of
Mr. Cocozza's option) under the Securities Act. See "Description of Capital
Stock--Registration Rights."

Prior to its initial public offering in May 1994, the Company was treated for
federal and state income tax purposes as a S corporation under Subchapter S of
the Internal Revenue Code and comparable state tax laws. In connection with the
Company's reorganization, reincorporation and initial public offering, the
Company in March and May 1994 made distributions of S corporation earnings in
the aggregate amount of $20,227,000, of which $4,025,082 was distributed to Mr.
Maxwell V. Blum, $6,553,571 was distributed to Ms. Betty Ann Blum, $6,553,571
was distributed to Ms. Marjorie Blum and $3,094,776 was distributed to a trust
for the benefit of the wife of Mr. Maxwell V. Blum.

The Company and each of Mr. Blum, Ms. Betty Ann Blum, Ms. Marjorie Blum and a
trust for the benefit of Mr. Blum's wife have entered into a tax
indemnification agreement (the "Tax Agreement"). Subject to certain
limitations, the Tax Agreement provides for indemnification to the Selling
Stockholders or to the Company in the event of an adjustment by a taxing
authority that shifts federal and certain state income taxes to the Selling
Stockholders or to the Company, respectively, between periods before and after
the date of termination of the Company's status as a S corporation. The Tax
Agreement also provides for certain adjustments to the S corporation dividends
that were paid in connection with the Company's initial public offering in
certain circumstances if the Company determines that such amounts differed in
the aggregate from the previously undistributed S corporation earnings.

In fiscal 1994, the Company entered into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director and executive
officer of the Company. The Indemnity Agreements provide that the Company will
indemnify the director or officer (the "Indemnitee") against any amounts that
he or

39
<PAGE>

she becomes legally obligated to pay in connection with any claim against him
or her based upon any act, omission, neglect or breach of duty that he or she
may commit, omit or suffer while acting in his or her capacity as a director
and/or officer of the Company; provided that such claim: (i) is not based upon
the Indemnitee's gaining any personal profit or advantage to which he or she is
not legally entitled; (ii) is not for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company within the
meaning of Section 16(b) of the Exchange Act or similar provisions of any state
law; and (iii) is not based upon the Indemnitee's knowingly fraudulent,
deliberately dishonest or willful misconduct. The Indemnity Agreements also
provide that all costs and expenses incurred by the Indemnitee in defending or
investigating such claim shall be paid by the Company in advance of the final
disposition thereof unless the Company, independent legal counsel, the
stockholders of the Company or court of competent jurisdiction determines that:
(i) the Indemnitee did not act in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the
Company; (ii) in the case of any criminal action or proceeding, the Indemnitee
had reasonable cause to believe his or her conduct was unlawful; or (iii) the
Indemnitee intentionally breached his or her duty to the Company or its
stockholders. Each Indemnitee has undertaken to repay the Company for any costs
or expenses so advanced if it shall ultimately be determined by a court of
competent jurisdiction in a final, nonappealable adjudication that he or she is
not entitled to indemnification under the Indemnity Agreements.

In April 1997, the Company completed a transaction to jointly own and operate
approximately 130 retail women's footwear stores through the SLJ Retail joint
venture. The Company and the Butler Group Inc., a wholly owned subsidiary of
General Electric Capital Corporation, own 49% and 51% of SLJ Retail,
respectively. A subsidiary of the Company is the manager of SLJ Retail. The
Company holds an option through February 1, 2000 to purchase additional equity
in SLJ Retail to increase its equity ownership to 55%, subject to achieving
certain operating income levels.

The Company's contribution to SLJ Retail was the provision of exclusive
retail license agreements with respect to the Sam & Libby and Jones New York
brand names, management services for the business of SLJ Retail and access to
the Company's manufacturing resources worldwide. SLJ Retail will purchase
footwear directly at a first cost basis from the same factories as the Company,
as well as factories which the Company does not use. The Butler Group
contributed certain assets consisting of store leases and headquarter assets,
the purchase of a $12.5 million subordinated note and the provision of a bank
guaranty of a $16.0 million term loan all of which is secured by the assets of
SLJ Retail.

Upon consummation of the Offering, the Company will enter into a new
consulting agreement with Mr. Blum for certain specified services for up to 20
hours per month in consideration of certain benefits. See "Management--
Consulting Agreement."

Gibson, Dunn & Crutcher LLP has provided legal services to the Company in
connection with this offering and to the Company and certain affiliates of the
Company regarding certain other matters. The Company expects that such law firm
will render legal services to the Company and its affiliates in the future.
Jonathan K. Layne, a partner of Gibson, Dunn & Crutcher LLP, serves as a member
of the Company's Board of Directors. See "Management--Directors and Executive
Officers" and "Legal Matters."

The Company believes that the terms of all transactions between the Company
and the Selling Stockholders, the officers and directors of the Company and
Gibson, Dunn & Crutcher LLP, or any of their affiliates, described above are no
less favorable to the Company than terms that could have been obtained from
unaffiliated third parties.

40
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the Principal and
Selling Stockholders as of March 17, 1998 and the shares of Common Stock
beneficially owned by each Principal or Selling Stockholder that may be offered
pursuant to this Prospectus. Except as otherwise indicated, to the knowledge of
the Company, all persons listed below have sole voting and investment power
with respect to their securities. Such information has been obtained from the
Principal or Selling Stockholders. The Selling Stockholders are all directors,
officers or five percent stockholders of the Company.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING(1) OWNED AFTER OFFERING(1)(2)(3)(4)
----------------------------------------- ------------------------------------
CLASS A CLASS B CLASS A
-------------------- -------------------- ----------------------- PERCENT OF
PERCENT OF PERCENT OF PERCENT OF COMMON STOCK
NAME AND ADDRESS NUMBER CLASS NUMBER CLASS NUMBER CLASS VOTING POWER
- ------------------------ --------- ---------- --------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Maxwell V. Blum(5)(6)... 16,850 0.44% 871,940 17.22% 100,000(7) 1.10% 1.10%
Mark J. Cocozza(5)...... 935,612 24.37% -- -- 635,612 7.02% 7.02%
Betty Ann Blum(5)....... 32,000 0.83% 1,696,387 33.50% -- -- --
Marjorie W. Blum(5)..... 32,000 0.83% 1,696,387 33.50% -- -- --
David Andelman(5)(8).... -- -- 798,603 15.77% -- -- --
James J. Tinagero....... 51,000 1.33% -- -- 200,000(9) 2.21% 2.21%
Stephen A. Fine......... 20,000 0.52% -- -- 20,000 0.22% 0.22%
Jonathan K. Layne....... 20,000 0.52% -- -- 20,000 0.22% 0.22%
Malcolm L. Sherman...... 20,000 0.52% -- -- 20,000 0.22% 0.22%
FMR Corp.(10)........... 758,800 19.76% -- -- 758,800 8.38% 8.38%
Wynnefield Partners
Small Cap Value, L.P.
(11)................... 126,100 3.28% -- -- 126,100 1.39% 1.39%
All officers and
directors as a group
(nine persons)......... 1,143,762 29.79% 4,264,714 84.23% 1,011,912 11.18% 11.18%
</TABLE>
- --------
(1) The shares of Class A Common Stock underlying options that are exercisable
as of March 17, 1998 or that will become exercisable within 60 days
thereafter are deemed to be outstanding for the purpose of calculating the
beneficial ownership of the holder of such options, but are not deemed to
be outstanding for the purpose of computing the beneficial ownership of
any other person.
(2) Gives effect to the issuance of 588,412 shares of Class A Common Stock
upon exercise of an option that had been granted to Mr. Cocozza, which
option is currently exercisable, provided that Mr. Cocozza (i) is still
employed by the Company on that date or (ii) has ceased to be employed by
the Company on or before such date due only to either (x) Mr. Cocozza's
death or (y) termination of his employment by the Company for other than
cause.
(3) No Class B Common Stock will be outstanding after the consummation of the
Offering.
(4) Does not give effect to the issuance of 801,625 shares of Class A Common
Stock by the Company and the sale of such shares upon exercise of the
Underwriters' overallotment option.
(5) The address of each of the above is 101 Sprague Street, P.O. Box 37,
Readville (Boston), Massachusetts 02137.
(6) Excludes 798,603 shares held in trust for the benefit of Mr. Blum's wife,
as to which Mr. Blum disclaims beneficial ownership.
(7) Mr. Blum intends to donate 100,000 shares to the Maxwell V. Blum Family
Foundation, a private charitable foundation, concurrently with the
consummation of this Offering.
(8) Holds shares as trustee for the benefit of Mr. Blum's wife.
(9) Includes 149,000 shares of Class A Common Stock underlying options that
will become exercisable upon a change of control of the Company. The
consummation of the Offering will result in a change of control of the
Company for purposes of such option.
(10) This information is based solely on a Schedule 13G dated February 10, 1998
filed with the Securities and Exchange Commission. The address of FMR
Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
(11) This information is based solely on a joint Schedule 13D dated March 5,
1998 filed with the Securities and Exchange Commission by Wynnefield
Partners Small Cap Value, L.P. (with respect to 101,000 shares) and
Wynnefield Small Cap Value Offshore Fund Ltd. (with respect to 25,100
shares). The address of Wynnefield Partners Small Cap Value, L.P. is One
Penn Plaza, Suite 4720, New York, New York 10119.

41
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 1,000,000 shares of
Preferred Stock, par value $.01 per share, and 30,000,000 shares of Common
Stock, par value $.01 per share.

COMMON STOCK

Each share of Common Stock is designated as either Class A Common Stock or
Class B Common Stock. The Company is authorized to issue 20,000,000 shares of
Class A Common Stock and 10,000,000 shares of Class B Common Stock. As of the
date hereof, there are 2,535,770 shares of Class A Common Stock outstanding and
5,063,317 shares of Class B Common Stock outstanding. Upon consummation of the
Offering, there will be 7,979,937 shares of Class A Common Stock (8,568,349
shares of Class A Common Stock after giving effect to the issuance of 588,412
shares of Class A Common Stock upon the exercise of an option that had been
granted to Mr. Cocozza, the Company's President (see "Management")) and no
shares of Class B Common Stock outstanding. Authorized shares of Class A Common
Stock will be increased by an amount equal to any corresponding decrease
determined by the Board of Directors in the number of authorized shares of
Class B Common Stock. The issued and outstanding shares of Class A Common Stock
and Class B Common Stock have been, and the shares of Class A Common Stock
offered hereby will be, duly authorized, validly issued, fully paid and
nonassessable.

The Board of Directors has determined not to issue additional shares of Class
B Common Stock, except in conjunction with stock splits, reverse stock splits,
stock dividends, reclassifications and similar transactions and events
regarding the Class A Common Stock that would otherwise have the effect of
changing the conversion rights of the Class B Common Stock relative to the
Class A Common Stock (the "Adjustments"). In addition, as soon as practicable
after the consummation of the Offering, the Company intends to seek stockholder
approval to amend its Certificate of Incorporation to eliminate the
authorization for the issuance of Class B Common Stock. Consequently, assuming
the implementation of such amendment, the Company will have only one class of
Common Stock and one class of Preferred Stock. See Footnote 2 to
"Capitalization."

Holders of Common Stock do not have any preemptive rights or rights to
subscribe for additional securities of the Company. Shares of Common Stock are
not redeemable and there are no sinking fund provisions.

While the shares of Class A Common Stock are not convertible into any other
series or class of the Company's securities, each share of Class B Common Stock
is freely convertible into one share (subject to the Adjustments) of Class A
Common Stock at the option of the Class B stockholder. All shares of Class B
Common Stock shall automatically convert to shares of Class A Common Stock (on
a share-for-share basis, subject to the Adjustments) on the earliest record
date for an annual meeting of the Company's stockholders on which the number of
shares of Class B Common Stock outstanding is less than 5% of the total number
of shares of Common Stock outstanding. Shares of Class B Common Stock may not
be transferred to third parties (except for transfers to certain family members
and in other limited circumstances). Any impermissible transfer of Class B
Common Stock will result in the automatic conversion of such shares into shares
of Class A Common Stock.

Subject to the preferences applicable to Preferred Stock outstanding at the
time, holders of shares of Common Stock are entitled to dividends if, when and
as declared by the Board of Directors from funds legally available therefor,
and are entitled, in the event of liquidation, to share ratably in all assets
remaining after payment of liabilities and Preferred Stock preferences, if any.
In the case of dividends or other distributions payable in Common Stock, shares
of Class B Common Stock shall be distributed with respect to Class B Common
Stock unless the Board of Directors determines to distribute shares of Class A
Common Stock with respect to Class B Common Stock. In all other respects each
share of Class A Common Stock and Class B Common Stock will be treated equally
with respect to dividends and distributions.

42
<PAGE>

Holders of Class A Common Stock are entitled to one vote for each share held
of record, and holders of Class B Common Stock are entitled to ten votes for
each share held of record. The Class A Common Stock and the Class B Common
Stock vote together as a single class on all matters submitted to a vote of
stockholders (including the election of directors), except that, in the case of
a proposed amendment to the Company's Certificate of Incorporation that would
alter the powers, preferences or special rights of either the Class A Common
Stock or the Class B Common Stock, the class of Common Stock to be altered
shall vote on the amendment as a separate class. Shares of Common Stock do not
have cumulative voting rights with respect to the election of directors.

The Company's Board of Directors has seven members. Either the directors or
the stockholders may amend the Bylaws to change the size of the Board, subject
to the requirement in the Certificate of Incorporation that the entire Board
must consist of at least three and no more than twelve directors. The directors
stand for reelection at each annual meeting of the stockholders and vacancies
on the Board, including a vacancy caused by an increase in the size of the
Board, may be filled by the remaining directors. Any stockholder entitled to
vote at a meeting regarding the election of directors may nominate a person for
election as a director, provided that the stockholder gives the Company written
notice of the nomination at least 90 days before the meeting (or if later, the
seventh day after the first public announcement of the date of such meeting),
which notice must contain specified information about the stockholder and the
nominee.

The Company's Certificate of Incorporation provides that any action that can
be taken at a meeting of the stockholders may be taken by written consent in
lieu of the meeting if the Company receives consents signed by stockholders
having the minimum number of votes that would be necessary to approve the
action at a meeting at which all shares entitled to vote on the matter were
present. However, the Company does not presently expect the written consent
procedure to be utilized in the future.

The Company's Transfer Agent and Registrar for the Common Stock is The First
National Bank of Boston.

The Class A Common Stock is traded on the National Market System of NASDAQ
under the symbol "MAXS."

PREFERRED STOCK

The Company's Board of Directors is authorized without further action by the
stockholders, to issue, from time to time, shares of Preferred Stock in one or
more class or series, and to fix or alter the designations, powers and
preferences, and relative, participating, optional or other rights, if any, and
qualifications, limitations or restrictions thereof, including, without
limitation, dividend rights (and whether dividends are cumulative), conversion
rights, if any, voting rights (including the number of votes, if any, per
share), rights and terms of redemption (including sinking fund provisions, if
any), redemption price and liquidation preferences of any unissued shares or
wholly unissued series of Preferred Stock, and the number of shares
constituting any such class or series and the designation thereof, and to
increase or decrease the number of shares of any such class or series and the
designation thereof, and to increase or decrease the number of shares of any
such class or series subsequent to the issuance of shares of such class or
series, but not below the amount then outstanding. In the future, the Board of
Directors could authorize and issue preferred stock with terms and conditions
that could discourage offers to acquire the Company.

REGISTRATION RIGHTS

Mr. Cocozza (the "Holder") is entitled to certain rights with respect to the
registration under the Securities Act of his shares of Common Stock (the
"Registrable Shares") under the terms of certain agreements to which the
Company is a party. The agreements provide that in the event the Company
proposes to register any of its securities under the Securities Act for its own
account at any time or times, subject to certain exceptions, the Holder shall
be entitled to include Registrable Shares in any such registration, subject

43
<PAGE>

to the right of the managing underwriter of any such offering to exclude for
marketing reasons some or all of such Registrable Shares from such
registration. The Holder, if holding 50,000 or more Registrable Shares, may
also require the Company to register all or part of his shares on Form S-3 up
to one time each year (up to a maximum amount not to exceed 175,000 shares per
year) if the Company then qualifies for use of such form, subject to certain
conditions and limitations. The Company has agreed to separately register under
the Securities Act on Form S-8 (if available) the 588,412 shares of Class A
Common Stock issuable upon exercise of Mr. Cocozza's option, which was granted
in the first quarter of fiscal 1994 in exchange for the termination of a pre-
existing deferred compensation arrangement. The Company is generally required
to bear the expenses of all such registrations (except underwriting discounts
and commissions relating to the Registrable Shares) and the fees of one special
counsel to the Holder. The Holder will be required to indemnify the Company,
and the Company will be required to indemnify the Holder, against liabilities
incurred by the indemnified party under certain circumstances. See "Shares
Eligible for Future Sale."

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of Class A Common Stock by existing stockholders pursuant to
Rule 144 ("Rule 144") promulgated under the Securities Act, pursuant to
registration rights granted to certain holders of options to purchase the
Company's Class A Common Stock, or pursuant to other registrations or
exemptions from registration under the Securities Act, could have an adverse
effect on the price of the shares of Class A Common Stock. Upon consummation of
the Offering, the Company will have outstanding 7,979,937 shares of Class A
Common Stock, all of which will be freely tradable, and no shares of Class B
Common Stock. In addition, the Company has reserved for issuance (i) 725,080
shares of Class A Common Stock upon exercise of options granted under the
Company's 1994 Stock Option Plan, (ii) 14,150 shares upon the exercise of
options available for grant under the 1994 Plan, and (iii) 588,412 shares of
Class A Common Stock issuable upon exercise of an option granted to Mr.
Cocozza, the Company's President. Mr. Cocozza's option is currently exercisable
until January 6, 2010, and Mr. Cocozza may require the Company to register his
shares of Class A Common Stock under the Securities Act, which would permit Mr.
Cocozza to resell a certain amount of his shares without complying with Rule
144. See "Description of Capital Stock--Registration Rights." If such
registration statement is filed and becomes effective, then Mr. Cocozza
generally would be able to sell a certain amount of his shares in the open
market.

Furthermore, of the 725,080 shares of Class A Common Stock reserved for
issuance upon exercise of options granted under the Company's 1994 Stock Option
Plan, 200,000 of such shares will be issuable upon exercise of an option
granted to Mr. James Tinagero, the Company's Executive Vice President, all of
which shares have been registered under the Securities Act. Such option will
become exercisable upon a change of control of the Company, and hence, such
option will become exercisable upon the consummation of the Offering. If
Mr. Tinagero exercises such option, he would be able to sell such shares
issuable under such option in the open market.

Upon consummation of the Offering, the Company will grant to Messrs. Cocozza
and Tinagero 75,000 and 25,000 additional stock options, respectively, subject
to certain time and other vesting provisions. The Company will register under
the Securities Act on Form S-8 such 100,000 shares issuable upon exercise of
these additional 100,000 options.

Of the 2,535,770 shares of Class A Common Stock issued and outstanding,
2,375,000 were sold publicly in the Company's initial public offering and
150,000 shares were sold to the public subsequent to the conversion of 150,000
shares of Class B Common Stock by Mr. Blum. The remaining 10,770 outstanding
shares of Class A Common Stock are "restricted securities," as that term is
defined in Rule 144, and may only be sold pursuant to a registration statement
under the Securities Act or an applicable exemption from registration
thereunder, including exemptions provided by Rule 144. All of such shares are
presently eligible for resale under Rule 144.

44
<PAGE>

In general, under Rule 144, a person (or persons whose shares are aggregated)
who has beneficially owned his shares for at least one year, including persons
who may be deemed "affiliates" of the Company as defined under the Act, may
sell within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the Company's Class A Common
Stock or the average weekly trading volume during the four calendar weeks prior
to such sale. Rule 144 also permits the sale of an unlimited number of shares
by a person who is not an "affiliate" of the Company and who has not been an
"affiliate" of the Company at any time during the three months preceding the
sale and who has beneficially owned his shares for at least two years.

The Company and each of its officers and directors and each of the Selling
Stockholders have agreed that, for a period of 90 days after the effective date
of the Offering, they will not offer, sell or otherwise dispose of any shares
of Class A Common Stock without the prior written consent of Lehman Brothers
Inc. No prediction can be made as to the effect that future sales of Class A
Common Stock, or the availability of shares of Class A Common Stock for future
sales, will have on the market prices for the Class A Common Stock prevailing
from time to time. Sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Class A Common Stock, or the perception that such sales
could occur could impair the Company's ability to raise capital through the
future sale of its equity securities. See "Principal and Selling Stockholders"
and "Risk Factors--Shares Eligible for Future Sale; Registration Rights."

45
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF CLASS A COMMON STOCK

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Class A Common
Stock by a holder that is not a "U.S. person" (a "non-U.S. holder"). A "U.S.
person" is a person or entity that, for U.S. federal income tax purposes, is a
citizen or resident of the United States, a corporation or partnership created
or organized in the United States or under the laws of the United States or of
any political subdivision thereof, an estate whose income is includible in
gross income for U.S. federal income tax purposes regardless of its source or a
trust subject to the supervision of a court within the United States and the
control of a United States person as described in Section 7701 (a) (30) of the
Internal Revenue Code of 1986, as amended (the "Code"). An individual will be
deemed to be a resident of the United States for U.S. federal income tax
purposes if: (1) such individual is a lawful permanent resident of the United
States at any time during the taxable year, (2) such individual makes an
election to be treated as a resident pursuant to the provisions of the Code; or
(3) such individual is present in the United States for an aggregate of 183
days or more during the calendar year. In addition, an individual will be
presumed to be a resident of the United States for U.S. federal income tax
purposes if such individual is present in the United States on at least 31 days
in the current calendar year and for an aggregate of 183 days during the three-
year period ending with the current calendar year (counting, for such purposes
all of the days present in the United States during the current year, one-third
of the days present during the immediately preceding year and one-sixth of the
days present during the second preceding year). This presumption of residence
may be rebutted if an individual is present in the United States for fewer than
183 days during the current year and it is established that such individual has
a "tax home" in a foreign country and a "closer connection" to such foreign
country than to the United States, with such terms being defined in the Code.
Furthermore, the determination of residence under the Code may be rebutted by
application of an applicable tax treaty or convention between the United States
and an appropriate foreign country that may also treat such individual as a tax
resident of such country. A special definition of U.S. resident applies for
U.S. federal estate tax purposes. Resident aliens are subject to U.S. federal
tax as if they were U.S. citizens.

This discussion is based on Code and administrative and judicial
interpretations as of the date hereof, all of which may be changed either
retroactively or prospectively. This discussion does not address all the
aspects of U.S. federal income and estate taxation that may be relevant to non-
U.S. holders in light of their particular circumstances, nor does it address
tax consequences under the laws of any state, local or foreign taxing
jurisdiction.

Prospective holders should consult their own tax advisors about the
particular U.S. federal tax consequences to them of holding and disposing of
Class A Common Stock, as well as any tax consequences that may arise under the
laws of any state, local or foreign taxing jurisdiction.

DIVIDENDS

Distributions by the Company to a non-U.S. holder will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company. Such distributions ordinarily
will be subject to withholding of United States federal income tax on a gross
basis (that is, without allowance of deductions) at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty, unless the
dividends are treated as effectively connected with the conduct by the non-U.S.
holder of a United States trade or business or, if an income tax treaty
applies, as attributable to a United States permanent establishment of the non-
U.S. holder. Dividends that are effectively connected with such a trade or
business (or, if an income tax treaty applies, that are attributable to a
United States permanent establishment of the non-U.S. holder) will be subject
to tax on a net basis (that is, after allowance of deductions) at graduated
rates, in the same manner as domestic stockholders are taxed with respect to
such dividends and are generally not subject to withholding. Any such dividends
received by a non-U.S. holder that is a corporation may also be subject to an
additional branch profits tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.

46
<PAGE>

Under current U.S. Treasury regulations, dividends paid to an address outside
the United States are presumed to be paid to a resident of the country of
address (unless the payor has knowledge to the contrary), including for
purposes of determining the applicability of a tax treaty rate (the "address
rule"). Thus, non-U.S. holders who receive dividends at addresses outside the
United States generally are not yet required to file tax forms to obtain the
benefit of an applicable treaty rate. Under recently issued Treasury
Regulations scheduled to take effect January 1, 1999 (the "Final Regulations"),
the address rule will no longer apply, and a non-U.S. holder who seeks to claim
the benefit of an applicable treaty rate would be required to satisfy certain
certification and other requirements. The Final Regulations also provide
special rules regarding whether, for purposes of determining the applicability
of an income tax treaty, dividends paid to a non-U.S. holder that is an entity
should be treated as being paid to the entity itself or to the persons holding
an interest in that entity.

A non-U.S. holder must file a properly completed and executed Internal
Revenue Service ("IRS") Form 4224 (or, under the Final Regulations, for
distributions after December 31, 1998, an IRS Form W-8) with the Company's
withholding agent certifying that the investment to which the distribution
relates is effectively connected with the conduct of a United States trade or
business or is attributable to a permanent establishment of such non-U.S.
holder in order to qualify for the exemption from withholding under the
effectively connected income and permanent establishment exemptions discussed
above.

Distributions in excess of current or accumulated earnings and profits of the
Company will not be taxable to a non-U.S. holder to the extent that they do not
exceed the adjusted basis of the stockholder's Class A Common Stock, but rather
will reduce the adjusted basis of such stock. To the extent that such
distributions exceed the adjusted basis of a non-U.S. holder's Class A Common
Stock, they will give rise to gain from the sale or exchange of his stock, the
tax treatment of which is described below. Under current regulations, if it
cannot be determined at the time a distribution is made whether or not such
distribution will be in excess of current or accumulated earnings and profits,
the distribution will generally be treated as a dividend for withholding
purposes. Under the Final Regulations, the Company will generally be permitted
to make a reasonable estimate of the amount of such distribution that should be
treated as a dividend and therefore subject to withholding.

A non-U.S. holder of Class A Common Stock who is eligible for a reduced rate
of United States withholding tax pursuant to a tax treaty or whose dividends
have otherwise been subjected to withholding in an amount that exceeds such
holder's United States federal income tax liability, may obtain a refund by
filing an appropriate claim for a refund with the IRS.

GAIN ON DISPOSITION OF CLASS A COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax in
respect of gain recognized on a disposition of Class A Common Stock unless (i)
the Gain is effectively connected with the conduct of a trade or business of
the non-U.S. holder (or of a partnership that holds the Class A Common Stock in
which the non-U.S. holder is a member) in the United States, (ii) in the case
of a non-U.S. holder who is an individual and holds the Class A Common Stock as
a capital asset (or is a member in a partnership that holds the Class A Common
Stock as a capital asset), such holder is present in the United States for 183
or more days in the taxable year of the disposition and either (x) has a "tax
home" in the United States (as specially defined for U.S. federal income tax
purposes) or (y) maintains an office or other fixed place of business in the
United States and the income from the sale of the stock is attributable to such
office or other fixed place of business, (iii) the non-U.S. holder is subject
to tax pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates or (iv) under certain circumstances the Company is or has been a
"U.S. real property holding corporation" for federal income tax purposes. The
Company is not currently, has not been and does not anticipate becoming a "U.S.
real property holding corporation" for U.S. federal income tax purposes.

47
<PAGE>

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

The Company must report annually to the IRS and to each non-U.S. holder the
amount of dividends paid to, and the tax withheld with respect to such holder,
regardless of whether tax was actually withheld. That information may also be
made available to the tax authorities of the country in which the non-U.S.
holder resides.

United States federal backup withholding (which generally is withholding
imposed at the rate of 31% on certain payments to persons not otherwise exempt
who fail to furnish certain identifying information to the IRS) will generally
not apply to dividends paid to a non-U.S. holder that are subject to
withholding at the 30% rate (or would be so subject but for a reduced rate
under an applicable treaty). In addition, the payor of dividends may rely on
the payee's foreign address in determining that the payee is exempt from backup
withholding, unless the payor has knowledge that the payee is a U.S. person,
except that with regard to payments made after December 31, 1998, a non-U.S.
holder will be entitled to such an exemption only if it provides an IRS Form W-
8 (or satisfies certain documentary evidence requirements for establishing that
it is a non-United States person).

The backup withholding and information reporting requirements also apply to
the gross proceeds paid to a non-U.S. holder upon the disposition of Class A
Common Stock by or through a U.S. office of a U.S. or foreign broker, unless
the holder certifies to the broker under penalty of perjury as to its name,
address and status as a non-U.S. holder or the holder otherwise establishes an
exemption. Information reporting requirements (but not backup withholding) will
apply to a payment of the proceeds of a disposition of Class A Common Stock by
or through a foreign office of (i) a U.S. person, (ii) a foreign person 50% or
more of whose gross income for certain periods is effectively connected with
the conduct of a trade or business in the United States or (iii) a foreign
person that is a "controlled foreign corporation" for U.S. federal income tax
purposes, unless the broker has documentary evidence in its records that the
holder is a non-U.S. holder (and the broker has no actual knowledge to the
contrary) and certain other conditions are met, or the holder otherwise
establishes an exemption. Neither backup withholding nor information reporting
will generally apply to a payment of the proceeds of a disposition of Class A
Common Stock by or through a foreign office of a foreign broker not subject to
the preceding sentence.

Any amounts withheld under the backup withholding rules will be refunded or
credited against the non-U.S. holder's United States federal income tax
liability, provided that required information is furnished to the IRS.

FEDERAL ESTATE TAXES

Class A Common Stock owned or treated as owned by an individual who is
neither a citizen nor a resident of the United States for federal estate tax
purposes at the date of death will be included in such individual's estate for
U.S. federal estate tax purposes and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise. Estates of
nonresident aliens are generally allowed a statutory credit for U.S. estate tax
purposes. Estate tax treaties may permit a larger credit. A special definition
of U.S. resident applies for U.S. federal estate purposes.

48
<PAGE>

UNDERWRITING

Under the terms of, and subject to the conditions in, the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, the Underwriters named below,
for whom Lehman Brothers Inc., Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated and Tucker Anthony Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Selling
Stockholders, and the Selling Stockholders have agreed to sell to each
Underwriter. the aggregate number of shares of Class A Common Stock set forth
opposite their respective names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Lehman Brothers Inc. ..............................................
Bear, Stearns & Co. Inc. ..........................................
BT Alex. Brown Incorporated........................................
Tucker Anthony Incorporated........................................
---------
Total.......................................................... 5,344,167
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
to purchase shares of Class A Common Stock are subject to certain conditions,
and that if any of the foregoing shares of Class A Common Stock are purchased
by the Underwriters pursuant to the Underwriting Agreement, all the shares of
Class A Common Stock agreed to be purchased by the Underwriters must be so
purchased.

The Company and the Selling Stockholders have been advised that the
Underwriters propose to offer the shares of Class A Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain selected dealers (who may include the Underwriters)
at such public offering price less a selling concession not in excess of $
per share. The selected dealers may re-allow a concession not in excess of
$ per share to certain brokers and dealers. After the Offering, the public
offering price, the concession to selected dealers and the reallowance may be
changed by the Underwriters.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act and to contribute to payments that the Underwriters
may be required to make in respect thereof.

The Company has granted to the Underwriters an option to purchase up to an
aggregate of 801,625 shares of Class A Common Stock, exercisable solely to
cover over-allotments, at the offering price to the public less the
underwriting discounts and commissions shown on the cover page of this
Prospectus. Such option may be exercised at any time until 30 days after the
date of the Underwriting Agreement. To the extent that the option is exercised,
each Underwriter will be committed, subject to certain conditions, to purchase
a number of the additional shares of Class A Common Stock proportionate to such
Underwriter's initial commitment as indicated in the preceding table.

The Company and the Selling Stockholders of the Company have agreed pursuant
to the Underwriting Agreement that they will not, subject to certain limited
exceptions, directly or indirectly, offer, sell or otherwise dispose of any
shares of Class A Common Stock or any securities convertible into or
exchangeable or exercisable for any such shares for a period of 90 days after
the effective date of the Offering without the prior written consent of Lehman
Brothers Inc. In addition, all officers and directors of the Company have
agreed pursuant to lock-up agreements that they will not, subject to certain
limited exceptions, directly or indirectly, offer, sell or otherwise dispose of
any shares of Class A Common Stock or any securities convertible into or
exchangeable for such shares without the prior written consent of Lehman
Brothers Inc. for 90 days after the effective date of the Offering.

Until the distribution of the Class A Common Stock is completed, rules of the
Securities and Exchange Commission (the "Commission") may limit the ability of
the Underwriters and certain selling group members

49
<PAGE>

to bid for and purchase shares of Class A Common Stock. As an exception to
these rules, the Representatives are permitted to engage in certain
transactions that stabilize the price of the Class A Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Class A Common Stock.

In addition, if the Representatives over-allot (i.e., if they sell more
shares of Class A Common Stock than are set forth on the cover page of this
Prospectus), and thereby create a short position in the Class A Common Stock in
connection with the Offering, the Representatives may reduce that short
position by purchasing Class A Common Stock in the open market. The
Representatives also may elect to reduce any short position by exercising all
or part of the over-allotment option described herein.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Class A Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.

50
<PAGE>

LEGAL MATTERS

Certain legal matters with respect to the shares of Class A Common Stock
offered hereby will be passed upon for the Company by Gibson, Dunn & Crutcher
LLP, Los Angeles, California. Jonathan K. Layne, a member of the Company's
Board of Directors, is a partner of Gibson, Dunn & Crutcher LLP. Milbank,
Tweed, Hadley & McCloy, New York, New York will act as counsel to the
Underwriters.

EXPERTS

The financial statements and schedule of the Company as of October 31, 1996
and 1997, and for each of the years in the three-year period ended October 31,
1997, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the periodic reporting and other information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material may be obtained
by mail from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Company is required to file electronic versions of these documents with the
Commission through the Commission's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Material filed by the Company can also be inspected at the offices
of The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.

The Company has filed with the Commission a registration statement on Form S-
2 (the "Registration Statement") under the Securities Act with respect to the
Class A Common Stock offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain items of which are omitted as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any agreement or other document referred
to herein are not necessarily complete, and reference is made to the copy of
such agreement or other document filed as an exhibit or schedule to the
Registration Statement and each such statement shall be deemed qualified in its
entirety by such reference. For further information, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith, which
are available for inspection without charge at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of the material containing this information may be obtained
from the Commission upon payment of the prescribed fees.

51
<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents have been filed by the Company with the Commission
(File No. 0-24026) pursuant to the Exchange Act and are hereby incorporated by
reference:

1. Annual Report on Form 10-K for the fiscal year ended October 31, 1997;
and

2. Quarterly Report on Form 10-Q for the quarterly period ended January
31, 1998.

All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering of the Class A Common
Stock shall be deemed to be incorporated by reference herein. Any statement
contained herein or in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in any
subsequently filed document that is incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Investor
Relations, Maxwell Shoe Company Inc., 101 Sprague Street, Readville (Boston),
MA 02137 Attn: Director of Investor Relations. Telephone inquiries may be
directed to the Director of Investor Relations at (617) 364-5090.

52
<PAGE>

MAXWELL SHOE COMPANY INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................... F-2
Consolidated Financial Statements
Consolidated Balance Sheets as of October 31, 1996 and 1997 and January
31, 1998 (unaudited).................................................... F-3
Consolidated Statements of Income for the years ended October 31, 1995,
1996 and 1997 and for the three months ended January 31, 1997
(unaudited) and 1998 (unaudited)........................................ F-4
Consolidated Statements of Cash Flows for the years ended October 31,
1995, 1996 and 1997 and for the three months ended January 31, 1997
(unaudited) and 1998 (unaudited)........................................ F-5
Consolidated Statement of Changes in Stockholders' Equity for the years
ended October 31, 1995, 1996 and 1997 and for the three months ended
January 31, 1998 (unaudited)............................................ F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Maxwell Shoe Company Inc.

We have audited the accompanying consolidated balance sheets of Maxwell Shoe
Company Inc. as of October 31, 1996 and 1997, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each
of the three years in the period ended October 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Maxwell Shoe Company Inc. at October 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended October 31, 1997 in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Boston, Massachusetts
December 15, 1997

F-2
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS--EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
OCTOBER 31,
--------------- JANUARY 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $10,393 $ 3,129 $ 1,493
Accounts receivable, trade (net of allowance for
doubtful accounts and discounts of $730 in 1996,
$739 in 1997)................................... 16,853 28,594 29,715
Inventory, net................................... 12,175 20,141 25,696
Prepaid expenses................................. 127 251 295
Deferred income taxes............................ 821 1,526 1,374
------- ------- -------
Total current assets............................... 40,369 53,641 58,573
Property and equipment, net........................ 1,039 1,393 3,208
Trademarks......................................... 5,500 5,133 5,042
Other assets....................................... 12 12 12
------- ------- -------
$46,920 $60,179 $66,835
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 880 $ 2,197 $ 3,080
Accrued expenses................................. 3,300 6,767 10,322
Income taxes payable............................. 433 -- --
Deferred income taxes............................ 91 111 131
Current portion of capital lease obligation...... 142 125 125
------- ------- -------
Total current liabilities.......................... 4,846 9,200 13,658
Capital lease obligation........................... 469 344 313
Stockholders' equity:
Preferred stock, par value $.01, 1,000 shares
authorized, none outstanding.................... -- -- --
Class A common stock, par value $.01, 20,000
shares authorized, 2,525 outstanding............ 25 25 25
Class B common stock, par value $.01, 10,000
shares authorized, 5,063 shares outstanding..... 51 51 51
Additional paid-in capital....................... 27,312 27,312 27,312
Retained earnings................................ 14,217 23,247 25,476
------- ------- -------
Total stockholders' equity......................... 41,605 50,635 52,864
------- ------- -------
$46,920 $60,179 $66,835
======= ======= =======
</TABLE>

See accompanying notes.

F-3
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31, JANUARY 31,
--------------------------- -------------------
1995 1996 1997 1997 1998
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................... $101,870 $104,337 $134,211 $ 28,764 $ 36,328
Cost of sales................. 77,912 79,915 98,230 21,503 26,491
-------- -------- -------- --------- ---------
Gross profit.................. 23,958 24,422 35,981 7,261 9,837
Operating expenses:
Selling..................... 4,777 5,314 7,614 1,770 2,378
General and administrative.. 8,804 10,099 13,368 2,793 3,802
-------- -------- -------- --------- ---------
13,581 15,413 20,982 4,563 6,180
-------- -------- -------- --------- ---------
Operating income.............. 10,377 9,009 14,999 2,698 3,657
Other expenses (income):
Interest.................... 255 38 110 7 11
Other, net.................. 399 (579) 325 11 49
-------- -------- -------- --------- ---------
654 (541) 435 18 60
-------- -------- -------- --------- ---------
Income before income taxes.... 9,723 9,550 14,564 2,680 3,597
Income taxes.................. 3,889 3,629 5,534 1,018 1,367
-------- -------- -------- --------- ---------
Net income.................... $ 5,834 $ 5,921 $ 9,030 $ 1,662 $ 2,230
======== ======== ======== ========= =========
Earnings per share
Basic....................... $ .77 $ .78 $ 1.19 $ .22 $ .29
======== ======== ======== ========= =========
Diluted..................... $ .70 $ .72 $ 1.06 $ .20 $ .26
======== ======== ======== ========= =========
Shares used to compute
earnings per share
Basic....................... 7,588 7,588 7,588 7,588 7,588
======== ======== ======== ========= =========
Diluted..................... 8,311 8,261 8,537 8,358 8,702
======== ======== ======== ========= =========
</TABLE>

See accompanying notes.

F-4
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31, JANUARY 31,
---------------------------- --------------------
1995 1996 1997 1997 1998
-------- ------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income................ $ 5,834 $ 5,921 $ 9,030 $ 1,662 $ 2,230
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation and
amortization........... 213 242 672 157 267
Deferred income taxes... (153) 240 (685) (220) 172
Doubtful accounts
provision.............. 150 50 125 30 31
Changes in operating
assets and liabilities:
Accounts receivable... (1,571) 931 (11,866) (9,225) (1,152)
Inventory............. 4,157 219 (7,966) (7,307) (5,556)
Prepaid expenses...... (2) 706 (124) (94) (44)
Accounts payable...... (1,768) (48) 1,317 2,022 883
Income taxes payable.. (306) 433 (433) 1,514 597
Accrued expenses...... (897) 791 3,467 2,731 2,957
-------- ------- --------- --------- ---------
Net cash provided (used)
by operating activities.. 5,657 9,485 (6,463) (8,730) 385
Investing activities:
Purchase of trademark .... -- (5,500) -- -- --
Purchases of property and
equipment................ (144) (101) (659) (146) (1,990)
-------- ------- --------- --------- ---------
Net cash used by investing
activities............... (144) (5,601) (659) (146) (1,990)
Financing activities:
Payments on capital lease
obligation............... (163) (176) (142) (41) (31)
Proceeds from lease
financing................ 717 -- -- -- --
-------- ------- --------- --------- ---------
Net cash provided (used)
by financing activities.. 554 (176) (142) (41) (31)
-------- ------- --------- --------- ---------
Net increase (decrease) in
cash and cash
equivalents.............. 6,067 3,708 (7,264) (8,917) (1,636)
Cash and cash equivalents
at beginning of year..... 618 6,685 10,393 10,393 3,129
-------- ------- --------- --------- ---------
Cash and cash equivalents
at end of year........... $ 6,685 $10,393 $ 3,129 $ 1,476 $ 1,493
======== ======= ========= ========= =========
Interest paid............. $ 255 $ 38 $ 110 $ 7 $ 11
======== ======= ========= ========= =========
Income taxes paid......... $ 4,975 $ 2,380 $ 6,807 $ 107 $ 442
======== ======= ========= ========= =========
</TABLE>

See accompanying notes.

F-5
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
---------------- ----------------
ADDITIONAL
NUMBER OF NUMBER OF PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ --------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31,
1994................... 2,375 $24 5,213 $52 $27,312 $ 2,462 $29,850
Net income for 1995... 5,834 5,834
Shares converted...... 150 1 (150) (1) --
----- --- ----- --- ------- ------- -------
Balance at October 31,
1995................... 2,525 25 5,063 51 27,312 8,296 35,684
Net income for 1996... 5,921 5,921
----- --- ----- --- ------- ------- -------
Balance at October 31,
1996................... 2,525 25 5,063 51 27,312 14,217 41,605
Net income for 1997... 9,030 9,030
----- --- ----- --- ------- ------- -------
Balance at October 31,
1997................... 2,525 25 5,063 51 27,312 23,247 50,635
Net income for the
three months ended
January 31, 1998
(unaudited).......... 2,230 2,230
----- --- ----- --- ------- ------- -------
Balance at January 31,
1998
(unaudited)............ 2,525 $25 5,063 $51 $27,312 $25,477 $52,865
===== === ===== === ======= ======= =======
</TABLE>

See accompanying notes.

F-6
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS -- EXCEPT PER SHARE AMOUNTS)

OCTOBER 31, 1997

1. INTERIM FINANCIAL STATEMENTS

The unaudited financial statements at January 31, 1998 and for the three
months ended January 31, 1997 and 1998 have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, considered necessary for a fair presentation have been
included. The results of the interim periods presented herein are not
necessarily indicative of the results to be expected for any other interim
period or the full year.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All intercompany accounts and transactions
have been eliminated in consolidation.

Concentration of Credit Risk

The Company sells footwear for women and children to retailers located
throughout the United States, Canada and Japan. The Company performs periodic
credit evaluations of its customers' financial condition and generally does
not require collateral. Credit losses have been within or below management's
expectations. In fiscal 1995, 1996 and 1997 one customer accounted for
approximately 14%, 15%, and 19% respectively, of net sales. During 1996, this
one customer was acquired by another customer of the Company. Had these two
customers been treated as one account for fiscal years 1995 and 1996, they
would have accounted for approximately 18% and 22% respectively, of net sales.

Use of Estimates

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.

Recognition of Revenue

Sales are recognized upon shipment of products.

Cash and Cash Equivalents

Cash, checking accounts and all highly-liquid debt instruments with original
maturities three months or less are deemed to be cash and cash equivalents.

Inventory

Inventory is valued at the lower of cost or market, using the first-in,
first-out method.

F-7
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Long Term Assets

Property and equipment are stated at cost. Depreciation is provided using
both straight line and accelerated methods over the estimated useful lives of
these assets or the lease term, if shorter. The estimated useful lives of these
assets are as follows:

<TABLE>
<CAPTION>
ASSET USEFUL LIFE
----- -----------
<S> <C>
Furniture and fixtures....................................... 5 Years
Warehouse equipment.......................................... 7 Years
Leasehold improvements....................................... 7 Years
Computer equipment........................................... 5 Years
</TABLE>

In August 1996, the Company acquired the rights to the Sam & Libby and
certain related trademarks and tradenames for $5.5 million cash. The trademarks
and tradenames will be amortized on a straight line basis over 15 years, their
estimated useful lives. Amortization began in 1997 when sale of product with
the trademark names commenced. Accumulated amortization at October 31, 1997 was
$367.

Operating Expenses

General and administrative expenses include the cost of warehousing and
shipping operations.

Advertising Expenses

Advertising costs are expensed as incurred. Advertising expense (including
cooperative advertising with retailers) amounted to $1,449, $1,546, and $2,502
for the years ended October 31, 1995, 1996 and 1997, respectively.

Income Taxes

The Company utilizes the liability method for accounting for income taxes.
Deferred tax assets and liabilities are determined based on differences between
financial reporting and income tax bases of assets and liabilities and are
measured using the enacted tax rates and law that will be in effect when the
differences reverse. Deferred tax assets may be reduced by a valuation
allowance to reflect the uncertainty associated with their ultimate
realization.

Forward Exchange Contracts

The Company uses forward exchange contracts to manage its foreign currency
exposure. Realized and unrealized gains and losses on contracts that hedge
anticipated cash flows are determined by comparison of contract values to
current market values upon execution of a contract (realized) and at each
balance sheet date for open contracts (unrealized). Resulting gains and losses
are recognized in other income and expense ($41 loss in 1995, $275 gain in 1996
and $76 loss in 1997).

Stock Based Compensation

The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and, accordingly, recognizes no compensation expense for
the stock option grants.

F-8
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). These provisions require the Company to disclose pro
forma net income and earnings per share amounts as if compensation related to
grants of stock options were recognized based on the fair value of such options
(see Note 7).

NET INCOME PER SHARE

For all periods presented, the difference between basic and diluted shares
used in the computation of earnings per share are the common equivalent shares
resulting from outstanding common stock options. In 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, Earnings per Share. Statement 128 replaced the previously reported
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to the Statement 128
requirements. For all periods presented, the difference between basic and
diluted shares used in the computation of earnings per share are the common
equivalent shares resulting from outstanding common stock options.

In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" (FAS 130) and Statement No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (FAS 131). FAS 130 establishes standards
for reporting and displaying comprehensive income and its components. FAS 131
establishes standards for public companies to report information about
operating segments in financial statements, and supersedes FAS 14, "Financial
Reporting for Segments of a Business Enterprise," but retains the requirements
to report information about major customers. FAS 130 and FAS 131 are effective
for the Company in fiscal 1999. The Company does not believe the adoption of
these Statements will have a material effect on the Company's financial
statements.

3. RELATED PARTY TRANSACTIONS

One of the principal stockholders and another officer of the Company had
owned a chain of six retail stores that purchase footwear from the Company.
Their ownership position in these stores was sold during fiscal 1996. Total
sales (and cost of sales) to these stores in fiscal 1995, and while they had an
ownership position in 1996, were $365 ($229) and $237 ($173), respectively. In
addition, the Company has provided administrative services to these stores.
Fees for such services, as negotiated between the parties, totaled $25 and $19
in fiscal 1995 and 1996, respectively.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at October 31:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Warehouse equipment........................................... $1,275 $1,278
Furniture and fixtures........................................ 523 641
Leasehold improvements........................................ 398 635
Computer equipment............................................ 285 485
Other......................................................... 4 4
------ ------
2,485 3,043
Less accumulated depreciation................................. 1,446 1,650
------ ------
Property and equipment, net................................... $1,039 $1,393
====== ======
</TABLE>

F-9
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT -- (CONTINUED)

At October 31, 1996 and 1997, property and equipment included assets recorded
under capital leases of $1,047. Accumulated depreciation of such assets was
$468 and $637 at October 31, 1996, and 1997, respectively. Depreciation
expense, including amortization of assets recorded under capital leases, for
the years ended October 31, 1995, 1996 and 1997 amounted to $213, $242 and
$305, respectively.

5. BANK BORROWINGS

The Company has a revolving line of credit pursuant to a loan agreement with
Bank of Boston. The loan agreement provides that the bank will both advance
funds directly to the Company and issue letters of credit on behalf of the
Company. The total credit line available shall not exceed an amount which is
the lesser of (i) an amount determined under a formula based upon qualified
accounts receivable and inventory balances, or (ii) $25,000.

Direct borrowings bear interest at the bank's base rate. At October 31, 1997,
the Company had outstanding letters of credit totaling $10.9 million for the
purchase of inventory and approximately $14.1 million available under the line
of credit. The line of credit is secured by substantially all of the Company's
assets.

6. ACCRUED EXPENSES

Accrued expenses consist of the following at October 31:

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Inventory purchases........................................... $1,149 $3,394
Compensation.................................................. 1,455 2,653
Employee benefit plan contribution............................ 142 248
Other......................................................... 554 472
------ ------
$3,300 $6,767
====== ======
</TABLE>

7. STOCKHOLDERS' EQUITY

Preferred Stock

The Company's Charter authorizes the issuance of 1,000,000 shares of
preferred stock. The Company's Charter provides that the Board of Directors of
the Company may authorize the issuance of one or more series of preferred stock
having such rights, including voting, conversion and redemption rights, and
such preferences, including dividend and liquidation preferences, as the Board
may determine without any further action by the stockholders of the Company.
There are no shares of preferred stock currently outstanding.

Common Stock

Each share of Class B Common Stock is freely convertible into one share of
Class A Common Stock at the option of the Class B stockholders. Holders of
Class A Common Stock are entitled to one vote for each share held of record,
and holders of Class B Common Stock are entitled to ten votes for each share
held of record. The Class A Common Stock and the Class B Common Stock vote
together as a single class on all matters submitted to a vote of stockholders
(including the election of directors), except that, in the case of a proposed
amendment to the Company's Certificate of Incorporation that would alter the
powers, preferences or special rights of either the Class A Common Stock or the
Class B Common Stock, the class of Common Stock to be altered shall vote on the
amendment as a separate class. Shares of Common Stock do not have cumulative
voting rights with respect to the election of directors.

F-10
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. STOCKHOLDERS' EQUITY-- (CONTINUED)

Stock Options

Under the 1994 Stock Incentive Plan (the Plan), the Board of Directors has
reserved 750,000 shares of Class A Common Stock for issuance upon exercise of
options or grants of other awards under the Plan. Except for options granted to
non-employee directors, which vest immediately, options generally vest annually
over a four-year period.

In the first quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS
123). FAS 123 encourages companies to adopt the fair value method of accounting
for employee stock options. Under this method, compensation expense for stock-
based compensation plans is measured at the grant date based on the fair value
of the award and is recognized over the service period.

In accordance with FAS 123, the Company has elected to continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," (APB 25) and related interpretations in accounting for its employee
stock options. Under APB 25, no compensation expense is recognized as long as
the exercise price equals the market price of the underlying stock on the date
of grant.

Pro forma information regarding net income and earnings per share is required
by FAS 123, which also requires that the information be determined as if the
Company had accounted for its employee stock options and other stock-based
compensation granted subsequent to October 31, 1995 under the fair value method
of that Statement. The fair value for these options was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1996 and 1997: risk-free interest rates
ranging from 5.26% to 6.89%; dividend yield of 0%; volatility factor of the
expected market price of the Company's common stock of 63.4%; and a weighted
average expected life of 5.1 years for options granted. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting period.

<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
-------------
1996 1997
------ ------
<S> <C> <C>
Pro forma:
Net income................................................ $5,758 $8,731
Earnings per share:
Basic..................................................... $ .76 $ 1.15
Diluted................................................... $ .70 $ 1.02
Weighted average fair value of options granted during the
period..................................................... $ 3.53 $ 3.92
</TABLE>

During the initial phase-in period, the effects of applying FAS 123 for
recognizing compensation expense may not be representative of the effects on
reported net income or loss for future years because the options granted by the
Company vest over several years and additional awards may be made in future
years.

F-11
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. STOCKHOLDERS' EQUITY -- (CONTINUED)

Presented below is a summary of the status of the stock option plan and
related transactions:

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
1995 1996 1997
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year....... 104,700 $10.38 294,250 $ 9.47 670,850 $7.46
Granted.................. 198,000 $ 9.00 382,500 $ 5.96 129,500 $6.45
Cancelled................ (8,450) $ 9.81 (5,900) $10.38 (64,500) $9.00
------- ------- -------
Options outstanding at
end of year............. 294,250 $ 9.47 670,850 $ 7.46 735,850 $7.15
======= ======= =======
Options exercisable at
end of year............. 44,408 102,324 214,405
======= ======= =======
</TABLE>

The following table summarizes information about stock options outstanding
under the stock option plan at October 31, 1997:

<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
------------------------------ -----------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
RANGE OF EXERCISE PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
----------------------- ------- ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C>
$5.00 - $ 7.75............. 512,000 8.6 $6.08 121,930 $6.26
$9.00 - $10.38............. 223,850 6.9 $9.58 92,475 $9.77
------- -------
735,850 8.1 $7.15 214,405 $8.25
======= =======
</TABLE>

At October 31, 1996 and 1997, there were 79,150 shares and 14,150 shares
available, respectively, for future grants under stock option plans. In
December 1997, the Board of Directors reserved an additional 300,000 shares of
Class A Common Stock for issuance upon exercise of options or grants of other
awards under the 1994 Stock Incentive Plan. The shares reserved are subject to
the approval of the stockholders at the Company's April 1998 annual meeting.

In 1994, in consideration for the termination of a deferred compensation
agreement, the Board of Directors approved a non-transferable stock option
grant to the President for the purchase of 888,412 shares of Class A Common
Stock at an exercise price of $1.50 per share. The grant was outside of the
Company's stock option plan, and the stock options were immediately
exercisable. At October 31, 1997, all of the options granted were outstanding.

F-12
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of October 31 were as
follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets:
Stock option compensation................................... $ 2,800 $ 2,800
Inventory reserve........................................... 376 571
Allowance for doubtful accounts............................. 292 295
Accrued compensation........................................ -- 386
Inventory capitalization.................................... 153 274
------- -------
3,621 4,326
Valuation allowance for deferred tax assets................... (2,800) (2,800)
------- -------
Total deferred tax assets..................................... 821 1,526
Deferred tax liabilities:
Depreciation................................................ 91 111
------- -------
Total deferred tax liabilities................................ 91 111
------- -------
Net deferred tax assets....................................... $ 730 $ 1,415
======= =======
</TABLE>

FAS 109 requires a Company to recognize a valuation allowance if it is more
likely than not that some portion or all of the deferred tax asset will not be
realized. The stock option compensation, discussed in Note 7, will be
deductible for tax reporting only upon the exercise of the option. The ultimate
amount of the compensation deduction cannot be determined currently as it is
not certain when, if ever, the holder of the option will ultimately exercise
the option, or the value of the tax deduction that the Company would realize.

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current:
Federal............................................. $3,183 $3,011 $5,023
State............................................... 859 378 1,196
------ ------ ------
Total current......................................... 4,042 3,389 6,219
Deferred:
Federal............................................. (130) 204 (582)
State............................................... (23) 36 (103)
------ ------ ------
Total deferred........................................ (153) 240 (685)
------ ------ ------
$3,889 $3,629 $5,534
====== ====== ======
</TABLE>

The reconciliation of income tax computed at the U.S. federal statutory tax
rate to the effective income tax rate is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate........................................... 34% 34% 34%
State income taxes, net of federal tax benefit.............. 6 4 4
--- --- ---
Effective tax rate.......................................... 40% 38% 38%
=== === ===
</TABLE>

F-13
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. PROFIT-SHARING PLAN

The Company has a contributory 401(k) profit-sharing plan covering
substantially all employees. The plan requires the Company to match 100% of
employee contributions up to 2% of total employee compensation. The plan also
allows for additional discretionary Company contributions. Total plan expense
amounted to $156, $200 and $300 for fiscal years 1995, 1996 and 1997,
respectively.

10. COMMITMENTS

The Company leases equipment and office and warehouse space under long-term
non-cancelable operating leases which expire at various dates through January
31, 2007. These leases require the Company to pay the real estate taxes on the
real property. The Company also leases equipment under capital leases.

At October 31, 1997, future minimum payments under such leases were as
follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1998..................................................... $151 $1,225
1999..................................................... 151 1,026
2000..................................................... 142 1,003
2001..................................................... 123 1,066
2002..................................................... -- 660
Later years.............................................. -- 2,550
---- ------
Total minimum lease payments............................. $567 $7,530
======
Amounts representing interest............................ (98)
----
Capital lease obligation (including current portion)..... $469
====
</TABLE>
Rent expense for the years ended October 31, 1995, 1996 and 1997 was $605,
$639 and $831, respectively.

The Company is a licensee under two agreements which allow for the
manufacture and sale of various items of footwear. The agreements require the
payment of royalties on qualified product sales and generally guarantee minimum
royalty payments regardless of sales volume. In April 1997, the Company
exercised its option to renew the license agreement with Jones Investment Co.,
Inc. (the Jones Agreement) through December 31, 2002 which requires minimum
royalty payments ranging from $800 to $1,250 per annum during the period ending
December 31, 2002. The April 1997 amendment also granted the Company three
five-year option periods to renew through December 2017, subject to satisfying
certain conditions. The three option periods require minimum royalty payments
of $1,250 per annum. In April 1997, the Company entered into a license
agreement with J. G. Hook, Inc. (the Hook agreement) for an initial 18 month
period ending September 30, 1998, with two one-year option periods.

In January 1997, the Company entered into a license agreement with Inter-
Pacific Corporation (IPC), which provides IPC with the exclusive rights to
design, manufacture and distribute Sam & Libby beachwear type footwear for an
initial term of January 1997 to May 2000. For the use of the Sam & Libby
tradename, IPC will pay the Company royalties based on qualified product sales
subject to payment of minimum royalties of $495 over the initial term of the
agreement. Upon satisfaction of certain conditions, IPC may exercise its option
to extend the license agreement until May 2003.

On April 14, 1997 the Company completed a transaction to own and operate
approximately 130 retail women's footwear stores through a joint venture, SLJ
Retail LLC (SLJ Retail), which will sell a complete

F-14
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS -- (CONTINUED)

selection of women's footwear under the Sam & Libby and Jones New York brand
names. Initially, the joint venture will be 49% owned by the Company, which
will account for its ownership under the equity method, and 51% owned by the
Butler Group, Inc., a wholly owned subsidiary of General Electric Capital
Corporation. The Company also holds an option through February 1, 2000 to
purchase additional equity in the joint venture to increase its equity
ownership to 55%. Under certain circumstances, the Company may be obligated to
acquire the ownership interest of the Butler Group at a value based upon the
operating results of SLJ Retail. The Company also entered into an agreement to
provide management services to SLJ Retail for $500 per annum.

Summarized financial information of SLJ Retail as of October 31, 1997 and for
the period from April 14, 1997 (date of inception) to October 31, 1997 is as
follows: current assets--$17,559, noncurrent assets--$7,352, current
liabilities--$4,933, noncurrent liabilities--$26,532, net sales--$7,050, gross
profit--$4,107 and net operating loss--($6,430). The results reflect
significant start up costs associated with store openings and implementing a
new data processing system. The Company has not recognized any portion of SLJ
Retail's net operating losses through October 31, 1997 because, under the
equity method of accounting, the Company does not recognize any losses beyond
the carrying value of its investment in SLJ Retail, which is zero.

Simultaneously with the formation of SLJ Retail, the Company entered into a
sub-license agreement with SLJ Retail pursuant to which the Company granted to
SLJ Retail a sub-license of its rights under the Jones Agreement noted above.
The initial term of this sub-license agreement expires in December 2002, but is
extended automatically for the same period of time as any extension by the
Company of the Jones Agreement. The sub-license agreement is subject to early
termination for various reasons, including any termination of the Jones
Agreement. In addition, the Company entered into a retail license agreement
(the "Retail License Agreement") with SLJ Retail pursuant to which the Company
granted to SLJ Retail a license, throughout the United States and such other
locations outside the United States, in which SLJ Retail may manufacture and
sell Sam & Libby women's footwear products, provided however, that such license
does not extend to products to which IPC has the exclusive rights. Under the
Retail License Agreement, SLJ Retail does not have to pay any royalty to the
Company in consideration of the license granted. The initial term of the Retail
License Agreement expires on January 31, 2047, subject to earlier termination
upon the occurrence of certain specified events.

The Company has entered into forward exchange contracts in anticipation of
future purchases of inventory denominated in foreign currency, principally the
Spanish peseta. At October 31, 1997, forward exchange contracts totalling $700
were outstanding with settlement dates ranging from November 3, 1997 through
January 30, 1998. Maximum risk of loss on these contracts is the amount of the
difference between the spot rate at the date of contract delivery and the
contracted rate. The Company expects that future inventory purchases will
require sufficient foreign currency to meet these commitments.

F-15
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly results for the fiscal
years ended October 31, 1996 and October 31, 1997 and the quarter ended January
31, 1998.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------
APRIL JULY
JANUARY 31, 30, 31, OCTOBER 31,
----------- ------- ------- -----------
<S> <C> <C> <C> <C>
Fiscal 1996
Net sales........................ $23,705 $26,774 $30,222 $23,636
Gross profit..................... 5,821 5,917 7,009 5,675
Net income....................... 1,452 1,530 1,920 1,019
Net income per share
Basic............................ $ .19 $ .20 $ .25 $ .13
======= ======= ======= =======
Diluted.......................... $ .18 $ .19 $ .23 $ .12
======= ======= ======= =======
Fiscal 1997
Net sales........................ $28,764 $31,073 $36,833 $37,541
Gross profit..................... 7,261 9,161 10,173 9,386
Net income....................... 1,662 2,190 2,965 2,213
Net income per share
Basic............................ $ .22 $ .29 $ .39 $ .29
======= ======= ======= =======
Diluted.......................... $ .20 $ .26 $ .35 $ .25
======= ======= ======= =======
Fiscal 1998
Net sales........................ $36,328
Gross profit..................... 9,837
Net income....................... 2,230
Net income per share
Basic............................ $ .29
=======
Diluted.......................... $ .26
=======
</TABLE>

F-16
<PAGE>

[Copy of current Sam & Libby ad.]
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE CLASS A COMMON STOCK OFFERED HEREBY BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE ANY SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 14
Price Range of Class A Common Stock....................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Selected Consolidated Financial Data ..................................... 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 18
Business.................................................................. 23
Management................................................................ 35
Certain Transactions...................................................... 39
Principal and Selling Stockholders........................................ 41
Description of Capital Stock.............................................. 42
Shares Eligible for Future Sale........................................... 44
Certain United States Federal Tax Considerations for Non-U.S. Holders of
Class A Common Stock..................................................... 46
Underwriting.............................................................. 49
Legal Matters............................................................. 51
Experts................................................................... 51
Available Information..................................................... 51
Incorporation of Certain Documents by Reference........................... 52
Index to Consolidated Financial Statements................................ F-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

5,344,167 SHARES

MAXWELL SHOE COMPANY INC.

CLASS A COMMON STOCK

[LOGO OF MAXWELL SHOE COMPANY INC.]

------------------

PROSPECTUS
, 1998

------------------

LEHMAN BROTHERS

BEAR, STEARNS & CO. INC.

BT ALEX. BROWN

TUCKER ANTHONY
INCORPORATED

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table itemizes the expenses payable by the Registrant in
connection with the offering of the securities being registered, other than
underwriting discounts. Pursuant to a registration rights agreement, the
Selling Stockholders will not share any portion of these expenses. All the
amounts shown are estimates except the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee and the NASDAQ listing fee.

<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission............. $31,954.28
Filing Fee--National Association of Securities Dealers, Inc...... 12,177
NASDAQ Listing Fee...............................................
Accounting Fees and Expenses.....................................
Legal Fees and Expenses (other than Blue Sky)....................
Blue Sky Fees and Expenses, including Legal Fees.................
Printing, including Registration Statement, Prospectus, etc......
Transfer Agent and Registrar Fees................................
Miscellaneous Expenses...........................................
----------
Total.......................................................... $
==========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article IX of the Registrant's Certificate of Incorporation and Article VII
of its Bylaws provide for the indemnification by the Company of each director,
officer and employee of the Registrant to the fullest extent permitted by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended. Section 145 of the Delaware General Corporation Law provides in
relevant part that a corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such person's conduct was unlawful.

In addition, Section 145 provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and

II-1
<PAGE>

reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Delaware law further provides
that nothing in the above-described provisions shall be deemed exclusive of any
other rights to indemnification or advancement of expenses to which any person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.

The Registrant has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director and executive officer of the
Registrant. The Indemnity Agreements provide that the Company will indemnify
the director or officer (the "Indemnitee") against any amounts that he or she
becomes legally obligated to pay in connection with any claim against him or
her based upon any act, omission, neglect or breach of duty that he or she may
commit, omit or suffer while acting in his or her capacity as a director and/or
officer of the Company; provided that such a claim: (i) is not based upon the
Indemnitee's gaining any personal profit or advantage to which he or she is not
legally entitled; (ii) is not for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company within the
meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or
similar provisions of any state law; and (iii) is not based upon the
Indemnitee's knowingly fraudulent, deliberately dishonest or willful
misconduct. The Indemnity Agreements also provide that all costs and expenses
incurred by the Indemnitee in defending or investigating such claim shall be
paid by the Company in advance of the final disposition thereof unless the
Company, independent legal counsel, the stockholders of the Company or a court
of competent jurisdiction determines that: (i) the Indemnitee did not act in
good faith and in a manner that he or she reasonably believe to be in or not
opposed to the best interests of the Company; (ii) in the case of any criminal
action or proceeding, the Indemnitee had reasonable cause to believe his or her
conduct was unlawful; or (iii) the Indemnitee intentionally breached his or her
duty to the Company or its stockholders. Each Indemnitee has undertaken to
repay the Company for any costs or expenses so advanced if it shall ultimately
be determined by a court of competent jurisdiction in a final, nonappealable
adjudication that he or she is not entitled to indemnification under the
Indemnity Agreements.

The Registrant maintains an insurance policy insuring its directors and
officers against certain liabilities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:
<TABLE>
<C> <S>
1 Form of Underwriting Agreement*
5 Opinion of Gibson, Dunn & Crutcher LLP*
10.1 1994 Stock Incentive Plan (incorporated by reference to
exhibit 10.1 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.2.1 Form of Employee Nonqualified Stock Option Agreement pursuant
to 1994 Stock Incentive Plan (incorporated by reference to
exhibit 10.2.1 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.2.2 Form of Employee Incentive Stock Option Agreement pursuant to
1994 Stock Incentive Plan (incorporated by reference to
exhibit 10.2.2 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.2.3 Form of Nonemployee Director Stock Option Agreement pursuant
to 1994 Stock Incentive Plan (incorporated by reference to
exhibit 10.2.3 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.3 Form of Restricted Stock Agreement pursuant to 1994 Stock
Incentive Plan (incorporated by reference to exhibit 10.3 to
the Registrant's Form S-1 Registration Statement No. 33-
74768)
10.4 Form of Indemnity Agreement between Maxwell Shoe Company Inc.
and each of each of its directors and executive officers
(incorporated by reference to exhibit 10.4 to the
Registrant's Form S-1 Registration Statement No. 33-74768)
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
10.5 Form of Tax Indemnification Agreement between Maxwell Shoe
Company Inc. and each of Maxwell V. Blum, Eleanor S. Blum,
Betty Ann Blum and Marjorie Blum (incorporated by reference
to exhibit 10.5 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.6 Lease dated as of May 15, 1991 by and between George Shapiro,
Arthur S. Goldberg and Sidney Shapiro, Trustees of the
Shapiro Properties Realty Trust, as lessor, and Maxwell Shoe
Co., Inc., as lessee (incorporated by reference to
exhibit 10.7 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.7 Lease dated as of November 17, 1993 by and between Trustees
of Bradshaw Westwood Trust, as landlord, and Maxwell Shoe
Co., Inc., as tenant (incorporated by reference to exhibit
10.8 to the Registrant's Form S-1 Registration Statement
No. 33-74768)
10.8 Agreement of Lease between Anon Realty Associates, L.P., as
successor lessor to 1414 Americas Company and Maxwell Shoe
Co., Inc., as lessee (incorporated by reference to exhibit
10.9 to the Registrant's Form S-1 Registration Statement
No. 33-74768)
10.9 Loan and Security Agreement dated May 30, 1991 between
Maxwell Shoe Co., Inc. and The First Bank of Boston, as
amended March 11, 1993, June 22, 1993, and August 31, 1993
(incorporated by reference to exhibit 10.10 to the
Registrant's Form S-1 Registration Statement No. 33-74768)
10.10 Promissory Note dated March 11, 1993 issued by Maxwell Shoe
Co., Inc. to The First National Bank of Boston (incorporated
by reference to exhibit 10.11 to the Registrant's Form S-1
Registration Statement No. 33-74768)
10.11 License Agreement dated July 1, 1993 between Jones Investment
Co., Inc. and Maxwell Shoe Co., Inc. (incorporated by
reference to exhibit 10.12 to the Registrant's Form S-1
Registration Statement No. 33-74678)
10.12 Form of Registration Rights Agreement between Maxwell Shoe
Company Inc. on the one hand and Maxwell V. Blum, Betty A.
Blum, Marjorie Blum, Mark J. Cocozza, and Joseph Aborn, as
trustee of the Eleanor S. Blum Trust (incorporated by
reference to exhibit 10.13 to the Registrant's Form S-1
Registration Statement No. 33-74768)
10.13 Employment Agreement dated as of January 26, 1994 between
Maxwell Shoe Co., Inc. and Mark J. Cocozza (incorporated by
reference to exhibit 10.14 to the Registrant's Form S-1
Registration Statement No. 33-74768)
10.14 Stock Option and Registration Rights Agreement dated as of
January 26, 1994 between Maxwell Shoe Co., Inc. and Mark J.
Cocozza (incorporated by reference to exhibit 10.15 to the
Registrant's Form S-1 Registration Statement No. 33-74768)
10.15 Master Lease Agreement dated as of July 18, 1994 between
Maxwell Shoe Company Inc. and BancBoston Leasing Inc.
(incorporated by reference to exhibit 10.23 to the
Registrant's Form 10-K for the fiscal year ended October 31,
1994)
10.16 Assumption Agreement dated July 7, 1995 between BancBoston
Leasing Inc. and Maxwell Shoe Company Inc. (incorporated by
reference to exhibit 10.24 to the Registrant's Form 10-K for
the fiscal year ended October 31, 1995)
10.17 Letter Agreement dated January 25, 1995 between Legas Realty
Corp., as successor lessor to S.L. Green Properties Inc., as
successor to Anon Realty Associates, L.P., and Maxwell Shoe
Company Inc. (incorporated by reference to exhibit 10.25 to
the Registrant's Form 10-K for the fiscal year ended
October 31, 1995)
</TABLE>

II-3
<PAGE>

<TABLE>
<C> <S>
10.18 First Amendment to License Agreement dated October 2, 1995
between Jones Investment Co., Inc., and Maxwell Shoe Company
Inc. (incorporated by reference to Exhibit 10.26 to the
Registrant's Form 10-K for the fiscal year ended October 31,
1995)
10.19 Trademark and Intellectual Property Rights Purchase and Sale
Agreement dated July 2, 1996 between Sam & Libby, Inc. and
Maxwell Shoe Company Inc. (incorporated by reference to
exhibit 10.21 to the Registrant's Form 10-K for the fiscal
year ended October 31, 1996)
10.20 License Agreement dated January 8, 1997 between Inter-Pacific
Trading Corporation d/b/a Inter-Pacific Corporation and
Maxwell Shoe Company Inc. (incorporated by reference to
exhibit 10.22 to the Registrant's Form 10-K for the fiscal
year ended October 31, 1996)
10.21 License Agreement dated April 1, 1997 between J.G. Hook, Inc.
and Maxwell Shoe Company Inc. (incorporated by reference to
exhibit 10.31 to the Registrant's Form 10-K for the fiscal
year ended October 31, 1997)
10.22 Sublease Agreement dated June 16, 1997 between Macy's East,
Inc. and Maxwell Shoe Company Inc. (incorporated by reference
to exhibit 10.32 to the Registrant's Form 10-K for the fiscal
year ended October 31, 1997)
10.23 Lease Agreement dated June 16, 1997 between John H. Finley,
III as trustee of Brockton Oak Real Estate Trust And Maxwell
Shoe Company Inc. (incorporated by reference to exhibit 10.33
to the Registrant's Form 10-K for the fiscal year ended
October 31, 1997)
10.24 Contribution Agreement dated as of April 14, 1997 by and among
The Butler Group Inc., Maxwell Shoe Company Inc. and Maxwell
Retail Inc. (incorporated by reference to exhibit 10.1 to the
Registrant's Form 8-K filed May 5, 1997)
10.25 Operating Agreement of SLJ Retail LLC dated as of April 14,
1997 by and between The Butler Group Inc. and Maxwell Retail
Inc. (incorporated by reference to exhibit 10.2 to the
Registrant's Form 8-K filed May 5, 1997)
10.26 Option Agreement dated as of April 14, 1997 by and among The
Butler Group Inc., Maxwell Shoe Company Inc., Maxwell Retail
Inc. and SLJ Retail LLC (incorporated by reference to
exhibit 10.3 to the Registrant's Form 8-K filed May 5, 1997)
10.27 Services Agreement dated as of April 14, 1997 by and between
Maxwell Shoe Company Inc. and SLJ Retail LLC (incorporated by
reference to exhibit 10.4 to the Registrant's Form 8-K filed
May 5, 1997)
10.28 Non-Compete Agreement dated as of April 14, 1997 by and among
SLJ Retail LLC, Maxwell Shoe Company Inc., Maxwell V. Blum,
Betty Ann Blum, Marjorie W. Blum, Mark J. Cocozza, David
Andelman, as trustee of the Eleanor S. Blum Trust, Maxwell
Retail Inc. and Sprague Company (incorporated by reference to
exhibit 10.5 to the Registrant's Form 8-K filed May 5, 1997)
10.29 Retail Opportunity Agreement dated as of April 14, 1997 by and
among SLJ Retail LLC, Maxwell Shoe Company, Inc., Maxwell V.
Blum, Betty Ann Blum, Marjorie W. Blum, David Andelman, as
trustee of the Eleanor S. Blum Trust, Maxwell Retail Inc. and
Sprague Company (incorporated by reference to exhibit 10.6 to
the Registrant's Form 8-K filed May 5, 1997)
</TABLE>

II-4
<PAGE>

<TABLE>
<C> <S>
10.30 Registration Rights Agreement dated as of April 14, 1997 by
and among Maxwell Shoe Company Inc., The Butler Group Inc.,
Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, Mark J.
Cocozza and David Andelman, as trustee of the Eleanor S. Blum
Trust (incorporated by reference to exhibit 10.7 to the
Registrant's Form 8-K filed May 5, 1997)
10.31 Second Amendment to License Agreement dated as of April 14,
1997 by and between Maxwell Shoe Company Inc. and Jones
Investment Co., Inc. (incorporated by reference to exhibit
10.8 to the Registrant's Form 8-K filed May 5, 1997)
10.32 Trademark Sublicense Agreement dated as of April 14, 1997 by
and between Maxwell Shoe Company Inc. and SLJ Retail LLC
(incorporated by reference to exhibit 10.9 to the Registrant's
Form 8-K filed May 5, 1997)
10.33 Third Amendment to License Agreement dated as of March 16,
1998 by and between Maxwell Shoe Company Inc. and Jones
Investment Co., Inc.
10.34 First Amendment to the Trademark Sublicense Agreement dated as
of March 16, 1998 by and between Maxwell Shoe Company Inc. and
SLJ Retail LLC
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5)*
23.2 Consent of Ernst & Young LLP
</TABLE>
- --------
* To be filed by amendment

(b) Financial Statement Schedules:

Schedule II--Valuation

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities rising under the Securities Act of
1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the repayment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, Commonwealth of Massachusetts, on March 17,
1998.

MAXWELL SHOE COMPANY INC.

/s/ Mark J. Cocozza
By __________________________________
Mark J. Cocozza
President and Chief Operating
Officer

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Maxwell V. Blum Chairman of the Board and March 17, 1998
- ------------------------------------ Chief Executive Officer
Maxwell V. Blum (Principal Executive
Officer)

/s/ Mark J. Cocozza President and Chief March 17, 1998
- ------------------------------------ Operating Officer
Mark J. Cocozza

/s/ James J. Tinagero Executive Vice President March 17, 1998
- ------------------------------------ (Principal Financial
James J. Tinagero Officer)

/s/ Richard J. Bakos Vice President Finance and March 17, 1998
- ------------------------------------ Chief Financial Officer
Richard J. Bakos (Principal Accounting
Officer)

/s/ Betty Ann Blum Executive Vice President March 17, 1998
- ------------------------------------ and Director
Betty Ann Blum

/s/ Marjorie W. Blum Vice President Sales and March 17, 1998
- ------------------------------------ Secretary and Director
Marjorie W. Blum

/s/ Stephen A. Fine Director March 17, 1998
- ------------------------------------
Stephen A. Fine
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jonathan K. Layne Director March 17, 1998
- ------------------------------------
Jonathan K. Layne

/s/ Malcolm L. Sherman Director March 17, 1998
- ------------------------------------
Malcolm L. Sherman
</TABLE>

II-7
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1 Form of Underwriting Agreement*
5 Opinion of Gibson, Dunn & Crutcher LLP*
10.1 1994 Stock Incentive Plan (incorporated by reference to
exhibit 10.1 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.2.1 Form of Employee Nonqualified Stock Option Agreement
pursuant to 1994 Stock Incentive Plan (incorporated by
reference to exhibit 10.2.1 to the Registrant's Form S-
1 Registration Statement No. 33-74768)
10.2.2 Form of Employee Incentive Stock Option Agreement
pursuant to 1994 Stock Incentive Plan (incorporated by
reference to exhibit 10.2.2 to the Registrant's Form S-
1 Registration Statement No. 33-74768)
10.2.3 Form of Nonemployee Director Stock Option Agreement
pursuant to 1994 Stock Incentive Plan (incorporated by
reference to exhibit 10.2.3 to the Registrant's Form S-
1 Registration Statement No. 33-74768)
10.3 Form of Restricted Stock Agreement pursuant to 1994
Stock Incentive Plan (incorporated by reference to
exhibit 10.3 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.4 Form of Indemnity Agreement between Maxwell Shoe
Company Inc. and each of each of its directors and
executive officers (incorporated by reference to
exhibit 10.4 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.5 Form of Tax Indemnification Agreement between Maxwell
Shoe Company Inc. and each of Maxwell V. Blum, Eleanor
S. Blum, Betty Ann Blum and Marjorie Blum (incorporated
by reference to exhibit 10.5 to the Registrant's Form
S-1 Registration Statement No. 33-74768)
10.6 Lease dated as of May 15, 1991 by and between George
Shapiro, Arthur S. Goldberg and Sidney Shapiro,
Trustees of the Shapiro Properties Realty Trust, as
lessor, and Maxwell Shoe Co., Inc., as lessee
(incorporated by reference to exhibit 10.7 to the
Registrant's Form S-1 Registration Statement No. 33-
74768)
10.7 Lease dated as of November 17, 1993 by and between
Trustees of Bradshaw Westwood Trust, as landlord, and
Maxwell Shoe Co., Inc., as tenant (incorporated by
reference to exhibit 10.8 to the Registrant's Form S-1
Registration Statement No. 33-74768)
10.8 Agreement of Lease between Anon Realty Associates,
L.P., as successor lessor to 1414 Americas Company and
Maxwell Shoe Co., Inc., as lessee (incorporated by
reference to exhibit 10.9 to the Registrant's Form S-1
Registration Statement No. 33-74768)
10.9 Loan and Security Agreement dated May 30, 1991 between
Maxwell Shoe Co., Inc. and The First Bank of Boston, as
amended March 11, 1993, June 22, 1993, and August 31,
1993 (incorporated by reference to exhibit 10.10 to the
Registrant's Form S-1 Registration Statement No. 33-
74768)
10.10 Promissory Note dated March 11, 1993 issued by Maxwell
Shoe Co., Inc. to The First National Bank of Boston
(incorporated by reference to exhibit 10.11 to the
Registrant's Form S-1 Registration Statement No. 33-
74768)
</TABLE>

<PAGE>

EXHIBIT INDEX--(CONTINUED)

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.11 License Agreement dated July 1, 1993 between Jones
Investment Co., Inc. and Maxwell Shoe Co., Inc.
(incorporated by reference to exhibit 10.12 to the
Registrant's Form S-1 Registration Statement No. 33-
74678)
10.12 Form of Registration Rights Agreement between Maxwell
Shoe Company Inc. on the one hand and Maxwell V. Blum,
Betty A. Blum, Marjorie Blum, Mark J. Cocozza, and
Joseph Aborn, as trustee of the Eleanor S. Blum Trust
(incorporated by reference to exhibit 10.13 to the
Registrant's Form S-1 Registration Statement No. 33-
74768)
10.13 Employment Agreement dated as of January 26, 1994
between Maxwell Shoe Co., Inc. and Mark J. Cocozza
(incorporated by reference to exhibit 10.14 to the
Registrant's Form S-1 Registration Statement No. 33-
74768)
10.14 Stock Option and Registration Rights Agreement dated as
of January 26, 1994 between Maxwell Shoe Co., Inc. and
Mark J. Cocozza (incorporated by reference to exhibit
10.15 to the Registrant's Form S-1 Registration
Statement No. 33-74768)
10.15 Master Lease Agreement dated as of July 18, 1994
between Maxwell Shoe Company Inc. and BancBoston
Leasing Inc. (incorporated by reference to
exhibit 10.23 to the Registrant's Form 10-K for the
fiscal year ended October 31, 1994)
10.16 Assumption Agreement dated July 7, 1995 between
BancBoston Leasing Inc. and Maxwell Shoe Company Inc.
(incorporated by reference to exhibit 10.24 to the
Registrant's Form 10-K for the fiscal year ended
October 31, 1995)
10.17 Letter Agreement dated January 25, 1995 between Legas
Realty Corp., as successor lessor to S.L. Green
Properties Inc., as successor to Anon Realty
Associates, L.P., and Maxwell Shoe Company Inc.
(incorporated by reference to exhibit 10.25 to the
Registrant's Form 10-K for the fiscal year ended
October 31, 1995)
10.18 First Amendment to License Agreement dated October 2,
1995 between Jones Investment Co., Inc., and Maxwell
Shoe Company Inc. (incorporated by reference to
Exhibit 10.26 to the Registrant's Form 10-K for the
fiscal year ended October 31, 1995)
10.19 Trademark and Intellectual Property Rights Purchase and
Sale Agreement dated July 2, 1996 between Sam & Libby,
Inc. and Maxwell Shoe Company Inc. (incorporated by
reference to exhibit 10.21 to the Registrant's Form 10-
K for the fiscal year ended October 31, 1996)
10.20 License Agreement dated January 8, 1997 between Inter-
Pacific Trading Corporation d/b/a Inter-Pacific
Corporation and Maxwell Shoe Company Inc. (incorporated
by reference to exhibit 10.22 to the Registrant's Form
10-K for the fiscal year ended October 31, 1996)
10.21 License Agreement dated April 1, 1997 between J.G.
Hook, Inc. and Maxwell Shoe Company Inc. (incorporated
by reference to exhibit 10.31 to the Registrant's Form
10-K for the fiscal year ended October 31, 1997)
10.22 Sublease Agreement dated June 16, 1997 between Macy's
East, Inc. and Maxwell Shoe Company Inc. (incorporated
by reference to exhibit 10.32 to the Registrant's Form
10-K for the fiscal year ended October 31, 1997)
</TABLE>

<PAGE>

EXHIBIT INDEX--(CONTINUED)

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.23 Lease Agreement dated June 16, 1997 between John H.
Finley, III as trustee of Brockton Oak Real Estate
Trust And Maxwell Shoe Company Inc. (incorporated by
reference to exhibit 10.33 to the Registrant's Form 10-
K for the fiscal year ended October 31, 1997)
10.24 Contribution Agreement dated as of April 14, 1997 by
and among The Butler Group Inc., Maxwell Shoe Company
Inc. and Maxwell Retail Inc. (incorporated by reference
to exhibit 10.1 to the Registrant's Form 8-K filed
May 5, 1997)
10.25 Operating Agreement of SLJ Retail LLC dated as of
April 14, 1997 by and between The Butler Group Inc. and
Maxwell Retail Inc. (incorporated by reference to
exhibit 10.2 to the Registrant's Form 8-K filed May 5,
1997)
10.26 Option Agreement dated as of April 14, 1997 by and
among The Butler Group Inc., Maxwell Shoe Company Inc.,
Maxwell Retail Inc. and SLJ Retail LLC (incorporated by
reference to exhibit 10.3 to the Registrant's Form 8-K
filed May 5, 1997)
10.27 Services Agreement dated as of April 14, 1997 by and
between Maxwell Shoe Company Inc. and SLJ Retail LLC
(incorporated by reference to exhibit 10.4 to the
Registrant's Form 8-K filed May 5, 1997)
10.28 Non-Compete Agreement dated as of April 14, 1997 by and
among SLJ Retail LLC, Maxwell Shoe Company Inc.,
Maxwell V. Blum, Betty Ann Blum, Marjorie W. Blum, Mark
J. Cocozza, David Andelman, as trustee of the Eleanor
S. Blum Trust, Maxwell Retail Inc. and Sprague Company
(incorporated by reference to exhibit 10.5 to the
Registrant's Form 8-K filed May 5, 1997)
10.29 Retail Opportunity Agreement dated as of April 14, 1997
by and among SLJ Retail LLC, Maxwell Shoe Company,
Inc., Maxwell V. Blum, Betty Ann Blum, Marjorie W.
Blum, David Andelman, as trustee of the Eleanor S. Blum
Trust, Maxwell Retail Inc. and Sprague Company
(incorporated by reference to exhibit 10.6 to the
Registrant's Form 8-K filed May 5, 1997)
10.30 Registration Rights Agreement dated as of April 14,
1997 by and among Maxwell Shoe Company Inc., The Butler
Group Inc., Maxwell V. Blum, Betty Ann Blum, Marjorie
W. Blum, Mark J. Cocozza and David Andelman, as trustee
of the Eleanor S. Blum Trust (incorporated by reference
to exhibit 10.7 to the Registrant's Form 8-K filed May
5, 1997)
10.31 Second Amendment to License Agreement dated as of
April 14, 1997 by and between Maxwell Shoe Company Inc.
and Jones Investment Co., Inc. (incorporated by
reference to exhibit 10.8 to the Registrant's Form 8-K
filed May 5, 1997)
10.32 Trademark Sublicense Agreement dated as of April 14,
1997 by and between Maxwell Shoe Company Inc. and SLJ
Retail LLC (incorporated by reference to exhibit 10.9
to the Registrant's Form 8-K filed May 5, 1997)
10.33 Third Amendment to License Agreement dated as of March
16, 1998 by and between Maxwell Shoe Company Inc. and
Jones Investment Co., Inc.
10.34 First Amendment to the Trademark Sublicense Agreement
dated as of March 16, 1998 by and between Maxwell Shoe
Company Inc. and SLJ Retail LLC.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5)*
23.2 Consent of Ernst & Young LLP
</TABLE>
- --------
* To be filed by amendment

<PAGE>

EXHIBIT 10.33

THIRD AMENDMENT TO LICENSE AGREEMENT
------------------------------------

AMENDMENT to License Agreement, made as of the 16th day of March, 1998, by
----
and between JONES INVESTMENT CO. ("Jones"), a Delaware corporation, and MAXWELL
SHOE COMPANY INC. ("Licensee"), a Delaware corporation.

W I T N E S S E T H:

WHEREAS, Jones and Licensee are parties to a certain License Agreement
dated as of the 1st day of July, 1993, as amended by a First Amendment to
License Agreement dated as of the 2nd day of October, 1995 and as further
amended by a Second Amendment to License Agreement dated as of the 14th day of
April, 1997 (as so amended, the "Agreement"); and

WHEREAS, Jones and Licensee are now desirous of further amending the
Agreement; and

WHEREAS, all terms used but not otherwise defined herein shall have the
meanings given to them in the Agreement.

NOW, THEREFORE, in consideration of the premises contained herein and their
mutual promises, the parties hereby amend the Agreement, effective as of the
date first above written, as follows:

1. Paragraph 4.3 is amended in its entirety to read in full as follows:

"4.3 Restriction on Other Marks. During the Term, Licensee shall not
--------------------------
manufacture, sell, distribute or promote or enter into any
license or other agreement to manufacture, sell, distribute
or promote any product or category of products included in
the Merchandise bearing any trademark, trade name or other
mark (including, without limitation, Licensee's own
corporate name or trade name), except the Marks in
accordance with this Agreement, if such merchandise would
be, in price range, quality or style, in direct competition
with Jones Merchandise."

<PAGE>

2. A new section 4.8 is hereby added to the Agreement as follows:

"4.8 Licensee Personnel Matters. During the Term, Licensee (i) shall
--------------------------
employ an employee to work exclusively on a full-time basis
to design and develop Jones Merchandise, (ii) shall
promptly identify to Jones the names of all Licensee
personnel and any and all changes thereof (which personnel
shall at all times be acceptable to Jones) who are
responsible for the design, sales, merchandising and product
development of Jones Merchandise (MSC Jones Merchandise
Personnel) and, (iii) shall not change, divert, or relocate
any MSC Jones Merchandise Personnel without the prior
consent of Jones."

3. Clause (iv) of Subparagraph 8.3.1 (a) is amended in its entirety as
follows:

"(iv) Mark Cocozza is no longer Chief Executive Officer
of the Licensee."

4. Paragraph 8.3.1(a) is further amended by adding subparagraph (vi) to
read as follows:

"(vi) Any one beneficial stockholder or affiliated group of
beneficial stockholders is at any time the beneficial
holder of 15% or more of the licensee's voting stock. The
right of termination under this subparagraph (vi) to be
exercised within 60 days of Jones receiving notice of such
event."

5. Paragraph 9.3.2(a) is amended in its entirety to read in full as
follows:

"9.3.2 (a) This Agreement is personal to Licensee and Licensee may
not, without the prior written consent of Jones, assign,
sublicense or otherwise transfer all or any portion of this
Agreement or any rights or obligations hereunder, whether
voluntarily, involuntarily, by operation of law or otherwise,
and any such attempted assignment or other transfer shall be
null and void and of no effect. Notwithstanding the
foregoing, Licensee may (i) merge with a newly formed
corporation, with no liabilities, solely for the purpose of
reincorporation and (ii) assign and sublicense retail license
rights hereunder to SLJ Retail as contemplated by the
Trademark Sublicense Agreement attached hereto as Exhibit A
and Jones hereby acknowledges the consent to the terms of
such sublicense."

6. Paragraph 9 is hereby amended so as to add a new Paragraph 9.12, which
shall read in full as follows:

"9.12 Licensee shall promptly cause the Trademark Sublicense
Agreement to be amended so that Paragraph 9.3.2 of said
Trademark Sublicense Agreement

<PAGE>

shall read as follows:

9.3.2 This Agreement is personal to the Company, and the Company may
not, without the prior written consent of Maxwell and Jones, assign,
sublicense or otherwise transfer all or any portion of this Agreement or
any rights or obligations hereunder, whether voluntarily, involuntarily,
by operation of law or otherwise, and any such attempted assignment or
other transfer shall be null and void and of no effect."

IN WITNESS WHEREOF, the parties have hereunto executed this Amendment to
the Agreement by officers thereto duly authorized as of the day and year first
above written.

JONES INVESTMENT CO., INC.

By: /s/ Norman J. Shuman
----------------------------
Norman J. Shuman
Vice President

MAXWELL SHOE COMPANY INC.

BY: /s/ Mark J. Cocozza
----------------------------
Mark J. Cocozza
President

<PAGE>

EXHIBIT 10.34

FIRST AMENDMENT TO THE TRADEMARK SUBLICENSE AGREEMENT
-----------------------------------------------------

AMENDMENT to Trademark Sublicense Agreement, made as of the 16 day of
March, 1998, by and between MAXWELL SHOE COMPANY INC., a Delaware corporation
("Maxwell"), and SLJ RETAIL LLC, a Delaware limited liability company (the
"Company").

W I T N E S S E T H:

WHEREAS, Maxwell and the Company are parties to a certain Trademark
Sublicense Agreement dated as of the 14th day of April, 1997 (the "Trademark
Sublicense Agreement"); and

WHEREAS, Maxwell and the Company are now desirous of amending the Trademark
Sublicense Agreement; and

WHEREAS, all terms used but not otherwise defined herein shall have the
meanings given to them in the Trademark Sublicense Agreement.

NOW, THEREFORE, in consideration of the premises contained herein and their
mutual promises, the parties hereby amend the Trademark Sublicense Agreement,
effective as of the date first above written, as follows:

Paragraph 9.3.2 is amended in its entirety to read in full as follows:

"9.3.2 This Agreement is personal to the Company, and the Company may not,
without the prior written consent of Maxwell and Jones, assign, sublicense or
otherwise transfer all or any portion of this Agreement or any rights or
obligations hereunder, whether voluntarily, involuntarily, by operation of law
or otherwise, and any such attempted assignment or other transfer shall be null
and void and of no effect."

This First Amendment to the Trademark Sublicense Agreement may be executed
simultaneously in any number of counterparts and by facsimile, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.

IN WITNESS WHEREOF, the parties have hereunto executed this First Amendment
to the Trademark Sublicense Agreement by officers thereto duly authorized as of
the day and year first above written.

MAXWELL SHOE COMPANY INC.

By: /s/ Mark J. Cocozza
----------------------
Mark J. Cocozza
President

<PAGE>

SLJ RETAIL LLC

By: /s/ James J. Tinagero
----------------------
James J. Tinagero
Chairman

<PAGE>

EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP

We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" in the Registration Statement (Form
S-2) and related Prospectus of Maxwell Shoe Company Inc. for the registration
of 6,145,792 shares of its common stock and to the incorporation by reference
therein of our report dated December 15, 1997, with respect to the consolidated
financial statements and schedule of Maxwell Shoe Company Inc. included in its
Annual Report (Form 10-K) for the year ended October 31, 1997, filed with the
Securities and Exchange Commission.

Ernst & Young LLP

Boston, Massachusetts
March 16, 1998