MAXWELL SHOE CO INC, 10-K405, 1998-01-29

MAXWELL SHOE CO INC
10-K405, 1998-01-29
FOOTWEAR, (NO RUBBER)

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
FORM 10-K

(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended October 31, 1997

or
[_] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from _________________________to

Commission File Number 0-24026
MAXWELL SHOE COMPANY INC.
(Exact name of registrant as specified in its charter)

Delaware 04-2599205
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

101 Sprague Street
PO Box 37
Hyde Park (Boston), MA 02137
(Address of principal executive offices) (Zip code)

(617) 364-5090
(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Name of Each Exchange
Title of Each Class: on Which Registered:
- -------------------- -----------------------
None None

Securities Registered Pursuant to Section 12(g) of the Act:
Class A Common Stock,
par value $.01 per share
(Title of class)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the Class A Common Stock of the
registrant held by non-affiliates of the registrant on January 15, 1998 based on
the closing price of the Class A Common Stock on the NASDAQ National Market
System on such date was $11.00.

The number of shares of the registrant's Class A Common Stock
outstanding at January 15, 1998 was 2,525,000 shares. The number of shares of
the registrant's Class B Common Stock outstanding at January 15, 1998 was
5,063,317 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the registrant's 1998 Annual
Stockholders Meeting are incorporated by reference into Part III herein.

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MAXWELL SHOE COMPANY INC.
INDEX TO ANNUAL REPORT ON FORM 10-K

For The Fiscal Year Ended October 31, 1997

Caption Page
----
<S> <C> <C>

PART I
- ------

Item 1. Business.................................................... 3
Item 2. Properties.................................................. 15
Item 3. Legal Proceedings........................................... 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15

PART II
- -------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 16
Item 6. Selected Financial Data..................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Item 8. Financial Statements and Supplementary Data................. 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 36

PART III
- --------
Item 10. Directors and Executive Officers of the Registrant.......... 36
Item 11. Executive Compensation...................................... 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 36
Item 13. Certain Relationships and Related Transactions.............. 36

PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.................................................. 37

</TABLE>

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PART I
------

Item I. Business

General

All references herein to the "Company" mean Maxwell Shoe Company Inc., a
Delaware corporation, and its predecessors and its consolidated subsidiaries,
unless the context otherwise requires. 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 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 and in the upper moderately priced market segment under the
Sam & Libby brand name. The Company also sells moderately priced and upper
moderately priced children's footwear under both those brand names. The Company
manufactures and markets better women's footwear under the Jones New York and
Jones New York Sport brand names pursuant to an exclusive license agreement. The
Company also designs and develops private label footwear for selected retailers
under the retailers' own brand names. The Company has also 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 close-outs
which it purchases at discounts from other manufacturers.

Since 1987, when sales under the Mootsies Tootsies brand first became
significant, the Company has consistently increased net sales and maintained
profitability. In fiscal 1997, the Company's net sales and net profits increased
28.7% and 52.5%, respectively, as compared to fiscal 1996. 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 $70 for the Mootsies
Tootsies and Sam & Libby brand offerings and from $40 to $90 for the Jones New
York Sport and Jones New York product lines. Substantially all of the Company's
products are manufactured overseas by independent factories selected by the
Company together with 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 its
portfolio of established brands, to profitably increase 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
acquisition or licensing arrangements of additional brands in the future.

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 intend 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 which will allow the
Company to develop and grow internationally. The Company is in the process of
re-positioning the Sam & Libby brand from its recent 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 on a first
cost basis with brand names. The Company licensed the J.G. Hook name in 1997 to
sell as a first cost product for retailers who require brand identification.

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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 forward 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. The Company aims to satisfy these consumers through its Jones New York
and Jones New York Sport footwear lines, which enjoy a strong brand name
recognition and reputation for style, quality and value due to the success of
Jones New York in the better segments of the women's apparel industry.

The Company's original business was founded by Mr. Maxwell Blum in 1949 as
a sole proprietorship that was incorporated in Massachusetts in 1976 as Maxwell
Shoe Co., Inc. In March 1994, the Company changed its state of incorporation
from Massachusetts to Delaware.

Business Strategy

The Company's strategy is to leverage its existing competitive strengths to
profitably increase 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 acquisition or licensing 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, promotion and
packaging, 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 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 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 which will allow the
Company to develop and grow internationally. 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.
Universal Max Trading, the Company's principal buying agent in The
Peoples Republic of China ("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 will further improve the Company's product development and
sourcing capabilities.

In recent years, an increasing percentage of the Company's products are
being manufactured in China, resulting in approximately 83% of the
Company's fiscal 1997 products being sourced from China. The Company's
increased manufacturing concentration in China has resulted in lower
manufacturing costs to the Company while maintaining the Company's
quality standards. See "Restrictions on Imports." The Company continues
to seek to develop relationships with other buying agents with access to
numerous manufacturing facilities in order to maximize the Company's
sourcing flexibility.

. Emphasis on High Volume Segments of the Footwear Market. The Company
believes that its emphasis on the high volume segments of the women's
and children's footwear markets and its

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offerings of value-priced products in contemporary styles appealing to a
broad audience, rather than "fashion forward" styles, reduce 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 its emphasis on appealing to a broad audience and its
extensive market research and product testing minimize the risks of
carrying excessive 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
because of the Company's reputation among its customers for consistently
providing quality products, the Company enjoys a strong relationship
with its customers. 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 offering an increased assortment of products marketed under
such brandnames, through further penetration of the Company's existing
retail channels and through the development of new retail relationships.
With respect to Mootsies Tootsies, the Company seeks to expand the
appeal of such brand to a broader group of retail customers interested
in quality footwear at affordable prices primarily through a broader
range of styles and using innovative packaging and advertising.
Management believes that the value priced segment of the footwear
industry served by the Mootsies Tootsies brand presents continued growth
opportunities for the Company in the future. The Company also seeks to
increase sales of its Jones New York and Jones New York Sport footwear
by continuing to capitalize on the strong brand recognition and
reputation for quality and style enjoyed by Jones New York women's
apparel. The Company entered the upper moderately priced women's and
children's footwear markets through its introduction of the Sam & Libby
footwear lines in 1997. The Company is in the process of re-positioning
the Sam & Libby brand from its recent focus on the junior women's market
segment to the late 20's, career-oriented women market segment.
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 also seeks to increase its sales in the children's
footwear market by leveraging its brand recognition developed in the
women's footwear market, as well as by developing more styles catering
to such market segment and expanding the customer base.

. 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 on a first cost
basis with brand names. The Company has licensed the J.G. Hook name to
sell as a first cost product for retailers who require brand
identification.

. Capitalizing on Consolidating Footwear Industry. 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

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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 new brands or the
acquisition of 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. However, the Jones License Agreement prohibits the
Company from manufacturing, selling, distributing or promoting
merchandise that would compete both as to style and price 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. The Company believes
that it is well positioned to continue pursuing this strategy due to its
relatively strong and unencumbered balance sheet.

. Benefiting from Retail Joint Venture. The Company will manage SLJ Retail
LLC ("SLJ Retail"), a joint venture between the Company and the Butler
Group, Inc. ("Butler"), a wholly owned subsidiary of General Electric
Capital Corporation, and plans to operate 130 stores in fiscal 1998.
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. The Company will also continue to pursue other
available retail opportunities, including establishing outlets, if such
retail ventures are not pursued within SLJ Retail, subject to SLJ
Retail's right of first refusal to add on any such retail opportunity.

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
---------------------
Style Industry 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 and Just 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.

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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 and Just 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 will allow the Company to develop and grow internationally, although
the Company's expansion to overseas markets will be a long-term effort. A wholly
owned subsidiary of the Company has granted to SLJ Retail a license to sell Sam
& Libby and Just Libby women's footwear products. See "--License Agreements--
SLJ Retail."

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. The Company has granted a
sub-license to SLJ Retail to use the Jones New York trademark in connection with
certain activities, including retail sale of women's footwear merchandise
bearing such trademark. See "--License Agreements--SLJ Retail."

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. The Company has granted a sub-
license to SLJ Retail to use the Jones New York Sport trademark in connection
with certain activities, including retail sale of women's footwear merchandise
bearing such trademark. See "--License Agreements--SLJ Retail."

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.

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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>
Year Ended October 31
-----------------------
Category 1995 1996 1997
-------- ------ ------ ------
<S> <C> <C> <C>
Women's............................ 83.0% 85.4% 84.9%
Children's......................... 16.3 14.2 14.8
Other.............................. 0.7 0.4 0.3
----- ----- -----
Total.............................. 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.

Retail Joint Venture

In April 1997, the Company completed a transaction to operate approximately
130 retail Sam & Libby and Jones New York women's footwear stores through SLJ
Retail. 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 has been designated as the manager of
SLJ Retail. The Company accounts for its ownership under the equity method of
accounting as long as it continues to own less than 50% of the equity 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. In the event the Company exercises
such option it could 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 certain profitability.

Under the Services Agreement with SLJ Retail, Messrs. Mark Cocozza and
James Tinagero, the President and Executive Vice President of the Company,
respectively, are 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 to require the Company to purchase
all or a portion of its interest in SLJ Retail for cash or Common Stock of the
Company. 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.

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 on 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
guaranty for a $16.0 million term loan which is secured by the assets of SLJ
Retail.

The first retail stores operated by SLJ Retail opened in July 1997. As of
January 15, 1998, 120 stores had been converted from their prior retail concepts
to either Sam & Libby or Jones New York branded concepts. As of January 15,
1998, there were 93 Sam & Libby and 27 Jones New York footwear retail stores
opened.

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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 and a $500,000
annual management fee payable to the Company. In addition to such financial
advantages, SLJ Retail provides a showcase for the Jones New York and Sam &
Libby products. The Company believes that the SLJ Retail store presence will
increase consumer awareness of the Company's branded footwear products and act
as a showcase for the Company's full lines of 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.

Design and Product Development

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

Each of the Company's product lines is developed separately using a team
concept that includes design staff, sales staff and management 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. 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 5,000 retail locations. The Mootsies Tootsies retailers, which market
moderately priced apparel merchandise, include the Federated Department Stores,
the Mercantile Stores and Belks. The Jones New York and Jones New York Sport
footwear lines are distributed to those retailers who typically market
merchandise at higher retail price points, including Macy's, May Co., Dayton
Hudson and Bloomingdale's. The Sam & Libby footwear lines are distributed to
retailers such as Federated, May Co., Bon Ton and Nordstrom. The retail industry
has 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. 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 HSN.

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% and 19% of the Company's net sales in fiscal 1996

9
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and fiscal 1997, respectively, including revenues from closeouts. The Company's
top three customers accounted for 35% and 32% of net sales for fiscal 1996 and
fiscal 1997, 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 decision 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 restructuring 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."

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 in
order to maximize the growth potential of its Sam & Libby lines.

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. 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.

Print advertisements for Sam & Libby are 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. In addition, SLJ Retail will provide additional media focus
through a direct marketing catalog and collaborative in-store promotions.

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.

10
<PAGE>

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 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 the Company's quality
requirements, 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.

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 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.

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 assure the price of
products from Spain, 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."

11
<PAGE>

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,
Westwood 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.

For fiscal 1997, approximately 83% 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 quotes, 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

12
<PAGE>

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. 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 as of October 31, 1997 will be filled during the first six months of
fiscal 1998.

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 Retail, (iii) require the Company and SLJ Retail to
pay certain royalties to Jones and (iv) permit Jones to terminate the Jones
License Agreement with respect to the retail sale of Jones New York women's
footwear by SLJ Retail if the Company is no longer the managing member of SLJ
Retail or if SLJ Retail 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 both as to style
and price 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 which would compete both as to style and price with
the Jones New York and Jones New York Sport women's footwear while this license
is in effect. 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 occurrence of an event where the beneficial
ownership of the Company changes in a manner so as to change the actual control
of the Company.

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.

13
<PAGE>

SLJ Retail

In April 1997, the Company entered into a sub-license agreement (the "SLJ
Retail 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 Retail 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
Retail Sub-License Agreement is subject to early termination for various
reasons, including any termination of the Jones New York License Agreement or if
the Company or its subsidiaries is not a managing member of SLJ Retail.

In April 1997, the Company entered into a retail license agreement (the
"SLJ Retail 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. Under the SLJ Retail 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 Retail 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 is a 40 year old California-based seller and distributor of men's, women's
and children's footwear. 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.

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 Company, a 100% owned subsidiary of the Company. 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. In
January 1997, the Company entered into a license agreement with IPC, a 40 year
old California-based seller and distributor of men's, women's and children's

14
<PAGE>

footwear to license the Sam & Libby trademarks for slippers and E.V.A. sandals,
pursuant to which the Company will receive certain royalties and other revenues.

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 October 31, 1997, the Company employed 103 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.

Item 2. Properties

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.

Item 3. 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.

Item 4. Submission of Matters to a Vote of Security Holders

None.

15
<PAGE>

PART II
-------

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

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

<TABLE>
<CAPTION>
1996 January 31, April 30, July 31, October 31,
---- ----------- --------- -------- -----------
<S> <C> <C> <C> <C>
Low............. 4 3/4 4 1/2 5 6 1/8
High............ 7 6 7 3/8 6 3/4

1997 January 31, April 30, July 31, October 31,
---- ----------- --------- -------- -----------
<S> <C> <C> <C> <C>
Low............. 6 1/2 7 1/8 7 1/2 10 3/4
High............ 8 3/8 8 3/4 13 15
</TABLE>

The Class A Common Stock is listed on the automatic quotation system of the
National Association of Securities Dealers under the symbol MAXS.

The number of stockholders of record of the Class A Common Stock on October
31, 1997 was 23. However, based on available information, the Company believes
that the total number of Class A Common stockholders, including beneficial
stockholders, is approximately 1400.

There is currently no established public trading market for the Company's
Class B Common Stock. The number of stockholders of record of the Class B
Common Stock on October 31, 1997 was 4.

Dividend Policy

The Company has not paid cash dividends on the Common Stock to date since the
payment of certain distributions 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.

16
<PAGE>

Item 6. Selected Financial Data

The following selected financial data are derived from financial statements of
the Company. The financial statements for the five years ended October 31,
1993, 1994, 1995, 1996 and 1997 have been audited by Ernst & Young LLP,
independent auditors. The following data should be read in conjunction with
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Report.

<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------
1993 1994 1995 1996 1997
------- --------- -------- --------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net sales............................................ $79,049 $100,931 $101,870 $104,337 $134,211
Cost of sales........................................ 56,297 72,117 77,912 79,915 98,230
------- -------- -------- -------- --------
Gross profit......................................... 22,752 28,814 23,958 24,422 35,981
Selling, general and administrative
expenses(1)(2)...................................... 17,690 23,695 13,581 15,413 20,982
------- -------- -------- -------- --------
Operating income..................................... 5,062 5,119 10,377 9,009 14,999
Interest expense..................................... 609 662 255 38 110
Other expense (income), net.......................... 62 (101) 399 (579) 325
------- -------- -------- -------- --------
Income before income taxes........................... 4,391 4,558 9,723 9,550 14,564
Income taxes......................................... 400 1,709 3,889 3,629 5,534
------- -------- -------- -------- --------
Net income........................................... $ 3,991 $ 2,849 $ 5,834 $ 5,921 $ 9,030
======= ======== ======== ======== ========
Earnings per share(3)
Primary............................................. $ 0.70 $ 0.72 $ 1.06
======== ======== ========
Fully diluted....................................... $ 0.70 $ 0.71 $ 1.04
======== ======== ========

Shares used to compute earnings per share(3)
Primary............................................. 8,311 8,261 8,537
======== ======== ========

Fully diluted....................................... 8,311 8,314 8,710
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
October 31,
-------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital...................................... $15,967 $28,770 $35,097 $35,523 $44,441
Total assets......................................... 27,926 36,621 39,979 46,920 60,179
Total debt (including current maturities)............ 8,279 123 787 611 469
Total stockholders' equity........................... $14,623 $29,850 $35,684 $41,605 $50,635
</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.

(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

17
<PAGE>

arrangements subsequent to the initial public offering in fiscal 1995.
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.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Certain statements contained in this Form 10-K regard matters that are not
historical facts and are forward looking statements (as such term is defined in
the rules promulgated pursuant to the Securities Act of 1933, as amended (the
"Securities Act")). Because such forward looking statements include risks and
uncertainties, actual results may differ materially from those expressed in or
implied by such forward looking statements. Factors that could cause actual
results to differ materially include, but are not limited to: changing consumer
preferences, 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 Company undertakes no obligation to release publicly the
results of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.

Results of Operations

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

<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
(In millions--except percentages)
Mootsies Tootsies.......................... $ 65.6 64.4% $ 60.8 58.3% $ 71.0 52.9%
Jones New York Footwear.................... 17.2 16.9 24.0 23.0 32.2 24.0
Sam & Libby................................ -- -- -- -- 14.6 10.9
Private Label Footwear..................... 12.9 12.7 14.5 13.9 13.6 10.1
Closeout................................... 6.2 6.0 5.0 4.8 2.8 2.1
------ ----- ------ ----- ------ -----
$101.9 100.0% $104.3 100.0% $134.2 100.0%
====== ===== ====== ===== ====== =====
</TABLE>

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 $325,000 for fiscal 1997 compared to other income of
$579,000 for fiscal 1996. During fiscal 1997, amortization expense relating to
the acquisition of the Sam & Libby trademark was $367,000 and losses of $76,000
were realized from foreign exchange contracts, offset by $132,000 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

18
<PAGE>

$110,000 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 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, general and administrative expenses
increased $1.8 million during fiscal 1996 from fiscal 1995 due to the expenses
associated with launching the Company's Sam & Libby brand and increased
advertising expense.

Interest expense was $38,000 in fiscal 1996 compared to $300,000 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 $579,000 for fiscal 1996 compared to other expense of
$400,000 for fiscal 1995. 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 $300,000 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, and ($6.5) million in
fiscal 1997. At October 31, 1997, working capital was $44.4 million as compared
to $35.5 million at October 31, 1996. 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.

The Company currently has a $25.0 million revolving credit facility bearing
interest at the Bank of Boston's base rate, renewable annually under certain
conditions, which 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 October 31, 1997, there were no outstanding borrowings, $10.9
million was outstanding under letters of credit and $14.1 million was available
for future borrowings.

Capital expenditures, which have been for equipment and leasehold
improvements, were minimal in fiscal 1997. The Company utilizes operating leases
for substantially all of its management information systems and related
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

19
<PAGE>

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 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 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 timely resolved. 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.

During the first six months of 1998, the Company intends to acquire a conveyor
and warehouse management system for its Brockton, Massachusetts warehouse. This
equipment will cost approximately $3.0 million and will allow the distribution
facility to run more efficiently on a cost and service basis. The Company plans
to fund this acquisition through borrowings under its revolving credit facility
or equipment financing arrangements.

The Company regularly enters 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 totaling
$700,000 were outstanding with settlement dates ranging from November 3, 1997
through January 30, 1998. As of the date of this report, future inventory
purchases required sufficient foreign currency to meet these commitments.

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.

Item 8. Consolidated Financial Statements and Supplementary Data

The Consolidated Financial Statements required in response to this section are
submitted as part of Item 14(a) of this Report.

20
<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

21
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED BALANCE SHEETS
(In Thousands -- except per share amounts)

October 31,
-------------------
1996 1997
------ ------

ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................................... $10,393 $ 3,129
Accounts receivable, trade (net of allowance for doubtful accounts and discounts
of $730 in 1996, $739 in 1997)................................................ 16,853 28,594
Inventory, net.................................................................. 12,175 20,141
Prepaid expenses................................................................ 127 251
Deferred income taxes........................................................... 821 1,526
------- -------
Total current assets................................................................. 40,369 53,641
Property and equipment, net.......................................................... 1,039 1,393
Trademarks........................................................................... 5,500 5,133
Other assets......................................................................... 12 12
------- -------
$46,920 $60,179
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ $ 880 $ 2,197
Accrued expenses................................................................ 3,300 6,767
Income taxes payable............................................................ 433 --
Deferred income taxes........................................................... 91 111
Current portion of capital lease obligation..................................... 142 125
------- -------
Total current liabilities............................................................ 4,846 9,200
Capital lease obligation............................................................. 469 344
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
Class B common stock, par value $.01, 10,000 shares authorized, 5,063 shares
outstanding.................................................................. 51 51
Additional paid-in capital...................................................... 27,312 27,312
Retained earnings............................................................... 14,217 23,247
------- -------
Total stockholders' equity........................................................... 41,605 50,635
------- -------
$46,920 $60,179
======= =======
</TABLE>

See accompanying notes.

22
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands -- except per share amounts)

<TABLE>
<CAPTION>
October 31,
-----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................................. $101,870 $104,337 $134,211
Cost of sales......................................................... 77,912 79,915 98,230
-------- -------- --------
Gross profit.......................................................... 23,958 24,422 35,981
Operating expenses:
Selling............................................................. 5,042 5,589 7,903
General and administrative.......................................... 8,539 9,824 13,079
-------- -------- --------
13,581 15,413 20,982
-------- -------- --------
Operating income...................................................... 10,377 9,009 14,999
Other expenses (income):
Interest............................................................ 255 38 110
Other, net.......................................................... 399 (579) 325
-------- -------- --------
654 (541) 435
-------- -------- --------
Income before income taxes............................................ 9,723 9,550 14,564
Income taxes.......................................................... 3,889 3,629 5,534
-------- -------- --------
Net income............................................................ $ 5,834 $ 5,921 $ 9,030
======== ======== ========
Earnings per share
Primary............................................................. $ .70 $ .72 $ 1.06
======== ======== ========
Fully diluted....................................................... $ .70 $ .71 $ 1.04
======== ======== ========
Shares used to compute earnings per share
Primary............................................................. 8,311 8,261 8,537
======== ======== ========
Fully diluted....................................................... 8,311 8,314 8,710
======== ======== ========
</TABLE>

See accompanying notes.

23
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

<TABLE>
<CAPTION>
October 31,
------------------------------
1995 1996 1997
------- -------- ---------
<S> <C> <C> <C>
Operating activities:
Net income.............................................................. $ 5,834 $ 5,921 $ 9,030
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation and amortization......................................... 213 242 672
Deferred income taxes................................................. (153) 240 (685)
Doubtful accounts provision........................................... 150 50 125
Changes in operating assets and liabilities:
Accounts receivable................................................ (1,571) 931 (11,866)
Inventory.......................................................... 4,157 219 (7,966)
Prepaid expenses................................................... (2) 706 (124)
Accounts payable................................................... (1,768) (48) 1,317
Income taxes payable............................................... (306) 433 (433)
Accrued expenses................................................... (897) 791 3,467
------- ------- --------
Net cash provided (used) by operating activities........................ 5,657 9,485 (6,463)

Investing activities:
Purchase of trademark................................................... -- (5,500) --
Purchases of property and equipment..................................... (144) (101) (659)
------- ------- --------
Net cash used by investing activities................................... (144) (5,601) (659)

Financing activities:
Payments on capital lease obligation.................................... (163) (176) (142)
Proceeds from lease financing........................................... 717 -- --
------- ------- --------
Net cash provided (used) by financing activities........................ 554 (176) (142)
------- ------- --------
Net increase (decrease) in cash and cash equivalents.................... 6,067 3,708 (7,264)
Cash and cash equivalents at beginning of year.......................... 618 6,685 10,393
------- ------- --------
Cash and cash equivalents at end of year................................ $ 6,685 $10,393 $ 3,129
======= ======= ========
Interest paid........................................................... $ 255 $ 38 $ 110
======= ======= ========
Income taxes paid....................................................... $ 4,975 $ 2,380 $ 6,807
======= ======= ========
</TABLE>

See accompanying notes.

24
<PAGE>

MAXWELL SHOE COMPANY INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)

<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
-------------- ---------------
Number Number Additional
of 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
===== === ===== === ======= ======= =======
</TABLE>

See accompanying notes.

25
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands--except per share amounts)

October 31, 1997

1. 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.

26
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

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:

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.

Earnings Per Common Share

Primary earnings per share have been computed based upon the weighted-
average number of common shares outstanding during the year, adjusted for the
dilutive effect of shares issuable upon the exercise of stock options determined
based upon average market price for the period.

Fully diluted earnings per share have been computed based upon the
weighted-average number of common shares outstanding during the year, adjusted
for the dilutive effect of shares issuable upon the exercise of

27
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

stock options, determined based upon the higher of the average price for the
period or the period-ending market price.

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.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." 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 6).

Accounting Pronouncements

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, "Earnings Per Share" (FAS 128), which is required to be
adopted beginning with the Company's first fiscal quarter of 1998. At that time,
the Company will be required to change the method currently used to compute
primary and fully diluted earnings per share (EPS) and restate all prior
periods. Under FAS 128, basic earnings per share would be $.77, $.78 and $1.19
for the years ended October 31, 1995, 1996 and 1997, respectively. Diluted
earnings per share would be $.70, $.72 and $1.06 for the years ended October 31,
1995, 1996 and 1997, respectively.

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.

28
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

2. 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.

3. Property and Equipment

Property and equipment consists of the following:

<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>

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.

4. 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.

29
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

5. 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>

6. 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
Maxwell Shoe Company, Inc., 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.

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.

30
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

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:
Primary.......................................................... $0.70 $1.02
Fully diluted.................................................... $0.69 $1.00
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.

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
Canceled....................................... (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>

31
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

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

<TABLE>
<CAPTION>
Options Outstanding Options 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.

7. 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 allowances 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>

32
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

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 6, 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:

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>

8. 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.

9. 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.

33
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

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), which will sell a complete 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

34
<PAGE>

MAXWELL SHOE COMPANY INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Dollars in Thousands--except per share amounts)

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 totaling
$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.

10. 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.

<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------
January 31, April 30, July 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
Primary earnings per share............... $ .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
Primary earnings per share............... $ .20 $ .26 $ .35 $ .25
======= ======= ======= =======
</TABLE>

35
<PAGE>

MAXWELL SHOE COMPANY INC.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item will be contained in the Company's Proxy
Statement for its Annual Stockholders Meeting to be held April 2, 1998 to be
filed with the Securities and Exchange Commission within 120 days after October
31, 1997 and is incorporated herein by reference.

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

36
<PAGE>

PART IV
-------

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) (1) Financial Statements:

The following financial statements of the Company are included in response
to Item 8 of this report.
<TABLE>
<CAPTION>
Page Reference
Form 10K
--------------
<S> <C>
Report of Independent Auditors........................................... 21
Balance Sheets as of October 31, 1996 and 1997........................... 22
Statements of Income for each of the three years in the period ended
October 31, 1997..................................................... 23
Statements of Cash Flows for each of the three years in the period ended
October 31, 1997..................................................... 24
Statements of Changes in Stockholders' Equity for each of the three years
in the period ended October 31, 1997................................. 25
Notes to Financial Statements............................................ 26

(a) (2) Financial Statements:

Schedule II -- Valuation and qualifying accounts for the years
ended October 31, 1995, 1996 and 1997................................ 42

</TABLE>

Schedules other than those listed above have been omitted since they are
either not required, not applicable, or the information is otherwise
included.

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the fourth quarter of
fiscal 1997.
<TABLE>
<CAPTION>
(c) Exhibits
<S> <C>
3.1 Certificate of Incorporation of Maxwell Shoe Company Inc.
(incorporated by reference to exhibit 3.1 to the
registrant's Form S-1 Registration Statement No. 33-74768)

3.2 Bylaws of Maxwell Shoe Company Inc., as amended
(incorporated by reference to exhibit 3.2 to the
registrant's Form S-1 Registration Statement No.33-74768)

4.1 Specimen Maxwell Shoe Company Inc. Class A Common Stock
Certificate (incorporated by reference to exhibit 4.1 to
the registrant's Form 10-K for the fiscal year ended
October 31, 1994)

4.2 Specimen Maxwell Shoe Company Inc. Class B Common Stock
Certificate (incorporated by reference to exhibit 4.2 to
the registrant's Form 10-K for the fiscal year ended
October 31, 1994)

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)
</TABLE>

37
<PAGE>

<TABLE>
<S> <C>
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 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 Company 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
Company 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
Company 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 Company 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
Company 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 Company
Inc.(incorporated by reference to exhibit 10.12 to the
registrant's Form S-1 Registration Statement No. 33-74768)

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 Company 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 Company Inc. and Mark
J. Cocozza (incorporated by reference to exhibit 10.15 to
the registrant's Form S-1 Registration Statement No. 33-
74768)
</TABLE>

38
<PAGE>

<TABLE>
<S> <C>
10.15 Deferred Incentive Compensation Agreement dated October 31,
1988 between Maxwell Shoe Company Inc. and Mark J. Cocozza,
as amended (incorporated by reference to exhibit 10.16 to
the registrant's Form S-1 Registration Statement No. 33-
74768)

10.16 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
registrants Form 10K for the fiscal year ended October 31,
1994)

10.17 Assumption Agreement dated July 7, 1995 between BancBoston
Leasing Inc. and Maxwell Shoe Company Inc. (incorporated by
reference to exhibit 10.24 to the registrants Form 10K for
the fiscal year ended October 31, 1995)

10.18 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 registrants Form 10K for the fiscal
year ended October 31, 1995)

10.19 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 registrants Form 10K for the fiscal year ended October
31, 1995)

10.20 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 registrants Form 10K for the fiscal
year ended October 31, 1996)

10.21 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 registrants Form 10K for
the fiscal year ended October 31, 1996)

10.22 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 registrants Form 8K filed on May 5, 1997)

10.23 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 registrants Form 8K filed on May 5, 1997)

10.24 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 registrants Form 8K filed on May 5,
1997)

10.25 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
registrants Form 8K filed on May 5, 1997 )

10.26 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 registrants Form 8K filed
on May 5, 1997)

10.27 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 registrants Form 8K filed on May 5,
1997)
</TABLE>

39
<PAGE>

<TABLE>
<S> <C>
10.28 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 registrants Form 8K filed on May 5, 1997)

10.29 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 registrants Form 8K filed on May 5, 1997)

10.30 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
registrants Form 8K filed on May 5, 1997)

10.31 License Agreement dated April 1, 1997 between J. G. Hook
Inc. and Maxwell Shoe Company Inc.

10.32 Sublease Agreement dated June 16, 1997 between Macy's East,
Inc. and Maxwell Shoe Company Inc.

10.33 Lease Agreement dated June 16, 1997 between John H. Finley,
III, as trustee of Brockton Oak Real Estate Trust and
Maxwell Shoe Company Inc.

21 Subsidiaries of Maxwell Shoe Company Inc.

23 Consent of Independent Auditors

27 Financial Data Schedule

</TABLE>

40
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

MAXWELL SHOE COMPANY, INC.

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

January 28, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and 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 January 28, 1998
---------------------- Chief Executive Officer
Maxwell V. Blum (Principal Executive Officer)

/s/ MARK J. COCOZZA President and Chief January 28, 1998
---------------------- Operating Officer
Mark J. Cocozza

/s/ JAMES J. TINAGERO Executive Vice President January 28, 1998
---------------------- (Principal Financial Officer)
James J. Tinagero

/s/ RICHARD J. BAKOS Vice President Finance and January 28, 1998
---------------------- Chief Financial Officer
Richard J. Bakos (Principal Accounting Officer)

/s/ BETTY ANN BLUM Executive Vice President January 28, 1998
---------------------- and Director
Betty Ann Blum

/s/ MARJORIE W. BLUM Vice President Sales and January 28, 1998
---------------------- Secretary and Director
Marjorie W. Blum

/s/ STEPHEN A. FINE Director January 28, 1998
----------------------
Stephen A. Fine

/s/ JONATHAN K. LAYNE Director January 28, 1998
----------------------
Jonathan K. Layne

/s/ MALCOLM L. SHERMAN Director January 28, 1998
-----------------------
Malcolm L. Sherman
</TABLE>

41
<PAGE>

MAXWELL SHOE COMPANY INC.

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)

<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Deductions/1/ Period
- ---------------------------------------------- -------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Year ended October 31, 1995
Allowance for doubtful accounts............. $801 $150 $ 98 $853

Year ended October 31, 1996
Allowance for doubtful accounts............. $853 $ 50 $173 $730

Year ended October 31, 1997
Allowance for doubtful account.............. $730 $125 $116 $739
</TABLE>

- --------------
/1/ Uncollectible accounts written off, net of recoveries.

<PAGE>

EXHIBIT 10.31
LICENSE AGREEMENT
-----------------

THIS LICENSE AGREEMENT is made this First day of April, 1997, by and
between J. G. HOOK, INC., a Pennsylvania Corporation, with its principal place
of business at Suite 415, The Warwick, 1701 Locust Street, Philadelphia,
Pennsylvania 19103 (hereinafter referred to as "LICENSOR"), and MAXWELL SHOE
COMPANY, INC., a Delaware Corporation, with its principal place of business at
101 Sprague Street, Readville, MA 02137 (hereinafter referred to as "LICENSEE").

BACKGROUND
----------

LICENSOR is the owner of the trademarks, set forth in Exhibit A attached
hereto and made a part hereof (hereinafter collectively referred to as the
"Trademarks"). The parties desire that LICENSOR grant to LICENSEE a license to
use the Trademarks in the design, manufacture, advertising and sale of women's
shoes.

1
<PAGE>

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending to be legally bound, agree as
follows:

1. GRANT OF LICENSE AND DESIGNATION OF LICENSED PRODUCTS.
-----------------------------------------------------

LICENSOR agrees to and does hereby grant to LICENSEE for the period
and upon the terms and conditions hereinafter set forth, the exclusive
right and license to use the Trademarks within the geographic area
described in Paragraph 3 hereof" in the design, manufacture, advertising
and sale of women's and childrens' shoes (hereinafter referred to as the
"Products"). As used herein, the term "Licensed Products" means all
Products sold or shipped by LICENSEE which bear the Trademarks. In the
event any questions arise regarding the classification of Products which
LICENSEE may wish to produce as Licensed Products, the decision of LICENSOR
shall be final and binding. The rights granted to LICENSEE herein are
limited to use of the Trademarks on or in connection with the Licensed
Products and LICENSEE specifically agrees not to use the Trademarks or
consent to their use in any manner on any other product or items. LICENSOR
reserves all rights to the Trademarks except to the extent specifically
granted to LICENSEE herein.

2. TERM. The Agreement shall be for a term commencing on April 1,
----
1997 and continuing for a period of eighteen months, terminating on
September 30, 1998, said initial term to be known as the First Year of this
Agreement. LICENSEE shall have two one-year options to renew this
Agreement, provided LICENSEE is not in default of any of the provisions
hereof at the time of exercise of this option, and provided it gives
LICENSOR written notice of its

2
<PAGE>

intention to so renew at least one hundred twenty (120) days prior to the
end of the then current term; and, in addition, for the First Renewal Year,
provided that it has achieved net sales or first cost or any combination
thereof in the amount of Five Hundred Thousand Dollars ($500,000) during
the First Year of this Agreement; and to renew for the Second Renewal Year,
provided that, during the First Renewal Year, it has achieved net sales or
first cost or any combination thereof in the amount of Seven Hundred Fifty
Thousand Dollars ($750,000). The First Renewal Year shall be the period
from October 1, 1998 to September 30, 1999. The Second Renewal Year shall
be the period from October 1, 1999 to September 30, 2000.

3. GEOGRAPHIC AREA. The rights granted to LICENSEE hereunder shall be
---------------
exercised by LICENSEE solely within the United States of America, its
territories and possessions (hereinafter referred to as the "Geographic
Area"), and shall be exclusive therein with respect to the Licensed
Products.

4. ROYALTIES. LICENSEE agrees to pay royalties for the use of the
---------
Trademarks as follows:

A. Minimum Guaranteed Royalty LICENSEE agrees to: pay LICENSOR a
Minimum Guaranteed Royalty of $5,000 during the First Year of the License
Agreement. The minimum Guaranteed Royalty for the First Renewal Year shall
be $12,500 and the Minimum Guaranteed Royalty for the Second Renewal Year
shall be $18,750. Minimum Guaranteed Royalties are payable as follows:

1) The sum of $1,250 upon execution, receipt whereof is hereby
acknowledged.

2) The balance of $3,750 for the First Year's minimum
Guaranteed Royalty shall be paid in four equal quarterly installments of

3
<PAGE>

$937.50 each, on October 1, 1997, January 1, 1998, April 1, 1998 and July
1, 1998.

3) The sum of $12,500 for the First Renewal Year's Minimum
Guaranteed Royalty shall be paid in four equal installments of $3,125 each,
on October 1, 1998, January 1, 1999, April 1, 1999 and July 1, 1999.

4) The sum of $18,750 for the Second Renewal Year's Minimum
Guaranteed Royalty shall be paid in four equal installments of $4,687.50
each, on October 1, 1999, January 1, 2000, April 1, 2000 and July 1, 2000.

B. Operating Royalties - LICENSEE agrees to pay to LICENSOR
-------------------
operating royalties equal to two and one-half percent (2.5%) of the Net
Sales, or if LICENSEE so desires, it may sell licensed product on a first-
cost basis, up to 100% of licensed product, and pay operating royalties
equal to two and one-half percent of first cost of Licensed Products sold
by LICENSEE pursuant to this Agreement. As used herein, yearly period
shall mean for the Initial Term of this agreement the eighteen month period
from April 1, 1997 to September 30, 1998, and for the renewal option years
shall mean the 12 month period. Minimum Guaranteed Royalties remitted by
LICENSEE shall be credited and offset against operating royalties first
coming due hereunder. Should the operating royalties be less than the
Minimum Guaranteed Royalty hereunder, the latter shall be non-refundable
and nevertheless remain the property of LICENSOR. Operating royalties due
to LICENSOR shall be paid by LICENSEE concurrently with delivery of the
periodic reports required by Paragraph 5 hereof. In the event LICENSEE
shall fail to pay any sum required to be paid hereunder (Minimum Guaranteed
Royalties or operating royalties) within ten (10) days after the due date
thereof,

4
<PAGE>

the amount owing shall thereupon bear interest at the then-current
Prime rate plus two and one-half percent (2.5%) per annum until paid, and
LICENSOR shall have the right to invoke the provisions of Paragraph 15
hereof.

C. Definition of "Net Sales" - As used herein, the term "Net
-------------------------
Sales" shall mean the invoice price charged by LICENSEE for Licensed
Products sold and shipped by LICENSEE less trade discounts afforded to and
actually taken by customers as payment for Licensed Products. If LICENSEE
sells the Licensed Products to a related marketing organization or any
individual or company in whole or in part controlled or owned by LICENSEE,
the invoice price used to determine Net Sales hereunder shall be the
invoice price at which the Licensed Products are resold by such related
entity to an unrelated customer in an arm's length transaction.

5. LICENSEE'S QUARTERLY REPORTS OF SHIPMENTS AND ROYALTY PAYMENTS. On
--------------------------------------------------------------
or before the fifteenth day of each month following the end of each
quarterly period during the term hereof, LICENSEE shall deliver to LICENSOR
a written statement certified to be true and correct by the Chief Financial
Officer of LICENSEE, setting forth the gross and Net Sales (or first cost)
of Licensed Products (broken down by gross and Net Sales (or first cost)
for each separate category (item) of Licensed Products as set forth in
Paragraph 1 hereof) for the preceding quarter, together with a check
payable to LICENSOR in full payment of the royalties shown on said
statement to be due under Paragraph 4 hereof accompanied by a statement of
invoices by customer showing the date, invoice number, dollar amount of
sale and salesman's name. In addition, LICENSEE will simultaneously report
the open, undelivered orders as of the close of the preceding quarter.
Quarterly periods herein shall mean

5
<PAGE>

the quarters commencing April 1, July 1, October 1 and January 1,
respectively.

6. LICENSEE'S ANNUAL REPORTS. Within ninety (90) days of the end of
-------------------------
each of LICENSEE's fiscal year's ending during the term of this Agreement
(LICENSEE hereby certifies that its fiscal year ends October 31), and
within ninety (90) days of the termination of this Agreement, LICENSEE
shall deliver to LICENSOR a report prepared by the certified public
accounting firm then servicing LICENSEE, showing gross shipments, Net Sales
(or first cost) (broken down as set forth above), royalties due, and
royalties paid for LICENSEE's preceding fiscal year or, in the case of
termination of this Agreement, such information for the period ending at
termination.

7. LICENSEES RECORDS. LICENSEE shall keep and maintain at its
-----------------
regular place of business complete books and records of all business
transacted by LICENSEE in connection with the Licensed Products, including,
but not limited to, books and records relating to Net Sales (or first cost)
of Licensed Products. LICENSEE's accounting records of sales, shipments and
returns of Licensed Products shall be maintained separately from LICENSEE's
accounting records relating to other items manufactured or sold by
LICENSEE. Such books and records shall be maintained in accordance with
generally accepted accounting procedures and principles consistently
applied. LICENSOR, or its duly authorized agents or representatives, shall
have the right to inspect said books and records at LICENSEE's premises
during LICENSEE's regular business hours, provided that LICENSOR shall give
to LICENSEE at least ten (10) days advance written notice thereof.

8. AUDIT BY LICENSOR. LIC ENSOR, upon giving to LICENSEE at least
-----------------
ten (10) days advance written notice of its intention to do so,

6
<PAGE>

shall have the right to audit all books and-records which LICENSEE is
required to maintain pursuant to Paragraph 7-hereof, and in the event any
such audit shall disclose the LICENSEE has understated Net Sales (or first
cost) or underpaid royalties for any reporting period, LICENSEE shall
forthwith and upon written demand pay to LICENSOR the amount by which the
royalties due exceed royalties paid, together with interest thereon, at the
then current Prime rate plus two and one-half percent (2.5%) per annum
calculated from the due date of such royalties. In the event that LICENSEE
has understated Net Sales (or first cost) or underpaid royalties in excess
of five percent (5%) of said Net Sales (or first cost) for any payment
period, LICENSEE shall forth with and upon written demand, also pay to
LICENSOR all costs, fees and expenses incurred by LICENSOR in conducting
such audit, and LICENSOR shall have the right to terminate this Agreement,
immediately. Should such audit disclose that the royalties paid exceed the
royalties due, LICENSEE shall be entitled to a credit equal to such excess
royalties against the royalties next accruing under this Agreement.

9. BEST EFFORTS OF LICENSEE. LICENSEE shall use its best efforts and
------------------------
skill to design, manufacture, advertise, sell and ship the Licensed
Products and shall continuously and diligently during the term hereof
produce an inventory of Licensed Products and produce and maintain
facilities and trained personnel sufficient and adequate to accomplish the
foregoing. Upon cessation of any of the above for a continuous period of
ninety (90) days, LICENSOR shall have the right to terminate this
Agreement, immediately.

10. APPROVALS. LICENSEE shall not sell any Licensed Products using
---------
any advertising or promotional material or packaging material

7
<PAGE>

bearing the Trademarks, or using LICENSOR's name without the Trademarks,
without prior approval of LICENSOR.

LICENSEE shall furnish to LICENSOR, without cost, the following:
--------
A. Photographs and/or design sketches of the proposed styling of
each item of Licensed Products;

B. At least one (1) sample, randomly selected of 1 finished
production models of each such item at least five days before, Licensed
Products will be marketed for LICENSOR, approval as to styling,
material and manufacturing quality;

C. Samples of all packaging materials, labels, tags, hang tags
and other indicia to be used on or in connection with the item;

D. All advertising and promotional items, programs and materials
relating to the Licensed Products at least fourteen (14), days prior to
media deadlines.

The foregoing provisions in this Paragraph 10 shall also apply to any
changes in any Licensed Products, advertising or promotional material or
packaging material bearing the Trademarks.

LICENSOR shall have the right to disapprove the use by LICENSEE of any
of the above which, in LICENSOR's opinion, do not meet LICENSOR's
standards, but failure of LICENSOR to notify LICENSEE of such disapproval
within fourteen (14) days after receipt of the items required to be
submitted hereunder shall constitute LICENSOR's approval. In addition
thereto, prior to submission of samples pursuant to Subparagraph B hereof,
LICENSEE shall conduct its normal tests and verification procedures on each
sample to assure that the quality of Licensed Products is at least equal to
the quality of similar non-licensed items manufactured by LICENSEE and sold
at retail at

8
<PAGE>

comparable prices, including but not limited to, tests and procedures
relating to color fastness, maximum shrinkage, burst strength, curing and
the like.

If, at any time, LICENSOR is of the opinion that LICENSEE is not
properly using the Trademarks on the Licensed Products on labels, tags,
hang tags, packaging, or in advertising, or that the standard of quality of
any item of the Licensed Products does not conform to the standards set by
LICENSOR or is not of a quality at least equal to similar, non-licensed
products manufactured by LICENSEE, LICENSOR may give LICENSEE written
notice to this effect, identifying in such notice the situation to which it
objects. LICENSEE shall have thirty (30) days after receipt of such notice
to correct, to LICENSOR's satisfaction, the situation or situations to
which LICENSOR has objected, and failing which, LICENSOR may terminate this
Agreement forthwith, and LICENSEE shall immediately discontinue use of the
Trademarks and shall not thereafter adopt any conflicting or confusing
similar mark or symbol for use on the class of goods to which this license
relates.

11. NONE.
----

12. PROHIBITIONS OF ASSIGNMENTS OR TRANSFERS. LICENSEE shall not
----------------------------------------
voluntarily or by operation of law assign or transfer this Agreement or any
of LICENSEE's rights or duties hereunder or any interest of LICENSEE
without the written consent of LICENSOR, except to a wholly-owned
subsidiary or an affiliated corporation, nor shall LICENSEE enter into any
sublicense of the use of the Trademarks by any third party. Should LICENSOR
permit such an assignment or should such assignment be to a wholly-owned
subsidiary or an affiliated corporation, LICENSEE shall continue,
nevertheless, to remain liable for the

9
<PAGE>

performance of this Agreement. Should LICENSEE sell its stock or a majority
thereof, or its assets or a substantial part thereof, to a third party,
this license shall terminate unless LICENSOR gives its written consent to
the said sale. It is understood that despite the fact that LICENSOR and
LICENSEE are corporations, this License Agreement is a highly personal
document, closely associated with the individuals employed by the
corporations who run the said programs. Should LICENSOR fail to give its
written consent to a sale as described above this License Agreement shall
terminate immediately pursuant to-the termination provisions contained,
herein, and LICENSOR shall, upon such termination, be free, thereupon, to
license the rights granted herein to any other person, firm or corporation,
without any further obligations to LICENSEE or its buyer or buyers.

13. PRESERVATION OF TRADEMARKS AND CHANGES IN OR IMPROVEMENTS TO
------------------------------------------------------------
LICENSED PRODUCTS. LICENSEE shall cause to appear on all Licensed Products
-----------------
and on all materials on or in connection with which the Trademarks are
used, such legends, markings and notices as may be required by the laws
governing the Geographic Area in order to give appropriate notice of any
trademark rights therein or pertaining thereto.

LICENSEE shall not use or permit the use of the Trademarks on or in
connection with any product or service, other than the Licensed Products
which are manufactured or sold by or for LICENSEE. No Licensed Products
shall be sold without a Trademark affixed to it, or on the package or
label.

Any permutation of the Trademarks and any secondary rights adopted and
used by LICENSEE on the Licensed Products, except trademarks already
registered by LICENSEE, shall be and become the property of LICENSOR and

10
<PAGE>

shall be included as a Trademark subject to this Agreement. Any change or
improvement in the Licensed Product, initiated by LICENSEE or anyone on its
behalf, shall likewise become the property of LICENSOR and shall be
included under the Trademark subject to this Agreement.

14. INFRINGEMENT AND OTHER TRADEMARK LITIGATION. LICENSOR hereby
-------------------------------------------
indemnifies LICENSEE (including its officers and directors) and shall
defend it against any claims or suits and hold it harmless against any
damages awarded by judgment of a court of competent jurisdiction arising
out of or in connection with any claims of Trademark infringement asserted
against LICENSEE by third parties relating to LICENSEE's use of the
Trademarks as authorized by this Agreement, provided that LICENSEE shall
give reasonably prompt notice, cooperation and assistance, other than
financial assistance, to LICENSOR relative to any claim or suit, and
further provided that LICENSOR shall have the option to undertake the
conduct and defense of any suit so brought.

LICENSEE shall give written notice to LICENSOR as soon as practicable
of any infringement of the Trademarks which comes to the attention of
LICENSEE. LICENSOR, at its sole cost and expense and in its own name and at
its sole discretion, may prosecute any action or proceeding which LICENSOR
deems necessary or desirable to protect the Trademarks, including, but not
limited to, actions or proceedings involving infringement of the,
Trademarks. LICENSEE may, and upon written request by LICENSOR shall, join
LICENSOR in any such action or proceeding.

LICENSEE shall not commence any action or proceeding alleging
infringement of the Trademarks without prior written consent of LICENSOR.
Any and all damages recovered in -any action or proceeding commenced by
LICENSOR shall belong solely and exclusively to LICENSOR.

11
<PAGE>

15. DEFAULT BY LICENSEE.
-------------------

A. LICENSEE shall default under this Agreement if:

1. LICENSEE fails to make payment of any amount due
hereunder and such payment has not been received by LICENSOR within ten
(10) days after written notice to LICENSEE, or

2. LICENSEE fails to perform pursuant to this Agreement and
such failure does not involve the payment of money and LICENSEE shall not
commence curing the same within ten (10) days after written notice to
LICENSEE, or if such default is not thereafter completely cured within
thirty (30) days thereof, or

3. A Receiver is appointed or one or more creditors takes
possession of all or substantially all of the assets of the LICENSEE, or if
LICENSEE shall make a general assignment for the benefit of creditors, or
if LICENSEE resolves to go into voluntary liquidation or if proceedings in
voluntary or involuntary bankruptcy are commenced by or against LICENSEE.

B. In the event of a default by LICENSEE, LICENSOR may at its
option, immediately or at any time thereafter cancel and terminate this
Agreement. In such event, LICENSEE shall not be relieved of any of its
obligations which have accrued or will accrue hereunder and LICENSOR shall
retain all of its right to damages therefor in law or in equity, including
but not limited to loss of profits during the unexpired portion of this
Agreement. In addition, all monies due or to become due as Minimum
Guaranteed Royalties hereunder shall become immediately due and payable.

16. DISPOSAL OF INVENTORY UPON TERMINATION OR EXPIRATION. Upon
----------------------------------------------------
expiration or sooner termination of this Agreement (unless sooner
termination takes place because of LICENSEE's default hereunder),

12
<PAGE>

LICENSEE shall have the right to dispose (in a manner consistent with its
prior methods of selling the Licensed Products during the term hereof) of
all Licensed Products on hand, on order, or in the process of manufacture
on the effective date of such expiration or termination for the period of
ninety (90) days following the date of expiration or termination hereof.
Within thirty (30) days following the effective date of expiration or
termination hereof, LICENSEE shall provide LICENSOR with a written
statement indicating the number and description of Licensed Products on
hand, on order, or in process of manufacture as of the effective date of
expiration or termination, and LICENSOR shall have the right to conduct a
physical inventory to verify such statement. In the event LICENSEE refuses
to permit LICENSOR to conduct such physical inventory or fails to deliver
such written statement, the LICENSEE shall forfeit its rights hereunder to
dispose of Licensed Products following the date of expiration or
termination. With respect to. all Licensed Products sold pursuant to this
Paragraph 16, LICENSEE shall pay LICENSOR an operating royalty as provided
in Paragraph 4B above, but not a Minimum Guaranteed Royalty. Such operating
royalties shall be payable within sixty (60) days following the end of the
aforesaid ninety (90) day period. Should termination or cancellation occur
because of LICENSEE's default hereunder, LICENSEE shall have only thirty
(30) days from the date of termination to dispose of its inventory.

17. ADDITIONAL RIGHTS UPON TERMINATION.
----------------------------------

A. During the final twelve (12) months of the term hereof,
LICENSOR shall have the right to negotiate and conclude such agreements as
it desires, pursuant to which it shall grant a license to any party or
parties of any or all of the rights herein granted to LICENSEE, except that
no merchandise herein identified as Licensed

13
<PAGE>

Products shall be advertised or sold by LICENSOR or any third party other
than LICENSEE prior to the expiration or termination of this Agreement.

B. Upon the expiration of the license granted hereunder or the
earlier termination thereof (unless earlier termination occurs because of
LICENSEE I s default hereunder) the license shall revert to LICENSOR and
LICENSEE thereafter shall not use or refer to the Trademarks and LICENSOR
shall be free to license others to use the Trademarks in connection with
the Licensed Products in the Geographic Area.

18. GOODWILL. LICENSEE acknowledges that the Trademarks have
--------
acquired a valuable secondary meaning and goodwill with the public.
Accordingly, LICENSEE undertakes and agrees not -to use the Trademarks in
any manner whatsoever which, directly or indirectly, would derogate or
detract from its repute and to use its best efforts to insure and uphold
LICENSOR's excellent image and its trademarks in the marketplace. Except as
may be otherwise specified in this Agreement, LICENSEE shall not use the
Trademarks herein licensed or any name confusingly similar thereto as part
of its company name or as part of the name of any company or corporate name
of any corporation which it controls or with which it is affiliated.
LICENSEE will not attack LICENSOR's right or title in and to the Trademarks
and hereby acknowledges LICENSOR'S ownership of the Trademarks.

19. INDEMNIFICATION. LICENSEE hereby agrees to pay on behalf of
---------------
LICENSOR, its officers and directors, and to defend it and them (and to pay
all counsel fees necessary to do so) against any and all claims or suits
and hold it and them harmless against any and all claims, suits,
liabilities, causes of action, damages or expenses arising out of any

14
<PAGE>

unauthorized use by LICENSEE of the Trademarks, and from any and all claims
or suits, liabilities, causes of action, damages or expenses which ate the
sole fault of LICENSEE and which arise out of the manufacture, use,
advertising or sale by LICENSEE of the Licensed Products, other than claims
of trademark infringement, as referred to in Paragraph hereof, including.,
but not limited to, actions or subrogations brought by employees, agents,
trustees, insurance companies or others, acting with or on behalf of
LICENSEE. LICENSEE agrees to carry (1) worldwide product liability
insurance with respect to the Licensed Products with a limit of liability
of Million Dollars ($_,000,000) and (2) bodily injury and property damage
liability insurance (including contractual liability) with respect to the
Licensed Products with a limit of liability of Million Dollars
($_,000,000). In addition, (3) LICENSEE agrees to provide business
interruption insurance for the benefit of LICENSOR, with limits equal at
least to the anticipated annual royalties payable to LICENSOR by LICENSEE
during the first effective year of this Agreement, such projection to be
made by LICENSEE. Thereafter, for each year of this Agreement, the
projection of such royalties shall be made annually by LICENSEE, approved
by LICENSOR, and shall govern the business interruption insurance coverage.
Business interruption insurance coverage will be provided on a "valued"
basis (i.e. no coinsurance and no need for calculation after loss) and will
be "all risk". LICENSOR shall be named in each such insurance policy as
additional insured as its interest may appear. Such insurance may be
obtained in conjunction with a policy or policies of insurance which cover
products other than the Licensed Products, and shall provide at least
thirty (30) days prior written notice to LICENSOR of the cancellation, non-
renewal or substantial modification thereof. LICENSEE

15
<PAGE>

shall deliver, to LICENSOR a certificate evidencing the existence of such
insurance policies promptly after the execution of this Agreement, the
insurance companies to be acceptable to LICENSOR.

20. ATTORNEY'S FEES, SITUS OF ACTION, APPLICABLE LAW. In the event
------------------------------------------------
LICENSOR or LICENSEE shall commence any action or proceeding against the
other by reason of any breach or claimed breach of the performance of any
of the terms or conditions of this Agreement, or seek a declaration of
rights hereunder, the prevailing party in such action or proceeding against
the other by reason of any breach or claimed breach of the performance of
any of the terms or conditions of this Agreement, or in seeking a
declaration of rights hereunder, the prevailing party in such action or
proceeding shall be entitled to reasonable attorney's fees to be fixed by
the trial court. Any legal action-or proceeding of any sort against
LICENSOR by or on behalf of LICENSEE shall be brought in a court of
competent jurisdiction in Philadelphia County, Pennsylvania. In any legal
action or proceeding brought in which any rights or obligations arising
from this Agreement is an issue, the law applicable thereto shall be the
law of the Commonwealth of Pennsylvania.

21. NON-AGENCY OF PARTIES. This Agreement does not constitute
---------------------
LICENSEE as the agent or legal representative of LICENSOR or LICENSOR as
the agent or legal representative of LICENSEE for any purpose whatsoever
LICENSEE is not granted 'any rights or authority to assume or to create any
obligation or responsibility, express or implied, on behalf of or in the
name of LICENSOR or to bind LICENSOR in any manner or thing whatsoever; nor
is LICENSOR granted any right or authority to assume or create any
obligation or responsibility, express or implied, on behalf of or in the
name of LICENSEE or to bind LICENSEE in any manner or thing

16
<PAGE>

whatsoever. No joint venture or partnership between LICENSOR and LICENSEE
is intended or shall be inferred.

22. SPECIFIC UNDERTAKINGS OF LICENSEE. During the term of this
---------------------------------
Agreement, LICENSEE agrees that:

A. It will manufacture, sell and distribute the Licensed
Products in an ethical manner and in accordance with the terms and intent
of this Agreement.

B. It will protect, to the best of its ability, its right to
manufacture, sell and distribute the Licensed Products.

C. It will not directly or indirectly knowingly distribute
Licensed Products outside of the Geographic Area, nor shall it sell
Licensed Products to any customers whom LICENSEE knows or has reason to
believe will resell Licensed Products outside of the Geographic Area.

D. It acknowledges that the Trademarks are the property of the
LICENSOR and that all use of the Trademarks and' goodwill created thereby
by LICENSEE shall inure to the benefit of LICENSOR. LICENSEE shall render
reasonable assistance, other than financial assistance, to LICENSOR which
may be required by LICENSOR to enforce and preserve the Trademarks.

E. No brokers and finders were involved in connection with this
Agreement.

F. LICENSOR reserves all rights to use the Trademarks except to
the extent of the rights granted to the Trademarks by LICENSOR to LICENSEE
hereunder.

G. If LICENSEE obtains any copyrights with respect to labels
and/or packaging materials used in connection with the Licensed Products,
such copyrights shall be obtained in the name of LICENSOR and

17
<PAGE>

shall revert to LICENSOR at the expiration or earlier termination of this
Agreement.

23. ADDRESSES FOR NOTICE. All notices between the LICENSOR and
--------------------
LICENSEE shall be in writing by certified mail, return receipt requested,
addressed to LICENSEE or LICENSOR, at the respective addresses set forth
below, and shall be effective upon receipt:

LICENSOR: J. G. HOOK, INC.
Suite 415, The Warwick
1701 Locust Street
Philadelphia, PA 19103
Attention: Max L. Raab

LICENSEE: MAXWELL SHOE COMPANY, INC.
101 Sprague Street
Readville, MA 02137
Attention: Maxwell V. Blum, CEO

If any of the parties hereto shall, during the currency of this
Agreement, change address, then upon giving written notice to the other
party of the new address, the new address shall be the address for notice.

24. WAIVER OF LICENSOR. In the event LICENSOR shall at any time
------------------
waive any of its rights under this Agreement or the performance by LICENSEE
of any of its obligations hereunder, such waiver shall not be construed as
a continuing waiver of the same rights or obligations or a waiver of any
other rights or obligations.

25. INTEGRATED AGREEMENT. This Agreement constitutes the entire
--------------------
agreement between the parties as to the Licensed Products, there are no
other understandings between the parties, oral or otherwise, nor any
representations made by either party to the other prior to this Agreement,
and no modifications or revisions hereof shall be of any

18
<PAGE>

force or effect unless the same are in writing and executed by the parties
hereto.

26. SEPARABILITY OF PROVISIONS AND TITLES. Any provisions of this
-------------------------------------
Agreement which shall be or be determined to be invalid shall be
ineffective, but such invalidity shall not affect the remaining provisions
hereof. The titles to the paragraphs hereof are for convenience only and
have no substantive effect.

27. BINDING UPON SUCCESSORS. This Agreement shall be binding upon
-----------------------
and shall inure to the benefit of the parties hereto and their respective
successors. This Paragraph 27 shall not be construed to alter or modify the
prohibitions upon assignments or transfers by LICENSEE expressed elsewhere
in this Agreement.

28. FAILURE TO SHIP CERTAIN ITEMS. All of the various categories
-----------------------------
(items) set forth in paragraph 1 hereof as Licensed Products must be
designed, manufactured and advertised and sold by LICENSEE no later than
one year after the execution of this Agreement. Failure of LICENSEE to ship
any category (item) as aforesaid within one year after the execution
hereof, shall cause the said unshipped item or items, as the case may be,
to be deleted from the he category of a Licensed Product hereunder, and
LICENSOR shall be free then-to license said item to any third party, free
and clear of any restrictions in this Agreement.

J. G. HOOK, INC.

(Corporate Seal) BY: _________________________

19
<PAGE>

MAXWELL SHOE COMPANY, INC.

(Corporate Seal) By: _________________________

20
<PAGE>

EXHIBIT A
J. G. HOOK
K
United States Registration
No. 1,068,167
Issued June 21, 1977

[LOGO APPEARS HERE]

United States Registration
No. 101930945
Issued April 20, 1982

United States Registration
No. 1,617,734
0 Issued October 16, 1990

United States Trademark Registration No. 1,620,047 Issued October 30,
1990.

<PAGE>

EXHIBIT 10.32

EXHIBIT A

SUBLEASE

THIS SUBLEASE (this "Sublease") is entered into as of June __, 1997, by and
between MACY'S EAST, INC., an Ohio corporation, successor by merger to Jordan
Marsh Stores Corporation, an Ohio corporation ("Macy's"), as sublandlord, and
MAXWELL SHOE COMPANY, INC., a corporation ("Maxwell"), as subtenant.

I. Master Lease and Prior Sublease.
--------------------------------

A. Macy's entered into a Lease (as amended, the "Master Lease"), dated
December 13, 1990, with John H. Finley, III, Trustee of Brockton Oak Real Estate
Trust, under Declaration of Trust dated August 24, 1989 ("Landlord"), a true and
accurate copy of which, together with the First Amendment to Lease dated January
28, 1991 and the Second Amendment to Lease dated July 24, 1991, which constitute
all amendments to the Lease, has been delivered to Maxwell. Maxwell acknowledges
and agrees that this Sublease shall be subject and subordinate to the Master
Lease in all respects. If the Master Lease is terminated, then this Sublease
shall automatically terminate.

B. Macy's has entered into a Prior Sublease dated December 1, 1995 with
Reebok International, Inc., which sublease the parties thereto intend to
terminate by mutual agreement.

II. Definitions
-----------

A. Common Area: All parking areas, truck ways, entrances, exits, curbs,
-----------
gutters, loading docks, signs, pedestrian sidewalks and ramps, landscaped areas,
exterior stairways, internal roads and other areas and improvements provided for
the general use, in common of tenants of the Macy's Parcel, their officers,
agents, employees, customers and invitees,

B. Common Area Maintenance Cost: Common Area Maintenance Cost shall
----------------------------
include, but not be limited to, the cost of small tools and supplies to be
utilized for Common Area Maintenance; all cost of policing, security protection,
traffic direction, control and regulation of the Common Area; all costs of
compliance with governmental environmental requirements affecting the Common
Area and arising from the Operation of the Common Area; all premiums for public
liability and property damage insurance required to be carried by Landlord to
insure the Common Area under the provisions of this Sublease, all personal
property taxes on equipment used for Common Area Maintenance; all cost of
removing ice and snow from the Common Area; all cost of collecting, cleaning,
storage, and removal of rubbish, dirt and debris from the Common Area (other
than emptying Occupants' trash receptacles and the cartage of such trash); all
costs associated with minor repairs to the parking areas located in the Common
Area; all cost for labor, utilities and materials utilized in the maintenance
and replacement of the landscaping in the Common Area; all charges for utilities
services incurred in connection with Common Area Maintenance, including for the
illumination of the Common Area, together with all costs of maintaining and
- ------------
replacing lighting fixtures in the Common Area; all costs of maintaining and
replacing the Common Utility Lines.

C. Macy's Parcel: That property covered by the Master Lease and
-------------
described in Exhibit A attached hereto.

D. Maxwell's Proportionate Share: 47.70%.
-----------------------------

III. Grant: Premises., Term; Holdover.
--------------------------------

A. Macy's, for and in consideration of the rents, covenants and
agreements contained in this Sublease, agrees to sublet to Maxwell portions of
the premises located at 560 Oak Street, in Brockton, Massachusetts (the
"Building"), consisting of the following locations:

1
<PAGE>

<TABLE>
<CAPTION>
SPACE SUE (S.F.) DESCRIPTION
----- ---------- -----------
<S> <C> <C>

A 22,150 Platform Area
B 93,030 1' Level Warehouse Space
C 93,030 2' Level Warehouse Space
D 6,300 Maintenance Area

TOTAL 214,510
</TABLE>

(the parcels combined are shown on the attached Exhibit B, and are hereafter
referred to as the "Premises").

B. Maxwell shall have and Macy's hereby grants to Maxwell the right,
privilege and easement for the benefit of the Premises and Maxwell and its
permittees to use, in common with others, the Common Areas, such use to be for
the intended uses and purposes of the Common Areas and the improvements thereon,
including ingress and egress and parking and passage, and such other things as
are permitted under this Sublease. Maxwell's use of the Common Areas shall be
limited to the non-exclusive use for its permittees of parking spaces in the
area at the rear of the Building.

C. Macy's reserves the right to install and maintain within the wall,
columns and suspended ceilings of the Premises, wires, pipes, cables, flues,
ducts and conduits for ventilation, heating, air conditioning, water, gas,
sewer, drains, sprinklers and electricity leading to other portions of the
Building and to have access thereto at all reasonable times, after providing
reasonable advance notice to Maxwell (except in case of emergency).

D. The initial term of this Sublease (the *Term") shall be for a period
of approximately three (3) years and eight (8) months, commencing on June 1,
1997 and expiring on January 31, 2001, unless earlier terminated as provided in
this Sublease, or because the Master Lease has been terminated.

IV. Rents
-----

A. Commencing on June __, 1997, Maxwell agrees to pay to Macy's without
demand, on the first day of each month during the Term and thereafter until this
Sublease is terminated, without deduction or setoff, monthly rent of $41,998.75
("Rent"). Rent for any partial month during the Term shall be prorated on a per
them basis.

V. Use of Premises.
----------------

A. Maxwell shall use the Premises solely for the storage and
distribution of merchandise. If permitted by law and by the terms of the Master
Lease, Maxwell may use the Premises for the light manufacture of merchandise. If
-----------
at any time Maxwell receives notice from either Macy's or Landlord that
--------
Maxwell's manufacturing use violates any law or the Master Lease, Maxwell shall
immediately discontinue such use. Maxwell shall use the Parking Areas solely for
the parking and storage of automobiles and trailers as permitted by Section III
B hereof, and for no other purposes whatsoever. Maxwell shall at all times
maintain the Premises, the entrances thereto, and the Parking Areas, in a neat,
clean and orderly condition and will not permit any accumulation of rubbish in
the entrance ways or exterior of the Premises or the Parking Areas. Furthermore,
Maxwell shall use the Premises in such a manner so as not to disturb the
residential neighbors of the Premises. Maxwell will regulate its trucks to
minimize truck traffic at the Premises between 9:00 p.m. and 6:00 a.m. daily.

B. Maxwell shall have the right to install within the Premises
conveyance systems, racking and other fixtures related to a distribution center
and may remove such systems at the end of the Term, provided Maxwell repairs
prior to the end of the Term all damage to the Premises attributable to the
installation, use or removal of such equipment, fixtures and systems. Maxwell
shall have the right to install reasonable signs on the exterior of the Demised
Premises, provided such signs comply with all applicable laws and regulations.
Maxwell shall obtain, at its own cost and expense, all necessary approvals for
such signs, including, if necessary, the approval of the Landlord under the
Master Lease.

VI. Assignment and Subletting. Maxwell may not assign, mortgage or
-------------------------
hypothecate this

2
<PAGE>

Sublease or the leasehold estate created hereby or any interest therein, nor may
Maxwell sublet the Premises or any portion thereof, without in each and every
instance obtaining the written consent of Macy's and the Landlord, which consent
by Macy's shall not be unreasonably withheld or delayed.

VII. Utilities. Maxwell shall reimburse Macy's for the cost of utilities
---------
supplied to the Premises during Maxwell's occupancy, within 20 days after
receipt by Maxwell of an invoice (with supporting documentation) from Macy's.
Maxwell's cost of utilities shall be calculated as follows:

Electricity: Maxwell shall pay the entire cost of electricity to
-----------
the Premises as measured by a check meter provided by Macy's.

Gas: Maxwell shall pay the entire cost of gas service to the
---
Premises as measured billed by the gas company.

Water: Maxwell shall pay its Proportionate Share (47.70%) of the
-----
water usage at the Building.

VIII. Additional Rent. Maxwell shall pay to Macy's Maxwell's Proportionate
---------------
Share of (i) all taxes assessed against the Macy's Parcel, and (ii) Common Area
Maintenance Costs. Such payment shall be made within 20 days after receipt by
Maxwell of an invoice (with supporting documentation) from Macy's.

IX. Damages or Destruction. Maxwell will promptly notify Macy's of any damage
----------------------
to, or destruction of, the Premises by fire or other casualty. If greater than
ten percent (10%) of the Premises is substantially damaged or destroyed by fire
or other casualty, then Maxwell shall have the right to terminate this Sublease,
in which case this Sublease shall be deemed terminated as of the date of the
fire or casualty and Macy's shall reimburse Maxwell for its proportionate share
of any prepaid Rent. Macy's shall have no obligation to repair the Premises or
the Building.

X. Condemnation. If the Premises is taken in any proceeding by public
------------
authority by condemnation or otherwise, or acquired for public or quasi-public
Purposes, then this Sublease shall be deemed terminated as of the date of such
taking or acquisition, unless Macy's can provide a satisfactory substitute
premises that is suitable to Maxwell. In no event shall Maxwell be entitled to
all or any portion of any award or damage by reason of such taking or
------
acquisition of all or any portion of the Premises; provided, however, that
Maxwell may pursue an independent claim for any losses it suffers as a result of
such taking. Macy's shall have no obligation to repair the Premises or the
Building.

XI. Repairs and Alterations.
------------------------

A. Maxwell shall, at its own expense, keep and maintain the interior of
the Premises, HVAC equipment and systems, mechanical equipment, and sprinklers
exclusively serving the Premises, in the same condition and repair as they are
in as of the Commencement Date of this Sublease. Any repairs required to the
interior of the Premises shall be made by Maxwell, at its expense. Macy's shall
be under no obligation to make any repairs, alterations, replacements or
improvements to and upon the Premises to comply with the Americans with
Disabilities Act. Unless caused by Maxwell', its agents' or employees' gross
negligence or willful misconduct, Maxwell shall not be responsible for
repairing: the exterior of the Building; the roof, HVAC equipment and systems,
mechanical equipment and sprinklers not exclusively serving the Premises; or the
structural portions of the Building. With respect to the immediately preceding
sentence, Macy's shall use reasonable efforts to encourage Landlord to comply
with its obligations under the Master Lease to repair same.

B. Maxwell shall have the right, at its sole cost and expense, to
provide security for, the Premises and Building.

XII. Compliance with Law: Environmental Regulations
----------------------------------------------

3
<PAGE>

A. Maxwell shall, at its own expense, comply with all laws, rules
orders, ordinances, directions, regulations and requirements of federal, state,
county and municipal authorities now in force or which hereafter may be in
force, with respect to Maxwell's specific use, occupation or alteration of the
Premises, including without limitation, environmental laws and regulations
(collectively, "Laws*). Maxwell agrees to indemnify and save Macy's harmless
from and against any penalty, damage or charge imposed for any violation by
------
Maxwell, its agents or employees of any of the Laws.

B. Maxwell shall not cause or permit any hazardous material to be
brought upon, stored, or used in or about the Premises, other than standard
office and janitorial supplies in such amounts customary for normal uses.
Maxwell shall inspect, use, store, generate, and dispose of all hazardous
materials or oil in compliance with the Laws and shall cause its agents to
comply with such Laws. Maxwell shall not release, or permit to be released by
its agents, employees or contractors, on, in, or from the Premises or in
connection with Maxwell's use of the Premises, any hazardous material or oil in
violation of the Laws. Maxwell shall comply and shall cause its agents to comply
with 310 CMR Part 30, relating to the handling, storage, generation,
transportation and disposal of hazardous waste. If Maxwell or its agents
generate hazardous wastes, then Maxwell shall provide Maxwell's generator number
and copies of permits required under 310 CMR Part 30 to Macy's, and shall
provide Macy's within seven days of its request thereof, copies of all manifests
used for the transportation and disposal of hazardous wastes. Immediately upon
discovering a release of hazardous material at the Premises, or a violation of
the Laws, Maxwell shall promptly notify Macy's in writing. Maxwell shall be
responsible for all costs incurred and all fines assessed in connection with the
handling, storage, generation, use, transportation and disposal of hazardous
material by Maxwell and its agents as a result of violations of its obligations
under this Article X. "Hazardous material" as used herein means any substance
defined as hazardous under the Comprehensive Environmental Response Compensation
and Liability Act (CERCLA) 42 U. S. C. (S)960 1, et seq.; the Massachusetts
Contingency Plan, M. G. L. Ch. 2 1 E, (S)2; M. G. L. Ch. 2 1 C; 3 10 CMR Part
30; the Clean Air Act, 42 U. S. C. (S)740 1, et seq. and 40 CFR Parts 50-85; or
the Massachusetts Clean Air Act, M.G. L. Ch. 111, (S) 142, et seq. and 3 10 CMR
Parts 6-8; or listed in the United States Department of Transportation Hazardous
Materials Table, 49 CFR 172. 101, as amended; or listed in the Environmental
Protection Agency as a hazardous substance, 40 CFR Part 302, as amended.
Maxwell's obligations under this Section shall survive the expiration or
termination of this Sublease.

XIII. Condition of Premises.
----------------------

A. On or before June 30, 1997 (subject to Subsection XXI C hereof),
Macy's shall complete "Macy's Work" as described in Exhibit C and deliver
possession of the Premises to Maxwell (the actual date of delivery being herein
called the "Delivery Date"). Provided Macy's Work is completed in a good and
workmanlike manner, Maxwell shall accept the Premises in its "AS IS" condition
as of the Delivery Date. Macy's makes no representations, covenants or
warranties with respect to the condition of the Premises, except that Macy's
Work shall be completed in a good, workmanlike manner. Maxwell has inspected the
Premises and the mechanical equipment located therein and is relying on its own
inspection with respect to the condition thereof Maxwell may request early entry
upon the Premises to commence Maxwell's improvements, fixturing and equipment
installation, which early entry shall be subject to Macy's reasonable approval,
provided any such early entry shall not interfere with Macy's Work.

B. Any installation, alteration, construction or modification to the
Premises by Maxwell on or for the Premises shall be approved in writing by
Macy's prior to commencement of any work. Within 30 days after receiving a
complete set of plans for such work from Maxwell, Macy's shall either approve or
disapprove such plans.

C. Macy's reserves the right at any time and from time to time (and
after providing Maxwell reasonable advance notice), solely in connection with
its maintenance and repair obligation hereunder, to make or permit alterations
or additions in or to the Building, and in connection therewith, to close
entrances, doors, corridors, elevators and other facilities, all without any
liability to Maxwell, its employees, agents or invitees, for any expense,
injury, loss, damage, interference or annoyance resulting from any such
alteration or addition or any work in connection therewith; provided that
Maxwell's use of the Premises, the dimensions or location of the Premises, and
Maxwell's access to the Premises are not materially, adversely impaired. Macy's
shall use reasonable efforts to minimize the detrimental impact of Macy's work,
if any, on Maxwell's use of the Premises.

4
<PAGE>

D. Macy's represents that it is duly authorized to enter into this
Sublease subject to the terms and conditions of the Master Lease. Maxwell
acknowledges that Landlord has certain rights of access to the Premises as set
forth in the Master Lease, and agrees to allow Landlord to exercise its rights
under the Master Lease, provided that Landlord does not materially, adversely
interfere with the conduct of Maxwell's business in the Premises and Maxwell is
given advance notice of such access in each event.

XIV. Liens.
-----

A. Maxwell shall not permit any mechanic's or materialman's liens or any
-------------
other similar lien to attach to the Premises or the Building. If any such lien
is filed, then Maxwell shall indemnify Landlord and Macy's for all costs and
liabilities arising from such lien. In the event that a foreclosure or other
court action is brought to enforce the lien, Maxwell shall promptly cause the
lien to be discharged of record at its expense by payment, bond or court order.

B. All trade fixtures, merchandise, signs and apparatus (as
distinguished from permanent leasehold improvements) owned by Maxwell and
installed in the Premises shall remain the property of Maxwell and shall be
removable at any time during the Term. Maxwell shall repair any damage to the
Premises caused by the removal of said fixtures. Any of Maxwell's property not
removed by Maxwell within five business days after the end of the Term or
earlier termination of this Sublease will be deemed abandoned by Maxwell, in
which case Macy's may retain the property, order Maxwell to remove the items or
have them removed, all at Maxwell's expense.

XV. Inspection of Premises. Maxwell shall permit Landlord, Macy's and their
----------------------
authorized representatives, to enter the Premises at reasonable times, upon
prior notice (except in the case of emergency), to inspect the Premises and to
exhibit the Premises for the purpose of selling or mortgaging the Building, or
showing the same to any prospective tenant of the Premises.

XVI. Macy's Right to Cure. If Maxwell fails to make any payment or perform
--------------------
any other obligation that Maxwell is required to do under this Sublease, then
Macy's may (but shall not be obligated to) make or perform the same on Maxwell's
behalf, without waiving or releasing Maxwell of its obligations under this
Sublease; so long as Macy's first provides Maxwell written notice and an
opportunity to cure its breach for a period of 20 days. Maxwell shall be liable
for all costs incurred by Macy's, together with interest at the rate of one
percent (1%) over the prime rate charged from time to time by Chase Manhattan,
N.A., New York per annum, which amounts shall be deemed additional rent and
shall be due and payable with the next installment of Rent.

XVII. Indemnification and Insurance.
-----------------------------

A. Unless caused by the negligence of Macy's, or its agents,
contractors, or employees, Maxwell shall indemnify and save Macy's harmless from
all claims, damages, losses, liabilities and expenses in connection with loss of
life, bodily or personal injury or property damage, arising from or out of the
use or occupancy of the Premises by Maxwell, its employees or agents.

B. Unless caused by the negligence of Maxwell, or its agents,
contractors, or employees, Macy's shall indemnify and save Maxwell harmless from
all claims, damages, losses, liabilities and expenses in connection with loss of
life, bodily or personal injury or property damage, arising from or out of
Macy's use of the Building.

C. Maxwell agrees to carry throughout the entire Term, at its expense,
commercial general liability and property damage insurance, in amounts not less
than $3,000,000 combined single limits and an annual aggregate of $3,000,000.
All of Maxwell's insurance shall be with companies authorized to do business in
Massachusetts and issued by insurance companies reasonably acceptable to
Landlord. Maxwell shall provide Macy's with certificates evidencing the
existence of such insurance prior to the date of Maxwell's use or occupancy of
the Premises, which policies shall name Macy's and Landlord as additional
insureds Such policies shall bear endorsements to the effect that the insurer
agrees to notify Macy's not less than ten days in advance of any modifications
to the coverage or cancellation thereof.

5
<PAGE>

XVIII. Quiet Enjoyment. Macy's covenants that, upon paying Rent and observing
----------------
keeping and performing the covenant, agreements and conditions of this Sublease
--------
on this part to be observed, kept and performed, Maxwell shall lawfully and
quietly hold, occupy and enjoy the Premises during the Term, without hindrance
or molestation of Macy's, subject to the terms and conditions of this Sublease,
and subject to the Master Lease.

XIX. Master Lease.
------------

A. Macy's represents, to the best of its knowledge, that: (a) the Master
Lease is in full force and effect; (b) no uncured default exists under the
Master Lease; and (c) Macy's has no notice of any condition or event that would
impair or prevent Maxwell's use of the Premises or the Parking Areas in
accordance with this Sublease. Upon receipt of written request including
invoices or proof of payment from Maxwell, Macy's will reimburse Maxwell for any
reasonable and directly related costs (but not consequential or incidental
damages) that Maxwell incurs as a direct result and solely because of the
termination of this Sublease provided that such is triggered by a default of
Macy's under the Master Lease.

B. Maxwell assumes and agrees to be bound by and perform all of the
terms, covenants and conditions to be kept, observed and performed by Macy's as
tenant under the Master Lease (except with respect to any portion of the
premises leased under the Master Lease which are not part of the Premises)
accruing on and after the Delivery Date, excluding only the obligation to pay to
Landlord directly rent and items constituting Additional Rent under the Master
Lease (rent and Additional Rent as stipulated herein being payable to Macy's,
who shall be responsible for making payments thereof under the Master Lease to
Landlord).

XX. Surrender of Premises. Upon the expiration of the Term or earlier
---------------------
termination of this Sublease, Maxwell will quit and surrender the Premises to
Macy's in at least as good a condition as existed upon Maxwell's acceptance of
possession of the Premises, wear and tear and damage from casualty excepted.

XIX. Default.
--------

A. The following shall be deemed defaults of this Sublease:

1. If Maxwell fails to pay Rent or any amount due from Maxwell under
this Sublease when due, and such default continues for five days after
receipt of written notice from Macy's of such nonpayment;

2. If Maxwell fails to perform any of its obligations under this
Sublease when due, and such default continues for 30 days after notice
from Macy's of such default;

3. If Maxwell makes an assignment for the benefit of creditors;

4. If a voluntary or involuntary petition is filed by or against Maxwell
under any law having for its purpose the adjudication of Maxwell a
bankrupt, and, if involuntary, a finding is made or an order is entered
by the court, that Maxwell is insolvent or unable to meet the debts and
obligations of Maxwell as they mature; or

5. If a receiver is appointed for the property of Maxwell by reason of
the insolvency or alleged insolvency of Maxwell, and is not discharged
within 60 days.

B. If any default shall occur and continue beyond the cure period as set
forth above, then Macy's may, in addition to exercising any of its legal or
equitable remedies, elect to: (1) terminate this Sublease, in which case Maxwell
will immediately surrender the Premises to Macy's, provided that Maxwell shall
remain liable for all outstanding amounts owed, or (2) reenter the Premises, and
remove all persons and property; either by summary eviction proceedings or by
any other suitable action or proceeding at law, or by self-help repossess the
Premises, without demand or notice, and without being guilty of trespass and
without prejudice to any remedy, without terminating this Sublease. If this
Sublease is terminated, Macy's may, at its option, relet the Premises or any
portion thereof, and receive and collect the rents therefor, applying the same
first to the payment of such expenses as Macy's may have incurred in recovering
possession of the Premises, including attorneys' fees, and for putting the same
into good order or condition, or preparing or altering the same for re-rental,
and all other expenses,

6
<PAGE>

commissions and charges paid, assumed or incurred by Macy's in or about
reletting the Premises, and Maxwell shall remain liable for any deficiency.

XXI. Miscellaneous.
-------------

A. Limitation of Liability. Unless caused by Macy's negligence or
-----------------------
willful misconduct, Macy's shall not be liable for, and, to the extent permitted
by law, Maxwell hereby releases Macy's and its agents and employees from, any
loss of or damage to property of Maxwell or its agents, contractors, employees,
------
invitees, or licensees for any injury or damage to persons or property resulting
from any cause of whatsoever nature Without limiting the foregoing, unless
caused by Macy's negligence or willful misconduct, Macy's shall not be liable
for any damage caused by other tenants or persons in the Building, or for
damages for Maxwell's property, that is caused by bursting, stoppages, or
leaking of water, gas, sewage or steam pipes, flooding, or by refrigerators,
sprinkling devices, air conditioning apparatus, water, snow, ice, frost, steam,
excessive heat or cold, broken glass, odor or noise, whether any such loss or
damage is caused by or results from the acts of Macy's or other occupants of the
Budding. All property belonging to Maxwell or any occupant of the Premises shall
be at the risk of Maxwell, and Macy's shall not be liable for loss or damage
thereto by reason of theft or misappropriation.

B. Notices. Any notice, demand, request for approval or consent or other
---------
communication which may be required or given under this Sublease shall be in
writing and shall be deemed to have been given when received by United States
registered or certified mail, return receipt requested, postage prepaid, or
other delivery service where receipt can be verified addressed to Macy's to:

c/o Federated Department Stores, Inc.
Seven West Seventh Street
Cincinnati, OH 45202
Attn.: Real Estate Department
with a copy to:

Macy's East, Inc.
151 West 34th Street
New York, NY 10001-2180

or to such address as Macy's may designate by notice to Maxwell in accordance
with this Section, and if to Maxwell, to:

Maxwell Shoe Company
560 Oak Street
Brockton, Massachusetts 02401
with a copy to:
Maxwell Shoe Company, Inc.
101 Sprague Street
P.O. Box 37
Readville, Massachusetts 02137
or to such other address as Maxwell may, from time to time, designate in writing
to Macy's in accordance with this Section.

C. Force Majeure. If either party is delayed, hindered or prevented
-------------
from performing any act required hereunder because of strikes, lockouts,
inability to procure labor or materials, failure of power, restrictive
governmental laws or regulations, riots, insurrection, war, fire or other
casualty or other reason of a similar or dissimilar nature beyond the reasonable
control of that party, then the performance of that act (other than the payment
of Rent or other amounts due) shall be excused for the reasonable period of the
delay and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay provided that if such delay shall
last more than fifteen (15) days, then either party may terminate this Sublease
by providing written notice to the other. The provisions of this Section shall
not operate to excuse Maxwell from prompt payment of Rent or any other payments
required by the terms of this Sublease and shall not extend the Term. Delays for
failures to perform resulting from lack of funds shall not be deemed delays
beyond the reasonable control of a party.

7
<PAGE>

D. Brokers. Each party warrants that it has dealt with no broker,
-------
commission agent, finder or other person or entity with respect to this
Sublease, except that Macy's has retained Meredith & Grew, and Maxwell has
retained Whittier Partners. Macy's shall be responsible for paying a commission
due to Meredith & Grew pursuant to their separate agreement. Maxwell shall be
responsible for any commission or other compensation due to Whittier Partners
which is not payable by Meredith & Grew pursuant to a co-op arrangement between
such brokers. Each party shall indemnify and hold the other party harmless from
any claims, actions, damages, costs, expenses and liability whatsoever,
including reasonable attorneys' fees, that may arise from any claims for
commission or finder's fees in connection with this Sublease or the Premises
which is based on any representations, acts or agreements made by the
indemnifying party.

E. Subordination by Maxwell to Third Parties. Maxwell agrees that this
-----------------------------------------
Sublease shall be subordinate to the Master Lease, any existing ground leases,
mortgages, conditions, easements, restrictions or encumbrances of record.
Maxwell agrees that, upon the request of Macy's or Landlord, it will subordinate
this Sublease, in writing, to any present or future ground lease or to the lien
of any present or future mortgage to a bank insurance company or similar
financial institution that may become necessary or desirable from time to time
irrespective of the time of execution of said Sublease or the time of recording
of any such mortgage(s). Maxwell shall subordinate this Sublease so long as the
holder of any such mortgage or ground lease, or any other person claiming under
said mortgage or ground lease, agrees to recognize that this Sublease and the
rights of Maxwell, hereunder shall continue in full force and effect and that
such rights shall not be expanded, terminated or disturbed unless Maxwell is in
default under this Sublease.

F. Attornment by Maxwell. Maxwell agrees that if the mortgagee or the
---------------------
holder of any ground lease or any person claiming under said mortgage or ground
lease shall succeed to the interest of Macy's in this Sublease, Maxwell shall
recognize and attorn to said mortgagee or person as landlord under this
Sublease, provided that Macy's successor expressly assumes Macy's obligations
under this Sublease and cures any outstanding default. Maxwell agrees that it
will, upon the request of Macy's, execute, acknowledge and deliver any and all
instruments necessary or desirable to give effect or notice of such
subordination. The failure of Maxwell to execute such document or instrument
within ten (10) days after Macy's request shall constitute a default by Maxwell
under the terms of this Sublease. The word "mortgage" as used herein includes
mortgages, deeds of trust or other similar instruments and modifications,
consolidations, extensions, renewals, replacements and substitutes thereof.

G. Accord and Satisfaction. No payment by Maxwell, or receipt by
-----------------------
Macy's of a lesser amount than any payment of rent or other charges herein
stipulated shall. be deemed to be other than on Maxwell's account and applied to
the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Macy's may accept such check or payment without
prejudice to Macy's right to recover the balance of such rent or pursue any
other remedy provided for in this Sublease or available at law or in equity.

H. Entire Sublease. This Sublease contains the entire agreement between
-----------------
the parties, and there is no other statement, agreement or representation,
either oral or written. No present or past dealings or custom between the
parties shall. be permitted to contradict or modify the terms hereof. No
modification of this Sublease shall be binding unless in writing, signed by all
parties.

I. Estoppel. Both parties agree at any time, upon not less than twenty
--------
(20) days' prior written request, to execute, acknowledge and deliver a written
statement certifying that this Sublease is unmodified and in full force and
-----------
effect (or, to the modifications if applicable), the dates to which Rent and
other charges have been paid pursuant to this Sublease, and such other
certification concerning the Sublease as may be reasonably requested. Both
parties further agree that said statement may be relied upon by any prospective
purchase mortgagee or purchaser of the Premises.

J. Interpretation; Severability. The laws of the Commonwealth of
----------------------------
Massachusetts shall govern the validity, performance and enforcement of this
Sublease. As used herein, the word "including" is not limiting. If any part of
this Sublease shall, be adjudged by any court of competent jurisdiction to be
invalid, such judgment shall, not affect or impair any other provision.

K. Recording. This Sublease shall not be recorded.
---------

8
<PAGE>

L. Section Headings. The section headings contained herein are for
----------------
convenience only and do not define, limit, construe or amplify the contents of
such sections.

M. Successors and Assigns. The conditions, covenants and agreements
----------------------
contained in this Sublease shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns. All covenants and agreements of this Sublease shall run,
with the land.

N. Authority. Each party and the individual(s) executing this Sublease
---------
on its behalf represent and warrant to the other party that such individual(s)
have full right, power and authority to execute this Sublease on behalf of the
party indicated and, if such party is a corporation, that such corporation has
full corporate power and authority to enter into this Sublease and has taken all
corporate action necessary to carry out the transaction contemplated hereby, so
that when executed this Sublease constitutes a valid and binding obligation
enforceable against such corporation.

IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be duly
executed by their officers thereunto duly authorized, and their corporate seals
to be hereunto affixed, the day and year first above written.

Signed and acknowledged
in the presence of: MACY'S EAST, INC.

By:
- ------------------------------------ --------------------------------
Print Name: Mary Ann Stumpf

- ------------------------------------
Print Name: Elizabeth J. Haass

Signed and acknowledge
in the presence of: MAXWELL SHOE COMPANY, INC.

By:
- ------------------------------------ ---------------------------------
Print Name: John Kelly Maxwell V. Blum
Chairman, Chief Executive Officer

- ------------------------------------
Print Name: Elaine Linski

9
<PAGE>

STATE OF OHIO
COUNTY OF HAMILTON
BE IT REMEMBERED, that on this 10th day of June 1997, before me, the
subscriber, a Notary Public in and for said county, personally came the above
named MACY'S EAST, INC., an Ohio corporation, by Robert C. Seppelt, its Vice
President, duly authorized by the Board of Directors of the Corporation,
acknowledged the signing of the foregoing sublease to be his/her voluntary act
and deed for and as the act and deed of the Corporation, for the uses and
purposes therein mentioned.

IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
office seal, on June 10, 1997.

-----------------------------------
Notary Public ELIZABETH J. HAASS

COMMONWEALTH OF )
) SS.
COUNTY OF Suffolk )

BE IT REMEMBERED, that on this 5 day of June, 1997, before me, the
subscriber, a Notary Public in and for said county, personally came the above
named MAXWELL SHOE COMPANY, INC., by Maxwell B. Blum , its Chairman, CEO duly
authorized by the Board of Directors of the Corporation, acknowledged the
signing of the foregoing sublease to be his/her voluntary act and deed for and
as the act and deed of the Corporation, for the uses and purposes therein
mentioned.

IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
office seal, on June 5, 1997.

---------------------------------
Notary

10
<PAGE>

COMMONWEALTH OF MASSACHUSETTS )
)SS.
COUNTY OF _____________________ )

BE IT REMEMBERED, that on this ______ day of _______________, 1997, before
me, the subscriber, a Notary Public in and for said county, personally came the
above named JOHN H. FINLEY, III, as Trustee for Brockton Oak Real Estate Trust,
duly authorized by the Board of Directors of the Corporation, acknowledged the
signing of the foregoing sublease to be his voluntary act and deed for and as
the act and deed of the Corporation, for the uses and purposes therein
mentioned.

IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my
----
office seal, on _________________, 1997.

------------------------------
Notary Public

11
<PAGE>

Exhibit C

Macy's Work

1. Erect demising walls for the Premises.

2. Secure elevator openings to adjacent space.

3. Install electricity check meter.

4. Remove Cafeteria fixtures and equipment.

5. Deliver Premises in broom clean condition, with all lighting, heating units
and loading doors in operating condition.

<PAGE>

EXHIBIT 10.33

L E A S E
---------

560 OAK STREET, BROCKTON, MASSACHUSETTS

Tenant: Maxwell Shoe Company, Inc.

TABLE OF CONTENTS

<S> <C>
1. LEASE INFORMATION AND DEFINITIONS .........................................1
1.1. LEASE INFORMATION .......................................................1
1.2. EXHIBITS ................................................................2
1.3. GENERAL DEFINITIONS .....................................................2

2. LEASE OF PREMISES .........................................................3
2.1. AGREEMENT TO LEASE ......................................................3
2.2. PREMISES, EXCEPTIONS AND APPURTENANCES ..................................3
2.3. RESERVATIONS ............................................................3
2.4. EXPANSION PREMISES ......................................................4
2.5. CONDITION ...............................................................4

3. TERM AND COMMENCEMENT .....................................................4
3.1. TERM ....................................................................4
3.2. OPTIONS TO EXTEND THE TERM ..............................................4
3.3. ACCELERATED COMMENCEMENT ................................................5

4. RENT.......................................................................6
4.1. FIXED RENT ..............................................................6
4.2. PAYMENT OF FIXED RENT ...................................................6
4.3. PAYMENT OF RENT .........................................................6

5. ADDITIONAL RENT ...........................................................6
5.1. TAXES ...................................................................6
5.2. OPERATING COSTS .........................................................7
5.3. OTHER ADDITIONAL RENT ...................................................8

6. CONDITION OF THE PREMISES .................................................9
6.1. CONDITION ...............................................................9

7. COVENANTS .................................................................9
7.1. COVENANTS ...............................................................9

8. USE OF LEASED PREMISES ...................................................10
8.1. PERMITTED USE ..........................................................10
8.2. USE COVENANTS ..........................................................10
8.3. ACCESS TO PREMISES .....................................................11
8.4. SIGNS ..................................................................11

9. MAINTENANCE, ALTERATIONS AND REMOVAL .....................................11
0.1. MAINTENANCE ............................................................12
9.3. REMOVAL ................................................................13

10. UTILITY SERVICES ........................................................14
10.1. SEPARATE UTILITIES ....................................................14
10.2. SERVICES ..............................................................14
</TABLE>

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<TABLE>

<S> <C>
10.3. PAYMENT FOR SERVICES ..................................................14
10.4. USE OF SERVICES .......................................................14
10.5. MEASUREMENT OF USAGE ..................................................15
10.6. NO LIABILITY ..........................................................15

11. LIABILITY AND INSURANCE .................................................15
11.1. LIABILITY .............................................................15
11.2. INSURANCE .............................................................15
11.3. WAIVER OF SUBROGATION .................................................16

12. ASSIGNMENT OR SUBLETTING ................................................16
12.1. RESTRICTION ...........................................................16
12.2. TRANSFERS OF INTERESTS ................................................17
12.3. REIMBURSEMENT OF COSTS ................................................17
12.4. AGREEMENT OF ASSIGNEE/SUBTENANT .......................................17
12.5. LIABILITY OF TENANT ...................................................17
12.6. EXCESS RENT ...........................................................18

13. MORTGAGES ...............................................................18
13.1. SUBORDINATION .........................................................18
13.2. MORTGAGEE'S ELECTION ..................................................18
13.3. ASSIGNMENT OF LEASES AND RENTS ........................................19

14. STATUS REPORTS ..........................................................19
14.1. ESTOPPEL CERTIFICATE ..................................................19

15. DAMAGE BY CASUALTY ......................................................19
15.1. CASUALTY ..............................................................19
15.2. TERMINATION ...........................................................20
15.3. TENANT'S OBLIGATION ...................................................20
15.4. ABATEMENT .............................................................20

16. EMINENT DOMAIN ..........................................................21
16.1. TAKING ................................................................21
16.2. TERMINATION ...........................................................21
16.3. OBLIGATION TO RESTORE .................................................21
16.4. ABATEMENT .............................................................21
16.5. AWARDS ................................................................21

17. DEFAULT .................................................................22
17.1. EVENT OF DEFAULT ......................................................22
17.2. TERMINATION ...........................................................22
17.3. REMEDIES ..............................................................23
17.4. SELF-HELP .............................................................24
17.5. LANDLORD'S DEFAULT ....................................................25

18. NOTICES .................................................................25
18.1. NOTICES ...............................................................25
18.2. NOTICES TO MORTGAGEE. AZARDS ..........................................26

19. ENVIRONMENTAL HAZARDS....................................................26
19.1. OBLIGATIONS ...........................................................26
19.2. INDEMNIFICATION .......................................................26
19.3. PROVISIONS ............................................................26

20. MISCELLANEOUS PROVISIONS ................................................27
20.1. CONSENTSIWAIVERS ......................................................27
</TABLE>

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<TABLE>

<S> <C>
20.2. DISPUTED PAYMENTS .....................................................27
20.3. FORCE MAJEUR ..........................................................28
20.4. QUIET ENJOYMENT .......................................................28
20.5. HOLDING OVER . ........................................................28
20.6. VACATING ..............................................................28
20.7. LATE PAYMENTS .........................................................28
20.8. WAIVER OF COUNTERCLAIMS ...............................................28
20.9. CONSENTS ..............................................................29
20.10. BINDING EFFECT; PARTIES; LANDLORD LIABILITY . ........................29
20.11. NOTICE OF LEASE . ....................................................29
20.12. BROKERS . ............................................................30
20.13. GENERAL PROVISIONS.
</TABLE>

iii
<PAGE>

L E A S E
---------

This Lease entered into by and between Landlord (as defined in Section 1,
together with its successors and assigns) and Tenant (as defined in Section 1,
together with its successors and permitted assigns).

1. LEASE INFORMATION AND DEFINITIONS
- -- ---------------------------------

1.1. LEASE INFORMATION.

For the purposes of this Lease, the following terms shall have the meanings set
forth below, unless the context otherwise requires:

"Lease Date": , 1997.
_____________________

"Landlord": John H. Finley, 111, as Trustee of Brockton Oak Real
Estate Trust

"Landlord's Address": c/o Creative Development Company
77 Franklin Street
Boston, MA 021 10

"Tenant": Maxwell Shoe Company, Inc.
a Delaware corporation

"Tenant's Address": 101 Sprague Street Boston, MA 02131
Boston, MA 02131

"Tenant's Trade Name": Maxwell Shoe Company

"Premises": Approximately 215,000 square feet of space in the
Building (as defined in Section 1.3), which Building
is located at 560 Oak Street in Brockton,
Massachusetts. The Premises are located substantially
as outlined on the plan attached hereto as Exhibit A.

"Commencement Date": February 1, 2001.

"Term": Six (6) years, expiring January 31, 2007.

"Annual Fixed Re': Lease Annual Monthly
Year Fixed Rent Installments
---- ---------- ------------
1-6 $600,000 $50,000

"Permitted Use": Warehouse use.

"Insurance Amounts': $3,000,000 for injury to persons and for damage to
property.

"Premises Rentable Are": 215,000 square feet.

"Building Rentable Area": 445,000square feet.

"Broker": Whittier Partners

"Option Periods": Two (2) 5-year options
<PAGE>

1.2. EXHIBITS.

The following Exhibits, Riders and Addenda are attached to this Lease and are
incorporated herein by reference:

Exhibit A Plan of Premises
- ---------

Exhibit B Plan of Expansion Premises
- ---------

1.3. GENERAL DEFINITIONS.

For the purposes of this Lease, the following terms shall have the meanings set
forth below, unless the context otherwise requires:

"Alterations": Any and all alterations, installations, improvements,
-----------
additions or other physical changes in or about the Premises, whether interior,
exterior, structural, nonstructural or otherwise.

"Applicable Law": All laws now or hereafter in effect and applicable with
respect to the matter referred to herein, including all applicable
constitutional provisions, statutes, ordinances, codes, by-laws, regulations,
rulings, decisions, rules, orders, determinations and requirements of any
Federal, State, county, local or other legislative, executive, judicial or other
governmental body or authority.

"Approvals": All governmental or private approvals and authorizations of
---------
any nature, including all permits, licenses, orders, variances, and the like.

"Building": The building in which the Premises are located.
--------

"Common Facilities": The portions of the Building and the Land which are
-----------------
reasonably necessary for access to and the use and enjoyment of the Premises
(except the interior of the Premises and of other rentable portions of the
Building) and which are designated as such from time to time by the Landlord;
the Common Facilities may include: common entranceways, hallways, stairways,
elevators and lobbies, common toilets, common loading docks, and common
walkways, exterior spaces, parking areas and landscaped areas.

"Default Interest Rate": An interest rate equal to the greater of (i) 1%
---------------------
per month or (ii) 500 basis points above the base lending rate (prime rate)
announced from time to time by The Bank of Boston, N.A., but in no event shall
the Default Interest Rate be greater than that permitted by Applicable Law.

"Including": Including without limitation.
---------

"Land": The parcel of land on which the Building is located.
----

"Lease Year": Each successive twelve-month period included in whole or in
----------
part in the Term of this Lease; the first Lease Year beginning on the
Commencement Date and ending at midnight on the day before the first anniversary
of the Commencement Date (provided that if the Commencement Date is not the
first day of a calendar month, the first Lease Year shall end at midnight on the
last day of the calendar month that includes the first anniversary of the
Commencement Date).

"Mortgage": Any real estate mortgage, ground lease, deed of trust or any
--------
other security agreement or indenture affecting the Premises, Building or
Property.

"Mortgagee": The holder of any Mortgage.
---------

"Property": The Land and the Building and all other buildings and
improvements on the Land.

"Tenant's Agents": Tenant's subtenants, licensees and concessionaires; the
---------------
employees, agents, contractors, subcontractors, suppliers, transporters,
licensees, invitees, guests or customers of Tenant or of Tenant's subtenants,
licensees or concessionaires; and anyone else claiming by, through or under
Tenant.

2
<PAGE>

"Tenant's Share": The amount of a respective item multiplied by a
--------------
fraction, the numerator of which is the Premises Rentable Area and the
denominator of which is the Building Rentable Area.

"Unavoidable Delays": Delays caused by strikes, lockouts, labor
------------------
difficulties, inability to obtain labor or materials, government restrictions,
sabotage, riots, civil commotion, enemy action, explosions, fire, unavoidable
casualty, accidents, acts of God or similar causes beyond the reasonable control
of Landlord.

2. LEASE OF PREMISES
- -- -----------------

2.1. AGREEMENT TO LEASE.

In consideration of the rents and covenants contained herein to be paid,
performed and observed by Tenant, the Landlord hereby leases to the Tenant and
the Tenant hereby leases from the Landlord, subject to the terms and provisions
hereinafter set forth, the Premises.

2.2. PREMISES, EXCEPTIONS AND APPURTENANCES.

2.2.1. Excepted and excluded from the Premises are: (i) the ceiling,
floor, perimeter walls and exterior walls and windows (except the interior
surfaces and coverings thereof); and (ii) any space in the Premises used for
pipes, ducts, wires, meters, vents, flues, conduits, utility lines, fan rooms,
shafts, stacks, utility closets, janitor closets, stairways and elevator wells
and not serving the Premises exclusively.

2.2.2. Included as appurtenant to the Premises are the non-exclusive
right to use, in common with others lawfully entitled thereto and in connection
only with business in the Building: (i) the Common Facilities, but only for the
purposes for which such Common Facilities (and portions thereof) shall have been
designated by Landlord; and (ii) the pipes, ducts, wires, meters, vents, flues,
conduits and utility lines serving the Premises. Such rights shall always be
subject to reasonable rules and regulations from time to time established by
Landlord and to the right of Landlord to designate and change from time to time
the Common Facilities.

2.2.3. The Premises are leased subject to existing encumbrances of record,
if any.

2.3. RESERVATIONS.

The Landlord reserves the right (without thereby assuming the obligation): to
install, maintain, use, repair, replace and relocate, within or without the
Premises, pipes, ducts, wires, meters, vents, flues, conduits, utility lines and
other equipment which now are, or hereafter may be, in the reasonable judgment
of the Landlord, reasonably required to be in the Premises or the Building to
service the Premises or other parts of the Building; to change the size, type
and shape of any and all buildings on the Land; to alter, reduce, increase and
relocate all parking areas, driveways and walkways, from time to time, provided
same does not impair Tenant's reasonable use of the Premises; and to make
additions to the Building and erect additional buildings and structures on the
Land. Should Landlord make additions to the Building or reconfigure the
Building, the Building Rentable Area shall be appropriately increased or
decreased by Landlord.

2.4. EXPANSION PREMISES.

On or prior to February 1, 2000, Landlord shall notify Tenant in writing of the
availability of the portion of the Building currently subleased to Apron's
Unlimited, Inc. (New England Sports) and consisting of 175,000 square feet of
rentable floor area (the "Expansion Premises"). Tenant shall have the option, to
be exercised by written notice to Landlord on or prior to March 1, 2000, to
lease the Expansion Premises. If Tenant so elects to lease the Expansion
Premises, such space shall be leased upon the same terms and conditions
contained in this Lease and shall be and become part of the Premises hereunder,
including without limitation with respect to the payment of additional rent, the
Term of this Lease and the extensions thereof, and the leasing of such space in
its "as is" condition as of the Commencement Date, except that the Annual Fixed
Rent for the Expansion Premises during the Term shall be $525,000, and Tenant's
Share hereunder shall be recalculated based upon the combined area of the
original Premises and the Expansion Premises. If Tenant fails to deliver written
notice to Landlord exercising its option by March 1, 2000 (or if Landlord shall
fail to notify Tenant by February 1, 2000, by the date 30 days after the date of
Landlord's notice), the option granted hereunder shall be deemed waived for all
purposes, and Landlord may lease the Expansion Premises to any party and upon
any terms free of any rights of Tenant. If Tenant shall

3
<PAGE>

exercise the option, Landlord and Tenant agree to execute an amendment to this
Lease so adding the Expansion Premises to the Premises.

2.5. CONDITION.

This Lease is conditioned on the execution by Tenant of a sublease (the
"Sublease") of the Premises with the current lessee, now known as Macy's East,
Inc. ("Macy's"), and Landlord's consent to same. If such condition is not
satisfied, Tenant may terminate this Lease by giving written notice thereof to
the Landlord. Such right to terminate shall be of no further force and effect if
not exercised within 6 months after the Lease Date.

3. TERM AND COMMENCEMENT
- -- ---------------------

3.1. TERM.

To have and to hold the Premises for the Term (also referred to as the "original
Term") beginning on the Commencement Date and expiring at midnight on the last
day of the Term, unless sooner terminated as hereinafter provided.

3.2. OPTIONS TO EXTEND THE TERM.

3.2.1. The Tenant shall have the option to extend the Term of this Lease
for the Option Periods (the "extension Terms"), provided that: (i) Tenant is not
in default (subject to notice and cure periods) under any of the terms and
conditions of this Lease at the time it elects to exercise each such option or
at the commencement of each such extension Term; and (ii) Tenant has given
Landlord written notice of its election to extend the Tenn no later than 12
months prior to the expiration date of the original Term (as it may have been
previously., extended). In the event that Tenant %,hall so extend the Tenn, such
extension shall be upon the same terms and conditions as set forth in this
Lease, except: (i) after the exercise of the second extension, no further right
to extend shall be deemed to be included; and (ii) the Annual Fixed Rent payable
hereunder during the extension Terms shall be adjusted in accordance with the
provisions of Section 3.2.2 below. Should Tenant so extend the Term of this
Lease, the term "Tenn" as used herein shall mean the original Term together with
the extension Tenn.

3.2.2. The Annual Fixed Rent payable by the Tenant during each extension
Term (if Tenant exercises its option to extend the Term), shall be as follows:
(a) The Annual Fixed Rent during the first extension Term shall
equal the Annual Fixed Rent payable during the last Lease
Year of the original Term, increased by the CPI Increase (as
defined below) from the Commencement Date to the last day of
the original Term.

(b) The Annual Fixed Rent during the second extension Term shall
equal the Annual Fixed Rent payable during the last Lease
Year of the first extension Term, increased by CPI Increase
from the first day of the first extension Term to the last
day of the first extension Term.

The "CPI Increase" shall be determined by calculating the percentage of increase
in the Price Index (as defined below), between the Price Index published next
prior to the first date of calculation and the Price Index published next prior
to the last date of calculation, and the Annual Fixed Rent shall be increased by
the percentage amount of such increase, provided in no event will the CPI
Increase for any extension Term be less than 0% or be more than 20%.

The term "Price Index", as used in this Lease, means the Consumer Price Index
for all Urban Consumers (CPI-U): U.S. City Average, All Items (1982-84=100),
published by the Bureau of Labor Statistics, U.S. Department of Labor. If any
expenditure groups, items, or components used to compute the Price Index are
added, deleted, or otherwise changed, or if the weights assigned to any spending
categories are materially altered, or if the Price Index population is
materially changed, or if the Price Index is calculated with respect to a
different base year, or if the Bureau of Labor Statistics should otherwise cease
to publish such Price Index in its present form and calculated on the present
basis, then Landlord shall appropriately adjust the Price Index or designate a
comparable index or designate an index reflecting changes in the cost of living
determined in a similar manner or, by substitution, combination or weighting of
available indices, expenditure groups, items, components or population,
establish such a substituted Price Index.

3.2.3. During the extension Term, Tenant shall continue to pay all
additional rent and other payments as provided in this Lease.

4
<PAGE>

3.3. ACCELERATED COMMENCEMENT.

If , after the satisfaction of the condition contained in Section 2.5 and prior
to the Commencement Date, the current lease (the "Macy's Lease") between
Landlord and Macy's shall terminate, then the Term of this Lease shall commence
as of the date of the termination of the Macy's Lease, with the Term nonetheless
continuing to expire on January 31, 2001, and during the period from such
early commencement of the Tenn and until the originally scheduled Commencement
Date (February 1, 2001), this Lease, and all of the terms and provisions
thereof, shall be in full force and effect, except that the Annual Fixed Rent
payable by Tenant during such period shall equal the annual fixed rent payable
to Macy's under the Sublease.

4. RENT
- -- ----

4.1. FIXED RENT.

Fixed rent ("Fixed Rent") shall be payable by Tenant during each Lease Year of
the original Term hereof in the annual amount of the Annual Fixed Rent.

4.2. PAYMENT OF FIXED RENT

4.2.1. Tenant's obligation to pay the Fixed Rent shall commence on the
Commencement Date.

4.2.2. All Fixed Rent shall be payable in advance in equal monthly
installments due on the first day of each calendar month during the Term hereof,
without offset or deduction and without previous demand therefor. Fixed Rent for
the first calendar month of the Term shall be payable on or prior to the
Commencement Date. Fixed Rent for any partial calendar month at the commencement
or expiration of the Tenn hereof shall be pro-rated on a per them basis at the
Fixed Rent applicable to such month(s). If the first Lease Year is longer than
one year, Fixed Rent for such Lease Year shall be increased proportionately to
the greater length of such Lease Year.

4.3. PAYMENT OF RENT.

4.3.1. All payments of Fixed Rent, additional rent or other amounts due
under any provision of this Lease shall be made payable to the Landlord and made
at Landlord's Address or such other payee and/or address as Landlord may
designate in writing from time to time.

4.3.2. All amounts payable by Tenant to Landlord hereunder, including
Fixed Rent, additional rent and all other payments and charges, and all amounts
payable to third parties and required to be paid by Tenant hereunder, shall be
deemed rent hereunder; and all provisions governing the payment of rent, and all
remedies applicable to the nonpayment of rent shall be applicable thereto.

4.3.3. Notwithstanding the fact that the amounts of Fixed Rent set forth
in this Section 4 were or may have been determined with reference to the floor
area of the Premises, said amounts set forth above are stipulated to be the
amounts of Fixed Rent due hereunder, whether or not the actual floor area of the
Premises is in fact actually more or less than the floor area figures used to
determine said Fixed Rent.

5. ADDITIONAL RENT
- -- ---------------

5.1. TAXES.

5.1.1. The Tenant shall pay to Landlord, as additional rent hereunder,
during the Term and any extension thereof- (i) Tenant's Share of the Taxes (as
defined below); and (ii) 100% of any portion of the Taxes attributable to any
Alterations made by the Tenant or to any of Tenant's property. Such additional
rent for any partial Tax Year (as defined below) at the commencement or
expiration of the Term shall be pro-rated on a per them basis.

5.1.2. The Tenant shall pay such additional rent to the Landlord within
10 days of billing therefor. Such billing may, without limitation, be
coordinated with the due dates of installment

5
<PAGE>

payments required by the taxing itithority.

5.1.3. The following terms as used herein shall have the meanings set
forth below:

"Tax Year": The taxing authority's fiscal year, currently the
period commencing on July I of a year and ending on June 30 of the following
year.to managing agents and for legal, accounting or other professional fees
relating to the Operation of the Property.

(d) Costs of and charges for all electrical, water, sewer, gas,
oil, telephone, alarm or other utility service to the Common
Facilities, and for such service to the Premises or to any
rentable portions of the Building, including all costs as
provided in Section 10 hereof.

(e) Costs relating to the Operation of heating, ventilating, air
conditioning, sprinkler and elevator systems, and water
lines, electrical lines, gas lines, sanitary sewer lines and
storm water lines located on the Premises, Building or Land.

(f) Costs in connection with the Operation of the exterior
portions of the Property, including: landscaping (including
planting and replanting); parking (including cleaning,
repaving and restriping); the exterior and roof of the
Building; signs and lighting; storage, collection and removal
of trash, rubbish, garbage and other refuse; and snow and ice
removal.

(g) Costs of all the premiums for all insurance carried by
Landlord on the Property (including insurance on the
Building, the Common Facilities and the Land), including all
costs as provided in Section I I hereof. Such insurance shall
include, without limitation, any of the following insurance
carried by Landlord: fire, extended coverage and all risk
insurance, flood insurance, rental value insurance, bodily
injury, public liability, and property damage liability
insurance, automobile parking lot liability insurance, sign
insurance, sprinkler insurance, boiler insurance and workers'
compensation insurance; all with limits and on such forms and
with such companies and against such risks as may be
reasonably determined by Landlord or as may be required by
the holder of any Mortgage on all or any portion of the
Property.

(h) Personal property, sales and use taxes on material,
equipment, supplies and services; the costs of all permits
and licenses; and fees for fire, security and police
protection.

(i) All other expenses (whether or not similar in type to the
costs specifically enumerated above) incurred in connection
with the Operation of the Common Facilities.

Operating Costs shall not include: (i) Structural Repairs (as defined in Section
9.1.2); (ii) costs, if any, associated with the maintenance of vacant leasable
space in the Building; (iii) costs associated with renting vacant leasable space
in the Building; and (iv) legal fees arising out of tenant disputes or from the
sale or refinancing of the Property.

5.3. OTHER ADDITIONAL RENT.

5.3.1. This is, and is intended to be, a NET LEASE. Except as expressly
otherwise provided: for herein all costs and expenses paid or incurred by
Landlord of any kind or nature whatsoever in maintaining and/or repairing the
Premises or the Building or the Land or any additions to the Building, or any
other buildings or structures on the Land (other than costs of maintaining or
repairing the interior of space leased to others or available for lease to
others) shall be included in determining the costs of which Tenant is obligated
to pay a proportionate share as provided herein.

6. CONDITION OF THE PREMISES
- -- -------------------------

6.1. CONDITION.

The Tenant shall accept the Premises in their "as is" condition as of the
Commencement Date, without representation or warranty, express or implied, in
fact or in law, by Landlord and without recourse to Landlord as to the nature,
condition or

6
<PAGE>

usability thereof and agrees that Landlord has no work to perform in or on the
Premises; and Tenant agrees further that any and all work to be done in or on
the Premises will be at Tenant's sole cost and expense.

7. COVENANTS
- -- ---------

7.1. COVENANTS.

Tenant covenants and agrees with Landlord as follows:

(a) To pay when due all Fixed Rent, all additional rent and all other
amounts due under this Lease from Tenant at the times and in the
manner set forth herein, without offset or deduction and without
previous demand therefor.

(b) To procure any Approvals required for any use to be made of the
Premises by Tenant.

(c) To pay promptly when due the entire cost of any work (including
all Alterations) to the Premises undertaken by Tenant so that the
Premises shall at all times be free of liens for labor and
materials.

(d) To permit Landlord and its agents to enter and examine the
Premises at reasonable times on prior reasonable notice and to
show the Premises to prospective purchasers or, during the last
12 months of the Tenn, tenants; and to permit Landlord to enter
the Premises to make such repairs, improvements, alterations or
additions thereto or to the Building as may be required in order
to comply with Applicable Law (without thereby obligating
Landlord to make such repairs, improvements, alterations or
additions), or as may be required or permitted of Landlord under
the terms of this Lease.

(e) To pay when due any and all Federal, State, or local taxes based
upon Tenant' s use or occupation of the Premises or pertaining to
Tenant's personal property or resulting from any Alterations made
by Tenant to the Premises.

(f) To comply with Applicable Law pertaining to the Premises or
Tenants use and occupation of the Premises.

(g) To refrain from doing anything, taking any action or failing to
act in such a manner that will cause any increase in the fire
insurance rates pertaining to the Premises or the Building and to
comply with any rules, regulations or recommendations of the
National Board of Fire Underwriters, any rating bureau, or any
similar association performing such function; and failing same,
without limiting other remedies of Landlord, Tenant shall pay to
Landlord, as additional rent hereunder, the entire amount of any
increase in insurance premiums resulting therefrom, such
addition. al rent to be paid to Landlord within 10 days after the
receipt of invoices from Landlord d therefor.

(h) To permit no waste with respect to the Premises.

(i) Upon the request of Landlord at any time or times during the Term
or thereafter until Tenant's obligations hereunder have been
performed in full, to promptly provide. Landlord with audited
financial statements of Tenant, such request to be made no more
frequently than annually.

8. USE OF LEASED PREMISES
- -- ----------------------

8.1. PERMITTED USE.

The Tenant shall have the right to use the Premises only for the Permitted Use,
and for no other purposes whatsoever, but in no event shall Tenant conduct at
the Premises any business use which is offensive, constitutes a nuisance or
violates any provisions of any zoning or building laws or any other Applicable
Law.

7
<PAGE>

Subject to Tenant obtaining all necessary Approvals and such use being in
compliance with all Applicable Law, Tenant shall have the right, during the
Term, to use all or any part of the Premises as a factory outlet store for
Tenant's products.

8.2. USE COVENANTS.

Tenant further agrees to conform to each of the following provisions during the
entire Term of this Lease or any extension thereof-

(a) Tenant shall always conduct its operations in the Premises under
Tenant's Trade Name, unless Landlord shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed.

(b) Tenant shall not permit any auction, fire, going-out-of-business or
bankruptcy sales to be conducted within the Premises without the
prior written consent of the Landlord.

(c) Tenant shall not use the sidewalks, parking areas, landscaped areas
or any other exterior space on the Property for advertising or
business purposes without the prior written consent of the Landlord.

(d) Tenant shall, at its own cost and expense, ensure that all trash,
refuse and the like is kept at all times in covered containers in
such places as Landlord may designate from time to time and is
removed and disposed of regularly.

(e) Tenant shall ensure that floor load limitations are not exceeded in
the Premises.

(f) Tenant shall not use the Premises for any unethical or unfair method
of business operation, nor perform any act or carry on any practice
which may injure the Premises or any other part of the Building or
the Property, nor cause any offensive odors or loud noise, nor
constitute a nuisance or menace to any other occupant of the
Building.

(g) Tenant shall not abandon the Premises; however, the foregoing shall
not forbid Tenant from vacating the Premises, so long as all of the
other covenants and conditions hereunder continue to be satisfied by
Tenant (including the payment of rent and the maintaining of all
required insurance), and provided Tenant keeps the Premises heated to
at least the levels required to protect the Building and all of its
systems and keeps the Premises secure.

(h) Tenant shall comply with such reasonable rules and regulations as
Landlord has promulgated or may promulgate during the term hereof of
any extension thereof.

(i) Tenant shall not install any equipment in the Premises that could
cause the electrical service to the Premises or the Building to be
overloaded. Tenant shall keep the Common Facilities free of any and
all of Tenant's equipment, refuse or property.

(k) Tenant will park its vehicles and will cause Tenant's Agents to park
their vehicles only in the parking areas adjacent to the Premises,
being those areas (i) located to the rear of the Building and (ii)
located at the side of the Building along the length of the Premises.

8.3. ACCESS TO PREMISES.
- ---- -------------------

Tenant shall have access to the Premises at all times, subject to such
reasonable security restrictions as may from time to time be in effect, to
Unavoidable Delays, and to restrictions based on emergency conditions.

8.4. SIGNS.
- ---- ------

Tenant may provide and install, at its sole expense, signs at the Premises and
exterior signs on the portion of the Building leased by Tenant, identifying
Tenant by Tenant's Trade Name and by the designated address of the Premises,
which signs shall be subject to the prior written approval of Landlord, which
approval shall not be unreasonably withheld. Such signs shall be in a style in
keeping with other such signs in the Building (and in accordance with any
Building standards for location, size and graphics, as may be established from
time to time by Landlord). Tenant shall be responsible for obtaining all permits
and approvals required for such signs before installing same. Tenant shall, at
its sole expense, maintain such

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signs in good repair and condition. Tenant shall remove such signs on the
expiration of the Tenn and shall be responsible for any damage or repairs to the
Premises and Building related to the erection and removal of said signs.

9. MAINTENANCE, ALTERATIONS AND REMOVAL
- -- ------------------------------------

9.1. MAINTENANCE.

9.1.1. Except only for maintenance and repairs to be performed or made by
Landlord as expressly provided in this Section, and ordinary wear and tear
(provided good maintenance practices are employed, but this exception shall not
excuse Tenant from any obligation hereunder to make necessary repairs or
replacements), the Tenant shall keep and maintain the Premises in a neat, clean
and sanitary condition and in good order, repair, and condition (and shall make
any necessary replacements), including the maintenance and repair of all of the
following, even if otherwise excluded from the Premises pursuant to Section 2.2:
any improvements constructed or installed by Tenant; all electrical, plumbing,
gas, HVAC, sewage and other utility facilities and equipment exclusively serving
the Premises; interior walls, floors, and ceilings; sprinklers, fixtures, signs
(if and where permitted) and all interior building appliances and similar
equipment; and the exterior and interior portions of all windows, window frames,
doors, door frames, and all other glass or plateglass thereon or therein. Tenant
shall also be responsible for the cost of repairs to the Building (including the
Common Facilities and the Premises) and the Property caused by any act or
negligence of Tenant or Tenant's Agents, including damage to the roof,
foundations and exterior walls of the Building and Premises or to the utilities
servicing the Building and the Premises; and if such repairs are required,
Landlord may demand that Tenant make the same forthwith, at its sole cost or
expense, or Landlord may cause such repairs to be made and the cost of same
shall be paid by Tenant, as additional rent, promptly upon demand therefor.

9.1.2. The Landlord shall, promptly after receipt of written notice from
the Tenant, make any necessary repairs (or replacement) to the roof,
foundations, exterior walls and structural components of the Building
("Structural Repairs"); provided Landlord shall not be responsible repairs
required by reason of any act or negligence by the Tenant or Tenant's Agents.

9.1.3. Landlord shall maintain the Common Facilities in at least as good
order and repair as same are now in, except for repairs and maintenance made
necessary by any act or negligence or default of Tenant or Tenant's Agents, in
which case such repairs and maintenance (and/or replacement) shall be made by
Tenant at its sole cost and expense, or Landlord may cause such repairs to be
made and the cost of same shall be paid by Tenant, as additional rent, promptly
upon demand therefor. The Common Facilities shall be subject to the exclusive
control and management of the Landlord who shall have the right, without
limitation, and in addition to the previous provisions hereof: to police the
same; to change the area, level, location and arrangement of Common Facilities,
provided same does not impair Tenant's reasonable use of the Premises; to close
all or any portion of said areas or facilities to such extent as may be legally
sufficient to prevent a dedication thereof or the accrual of any right to any
person or the public therein; and to close temporarily all or any portion of the
parking areas (if any) to discourage noncustomer parking and for the reasonable
stockpiling of snow. The Landlord shall operate the Common Facilities in such
manner as the Landlord in its reasonable discretion shall determine.

9.1.4. Except as specifically provided in subsections 9.1.2 and 9.1.3
above, Landlord shall not be responsible for any maintenance or repairs to the
Premises, the Building or the Property.

9.1.5. All costs incurred by Landlord in performing its obligations under
this Section 9.1 shall be included as a part of the Operating Costs, except for
Structural Repairs, the costs of which shall be borne by Landlord and shall not
be included as part of the Operating Costs.

9.2. ALTERATIONS

9.2.1. The Tenant shall not make any Alterations without on each occasion
obtaining Landlord's prior written consent thereto; provided, Tenant may make
non-structural Alterations (meaning Alterations which do not involve the change,
alteration or modification of the roof, foundation, exterior walls and
structural components of the Building or of any Building systems or facilities)
which, for any one project, cost less than $50,000 without Landlord's prior
consent, however, Tenant shall promptly provide Landlord with written notice of
such work and its scope.

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<PAGE>

9.2.2. Tenant shall provide Landlord with plans, specifications and other
documents as may be reasonably required by Landlord in connection with the
consideration of such consent; and all costs (including reasonable attorneys'
fees) incurred by Landlord in connection with the consideration of such consent
(whether or not such consent is given) shall be home by Tenant and shall
promptly be paid by Tenant to Landlord.

9.2.3. If Landlord consents in writing to such Alterations, such work
shall be performed in accordance with the terms and conditions of such consent,
with all Applicable Law (including the obtaining of all Approvals) and with all
the provisions of this Lease including the provisions of Section 7. 1 (c)
hereof. Tenant shall procure all necessary Approvals before undertaking any
Alterations, shall do all such work in a good and workerlike manner, employing
materials of good quality and complying with all Applicable Law. Once commenced
by Tenant, such work shall proceed diligently and continuously to completion. In
performing such Alterations, Tenant shall avoid interfering with the use. and
occupancy of other tenants of the Building and shall keep all areas outside the
Premises clean and free of debris at all times. Tenant shall comply, and shall
cause its contractors to comply, with any reasonable directive from the Landlord
regarding the performance of the Alterations. In no event shall any Alterations,
or the work in connection therewith, impair the safety of the structure of the
Building nor diminish the value of the Building or the Premises as then
constituted. At any time while any construction work is being performed upon the
Premises, Tenant shall maintain workmen's compensation, public liability,
builder's risk and contractor's liability insurance in the statutory amounts
(for workmen's compensation) or in the amounts reasonably required by Landlord
(for other insurance); and Landlord, and any other parties designated by
Landlord, shall be named additional insureds on such policies. After any
Alterations are completed, Tenant shall cause all required inspections of the
Premises to be made and shall deliver to Landlord a copy of a Certificate of
Occupancy or similar document evidencing completion of the Alterations and
compliance with all Applicable Law. Tenant shall save Landlord harmless and
indemnified from all injury, loss, claims or damage to any person or property
occasioned by or growing out of such work including, without limitation,
reasonable attorneys' fees and upon receipt of notice from Landlord, Tenant
shall take over Landlord's defense in any action related to work undertaken by
Tenant on the Premises. It is agreed by Landlord that Alterations can include
the installation of conveyor systems, racking and other fixtures relating to a
distribution center, and Tenant shall have the right, and obligation, to remove
all such systems, fixtures and equipment at the expiration or earlier
termination of this Lease.

9.3. REMOVAL.

9.3.1. The Tenant shall at the expiration or earlier termination of this
Lease remove its goods and effects and peaceably yield up the Premises clean and
in good order, repair and condition, ordinary wear and tear excepted (but this
exception shall apply only if Tenant has employed good maintenance practices,
and this exception shall not excuse Tenant from any obligation hereunder to make
necessary repairs and replacements), and except for repairs which the Landlord
expressly agrees to make as herein provided; and Tenant shall repair any injury
done to the Premises or the Building or the Property by the installation or
removal of the Tenant! s fixtures or other property.

9.3.2. All Alterations, or other additions, improvements and fixtures
which may be made or installed by either the Landlord or the Tenant and which
are attached to a floor, wall or ceiling, including any wall or floor coverings,
shall remain upon the Premises, and at the expiration or earlier termination of
this Lease shall be surrendered with the Premises as a part thereof, however,
the Landlord upon termination of this Lease, may require the Tenant to restore
the Premises to their condition at the commencement of this Lease, in whole or
in part.

9.3.3. Notwithstanding subsection 9.3.2 above, any trade fixtures,
furniture, movable equipment and other personal property installed by the Tenant
and owned by the Tenant which may be removed from the Premises without injury
thereto shall remain the property of the Tenant and shall be removed by the
Tenant from the Premises prior to the expiration or earlier termination of this
Lease; provided, if the Premises or the Building is damaged by or as a result of
the removal of any such articles, Tenant shall promptly repair such damage, at
Tenant's sole cost and expense. In the event Tenant fails to remove said
articles prior to the expiration or earlier termination of this Lease, or if
such articles are stored by Landlord (without any responsibility by Landlord for
any damage resulting therefrom, and at Tenant's sole cost and expense) and
Landlord elects to end such storage, 30 days after such expiration or earlier
termination they shall be deemed abandoned and may be disposed of by Landlord in
any way Landlord sees fit, at Tenant's sole cost and expense.

10. UTILITY SERVICES
- --- ----------------

10.1. SEPARATE UTILITIES.

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<PAGE>

The Tenant shall obtain directly from the supplier or utility company all
utility services provided to the Premises which are now or are hereafter
separately metered and served by such supplier or utility company, or which are
not now provided to the Premises by the Landlord, and Landlord shall have no
responsibility in connection therewith.

10.2. SERVICES.

10.2.1. Water, The Landlord shall provide hot water for lavatory purposes
and cold water for normal drinking, lavatory and toilet purposes to the
Building's restrooms. Tenant shall pay to Landlord, as additional rent
hereunder, during the Tenn and any extensions thereof, Tenant's Water Share of
the water and sewer charges assessed against the Property. Such additional rent
shall be paid within 10 days after Tenant's receipt of a bill therefor.
"Tenant's Water Share" shall be determined by Landlord based on the occupancy
levels of the various tenants at the Building.

10.2.2. Electricity. The Tenant shall be responsible, at Tenant's sole
cost and expense, for all electrical service to the Premises. Tenant shall also
be responsible for keeping all light fixtures property lamped and for the
replacement of all burnt out lamps at the Premises. The Landlord shall have the
right, in its sole discretion, to designate from time to time (and to change any
previous designation) the particular utility company or companies who will be
supplying electrical services to the Building or any portion thereof, and, if
Landlord has so designated such companies, Tenant shall contract for its
electrical service exclusively from such companies.

10.2.3. Heat. The Tenant shall responsible for providing heat to the
Premises during the normal heating season, and shall at all times keep the
Premises heated at least to minimum levels to protect the Premises and the
Building's systems and facilities.

10.3. PAYMENT FOR SERVICES.

The Tenant shall pay directly to the supplier or utility company all charges for
utility services supplied to the Premises as provided in Section 10. 1 above and
for all services which are the Tenant's responsibility as provided in Section
10.2 above. The Tenant shall also pay to Landlord, as additional rent hereunder,
within 10 days of being billed therefor: (i) all charges for common utility
services provided to the Premises which are reasonably allocable to the Premises
by Landlord (including pursuant to utility monitor metering as provided in
Section 10.5); and (ii) all charges provided for herein with respect to the
overloading or overutilization of utility services serving the Premises.

10.4. USE OF SERVICES.

Tenant shall not introduce to the Premises personnel, fixtures or equipment
which (individually or in the aggregate) overload the capacity of the
electrical, HVAC or mechanical systems or other utility systems serving the
Premises or the Building. Without limiting Landlord's rights hereunder, if
Tenant uses the Premises or installs fixtures or equipment which would so
overload said utility systems, as reasonably determined by Landlord, Tenant
shall pay, on demand, as additional rent, the cost of providing and installing
any additional equipment or other facilities and services may be required as a
result thereof. In addition to the foregoing, if water is consumed on the
Premises for other than ordinary drinking and lavatory purposes or in excessive
quantities (as reasonably determined by Landlord) or if other utilities are used
on the Premises for other than ordinary purposes or in excessive quantities (as
reasonably determined by Landlord), Tenant shall pay to Landlord, on demand from
time to time, as additional rent, the additional charges resulting therefrom, as
reasonably estimated by Landlord.

10.5. MEASUREMENT OF USAGE.

Landlord reserves the right, at any time, to install monitor or check meters to
measure consumption of any or all common utilities in the Premises and/or to
have any and all utilities supplied to the Premises separately metered and
directly served by a utility company; and the costs incurred by Landlord in
connection with the installation, maintenance and repair of such meters or of
such separate supplying shall be borne by Tenant and shall be paid to Landlord,
as additional rent, on demand from time to time.

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10.6. NO LIABILITY.

The Landlord shall not be liable for any interruption of electricity, gas, oil,
water, telephone, sewage or other utility service supplied to the Premises.

11. LIABILITY AND INSURANCE

11.1. LIABILITY.

11.1.1. The Tenant shall save the Landlord harmless and indemnified from
all injury, loss, claims, damage or liability of whatever nature (including,
without limitation, court costs and reasonable attorney's fees) incurred by
Landlord, and arising: from any act, omission or negligence of the Tenant or
Tenant's Agents with respect to the Premises, the Common Facilities, the
Building or the Property; from the use or occupation thereof by Tenant or
Tenant's Agents or the business conducted thereat by Tenant or Tenant's Agents;
from any default by Tenant hereunder; or in any other respect at, about or in
connection with the Premises during the Term hereof. Upon request of Landlord,
the Tenant shall take over Landlord's defense in any action related to such
matter for which Tenant has agreed to indemnify Landlord.

11.1.2. Neither the Landlord nor any agent or employee of the Landlord
shall be liable for any damage to the person or property of the Tenant or of
Tenant's Agents. Without in any way limiting the generality of the foregoing,
Landlord, its agents or employees shall not be liable, in any event, for any
such damage, or from any damage or loss from interruption of business,
resulting: (i) from any casualty; (ii) from steam, gas, electricity, water, rain
or snow, from leaks from pipes, appliances or plumbing, from falling plaster or
other building components, from dampness or from any other similar cause; (iii)
from any hidden defect on the Premises, the Building or the Land; and/or (iv)
from any acts or omissions of persons occupying adjacent premises or other parts
of the Building or otherwise entitled to use the Property.

11.1.3. All provisions in this Lease dealing with the indemnification and
the like of the Landlord by Tenant shall be deemed modified in each case by the
insertion in the appropriate place of the language "except as otherwise provided
in Chapter 186, Section 15 of the General Laws of Massachusetts as then in
effect."

11.1.4. Notwithstanding anything to the contrary in this Lease, in no
event whatsoever shall landlord be responsible for indirect, incidental or
consequential damages.

11.2. INSURANCE.

11.2.1. The Tenant shall maintain during the Tenn of this Lease, at its
own expense, comprehensive public liability insurance, written on an occurrence
basis, in responsible companies qualified to do business in Massachusetts, which
shall insure the Landlord (as a named, insured party) and all persons claiming
under the Landlord (including Mortgagees), as well as the Tenant against all
claims for injuries to persons (including death) occurring in or about the
Premises, the Building or the Property (for each occurrence) and against all
claims for damages to or loss of property occurring in or about the Premises
(for each occurrence) in the amounts of at least the Insurance Amounts or such
higher amounts of liability insurance coverage as Landlord shall reasonably
require from time to time. The Tenant shall furnish the Landlord with
certificates for such insurance prior to the commencement of the Term hereof and
at least 30 days prior to the expiration date of any of such policies. Each such
policy shall contain a provision that it shall be noncancellable with respect to
the Landlord's or any Mortgagee's interests without at least 30 days' prior
written notice to the Landlord.

11.2.2. The Landlord shall maintain fire and extended coverage insurance
covering the Building (but excluding, unless Landlord elects otherwise, any
property or improvements installed by or belonging to Tenant) against loss by
fire and other similar hazards included within customary building fire and
extended coverage insurance polices, and against other hazards determined by
Landlord, in amounts and forms and with deductibles all as determined by
Landlord. All costs incurred by Landlord hereunder shall be included as a part
of the Operating Costs, as provided in Section 5 hereof.

11.2.3. The Tenant shall, at its own expense, maintain fire and
comprehensive casualty insurance of adequate amounts with respect to its own
fixtures, furnishings, merchandise, equipment and other property contained in
the Premises.

11.3. WAIVER OF SUBROGATION

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Landlord and Tenant each hereby releases the other from any and all liability or
responsibility to the other (or anyone claiming through or under them by way of
subrogation or otherwise) for any loss or damage to property caused by fire or
any of the extended coverage or other insured casualties, even if such fire or
other casualty shall have been caused by the fault or negligence of the other
party, or anyone for whom such party may be responsible; provided, however, such
release shall only be effective to the extent of any insurance coverage provided
by insurance policies maintained by the releasor which policies contain the
clause or endorsement to the effect that any such release shall not adversely
affect or impair said policies or prejudice the right of the releasor to recover
thereunder; and provided, however, that this release shall be applicable and in
force and effect only with respect to loss or damage occurring during such time
as the releasor's insurance policies then in effect shall contain such a clause
or endorsement. Landlord and Tenant each hereby agree that it shall cause such a
clause or endorsement to be included in its policies, if obtainable, and, if
necessary, pay any additional premium that may be charged therefor.

12. ASSIGNMENT OR SUBLETTING
- --- ------------------------

12.1. RESTRICTION.

12.1.1. The Tenant shall not assign this Lease, shall not sublet all or
any portion of the Premises and shall not permit occupation of the whole or any
part thereof by another, by license or otherwise, without, on each occasion,
first obtaining the Landlord's approval in writing, which approval shall: not be
unreasonably withheld with, to an assignment of this Lease to occupancy tenant
or the subletting of all or a portion of the Premises to an occupancy tenant.
Without limitation, it shall not be unreasonable for Landlord to withhold such
approval from any assignment or subletting where, in Landlord's opinion, (i) the
proposed assignee or sublessee does not have a financial standing and credit
rating reasonably acceptable to Landlord, (ii) the proposed assignee or
sublessee does not have a good reputation in the community, or (iii) the
business in which the proposed assignee or sublessee is engaged could detract
from the Building, its value or the costs of ownership thereof.

12.1.2. The Tenant shall not collaterally assign this Lease, nor permit
any assignment of this Lease by mortgage or by operation of law .

12.1.3. The foregoing restrictions shall be binding on any assignee or
sublessee to which Landlord has consented, provided Landlord's consent to any
further assignment or sub-subleasing by any assignee or sublessee may be
withheld at Landlord's sole and absolute discretion.

12.1.4. Consent by the Landlord to any assignment or subletting shall not
include consent to the assignment or transferring of any lease renewal or
extension option rights, any rights of first refusal or option rights regarding
the rental of additional space, any special privileges or extra services granted
to Tenant by separate agreement, by addendum or amendment of the Lease.

12.2. TRANSFERS OF INTERESTS.

If at any time Tenant's interest in this Lease is held by a corporation, trust,
partnership, limited liability company or other entity, the transfer of more
than 25% of the stock, beneficial interests, partnership interest, membership
interest or other ownership interest therein (whether at one time or in the
aggregate) shall be deemed an assignment of this Lease. The foregoing provision
shall not be applicable so long as the Tenant is a corporation, the outstanding
voting stock of which is listed on a recognized security exchange.

12.3. REIMBURSEMENT OF COSTS.

Tenant shall reimburse Landlord on demand for any reasonable costs that Landlord
may incur in connection with the consideration of any proposed assignment or
subletting, including, without limitation, the reasonable costs of investigating
the acceptability of the proposed assignee or subtenant, and reasonable legal
costs incurred in connection with any request for approval of any proposed
assignment or subletting, in each case whether or not said proposed assignment
or subletting is approved by Landlord.

12.4. AGREEMENT OF ASSIGNEE/SUBTENANT.

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<PAGE>

It shall be a condition of the validity of any assignment or subletting which
has been approved in writing by Landlord that the assignee or subtenant shall
agree directly with Landlord, by written instrument in form satisfactory to
Landlord, to be bound by all the obligations of the Tenant hereunder, including,
without limitation, the obligation to pay rent and other amounts provided for
under this Lease, the covenant against further assignment and subletting, and
the covenant to use the Premises only for the purposes specifically permitted
under this Lease.

12.5. LIABILITY OF TENANT.

Notwithstanding any assignment or subletting of this Lease, Tenant and any
guarantor of Tenant's obligations under this Lease shall remain fully and
primarily liable for the prompt and timely payment of all Fixed Rent, additional
rent and other charges hereunder and for the timely performance of all of the
Tenant's other 3 agreements and obligations hereunder; and the Tenant and any
guarantor of Tenant's obligations under this Lease shall be deemed to have
waived any and all suretyship defenses. No consent by the Landlord to an
assignment, sublease or other indulgence or favor at any time granted by the
Landlord to Tenant or to anyone claiming under the Tenant, nor acceptance of
rent from, or other dealing with, anyone claiming under the Tenant, shall be
deemed to constitute any consent to any further assignment, sublease or other
indulgence, or relieve the Tenant or any such guarantor from their obligations
under this Lease.

12.6. EXCESS RENT.

If Landlord shall consent to any assignment of this Lease by Tenant or a
subletting of the whole of the Premises by Tenant at a rent which exceeds the
rent payable hereunder, or if Landlord shall consent to a subletting of a
portion of the Premises by Tenant at a rent in excess of the subleased portion's
pro- share (on a square footage basis) of the rent payable hereunder by Tenant,
then Tenant shall pay to Landlord, as additional rent, forthwith upon Tenant's
receipt of the same or any installment thereof, 50% of the net amount of any
consideration given for any such assignment and/or 50% of the net amount of any
such excess rent. The term "Net amount" shall mean all such excess rent or other
payments or consideration, less only reasonable leasing commissions, tenant
improvement costs, legal fees and tenant allowances reasonably incurred by
Tenant in connection with such subleasing or assignment. Each request by Tenant
for permission to assign this Lease or to sublet the whole or any part of the
Premises shall be accompanied by a warranty by Tenant as to the amount of rent
to be paid to Tenant by the proposed assignee or sublessee. For purposes of this
Section 14.6, the term "rent" shall mean all fixed rent, additional rent or
other payments and/or consideration payable by one party to another for the use
and occupancy of the Premises or any portion thereof or to acquire an assignment
of Tenant's interest in this Lease.

13. MORTGAGES
- --- ---------

13.1. SUBORDINATION.

This Lease shall be subject and subordinate to any existing Mortgages on the
Premises or the Property and to any and all advances made or to be made
thereunder and to any extensions and/or renewals and/or modifications thereof-,
and the Tenant shall from time to time, upon request of the Landlord, confirm
the foregoing and execute, acknowledge and deliver instruments confirming same.
In addition, and without limiting the foregoing, the Tenant shall from time to
time, upon request of the Landlord, also subordinate this Lease to any future
Mortgages hereafter placed upon the Premises or the Property, and to any and all
advances made or to be made thereunder and to any extensions, renewals,
modifications and/or replacements thereof (and to any replacements of any
existing Mortgages), and Tenant shall from time to time, upon request of the
Landlord, execute and acknowledge instruments evidencing such subordination
pursuant to this sentence, provided that in such instrument of subordination the
Mortgagee agrees that so long as the Tenant shall not be in default under this
Lease, the Mortgagee will not disturb the peaceful, quiet enjoyment of the
Premises by the Tenant. The Tenant hereby irrevocably appoints the Landlord its
attorney-in-fact (which appointment is coupled with an interest) to execute and
deliver any such instrument of subordination for and on behalf of the Tenant. If
this Lease is so subordinated, no entry under any such Mortgage or sale for the
purpose of foreclosing the same or repossession or other action pursuant to such
Mortgage shall be regarded as an eviction of the Tenant, constructive or
otherwise, or give the Tenant any right to terminate this Lease. Upon request of
Landlord, any such Mortgagee or any new owner or possessor, Tenant shall attorn
to the Mortgagee or new owner or possessor, and shall agree in writing with any
of said parties to so attorn.

13.2. MORTGAGEE'S ELECTION.

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If any Mortgagee elects, by written notice given to the Tenant, to have this
Lease and the interest of the Tenant hereunder superior to any such Mortgage,
then this Lease and the interest of the Tenant hereunder, shall be deemed
superior to any such Mortgage, whether this Lease was executed (and notice
thereof recorded) before or after the execution and/or recording of such
Mortgage.

13.3. ASSIGNMENT OF LEASES AND RENTS.

If Landlord shall at any time, or from time to time, assign Landlord's interest
in this Lease, or the rents payable hereunder, conditionally or otherwise, to
any Mortgagee, the Tenant agrees to each of the following:

(a) That the execution of such assignment by the Landlord, and the
acceptance thereof by such Mortgagee, shall never be deemed an
assumption by such Mortgagee of any of the obligations of the
Landlord hereunder, unless such Mortgagee shall, by written notice
sent to the Tenant, specifically otherwise elect.

(b) That, except as aforesaid, such Mortgagee shall be treated as having
assumed the Landlord's obligations hereunder only upon the occurrence
of both (i) the foreclosure of such Mortgagee's Mortgage and (ii) the
taking of possession of the Premises by such Mortgagee.

(c) To execute an agreement in form satisfactory to such Mortgagee
consenting to such assignment and acknowledging and recognizing such
assignment.

14. STATUS REPORTS
- --- --------------

14.1. ESTOPPEL CERTIFICATE.

Recognizing that Landlord may find it necessary to establish to third parties,
such as accountants, banks, Mortgagees (or prospective Mortgagees) purchasers
(or prospective purchasers) or the like, the then current status of performance
hereunder, Tenant, on the written request of the Landlord or of any Mortgagee
made from time to time will promptly furnish a written statement in form
satisfactory to Landlord and/or such Mortgagee as to the status of any matter
pertaining to this Lease. Without limiting the foregoing, such statement
furnished pursuant to this Section 16.1 shall, if and to the extent requested by
Landlord or any Mortgagee: (1) ratify this Lease; (2) express the Commencement
Date and the expiration date of the Term of this Lease; (3) certify that this
Lease is in full force and effect and has not been assigned, modified,
supplemented or amended (except by such writings as shall be stated); (4)
certify that all conditions under this Lease to be performed by Landlord have
been satisfied except as stated; (5) certify that there are no defenses or
offsets against the enforcement of this Lease by Landlord, except as stated; (6)
certify as to the amount of advance rental, if any (or none if such is the
case), paid by Tenant; (7) certify as to the date to which rental has been paid;
(8) certify as to the amount of security deposited with Landlord; and (9)
certify that as of such date (or as of any date designated by Landlord or such
Mortgagee) the entire cost of any work to the Premises undertaken by Tenant has
been paid for, and all liens for material and/or labor in connection therewith
have been discharged. Any statement furnished pursuant to this Section 16.1 may
be relied upon by any purchaser or Mortgagee of the Premises or the Property, or
by any other third party interested in the status of this Lease or the Property.

15. DAMAGE BY CASUALTY
- --- ------------------

15.1. CASUALTY.

If the Premises or the Building shall be damaged or destroyed by fire or other
casualty or cause (a "casualty"), the Tenant shall immediately give notice
thereof to the Landlord. Unless this Lease is terminated as provided in this
Section, the Landlord at its own expense, and proceeding with all reasonable
dispatch, but subject to Unavoidable Delays, shall repair and reconstruct the
same so as to restore the Premises (but not any Alterations made by or for
Tenant or any trade fixtures, equipment or personal property of Tenant) to
substantially the same condition they were in prior to such casualty, subject to
zoning and building laws then in existence. Notwithstanding the foregoing, in no
event shall Landlord be obligated either (i) to repair or rebuild if the damage
or destruction results from any casualty not insured against or (ii) to expend
for such repair or rebuilding more than the amount of the insurance proceeds
(net of all costs and expenses incurred by Landlord in collecting the same, and
net of all insurance proceeds retained by any Mortgagee) received by Landlord on
account thereof.

15.2. TERMINATION.

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15.2.1. If either the Premises or the Building shall be damaged or
destroyed to the extent of 25% or more by any casualty (whether insured against
by the Landlord or not), or shall be damaged or destroyed to any lesser extent
by any cause not insured against by the Landlord, the Landlord may elect, by
written notice to the Tenant given within 90 days after the occurrence of such
casualty, to terminate this Lease, such termination to be effective on the date
set forth in such notice or, if no date is so set forth, 90 days after such
notice.

15.2.2. If the Premises or the Building shall, within the last two years
of the Term, be damaged or destroyed by any casualty to such extent that in the
judgment of Landlord the same cannot be reasonably expected to be restored to
substantially the same condition as prior to such damage or destruction within
90 days (or such shorter period to the date of expiration of the Term) from the
time that such repair and reconstruction work would be commenced, then the
Landlord or (but only if such damage also impairs Tenant's reasonable use of the
Premises) the Tenant shall have the right to terminate this Lease by notice to
the other given within 90 days after the occurrence of such casualty; however,
nothing herein shall prevent Landlord from terminating (or nullify any notice by
Landlord terminating) this Lease pursuant to subsection 15.2.1 above.
Notwithstanding the foregoing, if any Option Periods remain to be exercised by
Tenant, and if Tenant duly exercises such option to extend within 15 days after
Landlord's notice of termination hereunder, such termination notice shall be
deemed void and of no force and effect and the provisions of this Section 15.2.2
shall no longer be applicable to such casualty.

15.2.3. If the Premises shall be damaged or destroyed by any casualty and
such damage impairs Tenant's reasonable use of the Premises, Tenant may elect to
terminate this Lease if (i) such damage, in the reasonable judgment of Landlord
cannot be reasonably repaired (such that same no longer impairs Tenant's
reasonable use of the Premises) within 180 days or (ii) such damage is not so
reasonably repaired within 270 days. Tenant shall exercise its option to
terminate by giving written notice to Landlord, as applicable, within 30 days
after such casualty or within 30 days after such 270- period.

15.3. TENANT'S OBLIGATION.

In the event that the Premises or the Building are damaged or destroyed by any
casualty, then, unless this Lease is terminated as above provided, the Tenant,
at its own expense and proceeding with all reasonable dispatch, shall repair or
replace suitably all Alterations made by or for Tenant and any trade. fixtures,
equipment or personal property of Tenant which shall have been damaged or
destroyed.

15.4. ABATEMENT.

If this Lease is not terminated as above provided, then from and after such
casualty and until the Premises are substantially restored as above provided,
the Fixed Rent reserved herein shall abate proportionately according to the
extent that the Premises have been rendered untenantable by such damage or
destruction.

16. EMINENT DOMAIN
- --- --------------

16.1. TAKING.

In the event of any taking by eminent domain, which shall be deemed to include a
voluntary conveyance in lieu of a taking (a "taking"), of all of the Property,
this Lease shall terminate as of the date when Tenant is required to vacate the
Premises.

16.2. TERMINATION.

16.2. 1. In the event of any taking of all or any part of the Building, or
in the event of any taking which reduces the total area of the Land by more than
15%, the Landlord or (but only if such taking also impairs Tenant's reasonable
use of the Premises) the Tenant shall have the right to terminate this Lease by
giving written notice to the other of its election to terminate within 90 days
after the date of filing of the notice of such taking; and this Lease shall
terminate on the date set forth in such notice.

16.2.2. The rights to terminate contained in this Section may be exercised
notwithstanding that the entire interest of the party exercising such right may
have been divested by such taking.

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16.3. OBLIGATION TO RESTORE.

If following any taking of all or any part of the Premises, the Building or the
Land, the Lease is not terminated as provided in Section 16.2, then the
Landlord, at the Landlord's expense, but only to the extent of the award for any
such taking received by Landlord (net of all costs and fees incurred by Landlord
in collecting the same and net of any portion of the award retained by any
Mortgagee), and proceeding with all reasonable dispatch, subject to Unavoidable
Delays, shall do such work as may be required to put what may remain of the
Premises (but not any Alterations made by or for Tenant or any trade fixtures,
equipment or personal property of Tenant) in reasonably proper condition for the
conduct of the Tenant's business; and the Tenant, at the Tenant's expense and
proceeding with all reasonable dispatch, shall do such work as may be required
to repair and replace the Alterations made by or for Tenant and any trade
fixtures, equipment and personal property of the Tenant as may be necessary to
put the remainder of the Premises in reasonably proper condition for the
Tenant's business.

16.4. ABATEMENT.

In the event of a taking, from and after the date on which the Tenant is
required to vacate the portion of the Premises so taken and until the Premises
are substantially restored as above provided, or if this Lease is terminated as
above provided, until the date of termination, the Fixed Rent reserved herein
shall abate proportionately according to the extent that the Premises have been
rendered untenantable by such taking; and from and after the date on which the
Landlord shall substantially restore the Premises as above provided the Fixed
Rent shall be reduced by the proportion that the floor area of the portion so
taken bears to the floor area of the Premises on the date prior to such I to
such taking.

16.5. AWARDS.

The Landlord reserves and excepts all rights to damages to the Land, the
Building, the Premises, the leasehold hereby created, or awards with respect
thereto, then or thereafter accruing, by reason of any taking by eminent domain
or by reason of anything lawfully done or required by any public authority; and
the Tenant grants to the Landlord all the Tenant's rights, if any, to such
damages, except with respect to the value of its personal property which may be
compensable by separate award without reducing the amount of any award to
Landlord and relocation expenses; and Tenant shall execute and deliver to the
Landlord such further instruments of assignment thereof as the Landlord may from
time to time request.

17. DEFAULT
- --- -------

17.1. EVENT OF DEFAULT.

Each of the following shall be an event of default hereunder (an "Event of
Default"):

(a) The failure of Tenant to pay when due any Fixed Rent, additional rent
or other payments hereunder, which failure continues for 5 days after
written notice thereof is given by Landlord to Tenant.

(b) The failure of Tenant to perform any other obligation hereunder
(other than payment of Fixed Rent, additional rent or other payments
hereunder), which failure continues for 30 days after notice thereof
is given by Landlord to Tenant; provided, if such failure by its
nature cannot be cured within 30 days, Tenant shall be given such
additional time as is reasonably necessary, not to exceed 60 days,
provided Tenant has commenced diligently to correct said failure and
thereafter diligently pursued such correction to completion.

(c) The estate hereby created shall be taken on execution or other
process of law; or the Tenant or any guarantor of Tenant's
obligations under this Lease shall become insolvent or become unable
to meet its obligations as they become due; or the Tenant or any
guarantor of Tenant's obligations under this Lease shall make or
offer to make, in or out of bankruptcy, a composition with its
creditors; or the Tenant or any guarantor of Tenant! s obligations
under this Lease shall be declared bankrupt, shall make an assignment
for the benefit of its creditors or if a receiver, trustee or other
officer shall be appointed to take charge of all or any substantial
part of its property by a court.

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(d) A petition for relief shall be filed by or against the Tenant or any
guarantor of Tenant's obligations under this Lease under the United
States Bankruptcy Code or any successor or similar state or federal
statute now or hereafter in effect; but if the same is filed against
but not by Tenant or any guarantor of Tenant's obligations under this
Lease, it shall not be an Event of Default unless same shall not be
dismissed within 30 days after the date on which it is filed.

(e) Tenant shall default in the performance or observance of any term,
covenant or condition of this Lease, and Landlord shall have given
Tenant notice of at least 2 defaults hereunder in the preceding 12-
month period, regardless of whether Tenant remedies the same within
any grace period provided herein.

17.2. TERMINATION.

Upon the occurrence of any Event of Default, notwithstanding any prior waivers
or consent, the Landlord lawfully may, in addition to and not in derogation of
any remedies for any preceding breach of covenant, immediately or at any time
thereafter and without prior demand or prior notice, terminate this Lease by
notice in writing (such termination to be effective forthwith, or on a date
stated in said notice), and/or with or without process of law (forcibly, if
necessary) enter into and upon the Premises or any part thereof in the name of
the whole and repossess the same and expel the Tenant and Tenant's Agents and
any other parties claiming through or under the Tenant and remove Tenant's and
their effects (forcibly, if necessary) without being deemed guilty of any manner
of trespass and without prejudice to any remedies which might otherwise be used
for arrears of rent or preceding breach of covenant, and upon entry as aforesaid
or on the date of termination pursuant to the foregoing notices, whichever
occurs first, this Lease shall terminate; and the Landlord without notice to the
Tenant may store the Tenant's chattels and those of any person claiming under
the Tenant at the expense and risk of the Tenant or of such person, and, if the
Landlord so elects, may sell such chattels at public auction or private sale and
apply the net proceeds after deduction of reasonable costs to the payment of all
sums due to the Landlord hereunder.

17.3. REMEDIES.

17.3.1. In the case of any termination as described in Section 17.2, the
Tenant shall, at the election of the Landlord, which election may be changed at
any time:

(a) Pay to the Landlord in equal monthly installments, in advance, sums
equal to the aggregate rent (as defined below) herein provided for
or, if the Premises have been relet, sums equal to the excess of the
aggregate rent herein provided for over the sums actually received by
the Landlord from such reletting, plus, in any case, Landlord's
Default Expenses (as defined below), such sums being payable as
liquidated damages for the unexpired Tenn hereof; or

(b) Pay to the Landlord as damages a sum which, at the time of such
termination or at the time to which installments of liquidated
damages shall have been paid pursuant to subsection (a) above,
represents the amount by which the then rental value of the Premises
is less than the aggregate rent herein provided for the residue of
the Tenn and pay from time to time to the Landlord upon demand such
additional sums as are equal to the excess, if any, of the aforesaid
rental value of the Premises over the rent actually received by
Landlord for the period from such termination, or from the time to
which installments of liquidated damages shall have been paid, or
from the time to which these additional sums may have been paid by
Tenant under this subsection, whichever the case may be, to the time
for which the Landlord may specify in its demand hereunder (but in no
event to the time later than the expiration of the Tenn hereof),
plus, in any case, Landlord's Default Expenses .

In any event, regardless of any other remedy available to Landlord, Tenant shall
indemnify the Landlord against loss of the aggregate rent herein provided from
the time of such termination to the .expiration date of the Term as provided
herein, plus, in any case, Landlord's Default Expenses.

17.3.2. In the event of an Event of Default, if the Landlord shall elect
not to terminate this Lease upon such default, it may relet the Premises or any
part or parts thereof in the name of either the Landlord or the Tenant, for a
term or terms which may, at the Landlord's option, extend beyond the balance of
the Term of this Lease and may remove and store the Tenant's effects at the
Tenant's expense; and the Tenant agrees that in the event of such reletting the
Tenant shall pay the Landlord any deficiency between the aggregate rent to be
paid hereunder and the net amount of the rents collected during

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<PAGE>

such reletting, plus in any case, Landlord's Default Expenses. All such expenses
and deficiencies shall be paid by Tenant, as additional rent, in monthly
installments upon statements rendered by the Landlord to the Tenant.

17.3.3. In the event of an Event of Default, whether or not the Landlord
shall elect to terminate this Lease, or in the event of an occurrence or default
which would become an Event of Default with the passage of time, in addition to
all other rights and remedies of Landlord upon default, Tenant agrees that the
Tenant shall pay to the Landlord any other costs and expenses, including
attorney's fees, incurred by the Landlord as a consequence of such default, and
shall indemnify and hold Landlord harmless from and against same.

17.3.4. In addition to the rights and remedies provided in this Section,
Landlord shall have all other rights and remedies at law or in equity for any
breach by Tenant of the provisions of this Lease. All rights and remedies which
the Landlord may have under this Lease or at law or in equity shall be
cumulative and shall not be deemed inconsistent with each other, and any two or
more of such rights and remedies may be exercised at the same time insofar as
permitted by law.

17.3.5. The following terms as used herein shall have the meanings set
forth below:

"Aggregate rent": All Fixed Rent, additional rent and all other
--------------
monetary amounts payable hereunder, as same may be adjusted from time to
time under the provisions hereof; provided, at Landlord's option, the
additional rent due under this Lease for periods after any default and
entry hereunder and/or after any termination by Landlord shall be computed
and determined based upon the reasonable projected amounts of same for the
balance of the unexpired Tenn, but in no event less than an annual rate
equal to the amount of additional rent paid or payable with respect to the
most current Lease Year, Tax Year or Operating Year, as appropriate.

"Landlord's Default Expenses": Any expenses incurred by the
----------------------------
Landlord as a consequence of any default by Tenant hereunder or in
connection with any reletting, including but not limited to, attorneys'
fees, brokers' fees and expenses of repairing, maintaining and putting the
Premises in good order and condition and preparing the same for re-rental.

17.4. SELF-HELP.

17.4.1. If the Tenant shall default in the performance or observance of
any agreement, condition or obligation in this Lease to be performed or observed
by Tenant and shall not cure such default within 30 days after notice from
Landlord specifying the default, Landlord may, at its option, without waiving
any claim for breach of agreement, at any time thereafter cure such default for
the account of Tenant, and make all necessary payments in connection therewith,
including but not limiting the same, attorneys' fees, costs or charges of or in
connection with any legal action which may have been brought; and any amount
paid by Landlord in so doing shall be deemed paid for the account of Tenant.
Tenant agrees to reimburse Landlord for all of the foregoing costs with interest
thereon from the date such costs are incurred at the Default Interest Rate, such
sums payable by Tenant to Landlord to be deemed additional rent and payable on
demand. Notwithstanding the foregoing, Landlord may cure any such default as
aforesaid prior to the expiration of said 30 day period, in the event of an
emergency or if the curing of such default prior to the expiration of said 30
day period is otherwise reasonably necessary to protect the Property or
Landlord's interest therein, or to prevent injury or damage to persons or
property.

17.4.2. If the Landlord shall default in the performance of its
maintenance or repair obligations under this Lease, and shall not cure such
default within 30 days after written notice from the Tenant specifying the
default (or, if the failure is of a nature that cannot reasonably be remedied
within 30 days, then within such additional period as is reasonably required to
correct the default), be reasonably necessary, provided such repairs are
diligently pursued), and Landlord's failure to perform such repairs impairs the
ability of Tenant to operate its business at the Premises, then, the Tenant
shall have the right to give Landlord (and Landlord's Mortgagee) written notice
of Tenant's intent to cure Landlord's failure, which notice shall include
detailed information on the means and methods of repair proposed (the "Cure
Notice"). If Landlord has not remedied the failure within 7 days after receipt
of the Cure Notice, then Tenant shall have the right to cure such failure. If
Tenant incurs third party expenses curing Landlord's failure pursuant to this
subsection, then Tenant may send Landlord a detailed bill itemizing such
expenses, and Landlord shall pay Tenant the reasonable cost of Tenant's cure of
Landlord's failure accomplished pursuant to this subsection. In effecting its
cure pursuant to the Cure Notice, Tenant shall be required to comply with the
restrictions contained in any other leases for space in the Building, such as to
the time, place and/or manner of Landlord fulfilling the obligations which was
the subject of the Cure Notice, and to coordinate with any other tenants in the
Building. Tenant agrees to indemnify and save harmless Landlord from and against
all claims of whatever

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nature arising from any act, omission or negligence of Tenant, or Tenant's
contractors, licensees, invitees, agents, servants or employees as a result of
Tenant' s cure pursuant to this subsection.

17.5. LANDLORD'S DEFAULT.

The Landlord shall not be deemed to be in default hereunder unless its default
shall continue for 30 days, or such additional time as is reasonably required to
correct its default, after written notice thereof has been given by the Tenant
to the Landlord specifying the nature of the alleged default.

18. NOTICES
- --- -------

18.1. NOTICES.

Any notice or other communication relating to this Lease shall be given in
writing and shall be deemed to be duly given if sent either (i) by registered or
certified mail, postage prepaid, return receipt requested or (ii) by overnight
mail service as provided by the U.S. mail or by a nationally recognized private
common carrier, and addressed to the party for whom it is intended at Landlord's
Address or at Tenant! s Address, as appropriate, or at the address as designated
by such party in a notice given as herein provided as its address for receiving
notices hereunder. The foregoing shall not be deemed to preclude the giving of
written notice hereunder in any other manner, in which case the notice shall
have been deemed to have been given when actually received by the party for whom
designated.

18.2. NOTICES TO MORTGAGEE.

After receiving written notice from any person, firm, or other entity, that it
holds a Mortgage which includes as part of the mortgaged premises the Premises
or any part thereof, the Tenant shall, so long as such Mortgage is outstanding,
be required to give to such holder, at its address set forth in such written
notice from such holder, the same notice as is required to be given to the
Landlord under the terms of this Lease, such notice to be given by the Tenant to
the Landlord and such holder concurrently. It is further agreed that such holder
shall have the same opportunity to cure any default, and the same time within
which to effect such curing, as is available to the Landlord; and if necessary
to cure such -a default, such holder shall have access to the Premises.

19. ENVIRONMENTAL HAZARDS
- --- ---------------------

19.1. OBLIGATIONS.

19.1.1. Tenant, and Tenant's Agents, shall not use, maintain, generate,
allow or bring on the Premises or the Property or transport or dispose of on or
from the Premises or the Property (whether into the ground, into any sewer or
septic system, into the air, by removal off-site or otherwise) any Hazardous
Matter.

19.1.2. Tenant shall promptly deliver to Landlord copies of any notices,
orders or other communications received from any governmental agency or official
affecting the Premises and concerning alleged violations of Environmental
Requirements.

19.2. INDEMNIFICATION.

Tenant shall save Landlord (together with its officers, directors, stockholders,
partners, beneficial owners, trustees, employees, agents, contractors,
attorneys, and mortgagees) harmless and indemnified from and against any and all
Environmental Damages which may be asserted on account of- (i) the presence or
release of any Hazardous Matter upon, in or from the Premises during the Tenn
and during any period when the Tenant, or Tenant's Agents, or any of its assigns
or sublessees, are occupying the Premises or any part thereof-, or (ii) the
activities or other action or inaction of Tenant or Tenant's Agents in violation
of Environmental Requirements; or (iii) the breach of any of Tenant's
obligations under this Section.

19.3. PROVISIONS.

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<PAGE>

19.3.1. The provisions of this Section shall be in addition to any other
obligations and liabilities Tenant may have to Landlord under this Lease or
otherwise at law or in equity; and in the case of conflict between this Section
and any other provision of this Lease or any requirement imposed by law or in
equity, the provision imposing the most stringent requirement on Tenant shall
control. The obligations of Tenant under this Section shall survive the
expiration or termination of this Lease and the transfer of title to the
Property.

19.3.2. The following terms as used herein shall have the meanings set
forth below:

"Hazardous Matter": Any substance: (i) which is or becomes defined
----------------
as Hazardous Waste, Hazardous Material or oil under M.G.L. Chapter 2 1 C, M.G.L.
Chapter 2 1 D, M.G.L. Chapter 2 1 E, the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA), 42 U.S.C. (S)9601 et seq., or the
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. (S)6901 et seq., and
the regulations promulgated thereunder, as same may be amended, supplemented or
replaced from time to time; or (ii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous to health and which is or becomes regulated pursuant to any Applicable
Law.

"Environmental Requirements": All Applicable Law, the provisions
of any all Approvals, and the terms and conditions of this Lease, insofar as
same relate to the release, maintenance, use, keeping in place, transportation,
disposal or generation of Hazardous Matter, including those pertaining to
reporting, licensing, permitting, health and safety of persons, investigation,
remediation, and disposal .

"Environmental Damages": All liabilities, injuries, losses,
claims, damages (whether special, consequential or otherwise), settlements,
attorneys' and consultants' fees, fines and penalties, interest and expenses,
and costs of environmental site investigations, reports and cleanup, including
costs incurred in connection with: any investigation or assessment of site
conditions or of health of persons using the Building or Property; risk
assessment and monitoring; any cleanup, remedial, removal or restoration work
required by any governmental agency or recommended by Landlord's environmental
consultant; any decrease in value of the Property; any damage caused by loss or
restriction of rentable or usable space in the Property; or any damage caused by
adverse impact on marketing or financing of the Property.

20. MISCELLANEOUS PROVISIONS
- --- ------------------------

20.1. CONSENT/WAIVERS.

No consent or waiver, express or implied, by the Landlord to or of any breach in
the performance by the Tenant of its agreements hereunder shall be construed as
a consent or waiver to or of any other breach in the performance by the Tenant
of the same or any other agreement. No acceptance by the Landlord of any rent or
other payment hereunder, even with the knowledge of any such breach, shall be
deemed a waiver thereof nor shall any acceptance of rent or other such payment
in a lesser amount than is herein required to be paid by the Tenant, regardless
of any endorsement on any check or any statement in any letter accompanying the
payment of the same, be construed as an accord and satisfaction or in any manner
other than as a payment on account by the Tenant. No reference in this Lease to
any assignee, sublessee, licensee or concessionaire, or acceptance by the
Landlord from other than the Tenant of any payment due hereunder shall be
construed as a consent by the Landlord to any assignment or subletting by the
Tenant, or to give to the Tenant any right to permit another to occupy any
portion of the Premises except as herein expressly provided. No waiver by the
Landlord in respect of any one tenant shall constitute a waiver with respect to
any other tenant. Failure on the part of the Landlord to complain of any action
or nonaction on the part of the Tenant or to declare the Tenant in default, no
matter how long such failure may continue, shall not be deemed to be a waiver by
the Landlord of any of its rights hereunder.

20.2. DISPUTED PAYMENTS.

If at any time a dispute shall arise as to any amount or sum of money to be paid
by one party to the other under the provisions hereof, the party against whom
the obligation to pay the money is asserted shall have the right to make payment
"under protest" and such payment shall not be regarded as a voluntary payment
and there shall survive the right on the part of the party making such payment
to institute suit to recover such payment. If it shall be adjudged that there
was no legal obligation on the part of said party to pay such sum or any part
thereof, said party shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of this Lease; if at any
time a dispute shall arise between the parties hereto as to any work to be
performed by either of them under the provisions hereof, the party against

21
<PAGE>

whom the obligation to perform the work is asserted may perform such work and
pay the cost thereof "under protest" and the performance of such work shall in
no event be regarded as a voluntary performance and there shall survive the
right on the part of said party to institute suit for the recovery of the cost
of such work. If it shall be adjudged that there was no legal obligation on the
part of said party to perform the same or any part thereof and that there was a
legal obligation on the other party to perform same, said party who performed
same shall be entitled to recover the cost of such work or the cost of so much
thereof as said party was not legally required to perform under the provisions
of this Lease and which the other party was legally required to perform.

20.3. FORCE MAJEUR.

The Landlord shall not be liable for a delay or failure in the co commencement,
performance or completion of any of its obligations hereunder where such delay
or failure is attributable to Unavoidable Delays.

20.4. QUIET ENJOYMENT.

Landlord agrees that, upon Tenant's paying the rent and performing and observing
the agreements, obligations and other provisions on its part to be performed and
observed, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises during the Term of this Lease without any manner of hindrance or
molestation from Landlord or anyone claiming under Landlord, subject, however,
to the rights of holders of present and future Mortgages, and to the terms and
provisions of this Lease.

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20.5. HOLDING OVER.

If the Tenant continues to occupy the Premises after the termination of this
Lease, it shall have no more rights than a tenant by sufferance, but shall be
liable for 150% of aggregate rent (as defined in Section 17.3) during such
occupancy and shall be liable for any loss or expense incurred by Landlord due
to such holding over. Nothing in this Section shall be construed to permit such
holding over.

20.6. VACATING.

Neither the vacating of the Premises by Tenant nor the delivery of keys to or
the acceptance of keys by the Landlord or any employees or agents of Landlord
shall operate as a termination of this Lease or a surrender or an acceptance of
surrender of the Premises.

20.7. LATE PAYMENTS.

20.7. 1. In the event any rent (whether Fixed Rent or additional rent) or
any other payments due from Tenant under this Lease are not paid when due, then
Tenant shall pay to Landlord, as additional rent, interest on such overdue
amounts from the date such amounts become due to the date on which same are paid
(the "delinquency period") at an interest rate equal to the Default Interest
Rate with respect to the delinquency period (such Default Interest Rate to be
recalculated, if appropriate, for each day during the delinquency period).

20.7.2. If, during the Term, Landlord receives a check from Tenant which
is returned by Tenant's bank for insufficient funds or are otherwise returned
unpaid, if Landlord so elects, all checks thereafter shall be either bank
certified, cashiers' or treasurer's checks. All bank charges resulting from any
returned checks, together with a reasonable service charge for the
administrative and overhead expenses of Landlord, shall be paid by Tenant as
additional rent hereunder.

20.8. WAIVER OF COUNTERCLAIMS.

If Landlord commences any summary proceeding for nonpayment of Fixed Rent,
additional rent or any other payments due hereunder, Tenant hereby waives the
right to interpose any counterclaim of whatever nature or description in any
such proceeding, other than compulsory counterclaims; provided, however, that
Tenant shall have the right to bring a separate action against Landlord to the
extent otherwise allowed under this Lease as long as Tenant does not attempt to
have such action joined or otherwise consolidated with Landlord's summary
proceeding.

20.9. CONSENTS.

Except as otherwise specifically provided in this Lease, any consent or approval
to be given by Landlord under this Lease may be withheld or denied at Landlord's
sole and absolute discretion. Whenever in this Lease the consent or approval of
Landlord is required, and it is specifically provided that such consent or
approval is not to be unreasonably withheld, delayed or conditioned, but
nevertheless Landlord shall refuse or delay or condition such consent or
approval, Tenant shall not be entitled to make any claim, and Tenant hereby
waives any claim, for money damages (nor shall Tenant claim any money damages by
any setoff, counterclaim or defense) based upon any claim or assertion by Tenant
that Landlord unreasonably withheld or delayed or conditioned its consent or
approval; and Tenant! s sole remedy in such circumstances shall be an action or
proceeding for specific performance, injunctive relief or declaratory judgment.

20.10. BINDING EFFECT; PARTIES; LANDLORD LIABILITY.

20.10.1. The conditions in this Lease contained to be kept and performed
by the parties hereto shall be binding upon and inure to the benefit of said
respective parties, their heirs, legal representatives, successors and assigns;
provided, however, nothing in this Section shall be construed to permit any
assignment by Tenant, except in accordance with the terms of this Lease, and no
assignee of Tenant shall have any rights hereunder unless the assignment was
accomplished in accordance with this Lease.

20.10.2. Wherever in this Lease reference is made to either of the
parties, it shall be held to include and apply to the heirs, legal
representatives, successors and assigns of such party as if in each case so
expressed, unless the context requires otherwise and regardless of the number or
gender of such party. Notwithstanding the foregoing provisions of this Section,

23
<PAGE>

the term "Landlord" as used in this Lease means only the owner for the time
being of the Premises, so that in the event of any sale or sales of the Premises
or of this Lease the Landlord shall be and hereby is entirely released of all
covenants and obligations of the Landlord hereunder.

20.10.3. If the Landlord shall at anytime bean individual, joint venture,
tenancy in common, firm, company, corporation, partnership (general, limited or
limited liability), trust or trustees of a trust, it is specifically understood
and agreed that there shall be no personal liability of the Landlord or any
joint venturer, tenant, member, manager, shareholder, director, officer, partner
(general or limited), trustee, beneficiary or holder of any ownership interest,
under any of the provisions hereof or arising out of the use or occupation of
the Premises by Tenant. In the event of a breach or default by Landlord of any
of its obligations under this Lease, Tenant shall look solely to the equity of
the Landlord in the Premises for the satisfaction of Tenant's remedies, and it
is expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions, warranties and obligations of this Lease shall in no
event exceed the loss of such equity interest. It is further understood and
agreed that the liability of any party who is a Landlord (whether the original
Landlord or any successor Landlord) shall be limited to defaults occurring or
arising during the period for which such party shall have been a Landlord, and
such party shall not be liable for defaults occurring or arising at any time
before such party obtained its interest as lessor or after such party disposed
of its interest as lessor.

20.11. NOTICE OF LEASE.

Landlord and Tenant each agree upon request of the other to execute and deliver
to the other a notice of lease or short form of lease suitable for recording and
setting forth the name of the Landlord and the Tenant, the term of the Lease and
an appropriate description of the Premises. No copy of this Lease or any portion
hereof shall be recorded in any Registry of Deeds or Land Court Registry
District.

20.12. BROKERS.

Tenant warrants and represents that it has dealt with no broker in connection
with the consummation of this Lease except the Broker, and in the event of any
brokerage claims against Landlord predicated upon dealings by Tenant with any
broker except the Broker, Tenant agrees to defend the same and indemnify and
hold Landlord harmless against any such claim.

20.13. GENERAL PROVISIONS.

20.13.1. If any provision of this Lease or the application thereof to any
person or circumstance shall be to any extent invalid or unenforceable, the
remainder of this Lease and the application to persons or circumstances other
than those as to which it is invalid or unenforceable shall not be affected
thereby, and each term and provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.

20.13.2. This Lease shall constitute the only agreement between the
parties relative to the Premises and no oral statements and no prior written
matter not specifically incorporated herein shall be of any force or effect. In
entering into this Lease, the Tenant relies solely upon the representations and
agreements contained herein. This agreement shall not be modified except by
writing executed by both parties.

20.13.3. In no case shall mention of specific instances under a more
general provision be construed to limit the generality of said provision.

20.13.4. The section and article headings throughout this instrument, if
any, are for convenience and reference only, and the words contained therein
shall in no way be held to limit, define or describe the scope or intent of this
Lease or in any way affect this Lease.

20.13.5. This Lease shall be construed without regard to any presumption
or other rule requiring construction against the party causing this Lease to be
drafted.

20.13.6. Landlord and Tenant agree that time is of the essence of this
Lease.

20.13.7. If more than one party is lessee hereunder, the obligations of
Tenant hereunder shall be joint and several.

24
<PAGE>

20.13.8. Employees or agents of the Landlord have no authority to make or
agree to make a Lease or any other agreement in connection herewith. The
submission of this document or a summary of some or all of its provisions for
examination and negotiation does not constitute an option to lease, or a
reservation of, or option for, the Premises, and this document shall become
effective and binding only upon the execution and delivery hereof by both
parties. Executed under seal, in multiple counterparts, as of Lease Date.

TENANT:

MAXWELL SHOE COMPANY, INC.

By:
--------------------------------------
Name: Maxwell V. Blum
Title: Chairman, Chief Executive Officer

LANDLORD:

- -----------------------------------------
John H. Finley, III
as Trustee of
Brockton Oak Real Estate Trust
and not Individually

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF MAXWELL SHOE COMPANY INC.

Sprague Company
101 Sprague Street
P.O. Box 37
Readville (Boston), Mass. 02137

State or other jurisdiction of incorporation or organization - Delaware

Ownership by Maxwell Shoe Company Inc. - 100%

Maxwell Retail Inc.
101 Sprague Street
P.O. Box 37
Readville (Boston), Mass. 02137

State or other jurisdiction of incorporation or organization - Delaware

Ownership by Maxwell Shoe Company Inc. - 100%

<PAGE>

Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-83438) pertaining to the 1994 Stock Incentive Plan of Maxwell Shoe
Company Inc. of our report dated December 15, 1997, with respect to the
consolidated financial statements of Maxwell Shoe Company Inc. included in the
Annual Report (Form 10-K) for the year ended October 31, 1997.

Our audits also included the consolidated financial statement schedule of
Maxwell Shoe Company Inc. listed in Item 14(a)(2). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the consolidated financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

ERNST & YOUNG LLP

Boston, Massachusetts
January 26, 1998

<PAGE>

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